As filed with the Securities and Exchange Commission on November 20, 1998
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BE Aerospace, Inc.
(Exact name of registrant as specified in its charter)
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<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)
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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)
Thomas P. McCaffrey
Chief Financial Officer
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
(561) 791-5000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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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 this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
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Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
Securities to be Registered Registered per unit offering price Registration Fee
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<S> <C> <C> <C> <C>
9 1/2% Series B Senior Subordinated Notes
due 2008.................................. $200,000,000 100% $200,000,000 $55,600
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 9(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).
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The information in the prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION DATED November 20, 1998
[LOGO]
Offer to Exchange
all outstanding 9 1/2% Senior
Subordinated Notes due 2008
($200,000,000 aggregate principal
amount outstanding)
for
9 1/2% Series B Senior Subordinated
Notes due 2008 of
BE Aerospace, Inc.
TERMS OF EXCHANGE OFFER
o Expires 5:00 p.m., New York City time, , 1998, unless
extended
o Not subject to any condition other than that the Exchange Offer
not violate applicable law or any applicable interpretation of the
Staff of the Securities and Exchange Commission
o All outstanding notes that are validly tendered and not validly
withdrawn will be exchanged
o Tenders of outstanding notes may be withdrawn any time period to
5:00 p.m. on the business day prior to expiration of the Exchange
Offer
o The exchange of notes will not be a taxable exchange for the U.S.
federal income tax purposes
o We will not receive any proceeds from the Exchange Offer
o The terms of the notes to be issued are substantially identical to
the outstanding notes, except for certain transfer restrictions
and registration rights relating to the outstanding notes
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See "Risk Factors" beginning on page 20 for a discussion of certain
matters that should be considered by prospective investors.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes to be distributed in the
exchange offer, nor have any of these organizations determined that this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is , 1998
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TABLE OF CONTENTS
Page
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Forward-Looking Statements. ...................................................2
Available Information..........................................................3
Incorporation of Certain Documents by Reference................................3
Summary........................................................................5
Risk Factors..................................................................20
Use of Proceeds...............................................................26
The Exchange Offer............................................................26
Capitalization................................................................33
Selected Financial Data.......................................................34
Pro Forma Combined Financial Data.............................................36
Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................43
Business......................................................................52
Management....................................................................67
Security Ownership of Certain Beneficial Owners and Management................70
Description of Certain Indebtedness...........................................72
Description of the New Notes..................................................74
Plan of Distribution..........................................................97
Legal Matters.................................................................97
Experts.......................................................................97
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FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us, including, among other things:
o Our anticipated growth strategies,
o Our expected internal growth,
o Our intention to introduce new products,
o Technological advances in our industry,
o Anticipated trends and conditions in our industry, including
regulatory reform,
o Our ability to integrate acquired businesses,
o Our ability to implement a Year 2000 readiness program,
o Our future capital needs and
o Our ability to compete, including internationally.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties, and assumptions,
the forward-looking events discussed in this Prospectus might not occur.
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AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith we file periodic reports, proxy statements and other information with
the Securities and Exchange Commission (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. You may also access
this information electronically through the Commission's web page on the
Internet at http://www.sec.gov. This web cite contains reports, proxy statements
and other information regarding registrants such as ourselves that have filed
electronically with the Commission.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by us with the Commission under the Securities
Act of 1933, as amended (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. As such we make in this Prospectus reference to the
Registration Statement and to the exhibits and schedules thereto. For further
information about us and about the securities we hereby offer, you should
consult the Registration Statement and the exhibits and schedules thereto. You
should be aware that statements contained in this Prospectus 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 governing the outstanding notes provides that we will
furnish to the holders of the notes copies of the periodic reports required to
be filed with the Commission under the Exchange Act. Even if we are not subject
to the periodic reporting and informational requirements of the Exchange Act, we
will make such filings to the extent that such filings are accepted by the
Commission. We will make these filings regardless of whether we have a class of
securities registered under the Exchange Act. Furthermore, we will provide the
Trustee for the notes 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, and quarterly reports containing the information required to be
contained in Form 10-Q promulgated by the Exchange Act. From time to time, we
will also provide such other information as is required to be contained in Form
8- K promulgated by the Exchange Act. If the filing of such information is not
accepted by the Commission or is prohibited by the Exchange Act, we will then
provide promptly upon written request, and at our cost, copies of such reports
to prospective purchasers of the notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We hereby incorporate by reference into this Prospectus the
following documents or information filed with the Commission (File No.
000-18348):
(a) the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1998 (the "1998 10-K"), filed with the
Commission on May 29, 1998, as amended by the amendment to the 1998
10-K filed with the Commission on June 29, 1998.
(b) the Company's Quarterly Reports on Form 10-Q for the
fiscal quarter ended May 30, 1998, filed with the Commission on July
14, 1998 and the quarter ended August 29, 1998, filed with the
Commission on September 25, 1998.
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(c) the Company's Current Reports on Form 8-K filed on April
13, 1998, April 27, 1998, May 8, 1998, August 24, 1998 and November
18,1998, respectively.
(d) all documents filed by the Company pursuant to Section 13
(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of the Registration 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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This Exchange Offer is not being made to, nor will we accept
surrenders for exchange from, holders of outstanding 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.
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SUMMARY
This Summary may not contain all the information that may be
important to you. You should read the entire Prospectus, including the financial
data and related notes, before making an investment decision. The terms "B/E,"
the "Company," "our company" and "we" as used in this Prospectus refer to "BE
Aerospace, Inc." and its subsidiaries as a combined entity, except where it is
made clear that such term means only the parent company. References to a fiscal
year end relate to a year ending on the last Saturday in February (for example,
fiscal 1998 refers to our fiscal year ended February 28, 1998). Market share
information in this Prospectus is based upon industry sources or knowledge of
the industry and on our dollar sales for the twelve months ended August 29,
1998, except for market shares for commercial aircraft seats and in-flight
entertainment systems, which are determined on the basis of installed base as of
August 29, 1998. The market share information 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." In addition, certain statements include forward-looking
statements which involve risks and uncertainties. See "Forward-Looking
Statements."
The Exchange Offer
We completed on November 2, 1998 the private offering of $200
million of 9 1/2% Senior Subordinated Notes due 2008. We entered into a
registration rights agreement with the initial purchasers in the private
offering in which we agreed, among other things, to deliver to you this
Prospectus and to complete the Exchange Offer within 150 days of the issuance of
the 9 1/2% Senior Subordinated Notes due 2008. You are entitled to exchange in
the Exchange Offer your outstanding notes for registered notes with
substantially identical terms. If the Exchange Offer is not completed within 150
days of the issuance of the 9 1/2% Senior Subordinated Notes due 2008, then the
interest rates on the notes will be increased to 10% per year. You should read
the discussion under the heading "Summary Description of the New Notes" and
"Description of the New Notes" for further information regarding the registered
notes.
We believe that the notes issued in the Exchange Offer may be resold
by you without compliance with the registration and prospectus delivery
provisions of the Securities Act, subject to certain conditions. You should read
the discussion under the headings "Summary of the Terms of Exchange Offer" and
"The Exchange Offer" for further information regarding the Exchange Offer and
resale of the notes.
The Company
Our company is the world's largest manufacturer of commercial and
general aviation aircraft cabin interior products. We serve virtually all major
airlines and a wide variety of general aviation customers and airframe
manufacturers. Our management believes that our company has achieved leading
global market positions and significant market shares in each of its major
product categories, which include:
o commercial aircraft seats including an extensive line of
first class, business class, tourist class and commuter
aircraft seats, with a market share of 50%;
o food and beverage preparation and storage equipment, with
market shares of:
-- 90% in coffee makers,
-- 90% in refrigeration equipment and
-- 50% in ovens;
o aircraft interior structures such as galleys and crew
rests, with a market share of 15%;
o oxygen delivery systems, with a market share of 50%;
o general aviation interior products, with market shares of
NYDOCS01/569031.10
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-- 60% in executive aircraft seats,
-- 85% in indirect overhead lighting systems and
-- 90% in air valves. and
o in-flight entertainment systems, with a market share of
-- 35% in individual-passenger in-flight
entertainments systems.
In addition, we offer our customers in-house capabilities to design,
project manage, integrate, install, test and certify reconfigurations and
modifications to commercial aircraft passenger cabin interiors and to
manufacture related products, including engineering kits and interface
components. We also provide upgrade, maintenance and repair services for our
airline customers around the world.
Our company has substantially expanded the size, scope and nature of
its business as a result of a number of acquisitions. Since 1989, we have
completed 15 acquisitions, including six in fiscal 1999, for an aggregate
purchase price of approximately $680 million in order to:
o increase our cabin interior product and service
offerings;
o expand our activities from the commercial to the general
aviation market; and
o position our company as the preferred global supplier to
our customers.
The acquisitions we have consummated to date have allowed us to
reduce costs, principally by integrating manufacturing facilities, or to
leverage our established customer relationships by selling more products through
our integrated sales force, or both. The largest of the six transactions we have
completed to date in fiscal 1999 was the acquisition of SMR Aerospace, Inc. and
its affiliates ("SMR") for a total aggregate purchase price of approximately
$142 million, subject to adjustment. SMR is a leader in providing design,
integration, installation and certification services associated with the
reconfiguration of commercial aircraft passenger cabin interiors. We believe
that the acquisition of SMR complements our cabin interior product manufacturing
capabilities. In addition, our management believes such acquisition positions
our company as the only company in the industry able to offer its customers the
complete range of products and services required for major cabin interior
reconfigurations and modifications. This range extends from the
conceptualization and engineering design of new cabin interiors, to the supply
of cabin interior products, through the management of the integration, final
installation and certification processes.
As of August 29, 1998, our backlog was approximately $700 million,
compared with a backlog of $560 million on February 28, 1998 and $420 million on
February 22, 1997. Of our backlog at August 29, 1998, approximately 43% is
deliverable by the end of fiscal 1999 and 51% of our total backlog was with
North American carriers, approximately 22% was with European carriers and
approximately 20% was with Asian carriers. Of such Asian carrier backlog, $34
million is deliverable in fiscal 1999. Approximately $35 million of the total
Asian carrier backlog was with Japan Airlines, Singapore Airlines and Cathay
Pacific, three of the largest Asian public airlines, each with a total equity
market capitalization of at least $3.0 billion as of October 20, 1998.
In fiscal 1998, approximately 92% of our total revenues were derived
from major airlines and 8% of our total revenues were derived from airframe
manufacturers. Approximately 61% of our revenues for fiscal 1998 were from
refurbishment and upgrade orders.
During the six months ended August 29, 1998, our company had
revenues of $296.3 million and operating earnings before acquisition-related
expenses of $42.3 million, an increase of 27% in revenues and 45% in operating
earnings before acquisition-related expenses over the six months ended August
30, 1997. During the fiscal year ended February 28, 1998, our company had
revenues of $488.0 million and operating earnings of $58.7 million, an increase
of 18% in revenues and 38% in operating earnings over the fiscal year ended
February 22, 1997.
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Competitive Strengths
We believe that we have a strong competitive position attributable
to a number of factors, including the following:
Leading Market Shares and Significant Installed Base. We believe our
leading market positions in each of our major product categories
provide us with significant competitive advantages in serving our
customers. Such advantages include 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 our large market shares and our
approximate $4.7 billion installed base of cabin interior equipment
(valued at replacement prices as of August 29, 1998), we believe we
are among the lowest cost producers in the cabin interior products
industry. We also believe that our large installed base provides our
company with a significant advantage over competitors in obtaining
orders for retrofit and refurbishment programs, principally because
airlines tend to purchase replacement 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.
Combination of Manufacturing and Cabin Interior Design Services. We
have continued to expand our products and services, believing that
the airline industry increasingly will seek an integrated approach
to the design, development, integration, installation, testing and
sourcing of aircraft cabin interiors. We believe that we are the
only manufacturer of a broad technologically advanced line of cabin
interior products that also has interior design capabilities. Based
on our established reputation for quality, service and product
innovation among the world's commercial airlines, we believe that we
are well positioned to provide "one-stop shopping" to these
customers. This maximizes sales opportunities for our company and
increases the convenience and value of the service provided to our
customers.
Technological Leadership/New Product Development. Our management
believes that we are a technological leader in our industry, with
the largest R&D organization in the industry comprised of
approximately 725 engineers. We believe that our R&D effort and our
on-site engineers at both the airlines and airframe manufacturers
enable our company to play a leading role in developing and
introducing innovative products to meet emerging industry trends and
needs. This allows us to gain early entrant advantages and
substantial market shares. Examples of such product development
include:
o the introduction of several premium and main cabin class
seats, which we believe are lighter in weight and provide
greater comfort as a result of their ergonomic design and
pre-engineered individual passenger comfort features;
o our family of individual passenger distributed video systems,
which we believe to be superior to existing operational
systems in terms of performance, reliability, weight, heat
generation and flexibility to adapt to changing technology;
o a cappuccino/espresso maker;
o a quick chill wine cooling system; and
o a constant-pressure, steam cooking oven, which we believe
substantially improves the appearance, aroma and taste of
airline food.
Our two individual passenger distributed video systems are designed
to meet the varying technological and price specifications of the
airlines. We also have a new interactive entertainment system in
final development stage and a joint venture with Harris Corporation
to develop and deliver live broadcast television (LiveTV(TM)) to
domestic narrow-body commercial aircraft.
Proven Track Record of Acquisition Integration. We have demonstrated
the ability to make strategic acquisitions and successfully
integrate such acquired businesses by identifying opportunities to
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consolidate engineering, manufacturing and marketing activities, as
well as rationalizing product lines. Between 1989 and January 1996,
our company acquired nine companies. We have integrated the
acquisitions by eliminating 11 operating facilities and
consolidating personnel at the acquired businesses, resulting in
headcount reductions of approximately 1,300 employees through
January 1998. Our integration activities, coupled with our
re-engineering program, have helped to improve our gross and
operating margins (before non-recurring expenses). During the
five-year period ended February 28, 1998 our gross margin increased
from 33.0% to 36.7% and our operating margin (before non-recurring
expenses) increased from 10.5% to 13.0%. During fiscal 1999, we
acquired six companies, including Aerospace Interiors, Inc.,
Puritan-Bennett Aero Systems Co., Aircraft Modular Products,
Aerospace Lighting Corporation, SMR Aerospace, Inc. and its
affiliates and CF Taylor Interiors Limited and one of its
affiliates, to broaden our product lines, to expand our activities
from the commercial to the general aviation market and to position
our Company as the preferred global supplier to our customers. The
aggregate purchase price of all acquisitions made by our company
since 1989 is approximately $680 million. While our company will
continue to be susceptible to industry-wide conditions, our
management believes that our significantly more diversified product
line and revenue base achieved through acquisitions has reduced our
exposure to demand fluctuations in any one product area within the
industry.
Growth Opportunities
We believe that we are benefitting from four major growth trends in
the aerospace industry:
Increase in Refurbishment and Upgrade Orders. Our substantial
installed base provides significant ongoing revenues from
replacements, upgrades, repairs and spare parts. Approximately 61%
of our revenues for the year ended February 28, 1998 were derived
from refurbishment and upgrade orders. We believe that we are 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 following a
deferral of cabin interior maintenance expenditures in the late
1980s and early 1990s. A significant portion of our recent growth in
backlog, revenues and operating earnings has been from refurbishment
and upgrade programs. We are 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 been purchasing a significant number of new aircraft
in part due to current high load factors and the projected growth in
worldwide air travel. Shipments of aircraft interior products will
grow with new aircraft deliveries.
o According to the Current Market Outlook published by the
Boeing Commercial Airplane Group in 1998, worldwide air
travel growth is projected to average 5% per year over the
next ten years and the worldwide fleet of commercial
passenger aircraft is projected to expand from approximately
10,845 at the end of 1997 to approximately 15,900 by the end
of 2007 and to approximately 23,500 by the end of 2017.
o According to the February 1998 Airline Monitor, the
percentage of new Boeing aircraft deliveries projected to be
wide-body aircraft for 1998 through 2002 is 42% as compared
to 37% for the five-year period ended December 31, 1997. This
shift toward wide-body aircraft is significant to us since
these aircraft require as much as seven times the dollar
value of cabin interior products as do narrow-body aircraft,
including substantially more seats, galley equipment and
in-flight entertainment products.
General Aviation and VIP Aircraft Fleet Expansion and Related
Retrofit Opportunities. General aviation and VIP airframe
manufacturers are experiencing a surge in new aircraft deliveries
similar to that occurring in the commercial aircraft industry.
o According to industry sources, executive aircraft deliveries
amounted to 241 units in calendar 1996 and were approximately
348 in calendar 1997.
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o Industry sources indicate that executive aircraft deliveries
are expected to be approximately 450 in calendar 1998 and
should reach approximately 545 per year by the year 2000.
Several new aircraft models, including the Visionaire
Vantage, Cessna Citation Excel, the Boeing Business Jet,
Global Express and Airbus Business Jet, have been or are
expected to be introduced over the next several years.
o Advances in engine technology and avionics and emergence of
fractional ownership of executive aircraft are all important
growth factors.
In addition to new aircraft deliveries, because we believe we have
been designated as the preferred supplier of seating products and
fluorescent lighting systems of essentially every general aviation
airframe manufacturer, we believe that we are well positioned to
capitalize on retrofit opportunities in the general aviation and VIP
aircraft fleet, which consists of approximately 10,000 aircraft with
an average age of approximately 15 years.
Emergence of Individual Passenger In-flight Entertainment Systems as
a Major New Product Category. Airlines increasingly are demanding
individual passenger in-flight entertainment systems 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. We expect 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.
Business Strategy
Our business strategy is to maintain our leadership position and
best serve our customers by:
o offering the broadest and most integrated product lines and
services in the industry, including not only new product and
follow-on product sales, but also design, integration,
installation and certification services, as well as
maintenance, upgrade and repair services;
o pursuing a worldwide marketing approach focused by airline
and general aviation airframe manufacturer and encompassing
our entire product line;
o pursuing the highest level of quality in every facet of our
operations, from the factory floor to customer support,
o remaining the technological leader in our industry, as well
as significantly growing our installed base of products in
the developing in-flight individual passenger entertainment
market;
o enhancing our position in the growing upgrade, maintenance,
inspection and repair services market; and
o pursuing selective strategic acquisitions in the commercial
aircraft and general aviation cabin interior products
industries.
Recent Developments
For the fiscal year 1999 to date, we have completed six strategic
acquisitions intended to further enhance our leadership position in the
commercial aircraft and general aviation cabin interior products industries. A
brief description of each of these acquisitions is as follows:
o On March 27, 1998, we acquired Aerospace Interiors, Inc. for
a total of 201,895 shares of Common Stock, representing a
purchase price of approximately $5.6 million. Aerospace
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Interiors services, cleans and repairs aircraft interior
parts and products, and is a leading provider of seat repair
and maintenance services performed by non-airline entities.
o On April, 13, 1998, we acquired Puritan-Bennett Aero Systems
Co., a wholly owned subsidiary of Nellcor Puritan Bennett
Inc., for a cash purchase price of $69.7 million. Puritan-
Bennett is a leading manufacturer of commercial aircraft
oxygen delivery systems and passenger service unit components
and systems and is a major supplier of air valves, overhead
lights and switches for both commercial and general aviation
aircraft.
o On April 21, 1998, we acquired Aircraft Modular Products for
a cash purchase price of $117.3 million. Aircraft Modular
Products is a leading manufacturer of cabin interior products
for general aviation (business jet) and commercial-type VIP
aircraft, providing a broad line of products including
seating, sidewalls, bulkheads, credenza, closets, galley
structures. lavatories, tables and sofas, as well as related
spare parts.
o On July 30, 1998, we acquired Aerospace Lighting Corporation
for a total of 964,780 shares of Common Stock, representing a
purchase price of approximately $28.1 million. Aerospace
Lighting is a market leader in producing interior fluorescent
lighting systems for business and corporate jet aircraft.
o On August 7, 1998, we acquired the common stock of SMR for a
total aggregate purchase price of approximately $142.0
million, subject to adjustment. SMR is a leader in providing
design, integration, installation and certification services
for commercial aircraft passenger cabin interiors. SMR
provides a broad range of interior reconfiguration services
that allow airlines to change the size of certain classes of
service, modify and upgrade the seating, install
telecommunications or entertainment options, relocate
galleys, lavatories, and overhead bins, and install crew rest
compartments. SMR is also a supplier of structural design and
integration services, including airframe modifications for
passenger-to-freighter conversions. In addition, SMR provides
a variety of niche products and components that are used for
reconfigurations and conversions. SMR Aerospace's services
are performed primarily on an aftermarket basis, and its
customers include major airlines, such as United Airlines,
Japan Airlines, British Airways, Air France, Cathay Pacific
and Qantas, as well as Boeing, Airborne Express and Federal
Express.
o On September 3, 1998, we acquired substantially all of the
galley equipment assets and certain property and assumed
related liabilities of CF Taylor Interiors Limited and
acquired the common stock of CF Taylor (Wales) Limited, both
wholly owned subsidiaries of EIS Group PLC, for a total cash
purchase price of approximately (pound)14.9 million
(approximately $25.1 million, based upon the exchange rate in
effect on September 3, 1998). CF Taylor is a manufacturer of
galley equipment for both narrow- and wide-body aircraft,
including galley structures, crew rests and related spare
parts.
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B/E's executive offices are located at 1400 Corporate Center Way,
Wellington, Florida 33414, and its telephone number is (561) 791-5000.
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Summary of the Terms of the Exchange Offer
The Exchange Offer relates to the exchange of up to $200 million
aggregate principal amount of outstanding 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 governing the outstanding notes. The form and
terms of the new notes are identical in all material respects to the form and
terms of the outstanding 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 granted under the registration rights agreement, executed as
part of the offering of the outstanding notes, dated November 2, 1998 among the
Company and the initial purchasers in the private offering, including Merrill
Lynch & Co., BT Alex. Brown, Chase Securities Inc., Credit Suisse First Boston,
Morgan Stanley Dean Witter and Paine Webber Incorporated, relating to certain
contingent increases in the interest rates provided for pursuant thereto.
Registration Rights Agreement................ You are entitled to exchange your
notes for registered notes with
substantially identical terms. The
Exchange Offer is intended to
satisfy these rights. After the
Exchange Offer is complete, you
will no longer be entitled to any
exchange or registration rights
with respect to your notes.
The Exchange Offer........................... We are offering to exchange $1,000
principal amount of 9 1/2% Series
B Senior Subordinated Notes due
2008 which have been registered
under the Securities Act of 1933
for each $1,000 principal amount
of our outstanding 9 1/2% Series B
Senior Subordinated Notes due 2008
which were issued in November 1998
in a private offering. In order to
be exchanged, an outstanding note
must be properly tendered and
accepted. All outstanding notes
that are validly tendered and not
validly withdrawn will be
exchanged.
As of this date there are $200
million principal amount of notes
outstanding.
We will issue registered notes on
or promptly after the expiration
of the Exchange Offer.
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), we
believe that the notes issued in
the exchange offer may be offered
for resale, resold and otherwise
transferred by you without
compliance with the registration
and prospectus delivery provisions
of the Securities Act of 1933
provided that:
- the notes issued in the
Exchange Offer are being
acquired in the ordinary
course of business;
- you are not participating,
do not intend to
participate, and have no
arrangement or
understanding with any
person to participate, in
the distribution of the
notes issued to you in the
Exchange Offer;
- you are not a broker-dealer
who purchased such
outstanding notes directly
from us for resale pursuant
to Rule 144A or any other
available exemption under
the Securities Act of 1933;
and
11
<PAGE>
- you are not an "affiliate"
of ours.
If our belief is inaccurate and
you transfer any note issued to
you in the Exchange Offer without
delivering a prospectus meeting
the requirement of the Securities
Act of 1933 or without an
exemption from registration of
your notes from such requirements,
you may incur liability under the
Securities Act of 1933. We do not
assume or indemnify you against
such liability.
Each broker-dealer that is issued
notes in the Exchange Offer for
its own account in exchange for
notes which were acquired by such
broker-dealer as a result of
market-making or other trading
activities, must acknowledge that
it will deliver a prospectus
meeting the requirements of the
Securities Act of 1933, in
connection with any resale of the
notes issued in the Exchange
Offer. 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. A
broker-dealer may use this
Prospectus for an offer to resell,
resale or other retransfer of the
notes issued to it in the Exchange
Offer. We have agreed that, for a
period of 180 days after the date
of this Prospectus, we 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.
We believe that no registered
holder of the outstanding 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 we accept
surrenders for exchange from,
holders of outstanding 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 Date.............................. The Exchange Offer will expire at
5:00 p.m., New York City time,
, 1998, unless we
decide to extend the expiration
date.
Accrued Interest on the Exchange Notes
and the Outstanding Notes.............. The new notes will bear interest
from November 2, 1998. Holders of
outstanding notes whose notes are
accepted for exchange will be
deemed to have waived the right to
receive any payment of interest on
such outstanding notes accrued
from November 2, 1998 to the date
of the issuance of the new notes.
Consequently, holders who exchange
their outstanding notes for new
notes will receive the same
interest payment on May 1, 1999
(the first interest payment date
with respect to the outstanding
notes and the new notes to be
issued in the Exchange Offer) that
they would have received had they
not accepted the Exchange Offer.
Termination of the Exchange
Offer................................. We may terminate the Exchange
Offer if we determine that our
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. We do
not expect any of the foregoing
conditions to occur, although
there can be no assurance that
such conditions will not occur.
Holders of outstanding notes will
have
12
<PAGE>
certain rights against our Company
under the registration rights
agreement executed as part of the
offering of the outstanding notes
should we fail to consummate the
Exchange Offer.
Procedures for Tendering
Outstanding Notes...................... If you are a holder of a note and
you wish to tender your note for
exchange pursuant to the Exchange
Offer, you must transmit to The
Bank of New York, as exchange
agent, on or prior to the
Expiration Date:
either
- a properly completed and duly
executed Letter of Transmittal,
which accompanies this
Prospectus, or a facsimile of
the Letter of Transmittal,
including all other documents
required by the Letter of
Transmittal, to the Exchange
Agent at the address set forth
on the cover page of the Letter
of Transmittal; or
- a computer-generated message
transmitted by means of DTC's
Automated Tender Offer Program
system and received by the
Exchange Agent and forming a
part of a confirmation of book
entry transfer in which you
acknowledge and agree to be
bound by the terms of the
Letter of Transmittal;
and, either
- a timely confirmation of
book-entry transfer of your
outstanding notes into the
Exchange Agent's account at The
Depository Trust Company
("DTC") pursuant to the
procedure for book-entry
transfers described in this
Prospectus under the heading
"The Exchange Offer--Procedure
for Tendering," must be
received by the Exchange Agent
on or prior to the Expiration
Date; or
- the documents necessary for
compliance with the guaranteed
delivery procedures described
below.
By executing the Letter of
Transmittal, each holder will
represent to us that, among other
things, (i) the notes to be issued
in the Exchange Offer are being
obtained in the ordinary course of
business of the person receiving
such new notes whether or not such
person is the holder, (ii) neither
the holder nor any such other
person has an arrangement or
understanding with any person to
participate in the distribution or
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
Owners................................. If you are the beneficial owner of
notes and your name does not
appear on a security position
listing of DTC as the holder of
such notes or if you are a
beneficial owner of registered
notes that are registered in the
name of a broker, dealer,
commercial bank, trust company or
other nominee and you wish to
tender such notes or registered
notes in the Exchange Offer, you
should contact such person whose
name your notes or registered
notes are registered promptly and
instruct such person to tender on
your behalf. If such beneficial
holder wishes to tender on his own
behalf such beneficial
13
<PAGE>
holder must, prior to completing
and executing the Letter of
Transmittal and delivering its
outstanding notes, either make
appropriate arrangements to
register ownership of the
outstanding 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.
Guaranteed Delivery Procedures............... If you wish to tender your notes
and time will not permit your
required documents to reach the
Exchange Agent by the Expiration
Date, or the procedure for
book-entry transfer cannot be
completed on time or certificates
for registered notes cannot be
delivered on time, you may tender
your notes pursuant to the
procedures described in this
Prospectus under the heading "The
Exchange Offer--Guaranteed
Delivery Procedure."
Withdrawal Rights............................ You may withdraw the tender of
your notes at any time prior to
5:00 p.m., New York City time, on
, 1998, the business day prior to
the Expiration Date, unless your
notes were previously accepted for
exchange.
Acceptance of Outstanding Notes and
Delivery of Exchange Notes............. Subject to certain conditions (as
summarized above in "Termination
of the Exchange Offer" and
described more fully under the
"The Exchange
Offer--Termination"), we will
accept for exchange any and all
outstanding notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration
Date.
Certain U.S. Federal Income Tax
Consequences........................... The exchange of the notes will
generally not be a taxable
exchange for United States federal
income tax purposes. We believe
you will not recognize any taxable
gain or loss or any interest
income as a result of such
exchange.
Use of Proceeds.............................. We will not receive any proceeds
from the issuance of notes
pursuant to the Exchange Offer. We
will pay all expenses incident to
the Exchange Offer.
Exchange Agent............................... The Bank of New York is serving as
exchange agent in connection with
the Exchange Offer. The Exchange
Agent can be reached at Corporate
Trust Trustee Administration, 101
Barclay Street, Floor 21W, New
York, NY 10286. For more
information with respect to the
Exchange Offer,
the telephone number for the
Exchange Agent is
and the facsimile number for the
Exchange Agent is (212) 815-5915.
14
<PAGE>
Summary Description of the New Notes
Notes Offered................................ $200,000,000 aggregate principal
amount of 9 1/2% Senior
Subordinated Notes due 2008.
Maturity Date................................ November 1, 2008.
Interest Payments Dates...................... May 1 and November 1 of each year,
commencing May 1, 1999.
Ranking...................................... The notes will be unsecured senior
subordinated obligations and will
be subordinated to all our
existing and future senior
indebtedness. The notes will rank
equally with all our other
existing and future senior
subordinated indebtedness,
including our currently
outstanding 8% senior subordinated
notes due 2008 and 97/8% senior
subordinated notes due 2006, and
will rank senior to all our
subordinated indebtedness. The
notes effectively will rank junior
to all liabilities of our
subsidiaries. Because the notes
are subordinated, in the event of
bankruptcy, liquidation or
dissolution, holders of the notes
will not receive any payment until
holders of senior indebtedness
have been paid in full. The terms
"senior indebtedness" and
"subordinated indebtedness" are
defined in the "Description of the
New Notes--Subordination" and
"Description of the New
Notes--Certain Definitions"
sections of this Prospectus.
As of August 29, 1998, after
giving pro forma effect to the
offering of the outstanding notes
and our use of the net proceeds
from the offering and borrowings
related to certain acquisitions
and related costs, we would have
had outstanding $88.5 million of
senior indebtedness and $549.4
million of senior subordinated
indebtedness outstanding and our
subsidiaries would have had no
indebtedness outstanding.
Optional Redemption.......................... We may redeem the notes, in whole
or in part, at any time on or
after November 1, 2003, at the
redemption prices set forth in
this Prospectus.
Public Equity Offering Optional Before November 1, 2001, we may
Redemption............................. redeem up to 35% of the aggregate
principal amount of the notes with
the net proceeds of a public
equity offering at 109 1/2% of the
principal amount thereof, plus
accrued interest, if 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."
Change of Control............................ Upon certain change of control
events, each holder of notes may
require us to repurchase all or a
portion of its notes at a purchase
price equal to 101% of the
principal amount thereof, plus
accrued interest. See "Description
of the New Notes--Certain
Definitions" for the definition of
a Change of Control.
15
<PAGE>
Certain Covenants............................ The indenture governing the notes
will contain covenants that, among
other things, will limit our
ability and the ability of our
restricted subsidiaries to:
o incur additional indebtedness,
o incur additional senior
subordinated indebtedness,
o pay dividends on, redeem or
repurchase our capital stock,
o make investments,
o issue or sell capital stock of
restricted subsidiaries,
o engage in transactions with
affiliates,
o create certain liens,
o sell assets,
o guarantee indebtedness,
o restrict dividend or other
payments to us, and
o consolidate, merge or transfer
all or substantially all our
assets and the assets of our
subsidiaries on a consolidated
basis.
These covenants are subject to
important exceptions and
qualifications, which are
described under the heading
"Description of the New Notes" in
this Prospectus.
Exchange Offer; Registration Rights.......... Under a registration rights
agreement executed as part of the
offering of the outstanding notes,
we have agreed to:
o file a registration statement
within 30 days after the issue
date of the notes enabling note
holders to exchange the
privately placed notes for
publicly registered notes with
identical terms,
o use our best efforts to cause
the registration statement to
become effective within 120
days after the issue date of
the notes,
o consummate the exchange offer
within 150 days after the
effective date of our
registration date, and
o use our best efforts to file a
shelf registration statement
for the resale of the notes if
we cannot effect an exchange
offer within the time periods
listed above and in certain
other circumstances.
The interest rate on the notes
will increase if we do not comply
with our obligations under the
registration rights agreement. See
"The Exchange Offer."
Risk Factors................................. See "Risk Factors" for a
discussion of factors you should
carefully consider before deciding
to invest in the notes.
16
<PAGE>
Summary Financial Data
(Dollars in thousands, except per share data)
The following table presents our summary historical financial information
as of and for the fiscal years ended February 24, 1996, February 22, 1997 and
February 28, 1998. This data is from our audited consolidated financial
statements and notes. This table also presents our summary historical financial
information as of and for the six months ended August 30, 1997 and August 29,
1998. This data is from our unaudited condensed consolidated financial statement
and notes, but, in the opinion of our management, includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. Operating results for the six months ended August 30, 1997 and August
29, 1998 do not necessarily show what the results for a full year may be. Also
shown in the table is certain unaudited pro forma financial information for the
fiscal year ended February 28, 1998 and as of and for the six months ended
August 29, 1998, reflecting pro forma adjustments as described in the footnotes
to the table. Since the information in this table is only a summary, you should
read our historical financial statements and the related notes, which are
incorporated herein by reference, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Pro Forma Combined Financial
Data" found elsewhere in this Prospectus. You should also read our financial
statements and other information filed with the SEC.
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
Historical Pro Forma
---------------------------------------- ------------
Feb. 24, Feb. 22, Feb. 28, Feb. 28,
1996(a) 1997 1998 1998(b)(c)
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Statements of Operations Data:
Net sales.................................... $232,582 $412,379 $487,999 $680,741
Cost of sales................................ 160,031 270,557 309,094 436,594
--------- -------- -------- ---------
Gross profit................................. 72,551 141,822 178,905 244,147
Operating expenses:
Selling, general and administrative.... 42,000 51,734 58,622 75,144
Research, development and 37,083
engineering...................... 58,327(e) 45,685 58,065
Amortization expense................... 9,499 10,607 11,265 18,363
In-process research and development
and acquisition-related
expenses......................... -- -- -- 169,155(h)
Other expenses......................... 4,170(f) -- 4,664(g) 6,664(g)
--------- --------- --------- -----------
Operating earnings (loss).................... (41,445) 42,398 58,669 (83,244)
Interest expense, net........................ 18,636 27,167 22,765 54,909
--------- --------- --------- -----------
Earnings (loss) before income taxes,
extraordinary item and cumulative
effect of change in accounting
principle.............................. (60,081) 15,231 35,904 (138,153)
Income taxes................................. -- 1,522 5,386 4,650
--------- --------- --------- -----------
Earnings (loss) before extraordinary item 13,709
and cumulative effect of change in
accounting principle................... (60,081) 30,518 (142,803)
Extraordinary item........................... -- -- 8,956(i) 8,956(i)
--------- --------- --------- -----------
Earnings (loss) before cumulative effect of 13,709
change in accounting principle......... (60,081) 21,562 (151,759)
Cumulative effect of change in accounting
principle.............................. (23,332)(e) -- -- --
---------- --------- --------- -----------
Net earnings (loss).......................... $ (83,413) $ 13,709 $ 21,562 $ (151,759)
========= ========= ========= ===========
Other Data:
Gross margin................................. 31.2% 34.4% 36.7% 35.9%
EBITDA(j).................................... $ (18,840) $ 66,545 $ 87,493 $ 128,034
Depreciation and amortization................ 18,435 24,147 24,160 35,459
Capital expenditures......................... 13,656 14,471 28,923 35,989
Backlog, at period end(k).................... 340,000 420,000 560,000 NM
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------------
Historical Pro Forma
-------------------------- ------------
August 30, August 29, August 29,
1997 1998(d) 1998(b)(c)
---------- ---------- ------------
<S> <C> <C> <C>
Statements of Operations Data:
Net sales.................................... $233,689 $296,343 $363,747
Cost of sales................................ 148,477 184,863 228,258
-------- --------- ---------
Gross profit................................. 85,212 111,480 135,489
Operating expenses:
Selling, general and administrative.... 27,935 37,041 46,403
Research, development and
engineering...................... 22,550 24,742 28,402
Amortization expense................... 5,529 7,360 8,560
In-process research and development
and acquisition-related
expenses......................... -- 169,155(h) --
Other expenses......................... -- -- --
--------- ----------- ----------
Operating earnings (loss).................... 29,198 (126,818) 52,124
Interest expense, net........................ 11,531 16,446 26,796
--------- ----------- ----------
Earnings (loss) before income taxes,
extraordinary item and cumulative
effect of change in accounting
principle.............................. 17,667 (143,264) 25,328
Income taxes................................. 2,647 4,401 4,306
--------- ----------- ----------
Earnings (loss) before extraordinary item
and cumulative effect of change in
accounting principle................... 15,020 (147,665) 21,022
Extraordinary item........................... -- -- --
--------- ----------- ----------
Earnings (loss) before cumulative effect of
change in accounting principle......... 15,020 (147,665) 21,022
Cumulative effect of change in accounting
principle.............................. -- -- --
---------- ----------- ----------
Net earnings (loss).......................... $ 15,020 $ (147,665) $ 21,022
========== =========== ==========
Other Data:
Gross margin................................. 36.5% 37.6% 37.2%
EBITDA(j).................................... $ 41,663 $ 58,595 $ 70,643
Depreciation and amortization................ 12,465 16,258 18,519
Capital expenditures......................... 11,656 20,210 21,613
Backlog, at period end(k).................... 525,000 700,000 NM
</TABLE>
(continued on following page)
17
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
Historical Pro Forma
---------------------------------------- ------------
Feb. 24, Feb. 22, Feb. 28, Feb. 28,
1996(a) 1997 1998 1998(b)(c)
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Selected Ratios:
Ratio of earnings to fixed charges(l)........ NM(m) 1.6x 2.5x NM(m)
Ratio of EBITDA to interest expense,
net(n)................................. NM 2.4x 3.8x 2.3x
</TABLE>
<TABLE>
<CAPTION>
<CAPTION>
Six Months Ended
---------------------------------------------
Historical Pro Forma
-------------------------- ------------
August 30, August 29, August 29,
1997 1998(d) 1998(b)(c)
---------- ---------- ------------
<S> <C> <C> <C>
Selected Ratios:
Ratio of earnings to fixed charges(l)........ 2.5x NM(m) 1.9x
Ratio of EBITDA to interest expense,
net(n)................................. 3.6x 3.6x 2.6x
</TABLE>
August 29, 1998
----------------------------
Actual Pro Forma(b)(c)
--------- ---------------
Balance Sheet Data (end of period):
Working capital............................ $182,116 $199,850
Total assets............................... 813,221 875,448
Long-term debt............................. 464,813 629,937
Stockholders' equity....................... 168,950 50,950
- -------------
(a) On January 24, 1996, we acquired all of the stock of Burns Aerospace
Corporation, an industry leader in commercial aircraft seating. The
acquisition of Burns was accounted for as a purchase. The results of
Burns are included in our historical financial data from the date of
acquisition.
(b) As adjusted to reflect the application of the net proceeds from this
offering to repurchase the 4,000,000 shares of our common stock issued to
the former stockholders of SMR and related costs associated with the
issuance of the notes.
(c) The pro forma combined statements of operations data for the fiscal year
ended February 28, 1998 and the six months ended August 29, 1998 gives
effect to the recent acquisitions of the Company which include (i) the
acquisition of SMR Aerospace, Inc. on August 7, 1998, (ii) the
acquisition of Puritan-Bennett Aero Systems on April 13, 1998, (iii) the
acquisition of Aircraft Modular Products on April 21, 1998 and (iv) the
acquisition of CF Taylor and one of its affiliates (together, "CF
Taylor") on September 3, 1998 and the refinancing of our 9 3/4% Senior
Notes due 2003 (which was completed on March 16, 1998), in each case as
if the acquisitions and the refinancing had occurred on February 23,
1997. The pro forma combined balance sheet as of August 29, 1998 assumes
that the acquisition of CF Taylor occurred on August 29, 1998. See "Pro
Forma Combined Financial Data."
(d) On March 27, 1998, we acquired Aerospace Interiors, Inc. On April 13,
1998, we acquired Puritan-Bennett Aero Systems Co. On April 21, 1998, we
acquired Aircraft Modular Products. On July 30, 1998, we acquired
Aerospace Lighting Corporation. On August 7, 1998, we acquired SMR
Aerospace, Inc. and its affiliates. The results of such acquisitions are
included in our historical financial data from the date of acquisition.
See "Summary--Recent Developments."
(e) In fiscal 1996, we changed our method of accounting relating to the
capitalization of precontract engineering costs. Previously our
precontract engineering costs were included as a component of inventories
and charged to earnings as the product was shipped. Effective February
26, 1995, such costs have been charged to research, development and
engineering and expensed as incurred. In connection with such change in
accounting, we recorded a charge to earnings of $23,332.
(f) In fiscal 1996, in conjunction with our rationalization of our seating
business and as a result of the Burns acquisition, we recorded a charge
to earnings of $4,170 related to costs associated with the integration
and consolidation of our European seating operations.
(g) In fiscal 1998, we settled a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. We
recorded a charge of $4,664 in fiscal year 1998 related to fines, civil
penalties and associated legal fees arising from the settlement. See
"Business--Legal Proceedings."
18
<PAGE>
(h) During the six months ended August 29, 1998, we recorded a charge of
$169,155 for the write-off of acquired in-process research and
development and acquisition-related expenses associated with the Puritan
Bennett, Aircraft Modular Products and SMR Aerospace transactions. These
expenses are reflected in the Pro Forma Combined Statements of Operations
for the year ended February 28, 1998 as the acquisitions are assumed to
have occurred on February 23, 1997. In addition, we expect that a portion
of the CF Taylor purchase price will be allocated to in-process research
and development and acquisition-related costs and will be written off. We
have engaged consultants to assist in the allocation of the purchase
price of CF Taylor, which we anticipate will be completed prior to the
end of the third quarter ending on November 28, 1998. However, based on
recent acquisitions by us, we do not expect that the portion of the
purchase price that will be allocated to in-process research and
development, and subsequently written off, will be in excess of 10% of
the CF Taylor purchase price. In-process research and development
expenses arise from new product development projects that are in various
stages of completion at the acquired enterprise at the date of
acquisition. In-process research and development expenses for products
under development at the date of acquisition that had not established
technological feasibility and for which no alternative use is identified
are written off.
(i) We incurred an extraordinary charge of $8,956 during fiscal year 1998 for
unamortized debt issue costs, tender and redemption premium and fees and
expenses related to the repurchase of our 9 3/4% Senior Notes due 2003.
(j) EBITDA represents net earnings before deducting extraordinary items,
income tax expenses, interest expense, net, other expenses, in-process
research and development and acquisition-related expenses and
depreciation and amortization expense. EBITDA is not a measurement in
accordance with generally accepted accounting principles. EBITDA is
presented to help you in fully analyzing our financial condition. These
data are not intended to be a substitute for net income (loss) or
operating cash flow as a measure of our profitability.
(k) As adjusted to exclude certain backlog which was removed from bookings in
August 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Bookings and Backlog Information."
(l) 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.
(m) Earnings were insufficient to cover fixed charges by $60,100 for the
fiscal year ended February 24, 1996 and by $143,800 for the six months
ended August 29, 1998. In addition, earnings were insufficient to cover
fixed charges by $138,200 for the year ended February 28, 1998 on a pro
forma basis giving effect to offering of the outstanding notes and our
use of the net proceeds from the offering and borrowings related to
certain acquisitions and related costs. The insufficiencies were
primarily the result of the charge to earnings of $23,332 in Fiscal 1996
for the change in accounting principal described in note (e) above and
the charge of $169,155 in Fiscal 1999 for the write-off of acquired
in-process research and development and acquisition related expenses
described in note (h) above.
(n) The ratio of EBITDA to interest expense in the Pro Forma columns was
computed on a pro forma basis giving effect to the offering of the
outstanding notes and our use of the net proceeds from the offering and
borrowings related to certain acquisitions and related costs in each case
as if the offering and borrowings related to certain acquisitions and
related costs had occurred on February 23, 1997.
19
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this Prospectus before deciding to invest in the notes.
Significant Indebtedness and Interest Payment Obligations
As of August 29, 1998, after giving pro forma effect to the offering of
the outstanding notes and our use of the net proceeds of the offering and
borrowings related to certain acquisitions and related costs, we would have had
outstanding $637.9 million of consolidated indebtedness (of which approximately
$88.5 million would have been senior indebtedness) and our total consolidated
indebtedness, as a percentage of capitalization, would have been 93%. For the
six months ended August 29, 1998, our earnings would have been insufficient to
cover fixed charges by $143.8 million, primarily due to the write-off of
acquired in-process research and development and acquisition-related expenses of
$169.2 million. We may incur additional indebtedness in the future, although we
will be limited in the amount we could incur by our existing and future debt
agreements.
Our high level of indebtedness could have important consequences to note
holders, such as:
o limiting our ability to obtain additional financing to fund our
growth strategy, working capital, capital expenditures, debt
service requirements or other purposes;
o limiting our ability to use operating cash flow in other areas
of our business because we must dedicate a substantial portion
of these funds to make principal payments and fund debt service;
o increasing our vulnerability to adverse economic and industry
conditions; and
o increasing our vulnerability to interest rate increases because
borrowings under our bank credit facilities are at variable
interest rates.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend upon, among other things, our future operating
performance and our ability to refinance indebtedness when necessary. Each of
these factors is to a large extent dependent on economic, financial, competitive
and other factors, beyond our control. If, in the future, we cannot generate
sufficient cash from operations to make scheduled payments on the notes or to
meet our other obligations, we will need to refinance, obtain additional
financing or sell assets. We cannot assure you that our business will generate
cash flow, or that we will be able to obtain funding, sufficient to satisfy our
debt service requirements.
Restrictions in Debt Agreements on Our Operations
The operating and financial restrictions and covenants in our existing
debt agreements, including our bank credit facilities, the indentures governing
these notes, the 9-7/8% senior subordinated notes and the 8% senior subordinated
notes, and any future financing agreements may adversely affect our ability to
finance future operations or capital needs or to engage in other business
activities. See "Description of the New Notes" and "Description of Certain
Indebtedness." A breach of any of these restrictions or covenants could cause a
default under other debt, and the notes. A significant portion of our
indebtedness then may become immediately due and payable. We are not certain
whether we would have, or be able to obtain, sufficient funds to make these
accelerated payments, including payments on the notes.
Subordination of the Notes to Senior Indebtedness
The notes will be subordinate to all our senior indebtedness. In
addition, the notes effectively will rank junior to all liabilities of our
subsidiaries. As of August 29, 1998, after giving pro forma effect to the
offering of the outstanding notes and our use of the net proceeds of the
offering and borrowings related to certain acquisitions and related costs, we
would have had outstanding $88.5 million of senior indebtedness and $549.4
million of senior subordinated indebtedness and our subsidiaries would have had
no indebtedness. We also may incur additional senior indebtedness consistent
with the terms of our debt agreements. For example, upon consummation of the
offering of the outstanding notes and our use of the net proceeds from the
offering, as of August 29, 1998, we would have had $109.4 million available
under our bank credit facilities which, if borrowed, would be senior
indebtedness.
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In the event of our bankruptcy, liquidation or dissolution, our assets would be
available to pay obligations on the notes only after all payments had been made
on our senior indebtedness. We cannot assure you that sufficient assets will
remain to make any payments on the notes. In addition, certain events of default
under our senior indebtedness would prohibit us from making any payments on the
notes. The term "senior indebtedness" is defined in the "Description of the New
Notes--Subordination" section of this Prospectus.
Notes Are Unsecured
In addition to being subordinate to all of our senior indebtedness, the
notes will not be secured by any of our assets. Our obligations under our bank
credit facilities are secured by substantially all of our assets. If we became
insolvent or are liquidated, or if payment under our bank credit facilities is
accelerated, the lenders under our bank credit facilities would be entitled to
exercise the remedies available to a secured lender under applicable law.
Therefore, our bank lenders will have a claim on such assets before the holders
of these notes. See "Description of Certain Indebtedness."
Possible Inability to Purchase Notes upon a Change of Control
Upon certain change of control events, each holder of notes may require
us to repurchase all or a portion of its notes at a purchase price equal to 101%
of the principal amount thereof, plus accrued interest. Our ability to
repurchase the notes upon a change of control event will be limited by the terms
of our debt agreements. Upon a change of control event, we may be required
immediately to repay the outstanding principal, any accrued interest on and any
other amounts owed by us under our bank credit facilities. There can be no
assurance that we would be able to repay amounts outstanding under our bank
credit facilities or obtain necessary consents under such facilities to
repurchase these notes. In addition, upon the happening of a change of control
event, we will be required to offer to purchase all of the 97/8% notes and the
8% notes. Any requirement to offer to purchase any outstanding notes may result
in us having to refinance our outstanding indebtedness, which we may not be able
to do. In addition, even if we were able to refinance such indebtedness, such
financing may be on terms unfavorable to us. The term "Change of Control" is
defined in the "Description of the New Notes--Certain Definitions."
Dependence upon Conditions in the Airline Industry
Our principal customers are the world's commercial airlines. As a result,
our business is directly dependent upon the conditions in the highly cyclical
and competitive commercial airline industry. In the late 1980s and early 1990s,
the world airline industry suffered a severe downturn, which resulted in record
losses and several air carriers seeking protection under bankruptcy laws. As a
consequence, during such period, airlines sought to conserve cash by reducing or
deferring scheduled cabin interior refurbishment and upgrade programs and by
delaying purchases of new aircraft. This led to a significant contraction in the
commercial aircraft cabin interior products industry and a decline in our
business and profitability. Since early 1994, the airlines have experienced a
turnaround in operating results, leading the domestic airline industry to record
operating earnings during calender years 1995 through 1997. This financial
turnaround has, in part, been driven by record load factors, rising fare prices
and declining fuel costs. The airlines have substantially improved their balance
sheets through cash generated from operations and the sale of 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 and the current general economic and financial turbulence, the current
profitability of the airline industry may not continue and the airlines may not
be able to 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 of 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 our revenues and
margins.
Recently, turbulence in the financial and currency markets of many Asian
countries has led to uncertainty as to the economic outlook for these countries.
Of our $700 million of backlog at August 29, 1998, we had $34 million with Asian
carriers deliverable in fiscal 1999 and a further $107 million deliverable in
subsequent fiscal years. Of such Asian carrier backlog, approximately $35
million was with Japan Airlines, Singapore Airlines and Cathay Pacific. Although
not all carriers have been affected by the current economic events in the
Pacific Run, certain carriers could cancel or defer their existing orders and
future orders from airlines in these countries may be adversely
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affected. In addition, Boeing has recently announced that in light of the recent
economic conditions in Asia, it may need to adjust its production schedules over
the next several years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Industry Conditions" and "--Deferred Tax
Assets" and "Business--Industry Overview."
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-fight
entertainment systems, such as the MDDS interactive individual passenger
in-flight entertainment system we have developed. Development of the MDDS and
related in-flight entertainment systems required substantial investment by us
and third parties in research, development and engineering. Our future success
may depend to some extent on our ability to continue to develop, profitably
manufacture and deliver, on a timely basis, other technologically advanced,
reliable high-quality products, which can be readily integrated into complex
cabin interior configurations. See "Business--Products and Services."
Competition
We compete with a number of established companies that have significantly
greater financial, technological and marketing resources than we do. Although we
have achieved a significant share of the market for a number of our commercial
airline cabin interior products, there can be no assurance that we will be able
to maintain this market share. Our ability to maintain our market share will
depend on our ability to remain the supplier of retrofit and refurbishment
products and spare parts on the commercial fleets on which our products are
currently in service. It will also depend on our success in causing our products
to be selected for installation in new aircraft, including next-generation
aircraft, expected to be purchased by the airlines over the next decade, and in
avoiding product obsolescence.
Our 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 and Rockwell Collins, each of
which has significantly greater technological capabilities and financial and
marketing resources than we do. See "Business--Competition."
Customer Delivery Requirements
The commercial aircraft cabin interior products industry is currently
experiencing a period of rapid growth. From February 22, 1997 to August 29,
1998, our backlog has increased by approximately 67%. Our ability to receive new
contract awards and to deliver our existing backlog is dependent upon our (and
our suppliers') ability to increase deliveries to meet the recent surge in
demand. Although we believe we have sufficient manufacturing capacity to meet
customer demand, we, and our suppliers, may not be able to meet the increased
product delivery requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Bookings and Backlog Information"
and "Business--Backlog."
General Aviation Acquisitions; Ability to Integrate Acquired Businesses;
Additional Capital Requirements
Between 1989 and January 1996, we acquired nine companies. During fiscal
1999, we acquired six additional companies. See "Summary--Recent Developments."
Through several of these recent acquisitions, we have expanded our activities
from the commercial to the general aviation market. There can be no assurance
that we will be successful in entering the general aviation market. We intend to
consider future strategic acquisitions in the commercial airline and general
aviation cabin interior industries, some of which could be material to us. We
are in discussions from time to time with one or more third parties regarding
possible acquisitions. As of the date of this Prospectus we have no agreement or
understanding on any acquisition. Our ability to continue to achieve our goals
will depend upon our ability to integrate effectively the recent and any future
acquisitions and to achieve cost efficiencies. Although we have been successful
in the past in doing so, we may not continue to be successful. See
"Business--Competitive Strengths."
Depending upon, among other things, the acquisition opportunities
available, we may need to raise additional funds. We may seek additional funds
through public offerings or private placements of debt or equity securities or
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bank loans. In the absence of such financing, our ability to make future
acquisitions in accordance with our business strategy, to absorb adverse
operating results, to fund capital expenditures or to respond to changing
business and economic conditions may be adversely affected. All of these factors
may have a material adverse effect on our business, results of operations and
financial condition.
Regulation
The Federal Aviation Administration (the "FAA") prescribes standards and
licensing requirements for aircraft components, including virtually all
commercial airline and general aviation cabin interior products, and licenses
component repair stations within the United States. Comparable agencies regulate
these matters in other countries. If we fail to obtain a required license for
one of our products or services or lose a license previously granted, the sale
of such 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
Regulations."
Potential Failure of Computer Systems to Recognize Year 2000
We are highly dependent on our computer software programs and operating
systems in operating our business. We also depend on the proper functioning of
computer systems of third parties, such as vendors and clients. The failure of
any of these systems to appropriately interpret the upcoming calendar year 2000
could have a material adverse effect on our financial condition, results of
operations, cash flow and business prospects. We are currently identifying our
own applications that will not be Year 2000 compliant and taking steps to
determine whether third parties are doing the same. In addition, we are
implementing a worldwide plan to prepare our computer systems to be Year 2000
compliant by the first half of 1999. We have already spent $17 million on Year
2000 issues and estimate that the total cost of implementing our Year 2000
compliance program will require an additional $13 million.
Our inability to remedy our own Year 2000 problems or the failure of
third parties to do so may cause business interruptions or shutdown, financial
loss, regulatory actions, reputational harm and/or legal liability. We can not
assure you that our Year 2000 program or the programs of third parties who do
business with us will be effective or that our estimates about the timing and
cost of completing our program will be accurate. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Year 2000 Costs."
Risks Inherent in International Operations
Our foreign operations accounted for 26% of total sales for each of the
six months ended August 29. 1998 and fiscal 1998, as compared to 24% for the six
months ended August 30, 1997 and 25% for fiscal 1997. In addition, we have
direct investments in a number of subsidiaries in foreign countries (primarily
in Europe). Fluctuations in the value of foreign currencies affect the dollar
value of our net investment in foreign subsidiaries, with these fluctuations
being included in a separate component of stockholders' equity. Operating
results of foreign subsidiaries are translated into U.S. dollars at average
monthly exchange rates. For the six months ended August 29, 1998 and fiscal
1998, the impact of such transactions on operating results was not significant.
However, we reported a cumulative foreign currency translation amount of $(2.6)
million in stockholders' equity at August 29, 1998 as a result of foreign
currency adjustments. There can be no assurance that we will not incur
additional adjustments in future periods. In addition, the U.S. dollar value of
transactions based in foreign currency (collections on foreign sales or payments
for foreign purchases) also fluctuates with exchange rates. Historically,
foreign currency risk has not been material because a substantial majority of
our sales have been denominated in the currency of the country of product origin
and no repatriation of earnings has occurred (or is anticipated). However, there
can be no assurance that a substantial majority of sales will continue to be
denominated in the currency of the country of product origin or as to the impact
of changes in the value of the United States dollar or other currencies. The
largest foreign currency exposure results from activity in Dutch guilders,
British pounds and Japanese yen.
We have not hedged net foreign investments in the past, although we may
engage in hedging transactions in the future to manage or reduce our exchange
risk. There can be no assurance that our attempts to manage our foreign currency
exchange risk will be successful.
Our foreign operations could also be subject to unexpected changes in
regulatory requirements, tariffs and other market barriers and political and
economic instability in the countries where we operate. There can be no
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assurance as to the impact of any such events that may occur in the future. See
"Risk Factors--Dependence upon Conditions in the Airline Industry."
Risk Associated with the Conversion by Certain EU Member States to the "Euro"
We may be exposed to certain risks as a result of the conversion by
certain European Union member states of their respective currencies to the
"euro" as legal currency on January 1, 1999. The conversion rates between such
member states' currencies and the euro will be fixed by the Council of the
European Union. Risks related to the conversion to the euro could include, among
other things:
o effects on pricing due to increased cross-border price
transparency;
o costs of modifying information systems, including both
software and hardware;
o costs of relying on third parties whose systems also
require modification;
o changes in the conduct of business and in the principal
markets for our products and services; and
o changes in currency exchange rate risk.
We have analyzed whether the conversion to the euro will materially
affect our business operations. While we are uncertain as to the impact of the
conversion, we do not expect costs in connection with the euro conversion to be
material. However, the actual effects of the conversion cannot be known until
the conversion to the euro has taken place and there can be no assurance that
the actual effects of the conversion could not have a material adverse effect on
our business, results of operations, and financial condition.
Environmental Matters
We are subject to extensive and changing federal, state and foreign laws
and regulations establishing health and environmental quality standards, and may
be subject to liability or penalties for violations of those standards. We are
also subject to laws and regulations governing remediation of contamination at
facilities currently or formerly owned or operated by us to which we have sent
hazardous substances or wastes for treatment, recycling or disposal. We believe
that we are currently in compliance, in all material respects, with all such
laws and regulations. However, we may be subject to future liabilities or
obligations as a result of new or more stringent interpretations of existing
laws and regulations. In addition, we may have liabilities or obligations in the
future if we discover any environmental contamination or liability at any of our
facilities, or at facilities we may acquire.
Liquid Trading Market for the Notes May Not Develop
There has not been established trading market for the notes. Although
each initial purchaser has informed us that it currently intends to make a
market in the outstanding notes and, if issued, the exchange notes, which will
replace the outstanding notes, it has no obligation to do so and may discontinue
making a market at any time without notice.
The notes are eligible for trading in the Private Offerings, Resale and
Trading through the Automatic Linkage ("PORTAL") market. However, we do not
intend to apply for listing of the outstanding notes or, if issued, the exchange
notes, on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
The liquidity of any market for the notes will depend upon the number of
holders of the notes, our performance, the market for similar securities, the
interest of securities dealers in making a market in the notes and other
factors. A liquid trading market may not develop for the notes.
Consequences of Failure to Exchange
Untendered outstanding notes that are not exchanged for new notes
pursuant to the Exchange Offer will remain restricted securities. Outstanding
notes will continue to be subject to the following restrictions on transfer: (i)
outstanding notes may be resold only if registered pursuant to the Securities
Act, if an exemption from registration
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is available thereunder, or if neither such registration nor such exemption is
required by law, (ii) outstanding notes shall bear a legend restricting transfer
in the absence of registration or an exemption therefrom and (iii) a holder of
outstanding notes who desires to sell or otherwise dispose of all or any part of
its outstanding notes under an exemption from registration under the Securities
Act, if requested by us, must deliver to us an opinion of independent counsel
experienced in Securities Act matters, reasonably satisfactory in form and
substance to us, that such exemption is available.
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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 net proceeds less estimated
debt issue costs received by the Company from the sale of the outstanding notes
were approximately $193.7 million. The Company used approximately $118.0 million
of the net proceeds from the offering of the outstanding notes (the "Offering"),
to repurchase four million shares (the "SMR Shares") of the Company's common
stock previously issued to the selling stockholders in connection with the
acquisition of SMR. The remainder of the net proceeds were used for the
repayment of approximately $75.0 million of outstanding borrowings under the
Company's bank credit facilities.
The Company paid for the acquisition of SMR by issuing the SMR Shares
(then valued at approximately $30 per share) to the former stockholders of SMR
and paying them $2.0 million in cash. The Company also paid $22.0 million in
cash to the employee stock ownership plan of a subsidiary of SMR Aerospace to
purchase the minority equity interest in such subsidiary held by the ESOP,
bringing the total aggregate purchase price paid by the Company for SMR
Aerospace to approximately $142.0 million. The Company agreed to register for
sale with the Securities and Exchange Commission the SMR Shares. If the net
proceeds from the sale of the shares, which included the $2.0 million in cash
already paid, was less than $120.0 million, subject to adjustment, the Company
agreed to pay such difference to the selling stockholders in cash. The Company's
obligations to the selling stockholders were secured by an irrevocable stand-by
letter of credit from The Chase Manhattan Bank in favor of the selling
stockholders. This letter of credit could have been drawn upon after December
31, 1998 if the selling stockholders had not received net proceeds of $120.0
million, including the $2.0 million in cash already paid, from the sale of the
SMR Shares. Because of the market price for the Company's common stock and the
Company's payment obligation to the selling stockholders described above, the
Company decided to repurchase the SMR Shares with approximately $118.0 million
of the proceeds from the sale of the outstanding notes (representing the net
proceeds of $120.0 million the Company was obligated to pay the selling
stockholders, less the $2.0 million in cash the Company already paid them)
instead of registering them for sale. In connection with the repurchase of the
SMR shares, the irrevocable stand-by letter of credit was returned to The Chase
Manhattan Bank. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
THE EXCHANGE OFFER
General
In connection with the sale of the outstanding notes (the "Old Notes"),
the purchasers thereof became entitled to the benefits of certain registration
rights (the "Registration Rights"). Pursuant to the registration rights
agreement executed as part of the Offering (the "Registration Rights
Agreement"), the Company agreed to (i) file within 30 days, and cause to become
effective within 120 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 to be issued in the Exchange Offer
(the "New Notes" and, together with the Old Notes, the "Notes") and (ii) cause
the Exchange Offer to be consummated within 150 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 150 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 in the Offering (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 150th 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 120th 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 150th 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 120-day period in the case of clause (ii) above or after such 150-day
period in the case of clause (iii) above. The aggregate amount of such increase
from the original interest rate pursuant to those
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provisions will in no event exceed one-half of one percent per annum. Upon (x)
the effectiveness of the Registration Statement after the 120-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
150-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 9 1/2%. 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, $200 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 , 1998 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
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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 , 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 November 2, 1998, payable
semiannually on May 1 and November 1 of each year commencing on May 1, 1999, at
the rate of 9 1/2% 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 November 2, 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 May 1, 1999
(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 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 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
28
<PAGE>
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 bookentry 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 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 t he 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
29
<PAGE>
waived. Any Old Notes received by the Exchange Agent that are not property
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 duty executed Notice
of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount
of Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in proper form
for transfer and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five business
days after the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York 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
deter-
30
<PAGE>
mined 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 property 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
The Bank of New York, the Trustee under the indenture governing the Notes
(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: The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Adminstration
Facsimile Transmission: (212) 815-5915
Confirm by Telephone:
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.
31
<PAGE>
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.
32
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
August 29, 1998 and on a pro forma basis (i) as adjusted to give effect to the
sale of the Old Notes in the Offering after deducting estimated discounts,
commissions and other offering expenses, and the application of the net proceeds
of the Offering as described in "Use of Proceeds" and (ii) as if the acquisition
of CF Taylor occurred on August 29, 1998. The table should be read in
conjunction with the B/E historical financial statements, including the notes
thereto, which are incorporated herein by reference, and "Pro Forma Combined
Financial Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of August 29, 1998
---------------------------------------------
Actual Pro Forma (a)
---------------- ------------------
(Dollar in thousands)
<S> <C> <C>
Short-term debt, including current maturities of long-term debt............... $ 7,983 $ 7,983
Long-term debt, excluding current maturities:
Bank Credit Facility..................................................... 113,500 78,500(b)
97/8% Senior Subordinated Notes due 2006................................. 100,000 100,000
8% Senior Subordinated Notes due 2008.................................... 249,409 249,409
Notes offered hereby..................................................... -- 200,000
Other.................................................................... 1,904 2,028
----------- -----------
Total long-term debt................................................ 464,813 629,937
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;
28,251,910 shares issued and outstanding; 24,251,910 shares
outstanding (as adjusted)........................................... 283 243
Additional paid-in capital............................................... 359,660 241,700
Accumulated deficit...................................................... (188,389) (188,389)
Cumulative foreign exchange translation adjustment....................... (2,604) (2,604)
------------ ------------
Total stockholders' equity.......................................... 168,950 50,950
----------- -----------
Total capitalization................................................ $ 641,746 $ 688,870
=========== ===========
</TABLE>
- -------------
(a) Adjusted to reflect the sale of the Old Notes. The Company used
approximately $118.0 million of the net proceeds from the Offering to
repurchase the four million shares of the Company's common stock previously
issued to the selling stockholders in connection with the acquisition of
SMR, with the remainder used to repay bank indebtedness under the Bank
Credit Facility (as defined herein). Following the Offering and the
application of the net proceeds received therefrom, the Company would have
available under its Bank Credit Facility approximately $109.4 million for
subsequent borrowings.
(b) The pro forma amount set forth above for the Bank Credit Facility reflects
the August 29, 1998 balance plus borrowings in September 1998 related to
certain acquisitions and related costs less the application of the proceeds
of the Offering.
33
<PAGE>
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
On January 24, 1996, the Company acquired all of the stock of Burns
Aerospace Corporation ("Burns"). On March 27, 1998, the Company acquired
Aerospace Interiors, Inc. ("ASI"). On April 13, 1998, the Company completed its
acquisition of Puritan-Bennett Aero Systems Co. ("PBASCO") and on April 21,
1998, the Company acquired substantially all of the assets of Aircraft Modular
Products ("AMP"). On July 30, 1998 the Company acquired Aerospace Lighting
Corporation ("ALC") and on August 7, 1998, the Company acquired SMR Aerospace,
Inc. and its affiliates ("SMR"). The financial data as of and for the fiscal
years ended February 26, 1994, February 25, 1995, February 24, 1996, February
22, 1997 and February 28, 1998 have been derived from financial statements which
have been audited by B/E's independent auditors. The financial data for the six
months ended August 30, 1997 and August 29, 1998 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 of such periods. Operating results for the six months ended August
30, 1997 and August 29, 1998 are not necessarily indicative of results that may
be expected for a full year. The following financial information is qualified by
reference to, and should be read in conjunction with, the B/E historical
financial statements, including notes thereto, which are incorporated herein by
reference, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
---------------------------------------------------------- --------------------
Feb. 26, Feb. 25, Feb. 24, Feb. 22, Feb. 28, Aug. 30, Aug. 29,
1994 1995 1996(a) 1997 1998 1997 1998(b)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ....................................$ 203,364 $ 229,347 $ 232,582 $ 412,379 $ 487,999 $ 233,689 $ 296,343
Cost of sales ................................ 136,307 154,863 160,031 270,557 309,094 148,477 184,863
--------- --------- --------- --------- --------- --------- ---------
Gross profit ................................. 67,057 74,484 72,551 141,822 178,905 85,212 111,480
Operating expenses:
Selling, general and administrative ........ 28,164 31,787 42,000 51,734 58,622 27,935 37,041
Research, development and engineering ...... 9,876 12,860 58,327(c) 37,083 45,685 22,550 24,742
Amortization expense ....................... 7,599 9,954 9,499 10,607 11,265 5,529 7,360
In-process research and development and
acquisition related expenses ............ -- -- -- -- -- -- 169,155(f)
Other expenses ............................. -- 23,736(d) 4,170(d) -- 4,664(e) -- --
--------- --------- --------- --------- --------- --------- ---------
Operating earnings (loss) .................... 21,418 (3,853) (41,445) 42,398 58,669 29,198 (126,818)
Interest expense, net ........................ 12,581 15,019 18,636 27,167 22,765 11,531 16,446
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before income taxes (benefit),
extraordinary item and cumulative effect of
change in accounting principle ............... 8,837 (18,872) (60,081) 15,231 35,904 17,667 (143,264)
Income taxes (benefit) ....................... 3,481 (6,806) -- 1,522 5,386 2,647 4,401
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting
principle .................................... 5,356 (12,066) (60,081) 13,709 30,518 15,020 (147,665)
Extraordinary item ........................... -- -- -- -- 8,956(g) -- --
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before cumulative effect of
change in accounting principle ............. 5,356 (12,066) (60,081) 13,709 21,562 15,020 (147,665)
Cumulative effect of change in accounting
principle .................................. -- -- (23,332)(c) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) ..........................$ 5,356 $ (12,066) $ (83,413) $ 13,709 $ 21,562 $ 15,020 $(147,665)
========= =====---- ========= ========= ========= ========= =========
Basic earnings (loss) per share (1):
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting
principle ....................................$ .35 $ (.75) $ (3.71) $ .77 $ 1.36 $ .68 $ (6.20)
Extraordinary item ........................... =- -- -- -- (.40)(g) -- --
Cumulative effect of accounting change ....... -- -- (1.44)(c) -- -- -- --
--------- --------- --------- --------- -------- --------- ---------
Net earnings (loss) ..........................$ .35 $ (.75) $ (5.15) $ .77 $ .96 $ .68 $ (6.20)
========= ========= ========= ========= ======== =====---- =====----
Weighted average common shares ............... 15,438 16,021 16,185 17,692 22,442 22,103 23,822
Diluted earnings (loss) per share (1):
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting
principle ....................................$ .34 $ (.75) $ (3.71) $ .72 $ 1.30 $ .64 $ (6.20)
Extraordinary item ........................... -- -- -- -- (.38)(g) -- --
Cumulative effect of accounting change ....... -- -- (1.44)(c) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) ..........................$ .34 $ (.75) $ (5.15) $ .72 $ .92 $ .64 $ (6.20)
========= ========= ========= ========= ========= =====---- =====----
Weighted average common shares ............... 15,623 16,021 16,185 19,097 23,430 23,493 23,822
(continued on following page)
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
---------------------------------------------------------- --------------------
Feb. 26, Feb. 25, Feb. 24, Feb. 22, Feb. 28, Aug. 30, Aug. 29,
1994 1995 1996(a) 1997 1998 1997 1998(b)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Gross margin.................................. 33.0% 32.5% 31.2% 34.4% 36.7% 36.5% 37.6%
EBITDA(h).....................................$ 34,533 $ 36,029 $(18,840) $ 66,545 $ 87,493 $ 41,663 $ 58,595
Depreciation and amortization................. 13,115 16,146 18,435 24,147 24,160 12,465 16,258
Capital Expenditures.......................... 11,002 12,172 13,656 14,471 28,923 11,656 20,210
Backlog, at period end (i).................... 131,000 221,000 340,000 420,000 560,000 525,000 700,000
Selected Ratios:
Ratio of earnings to fixed charges (j)........ 1.7x NM(k) NM(k) 1.6x 2.5x 2.5x NM(k)
Ratio of EBITDA to interest expense, net..... 2.7x 2.4x NM 2.4x 3.8x 3.6x 3.6x
Balance Sheet Data (end of period):
Working capital...............................$ 76,874 $ 76,563 $ 41,824 $ 122,174 $ 262,504 $144,686 $ 182,116
Total assets.................................. 375,009 379,954 433,586 491,089 681,757 510,521 813,221
Long-term debt................................ 159,170 172,693 273,192 225,402 349,557 225,446 464,813
Stockholders' equity.......................... 133,993 125,331 44,157 165,761 196,775 186,298 168,950
</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) On March 27, 1998, the Company acquired ASI. On April 13, 1998, the Company
acquired PBASCO. On April 21, 1998, the Company acquired AMP. On July 30,
1998, the Company acquired ALC. On August 7, 1998, the Company acquired
SMR. The results of such acquisitions are included in B/E's historical
financial data from the date of acquisition. See "Summary--Recent
Developments."
(c) 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, development and engineering 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 $23,332. See Note 2 of Notes to Consolidated Financial
Statements.
(d) 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 $4,170 related to costs associated with
the integration and consolidation of the Company's European seating
operations. In fiscal 1995, the Company charged to earnings $23,736 of
expenses primarily related to intangible assets and inventories associated
with the Company's earlier generations of passenger entertainment systems.
(e) In fiscal 1998, the Company settled a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The Company
recorded a charge of $4,664 in fiscal 1998 related to fines, civil
penalties and associated legal fees arising from the settlement. See
"Business--Legal Proceedings."
(f) During the six months ended August 29, 1998, the Company recorded a charge
of $169,155 for the write-off of acquired in-process research and
development and acquisition-related expenses associated with the PBASCO,
AMP and SMR transactions. In-process research and development expenses
arise from new product development projects that are in various stages of
completion at the acquired enterprise at the date of acquisition.
In-process research and development expenses for products under development
at the date of acquisition that have not established technological
feasibility and for which no alternative use is identified are written off.
(g) The Company incurred an extraordinary charge of $8,956 during fiscal 1998
for unamortized debt issue costs, tender and redemption premiums and fees
and expenses related to the repurchase of its 9 3/4% Senior Notes due 2003
(the "9 3/4% Notes").
(h) EBITDA represents net earnings before deducting extraordinary items, income
tax expenses, in-process research and development and acquisition-related
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.
(i) As adjusted 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) 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.
(k) Earnings were insufficient to cover fixed charges by approximately $18,000,
$60,100 and $143,800 for the fiscal years ended February 25, 1995 and
February 24, 1996 and the six months ended August 29, 1998, respectively.
(l) During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standard No. 128, Earnings per Share, and, accordingly, has
restated earnings per share for all periods presented.
35
<PAGE>
PRO FORMA COMBINED FINANCIAL DATA
(Dollars in thousands, except per share data)
The unaudited pro forma combined statements of operations and unaudited
pro forma combined balance sheet give effect to (i) the acquisition by B/E of
SMR, (ii) the acquisitions of AMP, PBASCO and CF Taylor (together, the "Other
Insignificant Acquisitions"), (iii) the issuance of the Company's shares in
connection with the acquisition of SMR, (iv) the refinancing of B/E's 9 3/4%
Notes (which was completed on March 16, 1998) and (v) the sale of the Old Notes
in the Offering and the use of $118.0 million of the net proceeds of the
Offering to repurchase the SMR Shares and the remainder to repay indebtedness
under the Bank Credit Facility. The pro forma combined statements of operations
for the year ended February 28, 1998 is comprised of the results of B/E for the
year ended February 28, 1998, the results of SMR, PBASCO and CF Taylor for the
year ended December 31, 1997 and the results of AMP for the twelve months ended
January 31, 1998. The pro forma combined statements of operations for the six
months ended August 29, 1998 is comprised of the results of B/E for the six
months ended August 29, 1998, the results of CF Taylor for the six months ended
June 30, 1998, the results of SMR for the five months ended May 31, 1998 and the
results of AMP and PBASCO for the one month ended March 31, 1998. The pro forma
combined balance sheet as of August 29, 1998 has been prepared by combining the
consolidated balance sheet of B/E as of August 29, 1998 with the balance sheet
of CF Taylor as of August 31, 1998 (SMR, AMP and PBASCO were already included in
the consolidated balance sheet of B/E as of August 29, 1998). Financial
information for CF Taylor has been prepared in conformity with generally
accepted accounting principles of the United Kingdom ("U.K. GAAP") applied on a
consistent basis throughout the periods involved. The differences between U.K.
GAAP and U.S. generally accepted accounting principles, insofar as they affect
the financial information of CF Taylor, are not material. The balance sheet of
CF Taylor was derived from the balance sheet prepared by the Company in
connection with the Company's acquisition of CF Taylor. The CF Taylor financial
information presented herein has been converted from U.K. pounds to U.S. dollars
at exchange rates of 1.6401 and 1.6508, respectively, based upon the weighted
average exchange rate for the year ended December 31, 1997 and the six months
ended June 30, 1998, respectively, and at an exchange rate of 1.6801, based upon
the exchange rate in effect on August 31, 1998 for the financial information as
of August 31, 1998.
The pro forma combined statements of operations for the year ended
February 28, 1998 and the six months ended August 29, 1998 assume that the
acquisition of SMR, the issuance of the Company's shares in connection with the
acquisition of SMR, the Other Insignificant Acquisitions, the refinancing of
B/E's 9 3/4% Notes and the Offering, and the application of the proceeds
therefrom occurred on February 23, 1997. The pro forma combined balance sheet as
of August 29, 1998 assumes that the acquisition of CF Taylor and the Offering
and the application of the proceeds therefrom occurred on August 29, 1998. The
pro forma combined statements of operations and balance sheet do not purport to
represent the results of operations or financial position of the Company had the
transactions and events assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future. Certain of the pro forma adjustments, for expenses related to the
SMR selling shareholders which will no longer be incurred after the acquisition,
represent estimates of cost savings expected to be realized in connection with
the acquisition of SMR. No assurance can be given as to the amount of costs that
will actually be incurred or cost savings that will actually be realized. The
pro forma adjustments are based on management's preliminary assumptions
regarding purchase accounting adjustments.
The pro forma combined financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma financial
statements. In connection with the acquisitions of AMP, PBASCO and SMR, during
the six months ended August 29, 1998, the Company recorded a charge of $169,155
for in-process research and development and acquisition-related expenses. B/E
expects that a portion of the CF Taylor purchase price will be allocated to
in-process research and development and acquisition-related costs and will be
written off and expensed. The Company has engaged consultants to assist in the
allocation of the purchase price of CF Taylor, which the Company anticipates
will be completed prior to the end of the third quarter ending on November 28,
1998, however, based on recent acquisitions by the Company, the Company does not
expect that the portion of the purchase price that will be allocated to
in-process research and development, and subsequently written off, will be in
excess of 10% of the CF Taylor purchase price. The CF Taylor charge has been
excluded in the accompanying pro forma combined statements of operations and pro
forma combined balance sheet. The pro forma combined financial information
should be read in conjunction with the B/E historical financial statements,
including notes thereto, which are incorporated herein by reference, and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and other financial information included elsewhere in this
Prospectus.
36
<PAGE>
BE AEROSPACE, INC.
Pro Forma Combined Statements of Operations (Unaudited)
Year Ended February 28, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Other
Insignificant
B/E Acquisitions Adjustments Combined SMR Adjustments Pro Forma
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales ............................. $487,999 $119,937 $ -- $607,936 $72,805 $ -- $ 680,741
Cost of Sales ......................... 309,094 84,190 (804)(a) 392,480 43,914 200(b) 436,594
-------- -------- --------- -------- ------- --------- ---------
Gross profit .......................... 178,905 35,747 804 215,456 28,891 (200) 244,147
Operating expenses:
Selling, general and
administrative ..................... 58,622 10,117 (937)(a) 67,802 8,593 (1,251)(c) 75,144
Research, development and
engineering ........................ 45,685 3,250 937 (a) 50,676 7,389 -- 58,065
804 (a)
Amortization expense ............... 11,265 2,552 2,877 (b) 16,694 -- 1,669 (b) 18,363
In-process research and
development and acquisition-
related expenses ................... -- -- 98,253 (h) 98,253 -- 70,902 (h) 169,155
Other expenses ..................... 4,664 2,000 -- 6,664 -- -- 6,664
-------- -------- --------- -------- ------- --------- ---------
Total operating expenses .............. 120,236 17,919 101,934 240,089 15,982 71,320 327,391
-------- -------- --------- -------- ------- --------- ---------
Operating earnings (loss) ............. 58,669 17,828 (101,130) (24,633) 12,909 (71,520) (83,244)
Interest expense, net ................. 22,765 538 14,904 (d) 38,207 723 15,979 (e) 54,909
-------- -------- --------- -------- ------- --------- ---------
Earnings (loss) before income taxes
and extraordinary items ............ 35,904 17,290 (116,034) (62,840) 12,186 (87,499) (138,153)
Minority interest in net earnings of
subsidiary ......................... -- -- -- -- 1,285 (1,285)(f) --
Income taxes .......................... 5,386 7,555 (7,629)(g) 5,312 2,500 (3,162)(g) 4,650
-------- -------- --------- -------- ------- --------- ---------
Earnings (loss) before extraordinary
item ............................... 30,518 9,735 (108,405) (68,152) 8,401 (83,052) (142,803)
Extraordinary item .................... 8,956 -- -- 8,956 -- -- 8,956
-------- -------- --------- -------- ------- --------- ---------
Net earnings (loss) ................... $ 21,562 $ 9,735 $(108,405) $(77,108) $ 8,401 $ (83,052) $(151,759)
======== ======== ========= ======== ======= ========= =========
Basic net earnings (loss) per share:
Earnings (loss) before extraordinary
item ............................... $ 1.36 $ (6.36)
Extraordinary item ................. (0.40) (0.40)
-------- ---------
Net earnings (loss) ................ $ 0.96 $ (6.76)
======== =========
Weighted average common shares ..... 22,442 22,442
Diluted net earnings (loss) per share:
Earnings (loss) before extraordinary
item ............................... $ 1.30 $ (6.36)
Extraordinary item ................. (0.38) (0.40)
-------- ---------
Net earnings (loss) ................ $ 0.92 $ (6.76)
======== =========
Weighted average common shares ..... 23,430 22,442
Operating and Other Data:
Gross margin .......................... 36.7% 35.9%
EBITDA (i) ............................ $ 87,493 $ 128,034
Depreciation and amortization ......... 24,160 35,459
Capital expenditures .................. 28,923 35,989
Selected Ratios:
Ratio of EBITDA to interest expense,
net ................................ 3.8x 2.3x
Ratio of EBITDA minus capital
expenditures to interest expense ... 2.6x 1.7x
Ratio of total debt to EBITDA ......... 4.4x 5.2x
Ratio of earnings to fixed
charges (j) ........................ 2.5x NM
See accompanying notes to Pro Forma Combined Statements of Operations for the Year Ended February 28, 1998.
</TABLE>
37
<PAGE>
BE AEROSPACE, INC.
Notes to Pro Forma Combined Statements of Operations
Year ended February 28, 1998
(a) Reflects adjustments to reclassify certain expenses in a manner consistent
with B/E's presentation, in which B/E classifies certain engineering
related expenses as a component of research and development as compared to
general and administrative expenses or cost of sales.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase price allocation related to the acquired property and
equipment and intangible assets.
(c) Reflects adjustments to eliminate costs paid directly to the selling
shareholders of the acquired businesses. The selling shareholders will no
longer be employed by B/E. Such costs consist of the following:
Shareholder salaries and benefits..................... $ 711
Shareholder bonuses................................... 540
------
Total......................................... $1,251
======
(d) Represents additional interest expense for the year ended February 28, 1998
that would have been incurred had the Other Insignificant Acquisitions and
refinancing of B/E's 9 3/4% Notes (which was completed on March 16, 1998)
taken place on February 23, 1997.
(e) Represents additional interest expense for the year ended February 28, 1998
that would have been incurred had the acquisition by B/E of SMR and the
Offering and the application of the net proceeds therefrom to repurchase
the shares issued in the acquisition of SMR taken place on February 23,
1997.
(f) To eliminate minority interest.
(g) To adjust income tax expense to reflect the Company's 15% effective tax
rate.
(h) During the first six months of fiscal 1999, the Company expensed $169,155
related to in-process research and development and acquisition-related
expenses. These expenses are reflected in the Pro Forma Combined Statements
of Operations for the year ended February 28, 1998 as the acquisitions are
assumed to have occurred on February 23, 1997.
(i) EBITDA represents net earnings before deducting extraordinary items, income
tax expenses, interest expense, net, other expenses, in-process research
and development and acquisition-related 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.
(j) 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. Earnings were insufficient to cover fixed charges by
$138,200 for the year ended February 28, 1998 on a pro forma basis giving
effect to the Offering and the Company's use of the net proceeds from the
Offering and borrowings related to certain acquisitions and related costs.
The insufficiency was primarily the result of the pro forma charge to
earnings of $169,155 for the write-off of acquired in- process research and
development and acquisition-related expenses described in note (h) above.
38
<PAGE>
BE AEROSPACE, INC.
Pro Forma Combined Statements of Operations (Unaudited)
Six Months Ended August 29, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Other
Insignificant
B/E Acquisitions Adjustments Combined SMR Adjustments Pro Forma
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales .............................$ 296,343 $ 27,089 $ -- $323,432 $40,315 $ -- $ 363,747
Cost of Sales ......................... 184,863 19,113 -- 203,976 24,199 83(b) 228,258
--------- -------- --------- -------- ------- --------- ---------
Gross profit .......................... 111,480 7,976 -- 119,456 16,116 (83) 135,489
Operating expenses:
Selling, general and
administrative ..................... 37,041 4,713 (78)(a) 41,676 5,276 (549)(c) 46,403
Research, development and
engineering ........................ 24,742 1,577 78 (a) 26,397 2,005 -- 28,402
Amortization expense ............... 7,360 -- 497 (b) 7,857 8 695 (b) 8,560
In-process research and
development and acquisition-
related expenses ................... 169,155 -- (98,253)(h) 70,902 -- 70,902 (h) --
--------- -------- --------- -------- ------- --------- ---------
Total operating expenses .............. 238,298 6,290 (97,756) 146,832 7,289 (70,756) 83,365
--------- -------- --------- -------- ------- --------- ---------
Operating earnings (loss) ............. (126,818) 1,686 97,756 (27,376) 8,827 70,673 52,124
Interest expense, net ................. 16,446 (10) 2,047 (d) 18,483 179 8,134 (e) 26,796
--------- -------- --------- -------- ------- --------- ---------
Earnings (loss) before income taxes ... (143,264) 1,696 95,709 (45,859) 8,648 (62,539) 25,328
Minority interest ..................... -- -- -- -- 1,129 (1,129)(f) --
Income taxes .......................... 4,401 -- (144)(g) 4,257 2,549 (2,500)(g) 4,306
--------- -------- --------- -------- ------- --------- ---------
Net earnings (loss) .................. $(147,665) $ 1,696 $ 95,853 $(50,116) $ 4,970 $ 66,168 $ 21,022
========= ======== ========= ======== ======= ========= =========
Basic net earnings (loss) per share:
Net earnings (loss) ................ $ (6.20) $ 0.89
======== =========
Weighted average common shares ..... 23,822 23,570
Diluted net earnings (loss) per share:
Net earnings (loss) ................ $ (6.20) $ 0.86
======== =========
Weighted average common shares ..... 23,822 24,452
Operating and Other Data:
Gross margin .......................... 37.6% 37.2%
EBITDA (i) ............................ $ 58,595 $ 70,643
Depreciation and amortization ......... 16,258 18,519
Capital expenditures .................. 20,210 21,613
Selected Ratios:
Ratio of EBITDA to interest expense,
net ................................ 3.6x 2.6x
Ratio of EBITDA minus capital
expenditures to interest expense ... 2.3x 1.8x
Ratio of earnings to fixed
charges (j) ........................ NM 1.9x
See accompanying notes to Pro Forma Combined Statements of Operations for the Six Months Ended August 29, 1998.
</TABLE>
39
<PAGE>
BE AEROSPACE, INC.
Notes to Pro Forma Combined Statements of Operations
Six Months Ended August 29, 1998
(a) Reflects adjustments to reclassify certain expenses in a manner
consistent with B/E's presentation, in which B/E classifies certain
engineering related expenses as a component of research and development
as compared to general and administrative expenses.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase price allocation related to the acquired property
and equipment and intangible assets.
(c) Reflects adjustments to eliminate costs attributable to the selling
shareholders of the acquired businesses. The selling shareholders will
no longer be employed by B/E. Such costs consist of:
Shareholder salaries and benefits................. $ 549
=======
(d) Represents additional interest expense for the six months ended August
29, 1998 that would have been incurred had the Other Insignificant
Acquisitions and refinancing of B/E's 9 3/4% Notes (which was completed
on March 16, 1998) taken place on February 23, 1997.
(e) Represents additional interest expense for the six months ended August
29, 1998 that would have been incurred had the acquisition by B/E of SMR
and the Offering and the application of the proceeds therefrom to
repurchase the shares issued in the acquisition of SMR taken place on
February 23, 1997.
(f) To eliminate minority interest.
(g) To adjust income tax expense to reflect the Company's 17% effective tax
rate.
(h) During the first six months of fiscal 1999, the Company expensed
$169,155 related to in-process research and development and
acquisition-related expenses. These expenses are eliminated in the Pro
Forma Combined Statements of Operations for the six months ended August
29, 1998 as the acquisitions are assumed to have occurred on February
23, 1997 and therefore are reflected in the Pro Forma Combined
Statements of Operations for the year ended February 28, 1998.
(i) EBITDA represents net earnings before deducting extraordinary items,
income tax expenses, interest expense, net, other expenses, in-process
research and development and acquisition-related 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.
(j) 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. Earnings were insufficient
to cover fixed charges by $143,800 for the six months ended August 29,
1998. The insufficiency was primarily the result of the charge to
earnings of $169,155 in fiscal 1999 for the write-off of acquired
in-process research and development and acquisition-related expenses
described in note (h) above.
40
<PAGE>
BE AEROSPACE, INC.
Pro Forma Combined Balance Sheet (Unaudited)
August 29, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
B/E CF Taylor Adjustments Combined Adjustments Pro Forma
--- --------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents ....... $ 29,203 $ -- $ -- $ 29,203 $ 194,750 (d) $ 44,953
(119,000)(e)
15,000(e)
(75,000) (f)
Account receivable--trade, net .. 113,524 7,895 -- 121,419 -- 121,419
Inventories, net ................ 188,668 9,121 -- 197,789 -- 197,789
Other current assets ............ 9,506 71 -- 9,577 -- 9,577
--------- --------- --------- --------- --------- ---------
Total current assets ............ 340,901 17,087 -- 357,988 15,750 373,738
Property & equipment, net .......... 136,873 4,536 -- 141,409 -- 141,409
Intangibles & other assets, net .... 335,447 1,935 25,124(a) 354,051 5,250(d) 360,301
(11,815)(b) 1,000(e)
3,360(b)
--------- --------- --------- --------- --------- ---------
Total assets .................... $ 813,221 $ 23,558 $ 16,669 $ 853,448 $ 22,000 $ 875,448
========= ========= ========= ========= ========= =========
Liabilities & Stockholders'
Equity Current liabilities:
Accounts payable ................ $ 56,874 $ 4,523 $ -- $ 61,397 $ -- $ 61,397
Accrued liabilities ............. 93,928 7,220 3,360(b) 104,508 -- 104,508
Current portion of long-term
debt .......................... 7,983 -- -- 7,983 -- 7,983
--------- --------- --------- --------- --------- ---------
Total current liabilities .... 158,785 11,743 3,360 173,888 -- 173,888
Long-term debt .................. 464,813 -- 25,124(a) 489,937 200,000 (d) 629,937
15,000 (e)
(75,000)(f)
Deferred income taxes ........... 1,161 -- -- 1,161 -- 1,161
Other liabilities ............... 19,512 -- -- 19,512 -- 19,512
--------- --------- --------- --------- --------- ---------
Total liabilities ............ 644,271 11,743 28,484 684,498 140,000 824,498
--------- --------- --------- --------- --------- ---------
Stockholders' equity:
Common stock .................... 283 10,516 (10,516)(c) 283 (40)(e) 243
Additional paid-in capital ...... 359,660 -- -- 359,660 (117,960)(e) 241,700
Accumulated deficit ............. (188,389) 1,299 (1,299)(c) (188,389) -- (188,389)
Cumulative foreign exchange
translation adjustment ...... (2,604) -- -- (2,604) -- (2,604)
--------- --------- --------- --------- --------- ---------
Total stockholders' equity ... 168,950 11,815 (11,815) 168,950 (118,000) 50,950
--------- --------- --------- --------- --------- ---------
$ 813,221 $ 23,558 $ 16,669 $ 853,448 $ 22,000 $ 875,448
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to Pro Forma Combined
Balance Sheet as of August 29, 1998.
41
<PAGE>
BE AEROSPACE, INC.
Notes to Pro Forma Combined Balance Sheet
August 29, 1998
(a) Reflects the use of cash related to the acquisition of CF Taylor:
Proceeds from borrowings under the Company's
Bank Credit Facility.......................... $ 25,124
==========
(b) The acquisition of CF Taylor has been accounted for as a purchase
pursuant to APB Opinion No. 16 "Business Combinations." The purchase
price has been allocated to the assets and liabilities of CF Taylor
based on relative fair values. Such allocations are subject to final
determination based on valuations and other studies. B/E expects that a
portion of the CF Taylor purchase price will be allocated to in-process
research and development and acquisition-related costs and will be
written off and expensed. The Company has engaged consultants to assist
in the allocation of the purchase price of CF Taylor, which the Company
anticipates will be completed prior to the end of the third quarter
ending on November 28, 1998, however, based on recent acquisitions by
the Company, the Company does not expect that the purchase price that
will be allocated to in- process research and development, and
subsequently written off, will be in excess of 10% of the CF Taylor
purchase price. The CF Taylor charge has been excluded in the
accompanying pro forma combined balance sheet. The final values may
differ significantly from those set forth below:
Purchase cost:
Aggregate purchase price............................... $ 25,124
Purchase accounting reserves........................... 3,360
Less estimated book value of net assets purchased...... (11,815)
---------
Total.......................................... $ 16,669
=========
Allocation of excess of purchase cost over book
value of assets:
Goodwill and other intangible assets, subject to
final determination.................................. $ 16,669
=========
Purchase accounting reserves include the costs to implement the business
integration plan, including severance, relocation, systems conversion
and other business acquisition-related costs.
(c) To reclassify the equity in CF Taylor as part of the allocation of
purchase price.
(d) Reflects the proceeds from the issuance of the Notes:
Net proceeds from issuance of the Notes................ $194,750
Initial Purchasers' discount........................... 5,250
--------
Total.......................................... $200,000
========
(e) Reflects adjustments for the repurchase of the 4,000,000 shares of
common stock issued to the selling stockholders in the acquisition of
SMR, related offering expenses (exclusive of initial purchasers'
discount) incurred in connection with the Notes (estimated at $1,000)
and borrowings related to certain acquisitions and related costs.
(f) Reflects adjustments to pay down debt with net proceeds after the
repurchase of the 4,000,000 shares of common stock discussed in note (e)
above.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Introduction
B/E is the world's largest manufacturer of commercial and general
aviation aircraft cabin interior products serving virtually all major airlines
and a wide variety of general aviation customers and airframe manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories, which include aircraft seats,
food and beverage preparation and storage equipment, galley and other interior
structures, oxygen delivery systems, lighting systems and in-flight
entertainment systems. In addition, B/E provides design, integration,
installation and certification services, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications for commercial aircraft cabin interiors and
to manufacture related products, including engineering kits and interface
components. B/E also provides upgrade, maintenance and repair services for its
airline customers around the world.
B/E's revenues are generally derived from two primary sources:
refurbishment or upgrade programs for the existing worldwide fleets of
commercial and general aviation aircraft, and new aircraft deliveries. B/E
believes its large installed base of products, estimated to be approximately
$4,700,000 as of August 29, 1998 (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. Chances in revenues by classes of product are
the result of acquisitions and volume demand in the industry, as more fully
described in the discussion and analysis that follows. 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 both
new aircraft and refurbishment programs.
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 1998 B/E has experienced significant growth in backlog of seating and
galley products, and 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. On January 24, 1996, the
Company acquired all of the stock of Burns, an industry leader in commercial
aircraft seating. On March 27, 1998, the Company acquired all of the capital
stock of Aerospace Interiors, Inc., which services, cleans and repairs aircraft
interior parts and products, and is a leading provider of seat repair and
maintenance services performed by non-airline entities. On April 13, 1998, the
Company acquired substantially all of the assets and assumed certain of the
liabilities of PBASCO, a leadine, manufacturer of commercial aircraft oxygen
delivery systems, a leading, manufacturer of passenger service unit components
and systems, and a major supplier of air valves, overhead lights and switches,
crew masks and protective breathing devices. On April 21, 1998, the Company
acquired substantially all of the assets and assumed certain of the liabilities
of AMP, a leading manufacturer of cabin interior products for general aviation
(business jet) and commercial type VIP aircraft. On July 30, 1998, the Company
acquired all of the capital stock of ALC, a market leader in producing interior
fluorescent lighting systems for business and corporate jet aircraft. On August
7, 1998, the Company acquired all of the capital stock of SMR Aerospace, Inc., a
leader in providing design, integration, installation and certification services
for commercial aircraft passenger cabin interiors. On September 3, 1998, the
Company acquired substantially all of the galley equipment assets and assumed
related liabilities of CF Taylor, a manufacturer of calley equipment and
structures for both narrow- and wide-body aircraft. 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.
43
<PAGE>
As a result of the acquisitions of PBASCO, AMP and SMR, the Company has
recorded a charge of $169,155 for the write-off of acquired in-process research
and development and acquisition related expenses associated with the
transactions. In addition, in connection with the acquisition of CF Taylor, the
Company anticipates that a portion of the purchase price will be allocated to
acquired in-process research and development. The Company has engaged
consultants to assist in the allocation of the purchase price of CF Taylor,
which the Company anticipates will be completed prior to the end of the third
quarter ending on November 28, 1998, however, based on recent acquisitions by
the Company, the Company does not expect that the purchase price that will be
allocated to in-process research and development, and subsequently written off,
will be in excess of 10% of the CF Taylor purchase price. In-process research
and development expenses arose from new product development projects that were
in various stages of completion at the respective acquired enterprises at the
date of acquisitions. In-process research and development expenses for products
under development at the date of acquisition that had not established
technological feasibility and for which no alternative use was identified were
written off.
New product development projects underway at AMP at the date of
acquisition included, among others, executive aircraft interior products for the
Bombardier Global Express, Boeing Business Jet, Airbus Corporate Jet, Cessna
Citation 560XL, Cessna Citation 560 Ultra, Visionaire Vantage and Lear60, as
well as other specific executive aircraft seating products. New product
development projects underway at PBASCO at the date of acquisition included,
among others, modular drop boxes, passenger and flight crew oxygen masks, oxygen
regulators and generators, protective breathing equipment, on board oxygen
generating systems, reading lights, passenger service units, external viewing
systems for executive and commercial aircraft and cabin monitoring systems. New
product development projects underway at SMR at the date of acquisition
included, among others, pneumatic and electrical deicing systems for the
substantial majority of all executive and commuter aircraft types, crew rest
modules for selected wide-body aircraft, passenger to freighter and combi to
freighter conversion kits for selected wide-body aircraft, hovercraft skirting
devices, cargo nets, and smoke barriers.
Management estimates that the research and development cost to complete
the in-process research and development related to projects underway at PBASCO,
AMP and SMR will aggregate approximately $19,000, which would be incurred over a
3-4 year period. Uncertainties that could impede progress to a developed
technology include (i) availability of financial resources to complete the
development, (ii) regulatory approval (FAA, CAA, etc.) required for each product
before it can be installed on an aircraft, (iii) economic feasibility of
developed technologies, (iv) customer acceptance and (v) general competitive
conditions in the industry. There can be no assurance that the in- process
research and development projects will be successfully completed and
commercially introduced.
Recently, Rockwell Collins has entered the in-flight entertainment
industry by purchasing Hughes Avicom, and in doing so has changed the
competitive landscape for this line of business. The Company has evaluated the
impact of the changing market conditions, and has determined that the long-term
success of this line of business may be enhanced by teaming with a partner with
substantial economic and technology resources. In connection therewith, the
Company may monetize a portion, or if no suitable partner can be found, all of
its investment in its in-flight entertainment business.
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 36.7% in fiscal 1998. The primary reasons for the improvement in
gross margins include: (i) shift in product mix in all divisions toward higher
margin products, (ii) higher unit volumes, and (iii) 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 1998,
research, development and engineering expenses totaled $45,685, or 9.4% of net
sales, primarily consisting of costs related to the development of the MDDS,
with the balance attributable to the seating and galley products businesses.
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."
The following discussion and analysis addresses the results of the
Company's operations for the six months ended August 29, 1998, as compared to
the Company's results of operations for the six months ended August 30, 1997.
The discussion and analysis then addresses the results of the Company's
operations for the year ended February
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28, 1998 as compared to the Company's results of operations for the year ended
February 22, 1997. The discussion and analysis then addresses the results of the
Company's operations for the year ended February 22, 1997 as compared to the
Company's results of operations for the year ended February 24, 1996. The
discussion and analysis then addresses the liquidity and financial condition of
the Company and other matters.
Six Months Ended August 29, 1998, as Compared to the Six Months Ended
August 30, 1997
Net sales for the fiscal 1999 six-month period were $296,343, an
increase of approximately $62,700, or 27% over the comparable period in the
prior year. The recent acquisitions of PBASCO, AMP and SMR accounted for a
substantial portion of the increase in revenues during this period; AMP and
PBASCO generated approximately $36,700 of revenues, in the aggregate, with SMR
adding approximately $6,000. Internal growth during the six months was low due
to uneven airline scheduling requirements. The Company does not believe this
period is reflective of the Company's strong growth in orders and backlog. As
described below, the Company expects very significant internal growth during the
second half of the year and significant internal growth for the full year.
During each of the six months ended August 29, 1998 and the year ended February
28, 1998, the Seating Products and Interior Systems Groups, exclusive of
businesses acquired during fiscal 1999, generated approximately 78% of total
revenues. During the eighteen month period ended August 29, 1998, these two
groups generated their highest bookings ever, with program awards of
approximately $764,909 from the world's airlines, including, among others, Delta
Air Lines, USAirways, British Airways, United Airlines, American Airlines and
Northwest Airlines. The Seating Products Group, which generated approximately
52% of total revenues in Fiscal 1998, had its strongest booking quarter ever
during the quarter ended August 29, 1998, with a book to bill ratio of
approximately 1.9:1; total bookings for the Company during the quarter were
approximately $215,000, and the Company experienced a book to bill ratio of
almost 1.4:1. Of the Company's backlog of approximately $700 million as of
August 29, 1998, $293 million is deliverable by the end of Fiscal 1999. The
scheduled delivery dates for the Seating Products and Interior Systems Groups
alone with scheduled deliveries for other programs form the basis for
management's expectation of very significant internal growth for the Company
during the second half of fiscal 1999.
Gross profit was $111,480 (37.6% of sales) for the six months ended
August 29, 1998. This was $26,268, or 31%, greater than the comparable period in
the prior year of $85,212, which represented 36.5% of sales. The primary reasons
for the improvement in gross margins include: (i) shift in product mix in all
divisions toward higher margin products; (ii) higher unit volumes; and (iii) a
company-wide re-engineering program which has resulted in higher employee
productivity and better manufacturing efficiency.
Selling, general and administrative expenses were $37,041 (12.5% of
sales) for the six months ended August 29, 1998. This was $9,106, or 33%,
greater than the comparable period in the prior year of $27,935 (12.0% of
sales). The increase in selling, general and administrative expenses was
primarily due to inclusion of the relevant expenses of the acquired companies
along with increases associated with internal growth.
Research, development and engineering expenses were $24,742 (8.3% of
sales) for the six months ended August 29, 1998, an increase of $2,192 over the
comparable period in the prior year. The increase in research, development and
engineering expense in the current period is primarily attributable to ongoing
new product development activities.
Amortization expense for the six months ended August 29, 1998 of $7,360
was $1,831 greater than the amount recorded in the comparable period in the
prior year.
Based on management's assumptions, a portion of the purchase price for
each of the recent acquisitions of PBASCO, AMP and SMR was allocated to
purchased in-process research and development that had not reached technological
feasibility and had no future alternative use. During the first six months of
fiscal 1999, the Company recorded a charge of $169,155 for the write-off of
acquired in-process research and development, acquisition-related and other
expenses. Management estimates that the research and development cost to
complete the in-process research and development related to projects underway at
PBASCO, AMP and SMR will aggregate $19,000 which will be incurred over a 3-4
year period.
Due to the acquisition-related charges of $169.155 during the six months
ended August 29, 1998, the Company incurred an operating loss of $(126,818), as
compared to operating earnings of $29,198 in the prior year's comparable period.
Operating earnings excluding the acquisition-related charges were $42,337.
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Interest expense, net was $16,446 for the six months ended August 19,
1998, or $4,915 greater than interest expense of $11,531 for the comparable
period in the prior year and is due to the increase in the Company's long-term
debt.
The loss before income taxes in the current quarter was $(143,264)
(which includes in-process research and development, acquisition-related and
other expenses of $169,155) as compared to earnings before incomes taxes of
$17,667 in the prior year's comparable period. Earnings before income taxes
excluding the acquisition-related charges were $25,891. Income tax expense for
the six months ended August 29, 1998 was $4,401, as compared to $2,647 in the
prior year's comparable period.
The net loss for the six months ended August 29, 1998 was $(147,665), or
$(6.20) per share (diluted), as compared to net earnings of $15,020 or $.64 per
share (diluted), for the comparable period in the prior year.
Year Ended February 28, 1998 Compared to Year Ended February 22, 1997
Sales for the year ended February 28, 1998 were $487,999, or 18% higher
than sales of $412,379 in the prior year, and reflected a 24% increase in
product sales, offset by a $13,305 decline in service revenues (attributable to
discontinued service lines of business). Year over year, the Company experienced
an increase in seating products revenues of approximately $35,000 (or 16%), a
$25,000, or 25% increase in interior systems products revenues and a $29,000, or
56% increase in in-flight entertainment products revenues. The revenue increases
for the Seating Products and In-Flight Entertainment Groups are primarily the
result of retrofit programs that seven of the ten largest airlines in the world
have commenced, while the increase in revenues for the Interior Systems Products
Group is primarily related to both the surge in new aircraft deliveries and the
increase in retrofit activity.
Gross profit was $178,905, or 36.7% of sales, for the year ended
February 28, 1998 and was $37,083, or 26% greater than the prior year's gross
profit of $141,822, which represented 34.4% of sales. The increase in gross
profit, while primarily the result of the higher sales volume, was also
positively impacted by the 230 basis point improvement in gross margin.
Selling, general and administrative expenses were $58,622, or 12% of
sales, for the year ended February 28, 1998. This was $6,888, or 13% higher than
the selling, general and administrative expenses for the prior year of $51,734
(12.5% 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 $45,685, or 9.4% of
sales, for the fiscal year ended February 28, 1998. For the prior year,
research, development and engineering expenses were $37,083, or 9.0% of sales.
The increase in research, development and engineering was attributable to B/E's
ongoing new product development programs, including costs related to the
development of the MDDS and related Boeing line-fit expenditures.
Amortization expense for the fiscal year ended February 28, 1998 of
$11,265 was $658, or 6% higher than the amount recorded in the prior year.
Other expenses for the fiscal year ended February 28, 1998 consisted of
a non-recurring charge of $4,664 related to the settlement of a dispute with the
U.S. Government over certain export sales between 1992 and 1995. See
"Business--Legal Proceedings."
Net interest expense was $22,765 for the year ended February 28, 1998 or
$4,402 less than the net interest expense of $27,167 recorded for 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 expenses in the current year resulted in earnings
before income taxes, extraordinary item and cumulative effect of change in
accounting principle of $35,904, an increase of $20,673 over the prior year.
Income taxes for the year ended February 28, 1998 were $5,386, or 15% of
earnings before income taxes as compared to $1,522, or 10% of earnings before
income taxes, in the prior year.
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Earnings before extraordinary item were $30,518, or $1.30 per share
(diluted), which includes the $4,664 non-recurring charge related to the
settlement of the dispute with the U.S. Government, for the year ended February
28, 1998, as compared to $13,709, or $.72 per share (diluted), for the prior
year.
The Company incurred an extraordinary charge of $8,956 during fiscal
1998 for unamortized debt issue costs, tender and redemption premiums and fees
and expenses related to the repurchase of its 9 3/4% Notes.
Net earnings were $21,562, or $.96 per share (basic) and $.92 per share
(diluted), for the year ended February 28, 1998, as compared to $13,709, or $.77
per share (basic) and $.72 per share (diluted), for the prior year.
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. Year over
year, Seating revenues increased $120,000, and Services revenues increased by
$19,000. The acquisition of Burns accounted for approximately $104,000 of the
$139,000 increase. Year over year, the interior systems products rose by
$22,000, or 28% while in-flight entertainment revenues increased by $19,000, or
58%. The revenue increases for the Seating Products and Inflight Entertainment
Groups are primarily the result of retrofit programs underway throughout the
airline industry, while the increase in revenues for the Interior Products Group
is primarily related to both the surge in new aircraft deliveries and the
increase in retrofit activity. Excluding the effect of the Burns acquisition,
sales increased 33% year over year.
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 was primarily the result of the higher sales volumes
and the mix of all 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 was 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 of $10,607 for the year ended February 22, 1997 was
$1,108 more than the amount recorded in fiscal 1996 as a result of the Burns
acquisition.
Other expenses of $4,170 for the year ended February 24, 1996 was a
charge to earnings related to costs associated with the integration and
consolidation of the Company's European seating operations in connection with
the Company's rationalization of its seating business and as a result of the
Burns acquisition. There was no similar charge in fiscal 1997.
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 was 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.
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.
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Net earnings were $13,709, or $.77 per share (basic) and $.72 per share
(diluted), for the year ended February 22, 1997 as compared to a net loss of
($83,413), or ($5.15) per share (basic and diluted) for the comparable period in
the prior year, which included the cumulative effect of an accounting change of
$23,332.
Bookings and Backlog Information
Management estimates that B/E's backlog at August 29, 1998 was
approximately $700,000, approximately 57% of which management believes to be
deliverable during the 12 months following August 29, 1998, compared with a
backlog of $560,000 and $420,000 on February 28, 1998 and February 22, 1997,
respectively (as adjusted for the debooking of the British Airways MDDS program
in August 1997 described below). See "Risk Factors--Customer Delivery
Requirements" and "Business--Backlog."
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. BA ultimately selected 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. Although the
Company has debooked the BA backlog, the Company is continuing to complete the
development and testing of the MDDS product and has completed line fit
certification of its MDDS System on Boeing 747-400 aircraft and delivered the
first MDDS product to its launch customer, Japan Airlines, in April 1998.
Subsequently, the Company delivered the second MDDS product to Japan Airlines in
June 1998. See "Business--Products and Services."
Liquidity and Capital Resources
The Company's liquidity requirements consist of working capital needs,
ongoing capital expenditures 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 $182,116 as of August 29, 1998, as
compared to $262,504 as of February 28, 1998.
At August 29, 1998, the Company's cash and cash equivalents were
$29,203, as compared to $164,685 at February 28, 1998. Cash provided from
operating activities was $11,785 for the six months ended August 29, 1998. The
primary source of cash during the six months ended August 29, 1998 was the net
loss of ($147,665) offset by non-cash charges for in-process research and
development, depreciation, amortization and acquisition-related expenses of
$185,413, decreases in accounts receivable of $6,163 and increases in accrued
and other liabilities of $13,439, offset by a use of cash of $46,550 related to
increases in inventories and other current assets. The primary use of cash
during the six-month period was $209,636 for the acquisition of PBASCO, AMP and
SMR.
The Company's capital expenditures were $20,210 and $11,656 during the
six months ended August 29, 1998 and August 30, 1997, 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 18 months and will be Year 2000 compliant. The Company anticipates ongoing
annual capital expenditures of approximately $35,000 for the next several years
to be in line with the expanded growth in business and the recent acquisitions.
The Company's Bank Credit Facility consists of a $100,000 revolving
credit facility and an acquisition facility of up to $100,000. An interim
revolving credit commitment of $120,000 available for the irrevocable letter of
credit in connection with the SMR acquisition, which was added in August 1998,
was returned to The Chase Manhattan Bank and cancelled on November 2, 1998 when
the SMR Shares were repurchased. The revolving credit facility expires in April
2004 and the acquisition facility is amortizable over five years beginning in
April 1999.
The Bank Credit Facility is collateralized by the Company's accounts
receivable, inventories and by substantially all of its other personal property.
The Bank Credit Facility contains customary affirmative covenants, negative
covenants and conditions of borrowing, all of which were met by the Company as
of August 29, 1998. At August 29, 1998, indebtedness under the existing Bank
Credit Facility consisted of letters of credit aggregating approximately
$124,000, including the irrevocable letter of credit in connection with the SMR
acquisition of $120,000, and outstanding borrowings under the revolving and
acquisition credit facilities aggregating $121,000 bearing interest at LIBOR
plus 1.50%. Since August 29, 1998, the Company has borrowed an additional $40.0
million under the revolving credit facility related to certain acquisitions and
related costs, repaid approximately $75.0
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million of outstanding borrowings with proceeds from the Offering and cancelled
the irrevocable letter of credit in connection with the SMR acquisition of
$120.0 million. See "Use of Proceeds."
In February 1998, the Company sold $250,000 of 8% Notes. In conjunction
with the sale of the 8% Notes, the Company initiated a tender offer for the
$125,000 of 9 3/4% senior notes due 2003 (the "9 3/4% Notes") in the Offering.
The net proceeds from the offering of approximately $240,419 were used (i) for
the tender offer (which expired on February 25, 1998) in which approximately
$101,800 of the 9 3/4% Notes were retired, (ii) to call the remaining 9 3/4%
Notes on March 16, 1998, and (iii) together with the proceeds from the Bank
Credit Facility, to fund the acquisitions of AMP and PBASCO. The Company
incurred an extraordinary charge of $8,956 for unamortized debt issue costs,
tender and redemption premiums and fees and expenses related to the repurchase
of the 9 3/4% Notes. Long-term debt principally consists of the Bank Credit
Facility, the 9 7/8% Notes, the 8% Notes and the Old Notes. The 9 7/8% Notes, 8%
Notes and the Notes mature on February 1, 2006, March 1, 2008 and November 1,
2008, respectively.
The Company believes that the cash flow from operations and availability
under the Bank Credit Facility will provide adequate funds for its working
capital needs, planned capital expenditures and debt service requirements
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, make planned capital expenditures, make scheduled
payments and 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.
Deferred Tax Assets
The Company has established a valuation allowance related to the
utilization of its deferred tax assets because of uncertainties that preclude it
from determining that it is more likely than not that it will be able to
generate taxable income to realize such asset during the operating loss
carryforward period, which expires in 2012. Such uncertainties include recent
cumulative losses by the Company, the highly cyclical nature of the industry in
which it operates, economic conditions in Asia which is impacting the airframe
manufacturers and the airlines, the Company's high degree of financial leverage
and risks associated with the integration of acquisitions. The Company monitors
these as well as other positive and negative factors that may arise in the
future, as it assesses the necessity for a valuation allowance for its deferred
tax assets.
Year 2000 Costs
The "Year 2000" issue is the result of computer programs using two
digits rather than four to define the applicable year. Because of this
programming convention, software, hardware or firmware may recognize a date
using "00" as the year 1900 rather than the year 2000. Use of non-Year 2000
compliant programs could result in system failures, miscalculations or errors
causing disruptions of operations or other business problems, including, among
others, a temporary inability to process transactions and invoices or engage in
similar normal business activities.
B/E Technology Initiatives Program. The Company has experienced
substantial growth as a result of having completed 15 acquisitions since 1989.
Essentially all of the acquired businesses were operating on separate
information systems, using different hardware and software platforms. In fiscal
1997, the Company undertook to examine its systems, both pre-existing and
acquired, for Year 2000 compliance with a view to replacing non-compliant
systems and creating an integrated Year 2000 compliant system. In addition, the
Company has undertaken a comprehensive program to address the Year 2000 issue
with respect to the following non-system areas: (i) network switching, (ii) the
Company's non-information technology systems (such as buildings, plant,
equipment and other infrastructure systems that may contain embedded
microcontroller technology); and (iii) the status of major vendors, third party
network service providers and other material service providers (insofar as they
relate to the Company's business). As explained below, the Company's efforts to
assess its systems as well as non-system areas related to Year 2000 compliance
involve (i) a wide-ranging assessment of the Year 2000 problems that may affect
the Company, (ii) the development of remedies to address the problems discovered
in the assessment phase and (iii) testing of the remedies.
Assessment Phase. The Company has identified substantially all of its
major hardware and software platforms in use as well as the relevant non-system
areas described above. The Company has determined its systems requirements on a
company-wide basis and has begun the implementation of an enterprise resource
planning (ERP) system, which is intended to be a single system data base onto
which all the Company's individual systems will be
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migrated. In relation thereto, the Company has signed contracts with
substantially all of its significant hardware, software and other equipment
vendors and third party network service providers related to Year 2000
compliance.
Remediation and Testing Phase. In implementing the ERP system, the
Company undertook, and has completed, a remediation and testing phase of all
internal systems, LANS, WANs and PBXS. This phase was intended to address
potential Year 2000 problems of the ERP system in relation to both information
technology and non-information technology systems and then to demonstrate that
the ERP software was Year 2000 compliant. ERP system software was selected and
applications implemented by a team of internal users, outside system integrator
specialists and ERP application experts. The ERP system was tested between June
1997 to 1998 by this team of experts. To date, one location has been fully
implemented on the ERP system. This company-wide solution is being deployed to
all other B/E sites in a manner that is designed to meet full implementation for
all non-Year 2000 compliant sites by December 31, 1999.
Contingency Plans. The Company has begun to analyze contingency plans to
handle worst case Year 2000 scenarios that the Company believes reasonably could
occur and, if necessary, intends to develop a timetable for completing such
contingency plans.
Costs Related to the Year 2000 Issue. To date, the Company has incurred
approximately $17,000 in costs related to the implementation of the ERP system.
The Company currently estimates the total ERP implementation will cost
approximately $30,000 and a portion of the costs have and will be capitalized to
the extent permitted under generally accepted accounting principles. The Company
expects that it will incur approximately $6,000 in costs related to this program
during the remainder of calendar 1998 and an additional $7,000 during calendar
1999.
Risks Related to the Year 2000 Issue. Although the Company's efforts to
be Year 2000 compliant are intended to minimize the adverse effects of the Year
2000 issue on the Company's business and operations, the actual effects of the
issue will not be known until 2000. Difficulties in implementing the ERP system
or failure by the Company to fully implement the ERP system or the failure of
its major vendors, third party network service providers, and other material
service providers and customers to adequately address their respective Year 2000
issues in a timely manner would have a material adverse effect on the Company's
business, results of operations, and financial condition. The Company's capital
requirements may differ materially from the foregoing estimate as a result of
regulatory, technological and competitive developments (including market
developments and new opportunities) in the Company's industry. See "Risk
Factors--Potential Failure of Computer Systems to Recognize Year 2000."
Industry Conditions
The Company's principal customers are the world's commercial airlines.
As a result, the Company's business is directly dependent upon the conditions in
the highly cyclical and competitive commercial airline industry. In the late
1980s and early 1990s the world airline industry suffered a severe downturn,
which resulted in record losses and several air carriers seeking protection
under bankruptcy laws. As a consequence, during such period, airlines sought to
conserve cash by reducing or deferring scheduled cabin interior refurbishment
and upgrade programs and delaying purchases of new aircraft. This led to a
significant contraction in the commercial aircraft cabin interior products
industry and a decline in the Company's business and profitability. 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. 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 and the current general economic and
financial turbulence, there can be no assurance that the 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
revenues and margins.
Recently, turbulence in the financial and currency markets of many Asian
countries has led to uncertainty with respect to the economic outlook for these
countries. Of the Company's $700,000 of backlog at August 29, 1998,
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approximately $302,000 is deliverable by the end of fiscal 1999. Of the total
backlog at August 29, 1998, the Company had $34,000 with Asian carriers
deliverable in fiscal 1999 and a further $107,000 deliverable in subsequent
fiscal years. Of such Asian carrier backlog, approximately $35,000 is with Japan
Airlines, Singapore Airlines and Cathay Pacific. Although not all 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 may be adversely affected. In addition, Boeing has
recently announced that in light of the recent economic conditions in Asia, it
may need to adjust its production schedules over the next several years. See
"Risk Factors--Dependence upon Conditions in the Airline Industry" and
"Business--Industry Overview."
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BUSINESS
Introduction
B/E is the world's largest manufacturer of commercial and general
aviation aircraft cabin interior products, serving virtually all major airlines
and a wide variety of general aviation customers and airframe manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories, which include aircraft seats,
food and beverage preparation and storage equipment, galley and other interior
structures, oxygen delivery systems, lighting systems and in-flight
entertainment systems. In addition, B/E provides design, integration,
installation and certification services, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications for commercial aircraft passenger cabin
interiors and to manufacture related products, including engineering kits and
interface components. B/E also provides upgrade, maintenance and repair services
for its airline customers around the world. In fiscal 1998, approximately 92%
and 8%, respectively, of the Company's total revenues were derived from major
airlines and airframe manufacturers. Approximately 61% of B/E's revenues for
fiscal 1998 were derived from refurbishment and upgrade orders.
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 and a complete line of general aviation seating products. 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 and refrigeration equipment. In
addition, the Company manufactures a broad range of interior structures,
including galleys, lavatories, sidewalls, credenzas, and closets. The Company is
also a worldwide leader in the manufacture of oxygen delivery systems, passenger
service units, air valves, lighting and switches, and is a major manufacturer of
passenger entertainment and service systems, including 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.
B/E has substantially expanded the size, scope and nature of its
business as a result of a number of acquisitions. Since 1989, the Company has
completed 15 acquisitions for an aggregate purchase price of approximately $680
million in order to increase its cabin interior product and service offerings,
to expand its activities from the commercial to the general aviation market and
to position B/E as the preferred global supplier to its customers. Acquisitions
have also enabled the Company to reduce costs, principally through the
integration of manufacturing facilities, and to leverage its established
customer relationships by selling more products through its integrated sales
force. The largest of the six transactions the Company has completed in fiscal
1999 was the acquisition of SMR, a leader in providing design, integration,
installation and certification services for commercial aircraft passenger cabin
interiors, for a total aggregate purchase price of approximately $142.0 million.
Management believes that the acquisition of SMR complements the Company's cabin
interior product manufacturing capabilities and positions B/E as the only
company in the industry able to offer its customers the complete range of
products and services required for major cabin interior reconfigurations and
modifications, from the conceptualization and engineering design of new cabin
interiors, to the supply of cabin interior products, through the management of
the integration, final installation and certification processes.
Industry Overview
The commercial and general aircraft cabin interior products industries
encompass a broad range of products and services, including not only aircraft
seating products, passenger entertainment and service systems, food and beverage
preparation and storage systems, and oxygen delivery systems, but also
lavatories, lighting systems, evacuation equipment, overhead bins, as well as a
wide variety of engineering design, integration, installation and certification
services and maintenance, upgrade and repair services. Management estimates that
the industry had annual sales in excess of $1.7 billion during fiscal 1998.
Historically, revenues in the airline 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
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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 last 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.
Historically, revenues in the general aviation cabin interior products
industry have been derived from four sources: (i) retrofit and refurbishment
programs in which the interior components of the aircraft are substantially
overhauled to improve the appearance and functionality; (ii) new installation
programs to outfit newly delivered aircraft; (iii) spare parts; and (iv)
equipment to upgrade the functionality or appearance of the aircraft interior.
The various product and service categories in which the Company
currently participates include:
Seating Products. 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 $570 million. Approximately ten companies
worldwide, including the Company, supply aircraft seats, although the
Company (which has an approximately 50% market share) and three other
competitors share approximately 90% of the market based on installed
base as of August 29, 1998.
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 $325 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 aircraft
and, with the further development of live broadcast television, many
narrow-body aircraft. PESS products are currently supplied by
approximately five companies worldwide. The Company has a market share
of approximately 35% in individual passenger in-flight entertainment
systems based on installed base as of August 29, 1998.
Interior Systems Products. This product category includes interior
systems for both narrow-body and wide-body commercial aircraft and
general aviation/VIP aircraft, including a wide selection of coffee and
beverage makers, water boilers, ovens, liquid containers, air chillers,
wine coolers and other refrigeration equipment, oxygen delivery systems,
air valves, lighting and switches, and other interior systems
components. The Company believes it is the only manufacturer with a
complete line of interior systems products and the only supplier with
the capability to fully integrate overhead passenger service units with
either chemical or gaseous oxygen equipment.
General Aviation and VIP Products. The Company entered this line of
business with its acquisition of AMP in April 1998. By combining AMP's
substantial presence in the general aviation and VIP aircraft cabin
interior products industry with that of PBASCO and ALC, B/E has become
the industry's leading manufacturer with a broad product line, including
a complete line of executive aircraft seating products, fluorescent
lighting air valves and oxygen delivery systems as well as sidewalls,
bulkheads, credenzas, closets, galley structures, lavatories, tables and
sofas. B/E has the capability to provide complete interior packages,
including all design services, all interior components and program
management services for executive aircraft interiors. B/E is the
preferred supplier of seating products and fluorescent lighting systems
of essentially every general aviation- airframe manufacturer.
Engineering/Integration and Maintenance/Support Services. The Company
entered the engineering design, integration, installation and
certification services market through the acquisition of SMR in August
1998. The Company has also historically been an active participant in
the growing market for upgrade, maintenance and repair services through
its Services Group. Historically, the airlines have relied on the
airframe manufacturers or in-house engineering resources to provide
engineering design and integration services, as well as maintenance and
repair services. As cabin interior configurations have become
increasingly sophisticated and the airline industry increasingly
competitive, the airlines have begun to outsource such services in order
to
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increase productivity and reduce costs and overhead. Through the recent
acquisition of SMR, the Company provides design, integration,
installation and certification services for commercial aircraft
passengers cabin interiors, offering its customers in-house capabilities
to design, project manage, integrate, test and certify reconfigurations
and modifications for commercial aircraft passenger cabin interiors and
to manufacture related products, including engineering kits and
interface components. Through its Services Group, B/E also provides
upgrade, maintenance and repair services for the products which it
manufactures as well as for those supplied by other manufacturers.
Through August 29, 1998, the Company operated primarily in the
commercial aircraft cabin interior products segment of the commercial airlines
supplier industry. Revenues for similar classes of products or services within
this business segment for the six months ended August 30, 1997 and August 29,
1998 and for the fiscal years ended February 1996, 1997 and 1998 are presented
below (dollars in millions):
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
-------------------------------------- ---------------------
August August
Feb. 24, Feb. 22, Feb. 28, 30, 29,
1996 1997 1998 1997 1998
----------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Seating products....................................... $ 97 $217 $252 $127 $129
Interior systems products.............................. 79 101 126 66 80
Passenger entertainment and service systems............ 33 52 81 26 44
Engineering/Integration and Services................... 23 42 29 15 19
General aviation and VIP products...................... -- -- -- -- 24
---- ---- ---- ---- ----
Total revenues......................................... $232 $412 $488 $234 $296
==== ==== ==== ==== ====
</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 achieved record operating earnings during
calendar years 1995 through 1997. During this period, the domestic airlines
substantially restored their balance sheets 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 61% of the Company's revenues in fiscal 1998. Further, throughout
calendar 1997, the aircraft manufacturers continued to experience a significant
increase in new aircraft orders. Among those factors expected to affect the
cabin interior products industry are the following:
Large Existing Installed Base. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1998 (the "Boeing
Report"), the world commercial passenger aircraft fleet consisted of
10,845 aircraft as of the end of 1997, including 3,102 aircraft with
fewer than 120 seats, 4,824 aircraft with between 120 and 240 seats and
2,919 aircraft with more than 240 seats. Based on such fleet numbers,
management estimates that the total worldwide installed base of
commercial and general aviation aircraft cabin interior products, valued
at replacement prices, was approximately $13.7 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 arow at a compounded average rate of five percent per year
over the next 10 years, increasing annual revenue passenger miles from
approximately 1.7 trillion in 1997 to approximately 4.4 trillion by 2017
(according to the July 1998 Airline Monitor). 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 Airbus Industrie Global Market Forecast published
in April 1998 (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
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approximately 1.7 million passenger seats at the end of 1997 to
approximately 4.1 million passenger seats at the end of 2017. The
expanding worldwide fleet will generate additional revenues from new
installation programs, while 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 February 1998 Airline Monitor, the percentage of Boeing aircraft
deliveries projected to be wide-body aircraft for 1998 through 2002 is
42%, as compared to 37% for the five-year period ended December 31,
1997. 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 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 and general aircraft cabin
interior products industries are engaged in intensive development and
marketing efforts for a number of new products, including full electric
"sleeper seats," convertible seats, interactive individual passenger
entertainment systems, live broadcast television, crew masks, advanced
telecommunications equipment, protective breathing equipment, oxygen
generating systems 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 TVTM, a new product line being developed by a joint
venture between the Company and Harris Corporation, will provide live
broadcast television via satellite to passenger 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 Services Markets. Historically, the airlines have relied on
airframe manufacturers or their own in-house engineering resources to
provide engineering, design, integration and installation services, as
well as services related to repairing or replacing cabin interior
products that have become damaged or otherwise non- functional. As cabin
interior product configurations have become increasingly sophisticated
and the airline industry increasingly competitive, the airlines have
begun to outsource such services in order to increase productivity and
reduce costs and overhead. Outsourced services include: (i) engineering
design, integration, installation and certification services, which will
entail providing the capabilities to design, project manage, integrate,
test and certify reconfigurations and modifications for commercial
aircraft and to manufacture related products, including engineering kits
and interface components; and (ii) 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 Shares 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
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sources, of approximately 50% in commercial aircraft seats, determined
on the basis of installed base as of August 29, 1998, 60% in executive
aircraft seats, 90% in coffee makers, 90% in refrigeration equipment,
90% in air valves, 50% in oxygen delivery systems, 50% in ovens, each
based on dollar sales for the twelve months ended August 29, 1998, and
35% in individual-passenger in-flight entertainment systems, determined
on the basis of installed base as of August 29, 1998. 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 $4.7 billion installed base of cabin interior equipment
(valued at replacement prices as of August 29, 1998), 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.
Combination of Manufacturing and Cabin Interior Design Services. The
Company has continued to expand its products and services, believing
that the airline industry increasingly will seek an integrated approach
to the design, development, integration, installation, testing and
sourcing of aircraft cabin interiors. The Company believes that it is
the only manufacturer of a broad technologically-advanced line of cabin
interior products with interior design capabilities. Based on its
established reputation for quality, service and product innovation among
the world's commercial airlines, the Company believes that it is well
positioned to provide "one-stop shopping" to these customers, thereby
maximizing sales opportunities for the Company and increasing the
convenience and value of the service provided to its customers.
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 725 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 play a leading role in developing and
introducing innovative products to meet emerging industry trends and
needs 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 individual passenger
distributed video 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.
The Company's two individual passenger distributed video systems are
designed to meet the varying technological and price specifications of
the airlines. The Company also has a new interactive entertainment
system in the final development stage and a joint venture with Harris
Corporation to develop and deliver live broadcast television
(LiveTV(TM)) to domestic narrow-body commercial aircraft.
Proven Track Record of Acquisition 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. Between 1989 and January 1996, B/E
acquired nine companies and has integrated the acquisitions by
eliminating 11 operating facilities and consolidating personnel at the
acquired businesses, resulting in headcount reductions of approximately
1,300 employees, through January 1998. B/E's integration activities,
coupled with its re-engineering program, have positively impacted gross
margins, which have increased from 33.0% to 36.7%, and operating margins
(before nonrecurring expenses), which have increased from 10.5% to
13.0%, during the five-year period ended February 28, 1998. During
fiscal 1999, the Company acquired six companies, including ASI, PBASCO,
AMP, ALC, SMR and CF Taylor, to broaden its product lines, to expand its
activities from the commercial to the general aviation market and to
position B/E as the preferred global supplier to its customers. The
aggregate purchase price of all acquisitions made by B/E since 1989 is
approximately $680 million. 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 have reduced its exposure to demand
fluctuations in any one product area.
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Growth Opportunities
B/E believes that it has benefitted from four major growth trends in the
aerospace industry.
Increase in Refurbishment and Upgrade Orders. B/E's substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and the sale of spare parts. Approximately 61% of
B/E's revenues for the year ended February 28, 1998 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 has been 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 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 Boeing Report, worldwide air
travel growth is projected to average 5% per year over the next 10 years
and the worldwide fleet of commercial passenger aircraft is projected to
expand from approximately 10,845 at the end of 1997 to approximately
15,900 by the end of 2007 and to more than 23,500 by the end of 2017.
Related growth in aircraft interior product shipments associated with
new aircraft deliveries began during calendar 1996. The Company
generally receives orders related to new aircraft deliveries
approximately six months before the delivery date. Furthermore,
according to the February 1998 Airline Monitor, the percentage of new
Boeing aircraft deliveries projected to be wide-body aircraft for 1998
through 2002 is 42% as compared to 37% for the five-year period ended
December 31, 1997. 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. See "Risk Factors-Dependence upon Conditions in
the Airline Industry."
General Aviation and VIP Aircraft Fleet Expansion and Related Retrofit
Opportunities. General aviation and VIP airframe manufacturers are
experiencing, a surge in new aircraft deliveries similar to that
occurring in the commercial aircraft industry. According to industry
sources, executive aircraft deliveries amounted to 241 units in calendar
1996 and were approximately 348 in calendar 1997. Industry sources
indicate that executive aircraft deliveries are expected to be
approximately 450 in calendar 1998 and should reach 545 per year by the
year 2000. Several new aircraft models, including the Visionaire
Vantage, Cessna Citation Excel, the Boeing Business Jet, Global Express
and Airbus Business Jet, have been or are expected to be introduced over
the next several years. Advances in engine technology and avionics and
emergence of fractional ownership of executive aircraft are all
important growth factors. In addition, the general aviation and VIP
aircraft fleet consists of approximately 10,000 aircraft with an average
age of approximately 15 years. As aircraft age or ownership changes,
operators retrofit and upgrade the cabin interior, including seats,
sofas and tables, sidewalls, headliners, structures such as closets,
lavatories and galleys, and related equipment including lighting and
oxygen delivery systems. The installed value of a new interior can range
from $1 million for smaller models to up to $7 million for a long haul
aircraft. In addition, operators generally reupholster or replace seats
every five to seven years. Management believes the Company is well
positioned to benefit from the retrofit opportunities due to (i) the
15-year average age of the executive jet fleet; (ii) operators who have
historically reupholstered their seats are now more inclined to replace
these seats with lighter weight, more modern and 16G complaint seating
models; and (iii) the belief that the Company is the only manufacturer
with the capability for cabin interior design services, a broad product
line for essentially all cabin interior products and program management
services, for true "one-stop shopping."
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.
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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 21,000 units, which is a system that
provides non interactive video programming and (ii) the B/E 2000M, with
an installed base of approximately 11,000 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 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 delivered the first MDDS product to its launch
customer, Japan Airlines ("JAL"), in April 1998. Subsequently, the
Company delivered the second MDDS product to JAL, in June 1998. The
Company also completed the engineering necessary to enable installation
of the MDDS as a line fit option on Boeing aircraft in 1998. As of
August 29, 1998, B/E had an in- flight entertainment systems backlog of
approximately $86 million.
Recently, Rockwell Collins has entered the in-flight entertainment
industry by purchasing Hughes Avicom, and in doing so has changed the
competitive landscape for this line of business. The Company has
evaluated the impact of the changing market conditions, and has
determined that the long term success of this line of business may be
enhanced by teaming with a partner with substantial economic and
technology resources. In connection therewith, the Company may monetize
a portion, or if no suitable partner can be found, all of its investment
in its in-flight entertainment business.
Business Strategy
The Company's business strategy is to maintain its leadership position
and best serve its customers by (i) offering the broadest and most integrated
product lines and services in the industry, including not only new product and
follow-on product sales, but also design, integration, installation and
certification services as well as maintenance, upgrade and repair services; (ii)
pursuing a worldwide marketing approach focused by airline and general aviation
airframe manufacturer and encompassing the Company's entire product line; (iii)
pursuing the highest level of quality in every facet of its operations, from the
factory floor to customer support; (iv) remaining the technological leader in
its industry, as well as significantly growing its installed base of products in
the developing in-flight individual passenger entertainment market; (v)
enhancing its position in the growing upgrade maintenance, inspection and repair
services market; and (vi) pursuing selective strategic acquisitions in the
commercial aircraft and general aviation cabin interior products industries.
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. The Company estimates that as of August 29, 1998 the Company had an
aggregate installed base of more than 1,000,000 aircraft seats, valued at
replacement prices of approximately $2.1 billion.
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. Based upon major airlines program selection
and orders on hand, the Company is the leading worldwide manufacturer of
premium-class seats. 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
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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.
Passenger Entertainment and Service Systems ("PESS")
Management estimates that the Company has the largest installed base of
PESS products in the world, which as of August 29, 1998, valued at replacement
prices, is approximately $470 million. The Company has the leading share of the
market for passenger control units ("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 1992, is one of the Company's
first-generation individual in-flight video systems and offers
centralized electronic distribution of a limited range of programming.
Since its introduction, the Company has installed approximately 21,000
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:
o 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 11,000 units.
o MDDS--B/E's MDDS is a state-of-the-art, fully interactive
individual passenger in-flight entertainment system which has the
capacity to offer numerous movies on demand, telecommunications,
gaming, Nintendo(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 delivered the first MDDS product
to its launch customer, JAL, in April 1998. Subsequently, the
Company delivered the Second MDDS Product to JAL in June 1998. The
Company also completed the engineering necessary to enable
installation of the MDDS as a line fit option on Boeing aircraft
in conjunction with the JAL delivery.
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 controls 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) sometime
in 1999.
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<PAGE>
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.
Interior Systems Products
The Company is the world's largest manufacturer of interior systems
products for both narrow- and wide-body aircraft, offering a wide selection of
structures, coffee and beverage makers, water boilers, ovens, liquid containers,
refrigeration equipment, oxygen delivery systems, passenger service units, air
valves, lighting and switches, and a variety of other interior components.
Management estimates that as of August 29, 1998 the Company has an aggregate
installed base of such equipment, valued at replacement prices, of approximately
$1.5 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 beverage 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.
Oxygen Delivery System. The Company is a leading manufacturer of oxygen
delivery systems, passenger service units, air valves, lighting and
switches for both commercial and general aviation aircraft. B/E is the
only manufacturer with the capability to fully integrate its own
manufactured components with overhead passenger service units with
either chemical or gaseous oxygen equipment. The Company's oxygen and
passenger service unit equipment has been approved for use on all Boeing
and Airbus aircraft and is also found on essentially all general
aviation and VIP aircraft.
General Aviation
The Company entered the market for general aviation and VIP aircraft
products with its acquisition of AMP in April 1998. By combining AMP's
substantial presence in the general aviation and VIP aircraft cabin interior
products industry with that of PBASCO and ALC, B/E is now the leading
manufacturer of a broad product line including a complete line of executive
aircraft seating products, fluorescent lighting, air valves and oxygen delivery
systems as well as sidewalls, bulkheads, credenzas, closets, galley structures,
lavatories, tables and sofas. B/E has the capability to provide complete
interior packages, including all design services, all interior components and
program management services for executive aircraft interiors. B/E is the
preferred supplier of seating products and fluorescent lighting systems of
essentially every general aviation airframe manufacturer.
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<PAGE>
Services and Speciality Products
The Company is an active participant in the growing services 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.
Engineering Design, Integration, Installation and Certification
Services. Through the acquisition of SMR in August 1998, B/E is a leader
in providing engineering design, integration, installation and
certification services for commercial aircraft passenger cabin
interiors, offering its customers in-house capabilities to design,
project manage, integrate, test and certify reconfigurations and
modifications for commercial aircraft and to manufacture related
products, including engineering kits and interface components. The
Company provides a broad range of interior reconfiguration services
which allow airlines to change the size of certain classes of service,
modify and upgrade the seating, install telecommunications or
entertainment options, relocate galleys, lavatories and overhead bins,
and install crew rest compartments. B/E is also a leading supplier of
structural design and integration services, including airframe
modifications for passenger-to-freighter conversions.
Upgrade, Maintenance and Repair Services. The Company provides a
comprehensive range of services for cabin interior products on board
aircraft either between flights or on an overnight basis, or at one or
more of eight 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 crew rest compartments,
flight attendant seats, observer seats, and custom products in the
passenger seating area, as well as fire/smoke barriers and cargo nets.
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.
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 $24.7 million, $45.7 million, and $37.1
million for the six months ended August 29, 1998 and for the fiscal years ended
February 18, 1998, and February 22, 1997, respectively. The increase in expenses
during fiscal 1998 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 currently employs
approximately 725 professionals in the engineering and product development
areas. As part of its engineering design, integration, installation and
certification services business acquired in August 1998, the Company added
approximately 105 engineers. 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 and commercial and General aviation aircraft
manufacturers. The Company markets its general aviation products directly to all
of the world's general aviation air frame manufacturers, modification centers
and operators. B/E has a sales and marketing organization of 138 persons, along
with 48 independent sales representatives. B/E's sales to non-U.S. airlines were
$137.0 million, $232.7 million, and $203.4 million for the six months ended
August 19, 1998 and for the fiscal years ended February 28, 1998 and February
22, 1997, respectively, or approximately 46%, 48% and 49%, respectively, of net
sales during such periods.
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<PAGE>
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 67% of the purchases of products manufactured by B/E during fiscal
1998. 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.
The Company markets its general aviation products directly to all of the
world's general aviation airframe manufacturers, modification centers and
operators.
During the latter part of fiscal 1997, 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
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 six months ended August 29, 1998 and for the fiscal year
ended February 28, 1998, one customer accounted for approximately 17% and 18%,
respectively, of the Company's total revenues, and no other customer accounted
for more than 10% of such revenues. There were no major customers in fiscal 1997
or 1996. 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 August 29, 1998 was
approximately $700 million, approximately 57% of which management believes to be
deliverable in the 12 months following August 29, 1998, compared with a backlog
of $560 million and $420 million on February 28, 1998 and February 22, 1997,
respectively (as adjusted 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."
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 on-site customer training.
Customer service is particularly important to airlines due to the high cost to
the airlines of late delivery, malfunctions and other problems.
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<PAGE>
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 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
Matsushita Electronics and Rockwell Collins. The Company's primary competitors
for galley products are JAMCO Limited, Britax PLC, Scott Aviation and
Intertechnique. The market for general aviation products and services is highly
fragmented, consisting of numerous competitors.
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 purchased from outside vendors.
The Company maintains state-of-the-art facilities, and management has an ongoing
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 U.S. 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 eight service centers throughout the
world.
In March 1992, the FAA adopted Technical Standard Order C127 requiring
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 August 29, 1998, the Company had developed
15 different seat models which meet these new seat safety regulations.
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<PAGE>
Environmental Matters
The Company is subject to extensive and changing, federal, state and
foreign laws and regulations establishing health and environmental quality
standards, and may be subject to liability or penalties for violations of those
standards. The Company is also subject to laws and regulations governing
remediation of contamination at facilities currently or formerly owned or
operated by it or to which it has sent hazardous substances or wastes for
treatment, recycling or disposal. The Company believes that it is currently in
compliance, in all material respects, with all such laws and regulations.
However, there can be no assurance that it will not be subject to future
liabilities or obligations as a result of new or more stringent interpretations
of existing laws and regulations. In addition, the Company may have liabilities
or obligations in the future if it discovers any environmental contamination or
liability at any of its facilities, or at facilities that may be acquired.
Patents
B/E currently holds 73 United States patents and 28 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 August 29, 1998, B/E had approximately 5,600 employees.
Approximately 73% of these employees are engaged in manufacturing, 13% in
engineering, research and development, and 14% in sales, marketing, product
support and general administration. Approximately 13% of the employees are
represented by unions. On April 25, 1997, the Company completed negotiations
with one of its two domestic unions which represents 7% 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. The contract with the only other
domestic union, which represents approximately 2% of the Company's employees,
runs to the year 2003. B/E considers its employee relations to be good.
Property
As of August 29, 1998, B/E had 27 principal facilities, comprising an
aggregate of approximately 1.9 million square feet of space. The following table
describes the principal facilities and indicates the location, function,
approximate size and ownership status of each location, including SMR, ALC and
CF Taylor:
<TABLE>
<CAPTION>
Facility
Size
Location Products and Function (Sq. Feet) Ownership
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
Corporate
Wellington, Florida....................... Corporate headquarters, finance, marketing sales 17,700 Owned
Seating Products
Litchfield, Connecticut................... Manufacturing, service and warehousing 147,700 Owned
Winston-Salem, North Carolina............. Manufacturing, research and development, finance,
marketing and sales; Seating Products Group
Headquarters 264,800 Owned
Leighton Buzzard, England................. Manufacturing, service, research and development,
sales support, finance and warehousing 114,000 Owned
Kilkeel, Northern Ireland................. Manufacturing, sales support and warehousing 38,500 Owned
Interior Systems
Anaheim, California....................... Manufacturing, service, research and development,
sales support, finance and warehousing 57,100 Leased
Delray Beach, Florida..................... Manufacturing, service, research and development,
sales support, finance and warehousing; Interior
Systems Group Headquarters 52,000 Owned
Lenexa, Kansas............................ Manufacturing, service, engineering and
warehousing 80,000 Leased
Nieuwegein, The Netherlands............... Manufacturing, service, research and development,
sales support, finance and warehousing 39,000 Leased
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Facility
Size
Location Products and Function (Sq. Feet) Ownership
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
PESS Products
Irvine, California........................ Manufacturing, service, research and development,
sales support, finance and warehousing; In-flight
Entertainment Group Headquarters 106,700 Leased
General Aviation and VIP Products
Miami, Florida............................ Manufacturing, service, research and development,
sales support, finance and warehousing; General 84,300 Leased
Aviation Headquarters 71,700 Owned
Fountain Valley, California............... Manufacturing, service, research and development,
sales support, finance and warehousing 26,000 Owned
Holbrook, New York........................ Manufacturing, service, research and development,
sales support, finance and warehousing 20,115 Leased
Services
Orange, California........................ Upgrade, maintenance, inspection and repair,
finance, sales support and warehousing; Services
Group Headquarters 106,300 Leased
Longwood, Florida......................... Upgrade, maintenance, inspection and repair 5,300 Leased
Burnsville, Minnesota..................... Upgrade, maintenance, inspection and repair 7,200 Leased
Woodville, Washington..................... Upgrade, maintenance, inspection and repair 26,800 Leased
Chesham, United Kingdom................... Upgrade, maintenance, inspection and repair 34,000 Owned
Toulouse, France.......................... Upgrade, maintenance, inspection and repair 400 Leased
Houston, Texas............................ Upgrade, maintenance, inspection and repair 45,000 Owned
Schipol, The Netherlands.................. Upgrade, maintenance, inspection and repair 3,600 Leased
SMR Technologies
Sharon Center, Ohio....................... Services, research and development, sales support,
finance and warehousing 16,282 Owned
Fenwick, West Virginia.................... Manufacturing, service and warehousing 132,600 Owned
Flight Structure and Integration
Group
Arlington, Washington..................... Manufacturing, service, research and development,
sales support, finance and warehousing 130,164 Leased
Jacksonville, Florida..................... Manufacturing, service, engineering, and
warehousing 75,000 Owned
Wokingham, England........................ Manufacturing, service, research and development,
sales support, finance and warehousing 70,000 Leased
Wales, United Kingdom..................... Manufacturing, service and warehousing 80,000 Owned
</TABLE>
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 entered into a settlement related to 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 Air. 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
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<PAGE>
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. The settlement 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 pled 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 consent order issued by the DOC
applies solely to PTC Aerospace ("PTC"), a unit of the Company's Seating
Products Group. PTC is located in Litchfield, Connecticut. Under the terms of
the consent order, if PTC were to violate any federal export laws during the
three-year period ending in January 2001, PTC, not B/E, would be subject to an
order denying export privileges. Under the Company's current organization, the
Company believes that it is unlikely that PTC would be in a position to engage
in any export transactions that are not reviewed and controlled at the Seating
Products Group level. As part of the plea agreement that was negotiated with the
Office of the United States Attorney for the District of Connecticut, B/E is
subject to a three-year term of corporate probation that began in January 1998.
The probation is unsupervised and thus B/E is not subject to monitoring or other
conditions that impede or affect its ability to conduct business. Under the
probation, the Company must refrain from violating any federal laws. The Company
has taken steps to implement a legal compliance program to prevent and detect
any violations of law. 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.
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MANAGEMENT
Directors and Executive Officers
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....................... 59 Chairman of the Board
Robert J. Khoury..................... 56 Vice Chairman of the Board and Chief
Executive Officer and Director
Paul E. Fulchino..................... 52 President, Chief Operating Officer and
Director
Marco C. Lanza....................... 42 Executive Vice President, Marketing and
Product Development
Thomas P. McCaffrey.................. 44 Corporate Senior Vice President of
Administration, Chief Financial Officer and
Assistant Secretary
E. Ernest Schwartz................... 62 Corporate Senior Vice President,
Development and Planning
Edmund J. Moriarty................... 54 Corporate Vice President--Law, General
Counsel and Secretary
Jeffrey P. Holtzman.................. 43 Corporate Vice President, Treasurer and
Assistant Secretary
Sam G. Ayoub......................... 56 Group Vice President and General Manager,
Services Group
Roman G. Ptakowski................... 50 Group Vice President and General Manager,
Interior Systems Group
Scott A. Smith....................... 43 Group Vice President and General Manager,
In-Flight Entertainment Group
Jim C. Cowart........................ 47 Director**
Richard G. Hamermesh................. 50 Director*
Brian H. Rowe........................ 67 Director**
Hansjoerg Wyss....................... 63 Director
- --------
* Member, Audit Committee.
** Member, Stock Option and Compensation Committee.
</TABLE>
The Company's Restated Certificate of Incorporation provides that the
Board of Directors is divided into three classes, each nearly as equal in number
as possible, so that each director (in certain circumstances 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, 1997 and 1996, respectively.
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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 May 28, 2003. Mr.
Khoury is the brother of Robert J. Khoury.
Robert J. Khoury has been a Director of the Company since July 1987. Mr.
Khoury was elected Vice Chairman and Chief Executive Officer effective April 1,
1996. From July 1987 until that date, Mr. Khoury served as the Company's
President and Chief Operating Officer. From 1986 to 1987, Mr. Khoury was Vice
President of The K.A.D. Companies, Inc. The Company has entered into an
employment agreement with Mr. Khoury extending through May 28, 2003. 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"), an international 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 May 28, 2003.
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 May 28, 2003.
E. Ernest Schwartz has been Corporate Senior Vice President--Development
and Planning since December 1997. From March 1992 through November 1997, Mr.
Schwartz was Group Vice President and General Manager of the Interior Systems
Group of the Company. 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--Law, 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 Group 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.
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Roman G. Ptakowski has been the Group Vice President and General Manager
of the Interior Systems 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 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.
Scott A. Smith has been the Group Vice President and General Manager of
the In-Flight Entertainment Group since April 1998. From December 1995 through
March 1998, Mr. Smith was with Toshiba American Information Electronics with his
last position being Senior Vice President, Sales of the Americas. From December
1992 to February 1994, Mr. Smith served as Corporate Vice President of
Engineering and from February 1994 to September 1995 served as the General
Manager of the Desktop and Server Product Division of AST Research. Prior to
that, Mr. Smith was with IBM for 16 years and served in numerous capacities,
including Systems Manager of the engineering team which developed IBM's first PC
Server and advanced desktop, Staff Assistant to the Chairman of the Board and
Director of Visual Subsystems Group.
Jim C. Cowart has been a Director of the Company since November 1989.
Mr. Cowart is currently an independent investor and has been a principal of
Cowart & Co. L.L.C. and EOS Capital, Inc., private capital firms retained from
time to time by the Company for strategic planning, competitive analysis,
financial relations and other services. From October 1992 to April 1998, Mr.
Cowart was a Director, and from January 1993 to November 1997, Mr. Cowart was
the Chief Executive Officer of Aurora Electronics Inc. (now known as Cerplex
Group, Inc.). From 1987 until 1991, Mr. Cowart was a founding general partner of
Capital Resources Partners, a private investment capital manager. Prior to such
time, Mr. Cowart held various positions in investment banking and venture
capital with Lehman Brothers, Shearson Venture Capital and Kidder, Peabody & Co.
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. He 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. Mr. Rowe is
also a Director of the following companies: January 1980--Fifth Third Bank, an
Ohio banking corporation; December 1994--Stewart & Stevenson Services, Inc., a
custom packager of engine systems; March 1995--Atlas Air, Inc., an air cargo
carrier; December 1995--Textron Inc., a manufacturer of aircraft, automobile
components, an industrial segment, systems and components for commercial
aerospace and defense industries, and financial services; March 1996--Canadian
Marconi Company, a manufacturer of aerospace, electronic communications products
and surface transportation electronics systems; and October 1996--Cincinnati
Bell Inc., a communications services company. From January 1996 to June 1998,
Mr. Rowe 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 served as Director, President and is currently Chairman
and Chief Executive Officer of Synthes North America and Synthes Canada, Ltd.,
manufacturers and distributors of orthopedic implants and instruments. Mr. Wyss
formerly held management positions with Monsanto Europe in Belgium and
Schappe-Burlington and Chrysler International in Switzerland. Mr. Wyss earned
his MBA at Harvard Graduate School of Business and attained a Master of Science
from the Swiss Federal Institute of Technology in Zurich. Mr. Wyss presently
sits on numerous boards including Harvard Graduate School of Business, Norian
Corporation, Boathouse Sports, Southern Utah Wilderness Alliance and the Grand
Canyon Trust.
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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
September 9, 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 1998 (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:
Common Stock
Beneficially Owned
------------------
Percent of
Number Outstanding
Name of Shares Shares(1)
- ---- --------- ---------
Executive Officers, Directors and 5% Stockholders:
T. Rowe Price Associates...........................
100 East Pratt
Baltimore, MD 21202 1,898,300 6.50%
Marco C. Lanza+.................................... 185,482(2) **
Amin J. Khoury+*................................... 162,500(3) **
Paul E. Fulchino+*................................. 155,179(4) **
Hansjorg Wyss*..................................... 146,109(5) **
Robert J. Khoury+*................................. 114,055(6) **
Thomas P. McCaffrey+............................... 113,640(7) **
Jim C. Cowart*..................................... 54,250(8) **
Brian H. Rowe*..................................... 30,000(9) **
Richard G. Hamermesh*.............................. 17,350(10) **
All Directors and Executive Officers as a group
(14 Persons)....................................... 1,155,430(11) 3.95%
- ----------------
+ Named Executive Officer
* Director of the Company
** Less than 1 percent
(1) The number of shares of Common Stock deemed outstanding includes: (i)
28,251,910 shares of Common Stock outstanding as of September 9, 1998;
and (ii) 968,000 shares of Common Stock subject to outstanding stock
options which are exercisable by the named individual or group in the
next sixty days (commencing September 9, 1998).
(2) Includes 185,482 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 61,250 shares of Common Stock
which are not exercisable in the next sixty days.
(3) Includes 162,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 197,500
shares of Common Stock which are not exercisable in the next sixty days.
(4) Includes 153,131 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 177,500 shares of Common Stock
which are not exercisable in the next sixty days.
(5) Includes 5,000 days issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 12,500
shares of Common Stock which are not exercisable in the next sixty days.
(6) Includes 114,055 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 147,500 shares of Common Stock
which are not exercisable in the next sixty days.
(7) Includes 109,238 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.
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(8) Includes 3,000 shares acquired by a profit sharing plan and 51,250
shares issuable upon the exercise of stock options exercisable in the
next sixty days. Excludes options to purchase 33,750 shares of Common
Stock which are not exercisable in the next sixty days.
(9) Includes 30,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 20,000
shares of Common Stock which are not exercisable in the next sixty days.
(10) Includes 8,750 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 12,500
shares of Common Stock which are not exercisable in the next sixty days.
(11) Includes 968,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 938,750
shares of Common Stock which are not exercisable in the next sixty days.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The Bank Credit Facility consists of a $100.0 million revolving credit
facility and an acquisition facility of up to $100.0 million. An interim
revolving credit commitment of $120.0 million available for the irrevocable
letter of credit in connection with the SMR acquisition, which was added in
August 1998, was returned to The Chase Manhattan Book and canceled on November
2, 1998 when the SMR Shares were repurchase. The revolving credit facility
expires in April 2004 and the acquisition facility is amortizable over five
years beginning in April 1999.
The Bank Credit Facility is collateralized by the Company's accounts
receivable, inventories and by substantially all of its other personal property.
The Bank Credit Facility contains customary affirmative covenants, negative
covenants and conditions of borrowing, all of which were met by the Company as
of August 29, 1998. At August 29, 1998, indebtedness under the existing Bank
Credit Facility consisted of letters of credit aggregating approximately $124.0
million and outstanding borrowings under the revolving and acquisition credit
facilities aggregating $121.0 million bearing interest at LIBOR plus 1.50%.
Since August 29, 1998, the Company has borrowed an additional $40.0 million
under the revolving credit facility related to certain acquisitions and related
costs, repaid approximately $75.0 million of outstanding borrowings with
proceeds from the Offering and canceled the irrevocable letter credit in
connection with the SMR acquisition. Upon completion of the Offering and the
Company's use of the net proceeds from the Offering and giving effect to
borrowings relating to certain acquisitions and related costs, the Company would
have had $109.4 million available under the Bank Credit Facility as of August
29, 1998.
In addition to the Old Notes, the Company has outstanding the $100
million of 9 7/8% Notes which 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 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 chance 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 August 19,
1998, including limitations on future indebtedness, restricted payments,
transactions with affiliates, liens, dividends, mergers and transfers of assets.
In February 1998, the Company sold $250.0 million of 8% Notes. In
conjunction with the sale of the 8% Notes, the Company initiated a tender offer
for the $125.0 million of 9 3/4% Senior Notes due 2003 (the "9 3/4% Notes"). The
net proceeds from the offering of approximately $240.4 million were used (i) for
the tender offer (which expired on February 25, 1998) in which approximately
$101.8 million of the 9 3/4% Notes were retired, (ii) to call the remaining 9
3/4% Notes on March 16, 1998, and (iii) together with the proceeds from the Bank
Credit Facility, to fund the acquisitions of AMP and PBASCO. The Company
incurred an extraordinary charge of $9.0 million for unamortized debt issue
costs, tender and redemption premiums and fees and expenses related to the
repurchase of the 9 3/4% Notes.
The 8% Notes are unsecured senior subordinated obligations of the
Company and are subordinated to all senior indebtedness of the Company and
mature on March 1, 2008. Interest on the 8% Notes is payable semiannually in
arrears March 1 and September 1 of each year. The 8% Notes are redeemable at the
option of the Company, in whole or in part, at any time after March 1, 2003 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 8% Notes may require the Company to repurchase such holder's 8%
Notes at 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of such purchase. The 8% Notes contain certain restrictive
covenants, all of which were met by the Company as of August 29, 1998, including
limitations on future indebtedness, restricted payments, transactions with
affiliates, liens, dividends, mergers and transfers of assets.
B/E Aerospace (UK) Limited ("B/E (UK)"), a subsidiary of the Company,
has a revolving line of credit agreement aggregating approximately $5.0 million
(the "UK Credit Agreement"). The UK Credit Agreement is collateralized by
accounts receivable and inventory of B/E (UK). There were no borrowings
outstanding under the UK Credit Agreement as of August 29, 1998.
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
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of the assets of Inventum. There were no borrowings outstanding under the
Inventum Credit Agreement as of August 29, 1998.
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DESCRIPTION OF THE NEW NOTES
The Old Notes were issued under an indenture dated as of November 2,
1998 (the "Indenture") between the Company, as issuer, and The Bank 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 $200,000,000 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 principal corporate trust office or agency of the Trustee in The City of New
York maintained for such purposes at 101 Barclay Street, Floor 21W, New York,
New York 10286. (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 will be made for any transfer,
exchange or redemption of Notes, except in certain circumstances for any tax or
other governmental share that may be imposed in connection therewith. (Section
305)
Maturity, Interest and Principal Payments
The Notes will mature on November 1, 2008. Except as otherwise described
below, each Note will bear interest at the applicable rate set forth on the
cover page hereof from November 2, 1998 or from the most recent interest payment
date to which interest has been paid, payable in cash semiannually in arrears on
May 1 and November 1 of each year, commencing May 1, 1999, 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 April 15 or October 15 next preceding such
interest payment date.
As discussed under "Exchange Offer; Registration Rights," 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 (the "Exchange Offer"), 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) (the "Exchange Notes") 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 150 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 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 with respect to the Exchange
Offer (the "Exchange Offer 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 Exchange Offer Registration Statement has not
been declared effective on or prior to the 120th 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
150th 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 120-day period in the case of clause (b) above or following such
150-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
Exchange Offer Registration Statement after the 30-day period described in
clause (a) above, (y) the effectiveness of the Exchange Offer Registration
Statement after the 120-day period described in clause (b) above or (z) the
consummation of the Exchange Offer or the effectiveness of a Shelf
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Registration Statement, as the case may be, after the 150-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; Registration Rights."
Notes that remain outstanding after the consummation of the Exchange
Offer and Exchange 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))
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
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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 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.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, the 8% 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 Indebtedness of the Company that at the time
of incurrence is incurred in violation of any covenant of the Indenture, (v) any
liability for federal, state or local taxes or other taxes, owed or owing by the
Company, (vi) trade accounts payable owed or owing by the Company, (vii)
Indebtedness of the Company to any Subsidiary or any other Affiliate of the
Company, (viii) Redeemable Capital Stock of the Company and (ix) Indebtedness
which when incurred and without respect to any election under Section 1111(b) of
Title 11 of the United States Code is without recourse to the Company or any
Subsidiary.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Bank Credit Agreement and (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.
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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 November 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:
Redemption
Year Price
---- ------
2003............................................. 104.750%
2004............................................. 103.167%
2005............................................. 101.583%
2006 and thereafter.............................. 100.000%
In addition, at any time or from time to time, on or prior to November
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 109 1/2% 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 least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption and
accepted for payment. (Sections 1104, 1105, 1107 and 1108)
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
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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),
(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
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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 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
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(vi) the purchase, redemption or other acquisition or retirement
for value of shares of Common Stock of the Company issued pursuant to
non-qualified options granted under stock option plans of the Company,
in order to pay withholding taxes due as a result of income recognized
upon the exercise of such options, provided that (1) the Company is
required, by the terms of such plans, to effect such purchase,
redemption or other acquisition or retirement for value of such shares
and (2) the aggregate consideration paid by the Company for such shares
so purchased, redeemed or otherwise acquired or retired for value does
not exceed $2 million during any fiscal year of the Company.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
(provided that any dividend paid pursuant to clause (i) of this paragraph (b)
shall reduce the amount that would otherwise be available under clause (3) of
paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i)) and the actions described in clause (v) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph (b) and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the Company under
clause (3)(A) of paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
the Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period. (Section 1011)
Limitation on Issuances and Sales of Restricted Subsidiary Stock. The
Indenture will provide that the Company (i) will not permit any Restricted
Subsidiary to issue any Capital Stock (other than to the Company or a
wholly-owned Restricted Subsidiary) and (ii) will not permit any Person (other
than the Company or a wholly-owned Restricted Subsidiary) to own any Capital
Stock of any Restricted Subsidiary; provided, however, that this covenant shall
not prohibit (1) the issuance and sale of all, but not less than all, of the
issued and outstanding 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
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any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or
Subordinated Indebtedness of the Company on or with respect to any of its
property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (x) in the case of any Lien
securing Pari Passu Indebtedness of the Company, the Notes are secured by a Lien
on such property, assets or proceeds that is senior in priority to or pari passu
with such Lien and (y) in the case of any Lien securing Subordinated
Indebtedness of the Company, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Lien.
(b) The Company will not permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is
pari passu or subordinate in right of payment to the Guarantee of such
Subsidiary, on or with respect to any of such Restricted Subsidiary's properties
or assets, including any shares of stock or Indebtedness of any Subsidiary of
such Restricted Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the case of
any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu
in right of payment to the Guarantee of such Restricted Subsidiary, such
Guarantee is secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien and (y) in the case of any
Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in
right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee
is secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien. (Section 1014)
Change of Control. Upon the occurrence of a Change of Control, the
Company shall be obligated to make an offer to purchase all of the then
outstanding Notes (a "Change of Control Offer"), and shall purchase, on a
business day (the "Change of Control Purchase Date") not more than 70 nor less
than 60 days following the Change of Control, all of the then outstanding Notes
validly tendered pursuant to such Change in Control Offer, at a purchase price
(the "Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the Change of Control
Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each Noteholder and
the Banks notice of the Change of Control Offer, which notice 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 Chance 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.
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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 the transaction is not a transaction defined as
a Change of Control. See "--Certain Definitions" for the definition of "Change
of Control."
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above. (Section 1015)
Limitation on Disposition of Proceeds of Asset Sales. (a) The Indenture
will provide that the Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company and
its Restricted Subsidiaries may engage in Asset Sales for consideration not in
the form of cash or Cash Equivalents in amounts in excess of that permitted in
this clause (ii), so long as (x) such excess consideration is in the form of
Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully
Traded Common Stock received by the Company and its Restricted Subsidiaries
(measured as of the date of receipt) from all Asset Sales in reliance on this
proviso since the date of the Indenture that has not been converted into cash or
Cash Equivalents does not exceed $10 million and (z) any Fully Traded Common
Stock that is converted into cash or Cash Equivalents shall be applied as
provided in paragraphs (b) and (c) of this "Limitation on Disposition of
Proceeds of Asset Sales" covenant.
(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 Indebtedness
represented by the 8% Notes or the 9 7/8% Notes 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 clause (i) or (ii) (without regard to the
parenthetical contained in such clause (ii)) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 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
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payment to such Restricted Subsidiary's Guarantee with respect to the Notes
substantially to the same extent as such Indebtedness is subordinated to the
Notes; (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Guarantee; (iii) such Restricted Subsidiary shall appoint
CT Corporation in New York City as its agent for the service of process; and
(iv) such Restricted Subsidiary shall deliver to the Trustee an Opinion of
Counsel to the effect that (A) such appointment of CT Corporation is valid, (B)
such Guarantee of the Notes has been duly executed and authorized and (C) such
Guarantee of the Notes constitutes a valid, binding and enforceable obligation
of such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; provided that
this paragraph (a) shall not be applicable to any Guarantee of any Restricted
Subsidiary that (x) existed at the time such Person became a Restricted
Subsidiary of the Company and (y) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company.
(b) Notwithstanding the foregoing and the other provisions of the
Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide
by its terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such Guarantee.
(Section 1017)
Limitation on Dividends and other Payment Restrictions Affecting
Restricted Subsidiaries. The Indenture will provide that the Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary of the Company, (c) make loans or advances to the
Company or any other Restricted Subsidiary of the Company, (d) transfer any of
its properties or assets to the Company or any other Restricted Subsidiary of
the Company or (e) guarantee any Indebtedness of the Company or any other
Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
nonassignment 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.
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The Company will not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any Person or Persons, and the Company will not permit any Restricted
Subsidiary to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or Persons, unless at the time and after
giving effect thereto (i) either (A) if the transaction or transactions is a
merger or consolidation, the Company shall be the surviving Person of such
merger or consolidation, or (B) the Person formed by such consolidation or into
which the Company or such Restricted Subsidiary is merged or to which the
properties and assets of the Company or such Restricted Subsidiary, as the case
may be, substantially as an entirety, are sold, assigned, transferred, leased or
otherwise disposed of (any such surviving Person or transferee Person being the
"Surviving Entity") shall be a corporation organized and existing under the laws
of the United States of America, any state thereof or the District of Columbia
and shall expressly assume by a supplemental indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Notes and the Indenture, and, in each case, the Indenture
shall remain in full force and effect; (ii) immediately before and immediately
after giving effect to such transaction or series of transactions on a pro forma
basis (including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing and the Company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma
basis, could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Indebtedness" covenant; and (iii)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis, the Consolidated Net Worth of the Company or the Surviving
Entity, as the case may be, is at least equal to the Consolidated Net Worth of
the Company immediately before such transaction or series of transactions.
(Section 801)
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in the form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate stating that such consolidation, merger,
transfer, lease or other disposition and the supplemental indenture in respect
thereto comply with the requirements under the Indenture and an Opinion of
Counsel stating that the requirements of clause (i) of the preceding paragraph
have been complied with.
Upon any consolidation or merger or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with the immediately preceding paragraphs in
which the Company is not the continuing obligor under the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the Company therein. When a successor
assumes all the obligations of its predecessor under the Indenture or the Notes,
the predecessor shall be released from those obligations; provided that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Notes.
Events of Default
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Notes; or
(ii) default in the payment of an installment of interest on any
of the Notes, when due and payable, for 30 days; or
(iii) default in the performance or breach of the provisions of
the "Merger, Consolidation and Sale of Assets" section of the Indenture,
the failure to make or consummate a Change of Control Offer in
accordance with the provisions of the "Change of Control" covenant or
the failure to make or consummate an Excess Proceeds Offer in accordance
with the provisions of the "Limitation on Disposition of Proceeds of
Asset Sales" covenant; or
(iv) the Company or any Guarantor shall fail to perform or observe
any other term, covenant or agreement contained in the Notes, any
Guarantee or the Indenture (other than a default specified in (i), (ii)
or (iii) above) for a period of 30 days after written notice of such
failure requiring the Company to remedy the
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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 some by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate some 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
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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 Notes 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 Notes, 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
actually known to the Trustee, the Trustee shall mail to each holder of the
Notes notice of the Default or Event of Default within five days after the
occurrence thereof Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on any Notes, the Trustee
may withhold the notice to the holders of such Notes if a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of the Noteholders. (Section 601)
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within ten days
of any Default.
Defeasance or Covenant Defeasance of Indenture
The Company may, at its option and at any time, terminate the
obligations of the Company and the Guarantors with respect to the outstanding
Notes ("defeasance"). Such defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and any Guarantor with respect to certain
covenants that are set forth in the Indenture,
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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 Opinion of Counsel satisfactory to the Trustee,
which, taken together, state that all conditions precedent under the Indenture
to either defeasance or covenant defeasance, as the case may be, have been
complied with. (Section 1204)
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel satisfactory to the Trustee, which, taken together, state
that all conditions precedent under the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with. (Section 401)
Amendments and Waivers
From time to time, the Company and the Trustee may, without the consent
of the Noteholders, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act of 1939, or making any change that does
not adversely affect the rights of any Noteholder; provided, however, that the
Company has delivered to the Trustee an Opinion of Counsel stating, in certain
cases, 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 an 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
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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).
"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
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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 August 7, 1998, 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.
"BEAH (UK)" means BE Aerospace Holdings (UK) Limited (Company number
516846).
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; and (iii) commercial paper with a
maturity of 180 days or less issued by a corporation that is not an Affiliate of
the Company and is organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 by S&P or at least P-1 by
Moody's.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total Voting Stock of
the Company; (b) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of
the surviving or transferee corporation or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted Payment
under the Indenture and (ii) immediately after such transaction no "person" 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 662/3% 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.
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"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
Noncash Charges, in each case, for such period, of such Person and its
subsidiaries on a consolidated basis, all determined in accordance with GAAP, to
(b) the sum of such Consolidated Interest Expense for such period; provided that
(i) in making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing, a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period, (ii)
in making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness under a revolving credit facility
computed on a pro forma basis shall be computed based upon the average daily
balance of such Indebtedness during the applicable period, and (iii)
notwithstanding clauses (i) and (ii) above, interest on Indebtedness determined
on a fluctuating, basis, to the extent such interest is covered by agreements
relating to Interest Rate Protection Obligations, shall be deemed to have
accrued at the rate per annum resulting after giving effect to the operation of
such agreements. If such Person or any of its subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the above clause shall
give effect to 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.
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"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 Noncash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Eligible Inventories" as of any date means the consolidated inventories
of the Company and its Restricted Subsidiaries (net of any reserve) on the basis
of the method of accounting (either last in/first out or first in/first out)
used by the Company in the preparation of its financial statements included in
the latest Form 10-K filed by the Company under the Securities Act, as shown on
a consolidated balance sheet of the Company and its Restricted Subsidiaries, all
in accordance with GAAP.
"Eligible Receivables" as of any date means the consolidated accounts
receivables (net of any reserve) of the Company and its Restricted Subsidiaries
that are not more than 60 days past their due date and that were entered into on
normal payment terms as shown on a consolidated balance sheet of the Company and
its Restricted Subsidiaries, all in accordance with GAAP.
"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.
"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.
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"Guarantee" means any guarantee of any Indebtedness of the Company
incurred by any Restricted Subsidiary pursuant to (1) paragraph (a) of the
"Limitation on Guarantees of Indebtedness by Restricted Subsidiaries" covenant,
(2) clause (v) of the "Limitation on Dividends and other Payment Restrictions
Affecting Restricted Subsidiaries" covenant, (3) clause (y) of paragraph (b) of
the "Limitation on Indebtedness" covenant, or (4) clause (ii) of the definition
of Permitted Investment. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Restricted Subsidiary which incurs a Guarantee.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit, bankers' acceptance or other
similar credit transaction and in connection with any agreement to purchase,
redeem, exchange, convert or otherwise acquire for value any Capital Stock of
such Person, or any warrants, rights or options to acquire such Capital Stock,
now or hereafter outstanding, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, if, and to the extent, any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (c) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such Person, (e) all Indebtedness referred to in the preceding
clauses of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees by such Person of Indebtedness
referred to in this definition, (g) all Redeemable Capital Stock of such Person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all obligations of such Person under or in
respect of currency exchange contracts and Interest Rate Protection Obligations
and (i) any amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of such Person of the types referred to in clauses
(a) through (h) above. For purposes hereof, the "maximum fixed repurchase price"
of any 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.
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"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 (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
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(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 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;
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(iv) Indebtedness of any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock of Restricted
Subsidiaries;
(v) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary
incurred pursuant to clause (i) of this definition, including any
successive refinancings by such Restricted Subsidiary, so long as any
such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration thereof, such lesser
amount as of the date of determination) so refinanced plus the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of
any premium reasonably determined by such Restricted Subsidiary as
necessary to accomplish such refinancing, plus the amount of expenses of
such Restricted Subsidiary incurred in connection with such refinancing
and such new Indebtedness has an Average Life longer than the Average
Life of the Notes and a final Stated Maturity later than the final
Stated Maturity of the Notes;
(vi) Indebtedness (as defined in clauses (e) and (f) of the
definition of Indebtedness) to the Noteholders incurred pursuant to
provisions of the Indenture;
(vii) Indebtedness in an amount not to exceed $30 million at any
one time outstanding, less the amount of Permitted Indebtedness then
outstanding pursuant to clause (viii) of the definition thereof; and
(viii) Guarantees of Indebtedness of the Company permitted under
the "Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries" covenant.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes or is redeemable at the option of the
holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"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.
"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.
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"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 Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns, or holds any Lien on, any property o 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.
"8% Notes" means the Company's 8% Senior Subordinated Notes due 2008.
"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.
96
<PAGE>
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
October 28, 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.
We have been advised by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse
First Boston Corporation, Morgan Stanley & Co. Incorporated and Paine Webber
Incorporated, the Initial Purchasers of the Old Notes, that following completion
of the Exchange Offer they intend to make a market in the New Notes to be issued
in the Exchange Offer; 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.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of
the New Notes offered hereby will be passed upon for the Company by Shearman &
Sterling, New York, New York.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended February 28, 1998,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated and combined financial statements of SMR as of December
31, 1997 and 1996 and for the years ended December 31, 1997 and 1996, have been
audited by Zalick, Torok, Kirgesner, Cook & Co., independent auditors, as stated
in their reports incorporated herein by reference and have been included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
97
<PAGE>
================================================================================
$200,000,000
EXCHANGE OFFER
BE Aerospace, Inc.
[LOGO]
9 1/2% Senior Subordinated
Notes due 2008
PROSPECTUS
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any 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 part 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.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed herewith or to be filed by
amendment:
Exhibit
Number Description
- ------ -----------
Exhibit 1 Underwriting Agreement
1.1 Purchase Agreement dated October 28, 1998 by and among the
Registrant, Merrill Lynch & Co., BT Alex. Brown, Chase
Securities Inc., Credit Suisse First Boston, Morgan Stanley
Dean Witter and Paine Webber Incorporated**
II-1
<PAGE>
Exhibit 3 Articles of Incorporation and By-Laws
3.1 Amended and Restated Certificate of Incorporation*
3.2 Certificate of Amendment of the Restated Certificate of
Incorporation*
3.3 Amended and Restated By-Laws*
Exhibit 4 Instruments Defining the Rights of Security Holders, including
debentures
4.1 Specimen Common Stock Certificate*
4.2 Form of Note for the Registrant's 9 1/2% Senior Subordinated
Notes (included in Exhibit 4.3)
4.3 Indenture dated November 2, 1998 between The Bank of New York,
as trustee, and the Registrant relating to the Registrant's
9 1/2% Senior Subordinated Notes**
4.4 Form of Note for the Registrant's Series B 9 7/8% Senior
Subordinated Notes (included in Exhibit 4.5)
4.5 Indenture dated January 24, 1996 between Fleet 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*
4.6 Form of Note for the Registrant's 8% Series B Senior
Subordinated Notes (included in Exhibit 4.7)
4.7 Indenture dated February 13, 1998 for the Registrant's issue
of 8% Senior Subordinated Notes*
4.8 Form of Stockholders' Agreement by and among the Registrant,
Summit Ventures II, L.P., Summit Investors II, L.P. and
Wedbush Capital Partners*
4.9 Rights Agreement between the Registrant and BankBoston, N.A.,
as rights agent, dated as of November 12, 1998*
Exhibit 5 Opinion Re Legality
5.1 Opinion of Shearman & Sterling
Exhibit 10(i) Material Contracts
10.1 Supply Agreement dated as of April 17, 1990 between the
Registrant and Applied Extrusion Technologies, Inc.*
10.2 Fifth Amended and Restated Credit Agreement dated August 7,
1998*
10.3 Receivables Sales Agreement dated January 24, 1996 among the
Registrant, First Trust of Illinois, N.A. and Centrally Held
Eagle Receivables Program, Inc.*
10.4 Escrow Agreement dated January 24, 1996 among the Registrant,
Eagle Industrial Product Corporation and First Trust of
Illinois, N.A. as Escrow Agent*
10.5 Acquisition Agreement dated as of December 14, 1995 by and
among the Registrant, Eagle Industrial Products Corporation,
Eagle Industries, Inc. and Great American Management and
Investment, Inc.*
10.6 Asset Purchase Agreement dated as of April 16, 1998 by and
between Stanford Aerospace Group, Inc. and the Registrant*
10.7 Stock Purchase Agreement dated as of March 31, 1998 by and
between the Registrant and Puritan Bennet Corporation*
10.8 Acquisition Agreement dated July 21, 1998 among the Registrant
and Sellers named therein*
Exhibit 10(ii) Leases
10.9 Lease dated May 15, 1992 between McDonnell Douglas Company, as
lessor, and the Registrant, as lessee, relating to the Irvine,
California property*
10.10 Lease dated September 1, 1992 relating to the Wellington,
Florida property*
10.11 Chesham, England Lease dated October 1, 1973 between Drawheath
Limited and the Peninsular and Oriented Stem Navigation
Company (assigned in February 1985)*
10.12 Utrecht, The Netherlands Lease dated December 15, 1988 between
the Pension Fund Foundation for Food Supply Commodity Boards
and Inventum*
10.13 Utrecht, The Netherlands Lease dated January 31, 1992 between
G.W. van de Grift Onroerend Goed B.V. and Inventum*
10.14 Lease dated October 25, 1993 relating to the property in
Longwood, Florida*
Exhibit 10 (iii) Executive Compensation Plans and Arrangements
10.15 Amended and Restateted 1989 Stock Option Plan*
II-2
<PAGE>
10.16 Directors' 1991 Stock Option Plan*
10.17 1990 Stock Option Agreement with Richard G. Hamermesh*
10.18 1990 Stock Option Agreement with B. Martha Cassidy*
10.19 1990 Stock Option Agreement with Jim C. Cowart*
10.20 1990 Stock Option Agreement with Petros A. Palandjian*
10.21 1990 Stock Option Agreement with Hansjorg Wyss*
10.22 1991 Stock Option Agreement with Amin J. Khoury*
10.23 1991 Stock Option Agreement with Jim C. Cowart*
10.24 1992 Stock Option Agreement with Amin J. Khoury*
10.25 1992 Stock Option Agreement with Jim C. Cowart*
10.26 1992 Stock Option Agreement with Paul W. Marshall*
10.27 1992 Stock Option Agreement with David Lahar*
10.28 United Kingdom 1992 Employee Share Option Scheme*
10.29 1994 Employee Stock Purchase Plan*
10.30 Amended and Restated Employment Agreement as of May 29, 1998
between the Registrant and Amin J. Khoury*
10.31 Amended and Restated Employment Agreement as of May 29, 1998
between the Registrant and Robert J. Khoury*
10.32 Employment Agreement dated as of March 1, 1992 between the
Registrant and Marco Lanza (the "Lanza Agreement")*
10.33 Amendment No. 1 dated as of January 1, 1996 to the Lanza
Agreement*
10.34 Employment Agreement dated as of April 1, 1992 between the
Registrant and G. Bernard Jewel*
10.35 Amended and Restated Employment Agreement dated as of May 29,
1998 between the Registrant and Thomas P. McCaffrey*
10.36 Amended and Restated Employment Agreement dated as of May 29,
1998 between the Registrant and Paul E. Fulchino*
10.37 BE Aerospace, Inc. Savings and Profit Sharing Plan and Trust--
Financial Statements for the Ten Months Ended December 31,
1995 and the Year Ended February 28, 1995, Supplemental
Schedules and Independent Auditors' Report*
10.38 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan Financial
Statements as of February 29, 1996 and February 26, 1995; and
for the Year Ended February 29, 1996 and the period from May
15, 1994 (inception) to February 28, 1995 and Independent
Auditors' Report*
10.39 Amendment No. 1 to Employment Agreement dated November 12,
1998 between the Registrant and Amin J. Khoury**
10.40 Amendment No. 1 to Employment Agreement dated November 12,
1998 between the Registrant and Robert J. Khoury**
10.41 Amendment No. 1 to Amended and Restated Employment Agreement
dated as of November 12, 1998 between the Registrant and
Thomas P. McCaffrey
10.42 Amendment No. 1 to Amended and Restated Employment Agreement
dated as of November 12, 1998 between the Registrant and
Paul E. Fulchino
10.43 Amendment No. 2 dated as of November 12, 1998 to the
Lanza Agreement
Exhibit 21 Subsidiaries of the Registrant
21.1 Subsidiaries*
Exhibit 23 Consents of Experts and Counsel
23.1 Consent of Independent Accountants -Deloitte & Touche LLP**
23.2 Consent of Shearman & Sterling (included in Exhibit 5.1)
23.3 Consent of Independent Accountants - Zalick, Torok, Kirgesner,
Cook & Co.**
Exhibit 24 Power of Attorney
24.1 Power of Attorney (Included on page II-5)
Exhibit 25 Statement of Eligibility of Trustee
25.1 Statement of Eligibility of The Bank of New York, Trustee**
- ---------------------
* Previously filed and incorporated by reference herein. See Exhibit Index.
** Filed herewith.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for the 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
II-3
<PAGE>
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 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston and
the Commonwealth of Massachusetts, on the 20th day of November, 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
Registration Statement has been signed below by the following persons in the
capacities indicated on the 20th day of November, 1998. Each person whose
signature appears below hereby authorizes Amin J. Khoury, Thomas P. McCaffrey
and Robert J. Khoury and each of them, with full power of substitution, to
execute in the name and on behalf of such person any amendment or any
post-effective amendment to this Registration Statement and to file the same,
with any exhibits thereto and other documents in connection therewith, making
such changes in this Registration Statement as the Registrant deems appropriate,
and appoints each of Amin J. Khoury, Thomas P. McCaffrey and Robert J. Khoury
and each of them, with full power of substitution, attorney-in-fact to sign any
amendment and any post-effective amendment to this Registration Statement and to
file the same, with any exhibits thereto and other documents in connection
therewith.
Signature Title
--------- -----
/S/ AMIN J. KHOURY
- ------------------------ Chairman of the Board of Directors
Amin J. Khoury
/S/ ROBERT J. KHOURY
- ------------------------ Vice Chairman of the Board of Directors and Chief
Robert J. Khoury Executive Officer (principal executive officer)
/S/ PAUL E. FULCHINO
- ------------------------ President, Chief Operating Officer and Director
Paul E. Fulchino
/S/ THOMAS P. MCCAFFREY
- ------------------------ Corporate Senior Vice President of Administration,
Thomas P. McCaffrey Chief Financial Officer and Assistant Secretary
(principal financial and accounting officer)
/S/ JIM C. COWART
- ------------------------ Director
Jim C. Cowart
- ------------------------ Director
Richard G. Hamermesh
/S/ BRIAN H. ROWE
- ------------------------ Director
Brian H. Rowe
/S/ HANSJOERG WYSS
- ------------------------ Director
Hansjoerg Wyss
II-5
<PAGE>
Exhibit Index
Exhibit
Number Description
- ------ -----------
Exhibit 1 Underwriting Agreement
1.1 Purchase Agreement dated October 28, 1998 by and among the
Registrant, Merrill Lynch & Co., BT Alex. Brown,
ChaseSecurities Inc., Credit Suisse First Boston, Morgan
Stanley Dean Witter and Paine Webber Incorporated**
Exhibit 3 Articles of Incorporation and By-Laws
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Certificate of Amendment of the Restated Certificate of
Incorporation (2)
3.3 Amended and Restated By-Laws (18)
Exhibit 4 Instruments Defining the Rights of Security Holders, including
debentures
4.1 Specimen Common Stock Certificate (1)
4.2 Form of Note for the Registrant's 9 1/2% Senior Subordinated
Notes (included in Exhibit 4.3)**
4.3 Indenture dated November 2, 1998 between The Bank of New York,
as trustee, and the Registrant relating to the Registrant's
9 1/2% Senior Subordinated Notes**
4.4 Form of Note for the Registrant's Series B 9 7/8% Senior
Subordinated Notes (3)
4.5 Indenture dated January 24, 1996 between Fleet 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 (3)
4.6 Form of Note for the Registrant's 8% Series B Senior
Subordinated Notes (4)
4.7 Indenture dated February 13, 1998 for the Registrant's issue
of 8% Senior Subordinated Notes (4)
4.8 Form of Stockholders' Agreement by and among the Registrant,
Summit Ventures II, L.P., Summit Investors II, L.P. and
Wedbush Capital Partners (5)
4.9 Rights Agreement between the Registrant and BankBoston, N.A.,
as rights agent, dated as of November 12, 1998 (18)
Exhibit 5 Opinion Re Legality
5.1 Opinion of Shearman & Sterling***
Exhibit 10(i) Material Contracts
10.1 Supply Agreement dated as of April 17, 1990 between the
Registrant and Applied Extrusion Technologies, Inc. (1)
10.2 Fifth Amended and Restated Credit Agreement dated August 7,
1998 (17)
10.3 Receivables Sales Agreement dated January 24, 1996 among the
Registrant, First Trust of Illinois, N.A. and Centrally Held
Eagle Receivables Program, Inc. (3)
10.4 Escrow Agreement dated January 24, 1996 among the Registrant,
Eagle Industrial Product Corporation and First Trust of
Illinois, N.A. as Escrow Agent (3)
10.5 Acquisition Agreement dated as of December 14, 1995 by and
among the Registrant, Eagle Industrial Products Corporation,
Eagle Industries, Inc. and Great American Management and
Investment, Inc. (8)
10.6 Asset Purchase Agreement dated as of April 16, 1998 by and
between Stanford Aerospace Group, Inc. and the Registrant (9)
10.7 Stock Purchase Agreement dated as of March 31, 1998 by and
between the Registrant and Puritan Bennet Corporation (10)
10.8 Acquisition Agreement dated July 21, 1998 among the Registrant
and Sellers named therein (16)
Exhibit 10(ii) Leases
10.9 Lease dated May 15, 1992 between McDonnell Douglas Company, as
lessor, and the Registrant, as lessee, relating to the Irvine,
California property (2)
10.10 Lease dated September 1, 1992 relating to the Wellington,
Florida property (2)
10.11 Chesham, England Lease dated October 1, 1973 between Drawheath
Limited and the Peninsular and Oriented Stem Navigation
Company (assigned in February 1985) (14)
10.12 Utrecht, The Netherlands Lease dated December 15, 1988 between
the Pension Fund Foundation for Food Supply Commodity Boards
and Inventum (14)
10.13 Utrecht, The Netherlands Lease dated January 31, 1992 between
G.W. van de Grift Onroerend Goed B.V. and Inventum (14)
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<PAGE>
10.14 Lease dated October 25, 1993 relating to the property in
Longwood, Florida(6)
Exhibit 10(iii) Executive Compensation Plans and Arrangements
10.15 Amended and Restated 1989 Stock Option Plan (11)
10.16 Directors' 1991 Stock Option Plan (11)
10.17 1990 Stock Option Agreement with Richard G. Hamermesh (11)
10.18 1990 Stock Option Agreement with B. Martha Cassidy (11)
10.19 1990 Stock Option Agreement with Jim C. Cowart (11)
10.20 1990 Stock Option Agreement with Petros A. Palandjian (11)
10.21 1990 Stock Option Agreement with Hansjorg Wyss (11)
10.22 1991 Stock Option Agreement with Amin J. Khoury (11)
10.23 1991 Stock Option Agreement with Jim C. Cowart (11)
10.24 1992 Stock Option Agreement with Amin J. Khoury (11)
10.25 1992 Stock Option Agreement with Jim C. Cowart (11)
10.26 1992 Stock Option Agreement with Paul W. Marshall (11)
10.27 1992 Stock Option Agreement with David Lahar (11)
10.28 United Kingdom 1992 Employee Share Option Scheme (2)
10.29 1994 Employee Stock Purchase Plan (12)
10.30 Amended and Restated Employment Agreement as of May 29, 1998
between the Registrant and Amin J. Khoury (15)
10.31 Amended and Restated Employment Agreement as of May 29, 1998
between the Registrant and Robert J. Khoury (15)
10.32 Employment Agreement dated as of March 1, 1992 between the
Registrant and Marco Lanza (the "Lanza Agreement") (14)
10.33 Amendment No. 1 dated as of January 1, 1996 to the Lanza
Agreement (13)
10.34 Employment Agreement dated as of April 1, 1992 between the
Registrant and G. Bernard Jewel (14)
10.35 Amended and Restated Employment Agreement dated as of May 29,
1998 between the Registrant and Thomas P. McCaffrey (15)
10.36 Amended and Restated Employment Agreement dated as of May 29,
1998 between the Registrant and Paul E. Fulchino (15)
10.37 BE Aerospace, Inc. Savings and Profit Sharing Plan and Trust--
Financial Statements for the Ten Months Ended December 31,
1995 and the Year Ended February 28, 1995, Supplemental
Schedules and Independent Auditors' Report (14)
10.38 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan Financial
Statements asof February 29, 1996 and February 26, 1995; and
for the Year Ended February 29, 1996 and the period from May
15, 1994 (inception) to February 28, 1995 and Independent
Auditors' Report (14)
10.39 Amendment No. 1 to Employment Agreement dated November 12,
1998 between the Registrant and Amin J. Khoury**
10.40 Amendment No. 1 to Employment Agreement dated November 12,
1998 between the Registrant and Robert J. Khoury**
10.41 Amendment No. 1 to Amended and Restated Employment Agreement
dated as of November 12, 1998 between the Registrant and
Thomas P. McCaffrey**
10.42 Amendment No. 1 to Amended and Restated Employment Agreement
dated as of November 12, 1998 between the Registrant and
Paul E. Fulchino**
10.43 Amendment No. 2 dated as of November 12, 1998 to the
Lanza Agreement**
Exhibit 21 Subsidiaries of the Registrant
21.1 Subsidiaries (14)
Exhibit 23 Consents of Experts and Counsel
23.1 Consent of Independent Accountants -Deloitte & Touche LLP**
23.2 Consent of Shearman & Sterling (included in Exhibit 5.1)***
23.3 Consent of Independent Accountants - Zalick, Torok, Kirgesner,
Cook & Co.**
Exhibit 24 Power of Attorney
24.1 Power of Attorney (Included on page II-5)**
Exhibit 25 Statement of Eligibility of Trustee
25.1 Statement of Eligibility of The Bank of New York, Trustee**
- ---------------------
* Previously filed.
** Filed herein.
*** To be filed by amendment
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (No. 33-33689), filed with the Commission on March 7,
1990.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (No. 33-54146), filed with the Commission on November 3,
1992.
i-2
<PAGE>
(3) Incorporated by reference to the Company's Registration Statement on Form
S-4 (No. 333-00433), filed with the Commission on January 26, 1996.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-4 (No. 333-47649), filed with the Commission on March 10, 1998.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-2 (No. 33-66490), filed with the Commission on July 23, 1993.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K as
amended for the Fiscal year ended February 26, 1994, filed with the
Commission on May 25, 1994.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K as
amended for the Fiscal year ended February 25, 1995, filed with the
Commission on May 26, 1995.
(8) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 14, 1995, filed with the Commission on December 28, 1995.
(9) Incorporated by reference to the Company's Current Report on Form 8-K
dated May 8, 1998, filed with the Commission on May 8, 1998.
(10) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 31,1998, filed with the Commission on April 27, 1998.
(11) Incorporated by reference to the Company's Registration Statement on Form
S-8 (No. 33-48119), filed with the Commission on May 26, 1992.
(12) Incorporated by reference to the Company's Registration Statement on Form
S-8 (No. 33-82894), filed with the Commission on August 16, 1994.
(13) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 26, 1996, filed with the Commission on April 5, 1996.
(14) Incorporated by reference to the Company's Annual Report on Form 10-K as
amended for the Fiscal year ended February 28, 1998, filed with the
Commission on May 29, 1998.
(15) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 30, 1998, filed with the Commission on July 14,
1998.
(16) Incorporated by reference to the Company's Current Report on Form 8-K
dated August 24, 1998, filed with the Commission on August 24, 1998.
(17) Incorporated by reference to the Company's Registration Statement on
Form S-3 (No. 333-60209), filed with the Commission on July 30, 1998.
(18) Incorporated by reference to the Company's Current Report on Form 8-K
dated November 12, 1998, filed with the Commission on November 18, 1998.
i-3
================================================================================
BE AEROSPACE, INC.
(a Delaware corporation)
$200,000,000
9 1/2% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
Dated: October 28, 1998
================================================================================
<PAGE>
BE AEROSPACE, INC.
(a Delaware corporation)
$200,000,000
9 1/2% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
October 28, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT Alex. Brown Incorporated
Chase Securities Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
Ladies and Gentlemen:
BE Aerospace, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Chase Securities
Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated
and PaineWebber Incorporated (each an "Initial Purchaser" and together the
"Initial Purchasers") $200,000,000 aggregate principal amount of its 9 1/2%
Senior Subordinated Notes due 2008 (the "Securities"). The Securities are to be
issued pursuant to an indenture to be dated as of November 2, 1998 (the
"Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"). The Securities and the Indenture are more fully described in the
Offering Memorandum (as hereinafter defined). Capitalized terms used herein and
not otherwise defined herein have the respective meanings specified in the
Offering Memorandum.
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<PAGE>
The Securities will be offered and sold to you without being
registered under the Securities Act of 1933, as amended (the "1933 Act"), in
reliance on an exemption therefrom. The Company has prepared a preliminary
offering memorandum, dated October 26, 1998 (such preliminary offering
memorandum being hereinafter referred to as the "Preliminary Offering
Memorandum"), and is preparing a final offering memorandum, dated October 28,
1998 (such final offering memorandum, in the form first furnished to the Initial
Purchasers for use in connection with the offering of the Securities being
hereinafter referred to as the "Offering Memorandum"), each setting forth
information regarding the Company and the Securities. The Company hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Securities.
The Company intends to use approximately $118.0 million of the
net proceeds from the offering to repurchase four million shares of the
Company's Common Stock previously issued in connection with the Company's
acquisition of SMR Aerospace, Inc. (the "Stock Repurchase").
The Company understands that you propose to make an offering
of the Securities on the terms set forth in the Offering Memorandum, as soon as
you deem advisable after this Agreement has been executed and delivered, to
persons in the United States whom you reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
under the 1933 Act, as such rule may be amended from time to time ("Rule 144A"),
in transactions under Rule 144A.
The holders of Securities will be entitled to the benefits of
a Registration Rights Agreement, in substantially the form attached hereto as
Exhibit A with such changes as shall be agreed to by the parties hereto (the
"Registration Rights Agreement"), pursuant to which the Company will file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Securities or the
Exchange Securities referred to in the Registration Rights Agreement under the
1933 Act.
Section 1. Representations and Warranties. (a) The Company
represents and warrants to and agrees with the Initial Purchasers as of the date
hereof and as of the Closing Time as follows:
(i) As of their respective dates and as of the Closing Time,
none of the Preliminary Offering Memorandum, the Offering Memorandum or
any amendment or supplement thereto will include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; except that this representation
and warranty does not apply to statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Company by the Initial Purchasers through Merrill Lynch expressly for
use in the Preliminary Offering Memorandum, the Offering Memorandum or
any amendment or supplement thereto.
(ii) Except for the Company's 8% Senior Subordinated Notes due
2008 and
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<PAGE>
the Company's 9 7/8% Senior Subordinated Notes due 2006, there are no
debt securities of the Company registered under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), or listed on a national
securities exchange or quoted in a U.S. automated inter-dealer
quotation system. The Company has been advised that the Securities have
been designated PORTAL securities in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc.
("NASD").
(iii) None of the Company or any affiliate of the Company (as
defined in Rule 501(b) under the 1933 Act) has directly or through any
agent, sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security (as defined in the 1933 Act) by
or for the Company that are of the same or similar class as the
Securities (other than with respect to the Exchange Securities) in a
manner that would require the registration of the Securities under the
1933 Act.
(iv) None of the Company or any affiliate of the Company or
any person acting on their behalf has (A) engaged, in connection with
the offering of the Securities, in any form of general solicitation or
general advertising (as those terms are used within the meaning of
Regulation D) or (B) solicited offers for, or offered or sold, such
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the 1933
Act) or in any manner involving a public offering within the meaning of
Section 4(2) of the 1933 Act.
(v) Each of Deloitte & Touche L.L.P., Zalick, Torok,
Kirgesner, Cook & Co. and Kane, Hoffman & Banner, which are reporting
upon the audited financial statements and related notes included in the
Offering Memorandum or underlying the pro forma financial statements
included in the Offering Memorandum, is an independent public
accountant with respect to the Company in accordance with the
provisions of the 1933 Act and the rules and regulations of the
Commission thereunder.
(vi) The financial statements of the Company included in the Offering
Memorandum present fairly (a) the financial position of the Company and
its subsidiaries on a consolidated basis as of the dates indicated and
(b) the results of operations and cash flows of the Company and its
subsidiaries on a consolidated basis for the periods specified,
subject, in the case of unaudited financial statements, to normal
year-end adjustments which shall not be materially adverse to the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
one enterprise. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. To our knowledge, the
financial statements of SMR Aerospace, Inc. ("SMR") and its
subsidiaries included in or incorporated by reference in the Offering
Memorandum present fairly (a) the financial position of the SMR and its
subsidiaries on a consolidated basis as of the dates indicated and (b)
the results of operations and cash flows of SMR and its subsidiaries on
a consolidated basis for the periods specified, subject, in the case of
unaudited financial statements, to normal year-end adjustments which
shall not be materially adverse to the condition (financial or
otherwise), earnings, business affairs or business prospects of SMR and
its subsidiaries, considered as one enterprise. To our
- 3 -
<PAGE>
knowledge, such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved. To our knowledge, the financial
statements of Aircraft Modular Products ("AMP") for the twelve months
ended January 31, 1998 and the month ended March 31, 1998 and Puritan
Bennett Aero Systems Co. ("PBASCO") for the year ended December 31,
1997 and the month ended March 31, 1998 underlying the pro forma
financial statements present fairly (a) the financial position of each
such entity and each such entity's subsidiaries on a consolidated basis
as of the dates indicated and (b) the results of operations and cash
flows of each such entity and each such entity's subsidiaries on a
consolidated basis for the periods specified, subject, in the case of
unaudited financial statements, to normal year-end adjustments which
shall not be materially adverse to the condition (financial or
otherwise), earnings, business affairs or business prospects of each
such entity and each such entity's subsidiaries, considered as one
enterprise. To our knowledge, such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. To our
knowledge, the financial statements for the year ended December 31,
1997, the six months ended June 30, 1998 and as of August 31, 1998, of
CF Taylor Interiors Limited and its affiliate ("CF Taylor") underlying
the pro forma financial statements present fairly (a) the financial
position of CF Taylor as of the dates indicated and (b) the results of
operations and cash flows of CF Taylor for the periods specified,
subject, in the case of unaudited financial statements, to normal
year-end adjustments which shall not be materially adverse to the
condition (financial or otherwise), earnings, business affairs or
business prospects of CF Taylor. To our knowledge, such financial
statements have been prepared in conformity with generally accepted
accounting principles of the United Kingdom ("U.K. GAAP") applied on a
consistent basis throughout the periods involved. The differences
between U.K. GAAP and U.S. generally accepted accounting principles
insofar as they affect the financial statements of CF Taylor are not
material. The financial statement schedules, if any, included in the
Offering Memorandum present fairly the information required to be
stated therein. The selected financial data included in the Offering
Memorandum present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited consolidated
financial statements included in the Offering Memorandum. The pro forma
financial information included in the Offering Memorandum present
fairly the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements and have been properly compiled on the bases
described therein and, in the opinion of the Company, the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions or
circumstances referred to therein.
(vii) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
with corporate power and authority under such laws to own, lease and
operate its properties and conduct its business as described in the
Offering Memorandum; and the Company is duly qualified to transact
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification
necessary, except to the extent that the failure to so qualify or be
- 4 -
<PAGE>
in good standing would not have a material adverse effect on the
Company and its subsidiaries, considered as one enterprise.
(viii) The Company's only subsidiaries (either direct or
indirect) are: BEA Aerospace International Ltd., a company incorporated
under the laws of Barbados ("BEA International"), BE Aerospace Holdings
(U.K.) Limited, a company incorporated under the Companies Act (United
Kingdom) ("BEAH(UK)"), BE Aerospace (UK) Limited, a company
incorporated under the laws of Northern Ireland ("BEA(UK)"), CF Taylor
(B/E) UK Limited, a company incorporated under the Companies Act
(United Kingdom) ("CF Taylor (UK)"), CF Taylor (Wales), a company
incorporated under the Companies Act (United Kingdom), Fort Hill
Aircraft Holdings Limited, a company incorporated under the Companies
Act (United Kingdom) ("Fort Hill"), AFI Holdings Limited, a company
incorporated under the Companies Act (United Kingdom) ("AFI"), BE
Aerospace (U.S.A.), Inc., a Delaware corporation ("BEA USA"), BE
Aerospace (Netherlands) B.V., a company incorporated under the laws of
the Netherlands ("BEA Netherlands"), Royal Inventum, B.V., a company
incorporated under the laws of the Netherlands ("Royal Inventum"), BE
Aerospace (Sales & Services) B.V., a company incorporated under the
laws of the Netherlands, Nordskog Industries, Inc., a California
corporation ("Nordskog"), Acurex Corporation, a Delaware corporation
("Acurex"), BE Aerospace (France) S.A.R.L., a company incorporated
under the laws of France ("BEA France"), Burns Aerospace (France)
S.A.R.L., a company incorporated under the laws of France ("Burns
France"), PBASCO, a California corporation, Aerospace Interiors, Inc.,
a Texas corporation ("ASI"), Aerospace Lighting Corporation, a New York
corporation and SMR, an Ohio corporation, B/E Harris Live TV LLC, a
Delaware limited liability company (of which, the Company owns 51%),
B/E Advanced Thermal Technologies, Inc., a Delaware corporation,
In-Flight Entertainment, LLC, a Delaware corporation and SMR Developers
LLC, a Delaware limited liability company, SMR Holdings, Inc., a
Delaware corporation, SMR Aerospace Management Co., Inc., a Delaware
corporation, Plush Mills, Inc., a Delaware corporation, SMR
Technologies, Inc., a Delaware corporation, Flight Structures, Inc., a
Delaware corporation, Flight Structures International, Inc., a company
incorporated under the laws of Barbados LLC, B/E Intellectual Property,
Inc. and B/E Services, Inc., a Delaware corporation (each individually,
a "Subsidiary" and collectively, the "Subsidiaries"). The Company has
no significant subsidiaries (as defined in Rule 1.02 of the
Commission's Regulation S-X), other than SMR, BEAH(UK) and In-Flight
Entertainment, LLC. (each individually, a "Significant Subsidiary" and
collectively, the "Significant Subsidiaries"). AFI, Fort Hill and
Nordskog are inactive subsidiaries with no significant assets and are
not engaged in any active trade or business. Each Significant
Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization
with corporate power and authority under such laws to own, lease and
operate its properties and conduct its business; and each Significant
Subsidiary is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which
it owns or leases property of a nature, or transacts business of a
type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
considered as one enterprise. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and
- 5 -
<PAGE>
validly issued or created and are fully paid and non-assessable and,
other than in the case of BEA France, of which five shares are owned by
Marc Leveille, a French national and director of BEA France, and five
shares are owned by The K.A.D. Companies, Inc., an investment, venture
capital and consulting firm owned by Amin J. Khoury, the Chairman of
the Company, are owned by the Company, directly or through one or more
Subsidiaries, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind, except that (1) 65%
of the issued and outstanding Ordinary Shares of BEAH(UK) are pledged
to the Agent under the Bank Credit Facility, (2) 65% of the issued and
outstanding capital stock of BEA Netherlands is pledged to the Agent
under the Bank Credit Facility (3) the outstanding capital stock of
each of BEA USA, Acurex, B/E Services, Inc. and ASI is pledged to the
Agent under the Bank Credit Facility. The Company does not, directly or
indirectly, own any equity or long term debt securities of any
corporation, firm, partnership, joint venture or other entity, other
than the stock of its Subsidiaries and 2,237,442.58 of convertible
preferred shares valued at approximately $2,237,443 in Interactive
Entertainment, Inc. and a note from BEA Netherlands in the principal
amount of Dfls. 49,385,000.
(ix) The Company had, at the date indicated in the Offering
Memorandum, a duly authorized, issued and outstanding capitalization as
set forth in the Offering Memorandum under the caption
"Capitalization".
(x) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares of capital stock
of the Company was issued in violation of the preemptive rights of any
stockholder of the Company. There are no outstanding options to
purchase, or any rights or warrants to subscribe for, or any securities
or obligations convertible into, or any contracts or commitments to
issue or sell, any shares of Common Stock of the Company, any shares of
capital stock of any subsidiary, or any such warrants, convertible
securities or obligations, except as set forth in the Offering
Memorandum.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium
or similar laws affecting creditors' rights generally, (y) the
availability of equitable remedies may be limited by equitable
principles of general applicability and (z) any rights to indemnity and
contribution may be limited by federal and state securities laws and
public policy considerations.
(xiii) The Indenture has been duly authorized by the Company,
will be substantially in the form heretofore delivered to you and, when
duly executed and delivered by the Company and the Trustee, will
constitute a valid and binding obligation of
- 6 -
<PAGE>
the Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law); and the Indenture conforms to the description
thereof in the Offering Memorandum.
(xiv) The Securities have been duly authorized by the Company.
When executed, authenticated, issued and delivered in the manner
provided for in the Indenture and sold and paid for as provided in this
Agreement, the Securities will constitute valid and binding obligations
of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law);
and the Securities conform to the description thereof in the Offering
Memorandum.
(xv) Since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise stated therein or
contemplated thereby, there has not been (A) any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise, whether or not arising in the ordinary
course of business, (B) any transaction entered into by the Company or
any subsidiary, other than in the ordinary course of business, that is
material to the Company and its subsidiaries, considered as one
enterprise, or (C) any dividend or distribution of any kind declared,
paid or made by the Company on its capital stock.
(xvi) Neither the Company nor any Subsidiary is in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is
a party or by which it may be bound or to which any of its properties
may be subject, except for such defaults that would not have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise. The execution and delivery
by the Company of this Agreement, the Registration Rights Agreement and
the Indenture, the issuance, sale and delivery of the Securities by the
Company, the consummation by the Company of the transactions
contemplated in this Agreement, the Offering Memorandum and compliance
by the Company with the terms of this Agreement, the Registration
Rights Agreement and the Indenture have been duly authorized by all
necessary corporate action on the part of the Company and do not and
will not result in any violation of the charter or by-laws of the
Company or any Subsidiary, and do not and will not conflict with, or
result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any
- 7 -
<PAGE>
lien, charge or encumbrance upon any property or assets of the Company
or any Subsidiary under, (A) any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company or any Subsidiary is a party or by which they may be bound or
to which any of their respective properties may be subject except as
such would not have a material adverse on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise or (B) any
existing applicable law, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or any
of their respective properties.
(xvii) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign
(other than under the 1933 Act and the rules and regulations thereunder
with respect to the Registration Rights Agreement and the transactions
contemplated thereunder and the securities or "blue sky" laws of the
various states) is required for the valid authorization, issuance, sale
and delivery of the Securities, for the execution, delivery or
performance by the Company of this Agreement, the Registration Rights
Agreement and the Indenture or for the consummation by the Company of
the transactions contemplated in this Agreement and the Offering
Memorandum (including, without limitation, the Stock Repurchase),
except such of the foregoing as will be obtained prior to the Closing
Time.
(xviii) Except as disclosed in the Offering Memorandum, there
is no action, suit or proceeding before or by any government,
governmental instrumentality or court, domestic or foreign, now pending
or, to the knowledge of the Company, threatened against or affecting
the Company or any Subsidiary or any of their respective officers, in
their capacity as such, that could result in any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise, or that could materially and adversely
affect the properties or assets of the Company and its subsidiaries,
considered as one enterprise, or that could adversely affect the
consummation of the transactions contemplated in this Agreement or the
Offering Memorandum (including, without limitation, the Stock
Repurchase); the aggregate of all pending legal or governmental
proceedings that are not described in the Offering Memorandum to which
the Company or any Subsidiary is a party or which affect any of their
respective properties, including ordinary routine litigation incidental
to the business of the Company or any Subsidiary, would not have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise.
(xix) There are no contracts or documents of a character that
would be required to be described in the Offering Memorandum, if it
were a prospectus filed as part of a registration statement on Form S-1
under the 1933 Act, that are not described as would be so required
(other than contracts or documents described in the Company's most
recent proxy statement filed with the Commission).
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<PAGE>
(xx) All disclosure regarding year 2000 compliance and the
Euro conversion that is required to be described in a registration
statement on Form S-1 under the 1933 Act (including disclosures
required by Staff Legal Bulletin No. 6 and SEC Release No. 33-7558
(July 29, 1998)) has been included in the Offering Memorandum. The
Company and the Subsidiaries will not incur significant operating
expenses or costs to ensure that its information systems will be year
2000 compliant or to adjust its operating and information systems to
the conversion to a single currency in Europe, other than as disclosed
in the Offering Memorandum.
(xxi) The Company and the Subsidiaries each has good and
marketable title to all properties and assets described in the Offering
Memorandum as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as (A) are described in the
Offering Memorandum or (B) are neither material in amount nor
materially significant in relation to the business of the Company and
its subsidiaries, considered as one enterprise; all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any
Subsidiary holds properties described in the Offering Memorandum, are
in full force and effect, and neither the Company nor any Subsidiary
has received any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of such corporation to the
continued possession of the leased or subleased premises under any such
lease or sublease.
(xxii) The Company and the Subsidiaries each owns, possesses
or has obtained all material governmental licenses, permits,
certificates, consents, orders, approvals and other authorizations,
including, without limitation, any licenses, permits, certificates,
consents, orders, approvals and other authorizations required to be
obtained from the Federal Aviation Administration, necessary to own or
lease, as the case may be, and to operate its properties and to carry
on its business as presently conducted, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to
revocation or modification of any such licenses, permits, certificates,
consents, orders, approvals or authorizations except as such would not
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise.
(xxiii) The Company and the Subsidiaries each owns or
possesses adequate patents, patent licenses, trademarks, service marks
and trade names necessary to carry on its business as presently
conducted, and neither the Company nor any Subsidiary has received any
notice of infringement of or conflict with asserted rights of others
with respect to any patents, patent licenses, trademarks, service marks
or trade names that in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could materially adversely affect the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
one enterprise.
(xxiv) To the best knowledge of the Company, no labor problem
exists with its employees or with the employees of any Subsidiary or is
imminent that could materially
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<PAGE>
adversely affect the Company and its subsidiaries, considered as one
enterprise, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or any Subsidiary's
principal suppliers, contractors or customers that could be expected to
materially adversely affect the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise.
(xxv) Neither the Company nor any Subsidiary has taken or will
take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities.
(xxvi) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers under, or in connection with the initial resale of
such Securities by the Initial Purchasers in accordance with, this
Agreement to register the Securities under the 1933 Act or to qualify
any indenture in respect of the Securities under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
(xxvii) No part of the proceeds of the sale of the Securities
will be used for any purpose that violates the provisions of any of
Regulation T, U or X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board of Governors.
(xxviii) All United States federal income tax returns of the
Company and the Subsidiaries required by law to be filed have been
filed and all United States federal income taxes which are due and
payable have been paid, except assessments against which appeals have
been or will be promptly taken and as to which adequate reserves have
been provided. The United States federal income tax returns of the
Company through the period ended February 26, 1994 have been settled
and no assessment in connection therewith has been made against the
Company other than $210,462.41 paid in connection with the Company's
February 27, 1993 and February 26, 1994 federal income tax returns. The
Company and the Subsidiaries each has filed all other tax returns that
are required to have been filed by it pursuant to applicable foreign,
state, local or other law except insofar as the failure to file such
returns would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one
enterprise, and has paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company and the
Subsidiaries, except for such taxes, if any, as are being contested in
good faith and as to which adequate reserves have been provided. The
charges, accruals and reserves on the books of the Company in respect
of any income and corporation tax liability for any years not finally
determined are adequate to meet any assessments or re-assessments for
additional income tax for any years not finally determined, except to
the extent of any inadequacy that would not have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as
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<PAGE>
one enterprise.
(xxix) The Company and the Subsidiaries each maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted
only in accordance with management's general or specific authorization;
and (D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company and its subsidiaries have
not made, and, to the knowledge of the Company, no employee or agent of
the Company or any subsidiary has made, any payment of the Company's
funds or any subsidiary's funds or received or retained any funds in
violation of any applicable law, regulation or rule or that would be
required to be disclosed in the Offering Memorandum.
(xxx) There are no holders of securities of the Company who
have the right to require the Company to register securities held by
them under the 1933 Act on any registration statement that will be used
to register the Securities or the Exchange Securities.
(xxxi) The Company is not an "investment company," and will
not be as a result of the sale of the Securities pursuant to this
Agreement, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxxii) Except as disclosed in the Offering Memorandum and
except as would not individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise, (A) the Company and the
Subsidiaries are each in compliance with all applicable Environmental
Laws, (B) the Company and the Subsidiaries have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened Environmental Claims against the
Company or any of the Subsidiaries, and (D) there are no circumstances
with respect to any property or operations of the Company or any
Subsidiary that could reasonably be anticipated to form the basis of an
Environmental Claim against the Company or any Subsidiary.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any United States (or
other applicable jurisdiction's) federal, state, local or municipal
statute, law, rule, regulation, ordinance, code, policy or rule of
common law and any judicial or administrative interpretation thereof
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or any chemical,
material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority. "Environmental Claims" means
any and all administrative, regulatory or judicial actions, suits,
demands,
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<PAGE>
demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental
Law.
(b) Any certificate signed by any officer of the Company or
any Subsidiary and delivered to the Initial Purchasers or to counsel for the
Initial Purchasers shall be deemed a representation and warranty by the Company
to the Initial Purchasers as to the matters covered thereby.
Section 2. Purchase, Sale and Resale of the Securities;
Closing; Representations and Warranties of the Initial Purchasers. (a) On the
basis of the representations and warranties herein contained, and subject to the
terms and conditions herein set forth, the Company agrees to sell to each of
you, severally and not jointly, and each of you severally agrees to purchase
from the Company, at a purchase price of 9 1/2% of the principal amount thereof,
the principal amount of the Securities set forth opposite your name on Schedule
I.
(b) Payment of the purchase price for, and delivery of, the
Securities shall be made at the offices of Fried, Frank, Harris, Shriver &
Jacobson, 1 New York Plaza, New York, New York 10004, or at such other place as
shall be agreed upon by the Company and you, at 9:00 A.M., New York time, on
November 2, 1998 or at such other time not more than ten full business days
thereafter as you and the Company shall determine (such date and time of payment
and delivery being herein called the "Closing Time"). The Securities shall be in
such denominations and registered in such names as you may request in writing at
least two business days before the Closing Time. The Securities, which may be in
temporary form, will be made available in New York City for examination and
packaging by you not later than 10:00 A.M. on the last business day prior to the
Closing Time.
(c) At the Closing Time, payment shall be made to the Company
in the aggregate amount of $194,750,000 in immediately available funds payable
to the order of the Company against delivery of the Securities to you.
(d) You have advised the Company that you propose to offer the
Securities for sale, upon the terms and conditions set forth in this Agreement
and in the Offering Memorandum. You hereby represent and warrant to the Company
that you are a Qualified Institutional Buyer as defined in Rule 144A and an
"Accredited Investor" as defined in Rule 501 of Regulation D. You agree with the
Company that you (i) will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
or in any manner involving a public offering within the meaning of Section 4(2)
of the 1933 Act and (ii) will solicit offers for the Securities only from, and
will offer, sell or deliver the Securities, as part of its initial offering,
only to persons in the United States whom you reasonably believe to be Qualified
Institutional Buyers or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to you that each such account is a
Qualified Institutional Buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in a
transaction under Rule 144A.
Section 3. Certain Covenants of the Company. The Company
covenants with you
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as follows:
(a) The Company will not at any time make any amendment or
supplement to the Offering Memorandum of which you shall not have
previously been advised and furnished a copy or to which you or your
counsel shall reasonably object.
(b) The Company will promptly deliver to you, without charge,
during the period from the date hereof to the date of the completion of
the distribution of the Securities by you, such number of copies of the
Offering Memorandum, as it may then be amended or supplemented, or the
Preliminary Offering Memorandum, as it may then be amended or
supplemented, as you may reasonably request.
(c) If, at any time prior to completion of the distribution of
the Securities by you, any event shall occur or condition exist as a
result of which it is necessary, in the opinion of your counsel or
counsel for the Company, to amend or supplement the Offering Memorandum
in order that the Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading or if, in the opinion of your counsel or counsel for the
Company, it is necessary to amend or supplement the Offering Memorandum
to comply with applicable law, the Company, at its own expense, will
promptly prepare such amendment or supplement as may be necessary so
that the statements in the Offering Memorandum as so amended or
supplemented will not, in the light of the circumstances existing at
the time it is delivered to a purchaser, be misleading or so that such
Offering Memorandum as so amended or supplemented will comply with
applicable law, as the case may be, and furnish you such number of
copies as you may reasonably request.
(d) The Company will endeavor, in cooperation with you, to
qualify the Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions as you may
designate and to maintain such qualifications in effect for a period of
not less than a year from the date of the Offering Memorandum;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject. The Company will file such statements and reports as may be
required by the laws of each jurisdiction in which the Securities have
been qualified as above provided. The Company will also supply you with
such information as is necessary for the determination of the legality
of the Securities for investment under the laws of such jurisdictions
as you may request.
(e) Except following the effectiveness of the Registration
Statement, neither the Company nor any of its affiliates (as such term
is defined in Rule 501(b) of Regulation D) will solicit any offer to
buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Rule 502(C)
of Regulation D) or in any manner involving a public offering within
the meaning of Section 4(2) of the 1933 Act.
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<PAGE>
(f) Neither the Company nor any of its affiliates (as such
term is defined in Rule 501(b) of the 1933 Act) will offer, sell or
solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the 1933 Act) the offering of which security could be
integrated with the sale of the Securities in a manner that would
require the registration of any of the Securities under the 1933 Act.
(g) The Company will not be or become an open-end investment
company, unit investment trust or face-amount certificate company that
is or is required to be registered under the 1940 Act, and will not be
or become a closed-end investment company required to be registered,
but not registered, thereunder.
(h) During the period from the Closing Time to the earlier of
(i) two years after the Closing Time or (ii) the date of effectiveness
of the Registration Statement, the Company will not, and will not
permit any of its affiliates (as such term is defined in Rule 144 under
the 1933 Act) to, resell any of the Securities that have been
reacquired thereby, except for Securities purchased by the Company or
any of its affiliates and resold in a transaction registered under the
1933 Act.
(i) The Company will, so long as the Securities are
outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the 1933 Act, either (i) file reports and other
information with the Commission under Section 13 or Section 15(d) of
the 1934 Act, or (ii) in the event the Company is not subject to
Section 13 or Section 15(d) of the 1934 Act, furnish to holders of the
Securities and prospective purchasers of the Securities designated by
such holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to Rule
144A(d)(4) under the 1933 Act to permit compliance with Rule 144A in
connection with resale of the Securities. For a period of five years
after the Closing Time, the Company will make available to you upon
request copies of all such reports and information, together with such
other documents, reports and information as shall be furnished by the
Company to the holders of the Securities issued by it.
(j) If requested by you, the Company will use its best efforts
in cooperation with you to permit the Securities sold in transactions
described in Section 2(d)(ii) hereof to be eligible for clearance and
settlement through The Depository Trust Company.
(k) Each Security will bear the following legend until such
legend shall no longer be necessary or advisable because such Security
is no longer subject to the restrictions on transfer described therein:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
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<PAGE>
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY),
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF
THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
(l) The Company will apply the net proceeds that it receives
from the offer and sale of the Securities issued by it in the manner
set forth with respect to it in the Offering Memorandum under the
heading "Use of Proceeds."
(m) Prior to the Closing Time, the Company will not issue any
press release or other communications directly or indirectly or hold
any press conference with respect to the Company, the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company, without your prior consent, which shall not
be unreasonably withheld, unless in the judgment of the Company and its
counsel, and after notification to you, such press release or
communication is required by law.
(n) For a period of 120 days from the date of the Offering
Memorandum, the Company will not, without your prior written consent,
directly or indirectly, offer, pledge, sell, grant any option, right or
warrant for the sale of or otherwise dispose of any debt securities of
the Company (or securities convertible or exchangeable into or
exercisable for debt securities of the Company), or file any
registration statement with respect to the foregoing, other than the
Exchange Securities referred to in the Registration Rights
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<PAGE>
Agreement.
Section 4. Payment of Expenses. Whether or not any sale of the
Securities is consummated, the Company will pay and bear all costs and expenses
incident to the performance of its obligations under this Agreement, including
(a) the preparation and printing of the Preliminary Offering Memorandum, the
Offering Memorandum and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Initial Purchasers, (b) the preparation,
reproduction and distribution of the Securities, this Agreement, the
Registration Rights Agreement, the Indenture and any "blue sky" or legal
investment memoranda, (c) the delivery of the Securities to the Initial
Purchasers, (d) the fees and disbursements of the Company's counsel and
accountants, (e) the qualification of the Securities under the applicable
securities laws in accordance with Section 3(d) and any filing for review of the
offering with NASD, including filing fees and fees and disbursements of counsel
for the Initial Purchasers in connection therewith and in connection with the
preparation of any "blue sky" or legal investment memoranda, (f) any fees
charged by rating agencies for rating the Securities, (g) the fees and expenses
of the Trustee, including the fees and disbursements of counsel for the Trustee,
in connection with the Indenture and the Securities and (h) the cost of
obtaining approval for the trading of the Securities through PORTAL.
If this Agreement is terminated by the Initial Purchasers in
accordance with the provisions of Section 5 or 9(a)(i), the Company shall
reimburse the Initial Purchasers for all of their out-of-pocket expenses,
including the fees and disbursements of counsel for the Initial Purchasers.
Section 5. Conditions of Initial Purchasers' Obligations. The
obligations of each Initial Purchaser to purchase and pay for the Securities
that it has severally agreed to purchase hereunder are subject to the accuracy
of the representations and warranties of the Company contained herein and in
certificates of any officer of the Company and any Subsidiary delivered pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) At the Closing Time, each of you shall have received a
signed opinion of each of Shearman & Sterling, counsel for the Company,
and Edmund Moriarty, General Counsel of the Company, in each case dated
as of the Closing Time, in substantially the form attached hereto as
Exhibit B-1. Such opinion shall be to such further effect with respect
to other legal matters relating to this Agreement and the sale of the
Securities pursuant to this Agreement as counsel for the Initial
Purchasers may reasonably request. In giving such opinion, such counsel
may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon
opinions of other counsel, who shall be counsel satisfactory to counsel
for the Initial Purchasers, in which case the opinion shall state that
they believe you are entitled to so rely. Such counsel may also state
that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers
of the Company and the Subsidiaries and certificates of public
officials; provided that such certificates have been delivered to the
Initial Purchasers.
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<PAGE>
(b) At the Closing Time, each of you shall have received a
signed opinion of Lovell White Durrant, counsel to BEAH(UK), dated as
of Closing Time, in substantially the form attached hereto as Exhibit
B-2. Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the sale of the Securities
pursuant to this Agreement as counsel for the Initial Purchasers may
reasonably request.
(c) At the Closing Time, each of you shall have received the
favorable opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
for the Initial Purchasers, dated as of the Closing Time, to the effect
that the opinions delivered pursuant to Sections 5(a) and 5(b) appear
on their face to be appropriately responsive to the requirements of
this Agreement except, specifying the same, to the extent waived by
you, and with respect to the incorporation and legal existence of the
Company, the Securities, this Agreement, the Indenture, the
Registration Rights Agreement, the Offering Memorandum and such other
related matters as you may require. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to you. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers
of the Company and the Subsidiaries and certificates of public
officials; provided that such certificates have been delivered to the
Initial Purchasers.
(d) At the Closing Time, (i) the Offering Memorandum, as it
may then be amended or supplemented, shall not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (ii) there shall not have been, since the respective dates
as of which information is given in the Offering Memorandum, any
material adverse change in the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business, (iii) no action, suit or proceeding at
law or in equity shall be pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary that would be required
to be set forth in the Offering Memorandum other than as set forth
therein and no proceedings shall be pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary before or by
any government, governmental instrumentality or court, domestic or
foreign, that could result in any material adverse change in the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
one enterprise, other than as set forth in the Offering Memorandum,
(iv) the Company shall have in all material respects complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time, (v) no event of default
shall exist under any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which the Company or
any Subsidiary is a party or to which the Company or any Subsidiary is
subject except as such would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
enterprise and (vi)
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the other representations and warranties of the Company set forth
herein shall be accurate in all material respects as though expressly
made at and as of the Closing Time. At the Closing Time, each of you
shall have received a certificate of the Chief Executive Officer and
the Chief Financial Officer of the Company, dated as of the Closing
Time, to such effect.
(e) At the time that this Agreement is executed by the
Company, each of you shall have received from Deloitte & Touche L.L.P.,
independent auditors for the Company and PBASCO, a letter, dated such
date, in form of Exhibit C-1 hereto.
(f) At the time that this Agreement is executed by the
Company, each of you shall have received from Zalick, Torok, Kirgesner
& Co., independent auditors for SMR, a letter, dated such date in the
form of Exhibit C-2 hereto.
(g) At the time that this Agreement is executed by the
Company, each of you shall have received from Kane, Hoffman & Danner,
P.A., independent auditors for AMP, a letter in the form of Exhibit C-3
hereto.
(h) At the Closing Time, each of you shall have received from
each of Deloitte & Touche L.L.P., Zalick, Torok, Kirgesner, Cook & Co.
and Kane, Hoffman & Danner, P.A. letters, in form and substance
satisfactory to you and dated as of the Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant
to Sections 5(e) through 5(g), as the case may be, except that the
specified date referred to shall be a date not more than five days
prior to the Closing Time.
(i) Prior to the Closing Time, the Company shall have obtained
consents from the lenders under its Bank Credit Facility which permits
the Stock Repurchase as described in the Offering Memorandum under "Use
of Proceeds" and such consents shall be binding on the Company.
(j) At the Closing Time, each of you shall have received a
certificate regarding the financial data and information relating to CF
Taylor from an officer of the Company or from an official of the
Company who has responsibility for financial and accounting matters in
a form to be agreed upon by the Company and Merrill Lynch.
(k) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Time, there shall not have been any
downgrading in the rating accorded any of the Company's securities,
including the Securities, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the 1933 Act, nor shall such rating organization have
publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's
securities, including the Securities.
(l) At the Closing Time, counsel for the Initial Purchasers
shall have been furnished with all such documents, certificates and
opinions as they may reasonably request for the purpose of enabling
them to pass upon the issuance and sale of the
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Securities as contemplated in this Agreement and the matters referred
to in Section 5(d) and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of
the Company, the performance of any of the covenants of the Company, or
the fulfillment of any of the conditions herein contained; and all
proceedings taken by the Company at or prior to the Closing Time in
connection with the authorization, issuance and sale of the Securities
as contemplated in this Agreement shall be reasonably satisfactory in
form and substance to the Initial Purchasers and to counsel for the
Initial Purchasers.
(m) At the Closing Time, the Registration Rights Agreement
shall have been fully executed and be in full force and effect.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement, this Agreement may
be terminated by you on notice to the Company at any time at or prior to the
Closing Time, and such termination shall be without liability of any party to
any other party, except as provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 1 (insofar as Section 8 provides for the
survival of such representations or warranties), 6, 7 and 8 shall remain in
effect.
Section 6. Indemnification. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act
as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of an untrue statement or
alleged untrue statement of a material fact included in any preliminary
offering memorandum or the Offering Memorandum (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission; provided that (subject
to Section 6(d) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including fees and disbursements of counsel chosen by you), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue
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<PAGE>
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by the Initial Purchasers through Merrill
Lynch expressly for use in any preliminary offering memorandum or the Offering
Memorandum (or any amendment or supplement thereto). The foregoing indemnity
with respect to any untrue statement contained in or any omission from a
preliminary offering memorandum shall not inure to the benefit of any Initial
Purchaser (or any person who controls such Initial Purchaser within the meaning
of Section 5 of the 1933 Act) from whom the person asserting any such loss,
liability, claim, damage or expense purchased any of the Securities that are the
subject thereof if the Company shall sustain the burden of proving that such
person was not sent or given a copy of the Offering Memorandum (or any amendment
or supplement thereto) at or prior to the written confirmation of the sale of
such Securities to such person and the untrue statement contained in or the
omission from such preliminary offering memorandum was corrected in the Offering
Memorandum (or any amendment or supplement thereto).
(b) Each Initial Purchaser severally (but not jointly) agrees
to indemnify and hold harmless the Company, its directors, each of its officers
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act, against any and all loss, liability, claim, damage and
expense described in the indemnity agreement in Section 6(a), as incurred, but
only with respect to untrue statements or omissions made in any preliminary
offering memorandum or the Offering Memorandum (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Initial Purchaser through Merrill Lynch expressly for use
in such preliminary offering memorandum or the Offering Memorandum (or any
amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the defense
of such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
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<PAGE>
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request with such request prior to the date of such
settlement.
Section 7. Contribution. If the indemnification provided for
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other hand in connection with the offering of
the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total discount received by the Initial Purchasers, bear to
the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and the
Initial Purchasers on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchasers, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or
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<PAGE>
alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities sold by it were distributed to the
purchasers thereof exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser, and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Company. The Initial Purchasers'
respective obligations to contribute pursuant to this Section are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A hereto and not joint.
Section 8. Representations, Warranties and Agreements to
Survive Delivery. The representations, warranties, indemnities, agreements and
other statements of the Company or its officers set forth in or made pursuant to
this Agreement will remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Company, the Initial Purchasers or
any person who controls the Company or the Initial Purchasers within the meaning
of Section 15 of the 1933 Act and will survive delivery of and payment for the
Securities.
Section 9. Termination of Agreement. (a) The Initial
Purchasers may terminate this Agreement, by notice to the Company, at any time
at or prior to the Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the Initial Purchasers' judgment, impracticable to market the Securities or
enforce contracts for the sale of the Securities or (iii) if trading in any
securities of the Company has been suspended by the Commission or the Nasdaq
National Market, or if trading generally on either the American Stock Exchange
or the New York Stock Exchange or in the Nasdaq National Market has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
such exchange or by order of the Commission, the NASD or any other governmental
authority or (iv) if a banking moratorium has been declared by either federal,
New York or Florida authorities.
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<PAGE>
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 1 (insofar as Section 8 provides for the
survival of such representations or warranties), 6, 7 and 8 shall survive such
termination and remain in full force and effect.
Section 10. Default. If one or more of the Initial Purchasers
shall fail at the Closing Time to purchase the Securities that it or they are
obligated to purchase (the "Defaulted Securities"), the non-defaulting Initial
Purchasers shall have the right, within 24 hours thereafter, to make
arrangements to purchase all, but not less than all, of the Defaulted Securities
upon the terms herein set forth; if, however, such non-defaulting Initial
Purchasers have not completed such arrangements within such 24-hour period,
then:
(a) if the aggregate principal amount of Defaulted Securities
does not exceed 10% of the aggregate principal amount of the Securities
to be purchased, the non-defaulting Initial Purchasers shall be
obligated to purchase the full amount thereof, or
(b) if the aggregate principal amount of Defaulted Securities
exceeds 10% of the aggregate principal amount of the Securities to be
purchased, this Agreement shall terminate without liability on the part
of the non-defaulting Initial Purchasers.
No action taken pursuant to this Section shall relieve any
defaulting Initial Purchaser from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company shall have the right to
postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in any other documents
or arrangements. As used herein, the term "Initial Purchaser" includes any
person substituted for an Initial Purchaser under this Section 10.
Section 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Initial Purchasers shall be directed to the Initial Purchasers at
Merrill Lynch World Headquarters, North Tower, World Financial Center, New York,
New York 10281, Attention: Mr. Michael F. Senft with copies to Fried, Frank,
Harris, Shriver & Jacobson at 1 New York Plaza, New York, New York 10004,
Attention: Valerie Ford Jacob; and notices to the Company shall be directed to
it at 1400 Corporate Center Way, Wellington, Florida 33414, Attention: Mr. Amin
J. Khoury, Chairman of the Board of Directors and Chief Executive Officer with
copies to Shearman & Sterling at 599 Lexington Avenue, New York, New York 10022,
Attention: Mr. Rohan S. Weerasinghe.
Section 12. Parties. This Agreement is made solely for the
benefit of the Initial Purchasers, the Company and, to the extent expressed, any
person who controls the Company or any Initial Purchaser within the meaning of
Section 15 of the 1933 Act, and the directors of the Company, its officers and
their respective executors, administrators, successors and assigns and
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<PAGE>
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser, as
such purchaser, from the Initial Purchasers of the Securities.
Section 13. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New York. Specified times of the day refer
to New York City time.
Section 14. Counterparts. This Agreement may be executed in
one or more counterparts and when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
-------------------------
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<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company and the Initial
Purchasers in accordance with its terms.
Very truly yours,
BE AEROSPACE, INC.
By:
---------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT Alex. Brown Incorporated
Chase Securities Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
By: Merrill Lynch, Pierce, Fenner & Smith Incorporated
By
--------------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
Principal Amount
of Securities
Initial Purchasers to be Purchased
------------------ ---------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................... 75,000,000
BT Alex. Brown Incorporated............................... 10,000,000
Chase Securities Inc...................................... 20,000,000
Credit Suisse First Boston Corporation.................... 43,000,000
Morgan Stanley & Co. Incorporated......................... 40,000,000
PaineWebber Incorporated.................................. 12,000,000
------------
Total............................................. $200,000,000
<PAGE>
EXHIBIT A
FORM OF
REGISTRATION RIGHTS AGREEMENT
<PAGE>
================================================================================
Registration Rights Agreement
Dated as of November 2, 1998
among
BE Aerospace, Inc.
and
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
BT Alex. Brown Incorporated,
Chase Securities Inc.,
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporated
and
PaineWebber Incorporated
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into November 2, 1998, among BE AEROSPACE, INC., a Delaware
corporation (the "Company"), and MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, BT ALEX. BROWN INCORPORATED, CHASE SECURITIES INC., CREDIT SUISSE
FIRST BOSTON CORPORATION, MORGAN STANLEY & CO. INCORPORATED and PAINEWEBBER
INCORPORATED (the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated October 28, 1998 among the Company and the Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Purchasers of an
aggregate of $200,000,000 principal amount of the Company's 9 1/2% Senior
Subordinated Notes due 2008 (the "Securities"). In order to induce the
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide to the Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble and
also includes the Company's successors.
"Depositary" shall mean the Depository Trust Company, or any
other depositary appointed by the Company; provided, however, that such
depositary must have an address in the Borough of Manhattan, in the
City of New York.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
- 1 -
<PAGE>
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Securities" shall mean 9 1/2% Series B Senior
Subordinated Notes due 2008 issued by the Company under the Indenture
containing terms identical to the Securities (except that (i) interest
thereon shall accrue from the last date on which interest was paid on
the Securities or, if no such interest has been paid, from the date of
their original issue, (ii) the transfer restrictions thereon shall be
eliminated and (iii) certain provisions relating to an increase in the
stated rate of interest thereon shall be eliminated), to be offered to
Holders of Securities in exchange for Securities pursuant to the
Exchange Offer.
"Holders" shall mean the Purchasers, for so long as they own
any Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture.
"Indenture" shall mean the Indenture relating to the
Securities dated as of November 2, 1998 between the Company and The
Bank of New York, as trustee, as the same may be amended from time to
time in accordance with the terms thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company shall be disregarded in
determining whether such consent or approval was given by the Holders
of such required percentage or amount.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to a prospectus, including post-effective amendments, and
in each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Purchaser" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean the Securities; provided,
however, that the
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<PAGE>
Securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall have
been disposed of pursuant to such Registration Statement, (ii) such
Securities shall have been sold to the public pursuant to Rule 144(k)
(or any similar provision then in force, but not Rule 144A) under the
1933 Act, (iii) such Securities shall have ceased to be outstanding or
(iv) such Securities have been exchanged for Exchange Securities upon
consummation of the Exchange Offer.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration
and filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws and compliance with
the rules of the NASD (including reasonable fees and disbursements of
counsel for any underwriters or Holders in connection with blue sky
qualification of any of the Exchange Securities or Registrable
Securities), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and
other documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) all fees and expenses
incurred in connection with the listing, if any, of any of the
Registrable Securities on any securities exchange or exchanges, (vi)
the fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses
of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, (vii) the fees and expenses of the
Trustee, and any escrow agent or custodian, and (viii) any fees and
disbursements of the underwriters customarily required to be paid by
issuers or sellers of securities and the reasonable fees and expenses
of any special experts retained by the Company in connection with any
Registration Statement, but excluding fees of counsel to the
underwriters or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement,
and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities on an appropriate form under Rule 415 under the 1933
- 3 -
<PAGE>
Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer
Registration. To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
(A) to file within 30 days after the Closing Date an Exchange Offer Registration
Statement covering the offer by the Company to the Holders to exchange all of
the Registrable Securities for Exchange Securities, (B) to cause such Exchange
Offer Registration Statement to be declared effective by the SEC within 120 days
after the Closing Date, (C) to cause such Registration Statement to remain
effective until the closing of the Exchange Offer and (D) to consummate the
Exchange Offer within 150 days following the Closing Date. The Exchange
Securities will be issued under the Indenture. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder (other than Participating Broker-Dealers (as defined in Section 3(f))
eligible and electing to exchange Registrable Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of Rule 405 under the 1933 Act, acquires the Exchange Securities in the ordinary
course of such Holder's business and has no arrangements or understandings with
any person to participate in the Exchange Offer for the purpose of distributing
the Exchange Securities) to trade such Exchange Securities from and after their
receipt without any limitations or restrictions under the 1933 Act and without
material restrictions under the securities laws of a substantial proportion of
the several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(iii) use the services of the Depositary for the Exchange
Offer;
(iv) permit Holders to withdraw tendered Registrable
Securities at any time prior to the close of business, New York City
time, on the last business day on which the Exchange Offer shall remain
open, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange, and a statement that such Holder is withdrawing
his election to have such Securities exchanged; and
- 4 -
<PAGE>
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange Registrable Securities duly tendered
and not validly withdrawn pursuant to the Exchange Offer in accordance
with the terms of the Exchange Offer Registration Statement and the
letter of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Securities to each Holder of Registrable Securities equal in
amount to the Registrable Securities of such Holder so accepted for
exchange.
Interest on each Exchange Security will accrue from the last
date on which interest was paid on the Registrable Securities surrendered in
exchange therefor or, if no interest has been paid on the Registrable
Securities, from the date of its original issue. The Exchange Offer shall not be
subject to any conditions, other than that the Exchange Offer, or the making of
any exchange by a Holder, does not violate applicable law or any applicable
interpretation of the Staff of the SEC. Each Holder of Registrable Securities
(other than Participating Broker-Dealers) who wishes to exchange such
Registrable Securities for Exchange Securities in the Exchange Offer will be
required to represent that (i) it is not an affiliate of the Company, (ii) any
Exchange Securities to be received by it were acquired in the ordinary course of
business and (iii) at the time of the commencement of the Exchange Offer it has
no arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities. The Company shall
inform the Purchasers of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Purchasers shall have the right to contact such
Holders and otherwise facilitate the tender of Registrable Securities in the
Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law
or applicable interpretations thereof by the Staff of the SEC, the Company is
not permitted to effect the Exchange Offer as contemplated by Section 2(a)
hereof, or (ii) if for any other reason the Exchange Offer is not consummated
within 150 days after the Closing Date, or (iii) if any Holder (other than a
Purchaser) is not eligible to participate in the Exchange Offer or (iv) upon the
request of any Purchaser (with respect to any Registrable Securities which it
acquired directly from the Company) following the consummation of the Exchange
Offer if such Purchaser shall hold Registrable Securities which it acquired
directly from the Company and if such Purchaser is not permitted, in the opinion
of counsel to such Purchaser, pursuant to applicable law or applicable
interpretation of the Staff of the SEC to participate in the Exchange Offer, the
Company shall, at its cost,
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the
Registrable Securities by the Holders
- 5 -
<PAGE>
from time to time in accordance with the methods of distribution
elected by the Majority Holders of such Registrable Securities and set
forth in such Shelf Registration Statement, and use its best efforts to
cause such Shelf Registration Statement to be declared effective by the
SEC by 150 days after the Closing Date. In the event that the Company
is required to file a Shelf Registration Statement upon the request of
any Holder (other than a Purchaser) not eligible to participate in the
Exchange Offer pursuant to clause (iii) above or upon the request of
any Purchaser pursuant to clause (iv) above, the Company shall file and
have declared effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all Registrable
Securities and a Shelf Registration Statement (which may be a combined
Registration Statement with the Exchange Offer Registration Statement)
with respect to offers and sales of Registrable Securities held by such
Holder or such Purchaser after completion of the Exchange Offer.
(B) use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of two years
from the date the Shelf Registration Statement is declared effective by
the SEC (or one year from the date the Shelf Registration Statement is
declared effective if such Shelf Registration Statement is filed upon
the request of any Purchaser pursuant to clause (iv) above) or such
shorter period which will terminate when all of the Registrable
Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement.
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act
and the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any supplement to
such Prospectus (as amended or supplemented from time to time), does
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading.
The Company further agrees, if necessary, to supplement or
amend the Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 3(b) below, to use all reasonable efforts to cause any such
amendment to become effective and such Shelf Registration to become usable as
soon as thereafter practicable and to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
- 6 -
<PAGE>
(c) Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) or 2(b) and, in the
case of any Shelf Registration Statement, will reimburse the Holders or
Purchasers for the reasonable fees and disbursements of one firm or counsel
designated in writing by the Majority Holders to act as counsel for the Holders
of the Registrable Securities in connection therewith, and, in the case of an
Exchange Offer Registration Statement, will reimburse the Purchasers, as
applicable, for the reasonable fees and disbursements of counsel in connection
therewith. Each Holder shall pay all expenses of its counsel other than as set
forth in the preceding sentence, underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Company will be
deemed not to have used its best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Securities covered thereby
not being able to exchange or offer and sell such Registrable Securities during
that period unless (A) such action is required by applicable law or (B) such
action is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly complies
with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that (i) the
Exchange Offer Registration Statement is not filed with the Commission on or
prior to the 30th calendar day after the Closing Date, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the 120th
calendar day after the Closing Date or (iii) the Exchange Offer is not
consummated or a Shelf Registration Statement with respect to the Registrable
Securities is not declared effective on or prior to the 150th calendar day after
the Closing Date, the interest rate borne by the Securities shall be increased
by one-half of one percent per annum following such 30-day period in the case of
clause (i) above, such 120-day period in the case of clause (ii) above, or such
150-day period in the case of clause (iii) above; provided that the aggregate
increase in such interest rate will in no event exceed one-half of one percent
per annum. Upon (x) the filing of the Exchange Offer Registration Statement
after the 30-day period described in clause (i) above, (y) the effectiveness of
the Exchange Offer Registration Statement after the 120-day period described in
clause (ii) above or (z) the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, after the
150-day period described in clause (iii) above, the interest rate borne by the
Securities from the date of such filing, effectiveness or consummation, as the
case may be, will be reduced to the original
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interest rate.
(f) Specific Enforcement. Without limiting the remedies
available to the Purchasers and the Holders, the Company acknowledges that any
failure by the Company to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Purchasers
or the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Purchasers or any Holder may obtain such relief as may
be required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations
of the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company,
(ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Securities by the selling Holders thereof and
(iii) shall comply as to form in all material respects with the
requirements of the applicable form and include or incorporate by
reference all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act; and
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by each Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof;
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(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities, at least five days prior to filing,
that a Shelf Registration Statement with respect to the Registrable
Securities is being filed and advising such Holders that the
distribution of Registrable Securities will be made in accordance with
the method elected by the Majority Holders; and (ii) furnish to each
Holder of Registrable Securities, to counsel for the Purchasers, to
counsel for the Holders and to each underwriter of an underwritten
offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such
Holder or underwriter may reasonably request, including financial
statements and schedules and, if the Holder so requests, all exhibits
(including those incorporated by reference) in order to facilitate the
public sale or other disposition of the Registrable Securities; and
(iii) subject to the last paragraph of Section 3, hereby consent to the
use of the Prospectus or any amendment or supplement thereto by each of
the selling Holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement and each underwriter of an
underwritten offering of Registrable Securities shall reasonably
request by the time the applicable Registration Statement is declared
effective by the SEC, to cooperate with the Holders in connection with
any filings required to be made with the NASD, and do any and all other
acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder;
provided, however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d) or (ii) take any action which would subject it to
general service of process or taxation in any such jurisdiction if it
is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities and counsel for the Purchasers promptly and, if
requested by such Holder or counsel, confirm such advice in writing
promptly (i) when a Registration Statement has become effective and
when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if, between the
effective date of a Registration Statement and the closing of any sale
of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any, relating
to such offering cease to be true and correct in all material respects,
(v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the happening of any event or the
discovery of
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any facts during the period a Shelf Registration Statement is effective
which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the
making of any changes in such Registration Statement or Prospectus in
order to make the statements therein not misleading and (vii) of any
determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Securities for Exchange Securities for the resale of such
Exchange Securities, (ii) furnish to each broker-dealer who desires to
participate in the Exchange Offer, without charge, as many copies of
each Prospectus included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or supplement
thereto, as such broker-dealer may reasonably request, (iii) include in
the Exchange Offer Registration Statement a statement that any
broker-dealer who holds Registrable Securities acquired for its own
account as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer"), and who receives Exchange
Securities for Registrable Securities pursuant to the Exchange Offer,
may be a statutory underwriter and must deliver a prospectus meeting
the requirements of the 1933 Act in connection with any resale of such
Exchange Securities, (iv) subject to the last paragraph of Section 3,
hereby consent to the use of the Prospectus forming part of the
Exchange Offer Registration Statement or any amendment or supplement
thereto, by any broker-dealer in connection with the sale or transfer
of the Exchange Securities covered by the Prospectus or any amendment
or supplement thereto, and (v) include in the transmittal letter or
similar documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Securities. If the
undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Registrable
Securities, it represents that the Registrable Securities to
be exchanged for Exchange Securities were acquired by it as a
result of market-making activities or other trading activities
and acknowledges that it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Securities pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of registrable Securities,
the broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) to the extent any Participating Broker-Dealer participates
in the Exchange Offer, the Company shall use its best efforts to cause
to be delivered at the request of an entity representing the
Participating Broker-Dealers (which entity shall be
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one of the Purchasers, unless they elect not to act as such
representative) only one, if any, "cold comfort" letter with respect to
the Prospectus in the form existing on the last date for which
exchanges are accepted pursuant to the Exchange Offer and with respect
to each subsequent amendment or supplement, if any, effected during the
period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer participates
in the Exchange Offer, the Company shall use its best efforts to
maintain the effectiveness of the Exchange Offer Registration Statement
for a period of one year following the closing of the Exchange Offer;
and
(D) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement
as would otherwise be contemplated by Section 3(b), or take any other
action as a result of this Section 3(f), for a period exceeding 180
days after the last date for which exchanges are accepted pursuant to
the Exchange Offer (as such period may be extended by the Company) and
Participating Broker-Dealers shall not be authorized by the Company to,
and shall not, deliver such Prospectus after such period in connection
with resales contemplated by this Section 3.
(g) (A) in the case of an Exchange Offer, furnish counsel for
the Purchasers and (B) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Securities copies of any request
by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for
additional information;
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement as
soon as practicable and provide immediate notice to each Holder of the
withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends; and
cause such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders or the underwriters, if any, may
reasonably request at least two business days prior to the closing of
any sale of Registrable Securities;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by
Section 3(e)(vi) hereof, use its best efforts to prepare a supplement
or post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not
contain at the time of such delivery any
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<PAGE>
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Company agrees to
notify each Holder to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission. At such time as such public disclosure is otherwise made or
the Company determines that such disclosure is not necessary, in each
case to correct any misstatement of a material fact or to include any
omitted material fact, the Company agrees promptly to notify each
Holder of such determination and to furnish each Holder such numbers of
copies of the Prospectus, as amended or supplemented, as such Holder
may reasonably request;
(l) obtain a CUSIP number for all Exchange Securities, or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement, and provide the Trustee
with printed certificates for the Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible for
deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities, or Registrable Securities, as
the case may be, (ii) cooperate with the Trustee and the Holders to
effect such changes to the Indenture as may be required for the
Indenture to be so qualified in accordance with the terms of the TIA
and (iii) execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to
enable the Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the
Majority Holders) in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters,
if any, in form, substance and scope as are customarily made
by issuers to underwriters in similar underwritten offerings
as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority
in principal amount of the Registrable Securities being sold)
addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested
in sales of securities or underwritten offerings and such
other matters as may be reasonably requested by such Holders
and underwriters;
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<PAGE>
(iii) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public
accountants addressed to the underwriters, if any, and will
use reasonable best efforts to have such letter addressed to
the selling Holders of Registrable Securities, such letters to
be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters
in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders
for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions and
procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 5 hereof with
respect to the underwriters and all other parties to be
indemnified pursuant to said Section; and
(vi) deliver such documents and certificates as may
be reasonably requested and as are customarily delivered in
similar offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto)
and (ii) each closing under any underwriting or similar agreement as
and to the extent required thereunder. In the case of any underwritten
offering, the Company shall provide written notice to the Holders of
all Registrable Securities of such underwritten offering at least 30
days prior to the filing of a prospectus supplement for such
underwritten offering. Such notice shall (x) offer each such Holder the
right to participate in such underwritten offering, (y) specify a date,
which shall be no earlier than 10 days following the date of such
notice, by which such Holder must inform the Company of its intent to
participate in such underwritten offering and (z) include the
instructions such Holder must follow in order to participate in such
underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable
Securities and any underwriters participating in any disposition
pursuant to a Shelf Registration Statement and any counsel or
accountant retained by such Holders or underwriters, all financial and
other records, pertinent corporate documents and properties of the
Company reasonably requested by any such persons, and cause the
respective officers, directors, employees, and any other agents of the
Company to supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant in
connection with a Registration Statement;
(p) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment
or supplement to a Prospectus, provide copies of such document to the
Purchasers, and make such changes in any such
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<PAGE>
document prior to the filing thereof as any of the Purchasers or their
counsel may reasonably request; (ii) in the case of a Shelf
Registration, a reasonable time prior to filing any Shelf Registration
Statement, any Prospectus forming a part thereof, any amendment to such
Shelf Registration Statement or amendment or supplement to such
Prospectus, provide copies of such document to the Holders of
Registrable Securities, to the Purchasers, to counsel on behalf of the
Holders and to the underwriter or underwriters of an underwritten
offering of Registrable Securities, if any, and make such changes in
any such document prior to the filing thereof as the Holders of
Registrable Securities, the Purchasers on behalf of such Holders, their
counsel and any underwriter may reasonably request; and (iii) cause the
representatives of the Company to be available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Securities, the Purchasers on behalf of such Holders or any underwriter
and shall not at any time make any filing of any such document of which
such Holders, the Purchasers on behalf of such Holders, their counsel
or any underwriter shall not have previously been advised and furnished
a copy or to which such Holders, the Purchasers on behalf of such
Holders, their counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange on which similar debt securities issued by the Company are
then listed if requested by the Majority Holders or by the underwriter
or underwriters of an underwritten offering of Registrable Securities,
if any;
(r) in the case of a Shelf Registration, use its best efforts
to cause the Registrable Securities to be rated with the appropriate
rating agencies, if so requested by the Majority Holders or by the
underwriter or underwriters of an underwritten offering of Registrable
Securities, if any, unless the Registrable Securities are already so
rated;
(s) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
and
(t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter and its counsel.
In the case of a Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Securities to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(ii) - (vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
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<PAGE>
Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(k) hereof, and, if so directed by
the Company, such Holder will deliver to the Company (at its expense)
all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. If the
Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Shelf Registration Statement as a
result of the happening of any event or the discovery of any facts,
each of the kind described in Section 3(e)(vi) hereof, the Company
shall be deemed to have used its best efforts to keep the Shelf
Registration Statement effective during such period of suspension
provided that the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Shelf Registration Statement and shall
extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received
copies of the supplemented or amended Prospectus necessary to resume
such dispositions.
4. Underwritten Registrations. If any of the Registrable
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Majority Holders of such
Registrable Securities included in such offering and shall be reasonably
acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The Company shall
indemnify and hold harmless each Purchaser, each Holder, including Participating
Broker-Dealers, each underwriter who participates in an offering of Registrable
Securities, their respective affiliates, and the respective directors, officers,
employees, agents and each Person, if any, who controls any of such parties
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all losses, liabilities, claims, damages
and expenses whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) pursuant to which
Exchange Securities or Registrable Securities were registered under the
1933 Act, including all documents incorporated therein by reference, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
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<PAGE>
(ii) against any and all losses, liabilities, claims, damages
and expenses whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement (subject to Section 5(d) below) is effected with the written
consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including fees and disbursements of counsel chosen by any indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
5(a);
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Purchasers,
any Holder, including Participating Broker-Dealers or any underwriter expressly
for use in the Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto).
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Purchasers, each underwriter who participates in an offering of Registrable
Securities and the other selling Holders and each of their respective directors
and officers (including each officer of the Company who signed the Registration
Statement) and each Person, if any, who controls the Company, the Purchasers,
any underwriter or any other selling Holder within the meaning of Section 15 of
the 1933 Act, against any and all losses, liabilities, claims, damages and
expenses described in the indemnity contained in Section 5(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Holder, as the case may be, expressly for use in the
Registration Statement (or any amendment thereto), or the Prospectus (or any
amendment or supplement thereto); provided, however, that no such Holder shall
be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities pursuant to such
Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability which it may
have other than on account of this indemnity agreement. An indemnifying party
may participate at its own expense in the defense of such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in
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<PAGE>
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 5 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances in which any of the indemnity provisions set forth in this Section
5 are for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company, the Purchasers
and the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, the Purchasers and the Holders, as incurred; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any Person that was not guilty of such fraudulent misrepresentation.
As between the Company, the Purchasers and the Holders, such parties
shall contribute to such aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect (i) the relative benefits received
by the Company on the one hand, the Purchasers on another hand, and the Holders
on another hand, from the offering of the Exchange Securities or Registrable
Securities included in such offering, and (ii) the relative fault of the Company
on the one hand, the Purchasers on another hand, and the Holders on another
hand, with respect to the statements or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and the Holders and the Purchasers on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company, the
Holders or the Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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<PAGE>
The Company, the Purchasers and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 5 were to be determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the relevant equitable
considerations. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
5 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 5, no Purchaser shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities sold by it were offered exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
For purposes of this Section 5, each affiliate of a Purchaser or
Holder, and each director, officer, employee, agent and Person, if any, who
controls a Purchaser or Holder or such affiliate within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Purchaser or Holder, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each Person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company. The parties hereto agree that any underwriting discount or
commission or reimbursement of fees paid to any Purchaser pursuant to the
Purchase Agreement shall not be deemed to be a benefit received by any Purchaser
in connection with the offering of the Exchange Securities or Registrable
Securities included in such offering. The Purchasers' respective obligations to
contribute pursuant to this Section are several in proportion to the principal
amount of Securities set forth opposite their respective names in Schedule A to
the Purchase Agreement and not joint.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as
the Company is subject to the reporting requirements of Section 13 or 15 of the
1934 Act, the Company covenants that it will file the reports required to be
filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and
the rules and regulations adopted by the SEC thereunder, that if it ceases to be
so required to file such reports, it will upon the request of any Holder of
Registrable Securities (i) make publicly available such information as is
necessary to permit sales pursuant to Rule 144 under the 1933 Act, (ii) deliver
such information to a prospective purchaser as is necessary to permit sales
pursuant to Rule 144A under the 1933 Act and it will take such further action as
any Holder of Registrable Securities may reasonably request, and (iii) take such
further action that is reasonable in the circumstances, in each case, to the
extent required from time to time to enable such Holder to sell its Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1993 Act, as such Rule may be
amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the
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<PAGE>
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
(b) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure; provided, however, that no amendment, modification,
supplement or waiver or consent to any departure from the provisions of Section
5 hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(d), which address initially is, with respect to a Purchaser, the
address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee, at
the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Securities,
in any manner, whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities, such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the
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<PAGE>
restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(f) Third Party Beneficiary. The Purchasers shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BE AEROSPACE, INC.
By:
----------------------------
Name:
Title:
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
--------------------------
Name:
Title:
<PAGE>
EXHIBIT B-1
FORM OF OPINION OF SHEARMAN & STERLING
[Shearman & Sterling Letterhead]
November 2, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT Alex. Brown Incorporated
Chase Securities Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, NY 10281-1201
Ladies and Gentlemen:
We are acting as counsel to BE Aerospace, Inc., a Delaware
corporation (the "Company"), in connection with the sale by the Company to
Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated,
Chase Securities Inc., Credit Suisse First Boston Corporation, Morgan Stanley &
Co. Incorporated and PaineWebber Incorporated (collectively, the "Initial
Purchasers"), subject to the terms and conditions set forth in the Purchase
Agreement, dated October 28, 1998 (the "Purchase Agreement"), among the Company
and the Initial Purchasers, of $200,000,000 aggregate principal amount of the
Company's 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") issued
pursuant to an Indenture, dated as of November 2, 1998 (the "Indenture"),
between the Company and The Bank of New York, as trustee (the "Trustee"), and
further subject to the terms and conditions set forth in the Registration Rights
Agreement, dated November 2, 1998 (the "Registration Rights Agreement"), among
the Company and the Initial Purchasers. Unless otherwise noted, capitalized
terms used but not defined herein are used as defined in the Purchase Agreement.
This opinion is being delivered pursuant to Section 5(a) of
the Purchase Agreement.
In this capacity we have examined a copy of the Preliminary
Offering
<PAGE>
Memorandum dated October 26, 1998, and the final Offering Memorandum dated
October 28, 1998 relating to the offering of the Notes (such final Offering
Memorandum being hereinafter referred to as the "Offering Memorandum"). We have
also examined the Purchase Agreement, the Indenture, the Registration Rights
Agreement, a specimen of the Notes and the originals, or copies identified to
our satisfaction, of such corporate records of the Company and its subsidiaries,
certificates of public officials, officers 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
with the originals of all documents submitted to us as copies. In rendering our
opinion, we have relied as to factual matters, to the extent we deem proper,
upon the representations and warranties of the Company and its subsidiaries
contained in or made pursuant to the Purchase Agreement, the Registration Rights
Agreement, certificates of officers of the Company and its subsidiaries and
certificates of public officials.
The opinions stated herein are limited to the laws of the
State of New York, the General Corporation Law of the State of Delaware and the
federal laws of the United States, and we do not express any opinion herein
concerning any other laws.
Based upon the foregoing, we are of the opinion that:
(i) The Notes and the Indenture conform in all material
respects to the respective descriptions thereof contained in the Offering
Memorandum under the caption "Description of the Notes."
(ii) The statements made in the Offering Memorandum under the
caption "Exchange Offer; Registration Rights," to the extent that they
constitute matters of law or legal conclusions, have been reviewed by us and
fairly present the information disclosed therein in all material respects.
(iii) The Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(iv) The Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and delivery
by the Trustee, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(v) The Notes have been duly authorized and executed by the
Company and, assuming that the Notes have been duly authenticated by the Trustee
in the manner described in its certificate delivered to you today (which facts
we have not determined by an inspection of the Notes), the Notes have been duly
issued and delivered by the Company and constitute valid and
- 2 -
<PAGE>
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as enforcement may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and the holders of the Notes will be entitled
to the benefits of the Indenture.
(vi) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and except that rights to indemnification or
contribution may be limited by federal or state securities laws or public policy
relating thereto.
(vii) The execution and delivery by the Company of the
Purchase Agreement, the Registration Rights Agreement and the Indenture, the
consummation by the Company of the transactions contemplated in the Purchase
Agreement, including without limitation the Stock Repurchase, the execution and
delivery of the Notes, and compliance by the Company with the terms of the
Purchase Agreement, the Registration Rights Agreement and the Indenture (x) do
not and will not result in any violation of the certificate of incorporation or
by-laws of the Company or SMR Aerospace, Inc. ("SMR") or the certificate of
registration or limited liability company agreement of In-Flight Entertainment,
LLC ("In-Flight"), and (y) and do not and will not conflict with or constitute
an event of default (or an event which with notice or lapse of time or both
would become an event of default) under, or result in the creation of or
imposition of any a lien, charge or encumbrance upon any property or assets of
the Company, SMR or In-Flight under (a) any contract, indenture, mortgage, lease
or other agreement, to which the Company or any of its significant subsidiaries
is a party or by which any of them may be bound or to which it or any of its
properties or assets are bound, that has been filed as an exhibit to the
Company's Form 10-K for the year ended February 28, 1998, the Company's Form
10-Qs for the quarter ended May 30, 1998 and for the quarter ended August 29,
1998 and the Company's Form 8-Ks filed on April 13, 1998, April 27, 1998, May 8,
1998 and August 24, 1998, or which is listed on Schedule I hereto, in each case,
on their face, or (b) any existing applicable New York State, Delaware (limited
to the General Corporation Law), or United States federal law, rule or
regulation, or any judgment, order or decree known to such counsel of any New
York State or United States federal government, governmental or regulatory
instrumentality or agency or court having jurisdiction over the Company or any
of its properties or assets
(viii) No authorization, approval, consent or license of any
governmental or regulatory body, agency or instrumentality of the United States
or New York State is required for the (i) valid issuance of the Notes in
accordance with the provisions of the Indenture, (ii) sale of the Notes to you
as contemplated by the Purchase Agreement, (iii) execution, delivery or
performance by the Company of the Purchase Agreement, the Registration Rights
Agreement or the Indenture or (iv) consummation of the transactions contemplated
by the Purchase Agreement
- 3 -
<PAGE>
(including without limitation the Stock Repurchase), except such as may be
required by the Securities Act of 1933, as amended (the "Securities Act"), the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and the
securities or blue sky laws of the various states.
(ix) The Company is not, and will not be as a result of the
sale of the Notes pursuant to the Purchase Agreement, an investment company
within the meaning of the Investment Company Act of 1940, as amended.
(x) Assuming (i) the accuracy of the representations and
warranties of the Initial Purchasers and the Company in the Purchase Agreement
and (ii) the due performance by the Initial Purchasers and the Company of the
covenants and agreements set forth in the Purchase Agreement, it is not
necessary in connection with the offer, sale and delivery of the Notes to the
Initial Purchasers in the manner contemplated by the Purchase Agreement and the
Offering Memorandum under the Purchase Agreement, or in connection with the
initial resale of such Notes by the Initial Purchasers to register the Notes
under the Securities Act or to qualify the Indenture under the Trust Indenture
Act, it being understood that no opinion is expressed as to any subsequent
resale of any Notes.
This opinion is being furnished to you solely for your
benefit, and is not to be used, circulated, quoted or otherwise referred to for
any other purpose.
- 4 -
<PAGE>
Schedule I
1. Fifth Amended and Restated Credit Agreement dated as of October 29,
1993, amended and restated as of August 7, 1998, among BE Aerospace, Inc., the
Chase Manhattan Bank, as Administrative Agent and Nationsbank, N.A. (South), as
Co-Agent.
2. The (UK) Credit Agreement (as defined in the Offering Memorandum).
3. The Inventum Credit Agreement (as defined in the Offering
Memorandum.
4. Amended and Restated Limited Liability Company Agreement of B/E
Harris LiveTV, LLC, dated as of February 10, 1998 by and between In-Flight
Entertainment, LLC, Harris Corporation and In-Flight Phone Corp.
5. Order dated January 13, 1998 of the United States Department of
Commerce Bureau of Export Administration, regarding the settlement of the U.S.
Government's investigation of export sales to Iran between 1992-5.
6. Indenture, dated as of January 24, 1996, as amended, between the
Company and Fleet National Bank of Connecticut, N.A.
7. Indenture, dated February 13, 1998 between the Company and United
States Trust Company of New York.
<PAGE>
November 2, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT Alex. Brown Incorporated
Chase Securities Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporation
PaineWebber Incorporated
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, NY 10281-1201
Ladies and Gentlemen:
We are acting as counsel to BE Aerospace, Inc., a Delaware
corporation (the "Company"), in connection with the sale by the Company to
Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated,
Chase Securities Inc., Credit Suisse First Boston Corporation, Morgan Stanley &
Co. Incorporated, and PaineWebber Incorporated (collectively, the "Initial
Purchasers"), subject to the terms and conditions set forth in the Purchase
Agreement dated October 28, 1998 (the "Purchase Agreement"), among the Company
and the Initial Purchasers, of $200,000,000 aggregate principal amount of the
Company's 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") issued
pursuant to an Indenture, dated as of November 2, 1998 (the "Indenture"),
between the Company and The Bank of New York, as Trustee (the "Trustee"), and
further subject to the terms and conditions set forth in the Registration Rights
Agreement dated November 2, 1998 (the "Registration Rights Agreement"), among
the Company and the Initial Purchasers. Unless otherwise noted, capitalized
terms used but not defined herein are used as defined in the Purchase Agreement.
In this capacity, we have examined copies of the Preliminary
Offering Memorandum, dated October 26, 1998, and the final Offering Memorandum,
dated October 28, 1998, relating to the offering of the Notes (such final
Offering Memorandum being hereinafter referred to as the "Offering Memorandum").
We have also reviewed and participated in discussions
concerning the preparation of the Offering Memorandum with certain officers and
employees of the Company, with its counsel and its auditors, and with your
representatives. The limitations inherent in the independent verification of
factual matters and in the role of outside counsel are such, however, that we
cannot and do not assume any responsibility for the accuracy, completeness or
fairness of any of the statements made in the Offering Memorandum, except as set
forth in paragraph (i) of our opinion addressed to you dated the date hereof. In
addition, with your approval, matters
<PAGE>
governed by the laws of the United Kingdom have been passed upon by Lovell White
Durrant, British counsel to the Company, and we have assumed, without
independent verification, the accuracy of its legal opinion delivered to you
today pursuant to the Purchase Agreement with respect to such laws or matters
governed or affected by such laws.
Subject to the limitations set forth in the immediately
preceding paragraph, we advise you that, on the basis of the information we
gained in the course of performing the services referred to above, no facts came
to our attention which gave us reason to believe that the Offering Memorandum
(other than the financial statements and other financial data contained therein
or omitted therefrom, as to which we have not been requested to comment), as of
its date or the date hereof, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
This letter is being furnished to you solely for your benefit,
and is not to be used, circulated, quoted or otherwise referred to for any other
purpose.
Very truly yours,
- 2 -
<PAGE>
FORM OF OPINION OF EDMUND MORIARTY
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT Alex. Brown Incorporated
Chase Securities Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporation
PaineWebber Incorporated
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, NY 10281-1201
Ladies and Gentlemen:
I am Corporate Vice President Law, General Counsel and
Secretary of BE Aerospace, Inc., a Delaware corporation (the "Company"), and
have advised the Company in connection with the sale by the Company to Merrill
Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Chase
Securities Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co.
Incorporated and PaineWebber Incorporated (collectively, the "Initial
Purchasers"), subject to the terms and conditions set forth in the Purchase
Agreement dated October 28, 1998 (the "Purchase Agreement"), among the Company
and the Initial Purchasers, of $200,000,000 aggregate principal amount of the
Company's 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") issued
pursuant to an Indenture dated as of November 2, 1998 (the "Indenture"), between
the Company and The Bank of New York, as Trustee (the "Trustee"), and further
subject to the terms and conditions set forth in the Registration Rights
Agreement dated November 2, 1998 (the "Registration Rights Agreement"), among
the Company and the Initial Purchasers.
This opinion is being delivered pursuant to Section 5(a) of
the Purchase Agreement.
In such capacity I have examined a copy of the Preliminary
Offering Memorandum, dated October 26, 1998, and the Final Offering Memorandum
dated as of October 28, 1998, related to the sale of the Notes (the "Offering
Memorandum").
I have also examined the Purchase Agreement, the Indenture,
the Registration Rights Agreement, and the originals, or copies identified to my
satisfaction, of such corporate records of the Company and its subsidiaries,
certificates of public officials, officers of the Company and its subsidiaries
and other persons, and such other documents, agreements and instruments as I
have deemed necessary as a basis for the opinions hereinafter expressed. In my
examination, I have assumed the genuineness of all signatures, the authenticity
of all documents
- 1 -
<PAGE>
submitted to me as originals and the conformity with the originals of all
documents submitted to me as copies. As to any facts material to the opinions
expressed herein which I did not independently establish or verify, I have
relied, without investigation, and believe that I am justified in relying, upon
such statements or representations of officers and other representatives of the
Company or others.
I am a member of the Bar of the State of Wisconsin. My
opinions set forth below are limited to the laws of the State of Wisconsin, the
General Corporation Law of the State of Delaware and the federal laws of the
United States.
Based upon the foregoing, I am of the opinion that:
(i) Each of the Company and In-Flight Entertainment, LLC is a
corporation or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of the State of Delaware
with corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum. SMR Aerospace,
Inc. is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio, with corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Offering Memorandum. The Company has all requisite corporate power and authority
to issue, sell and deliver the Notes, to execute and deliver the Purchase
Agreement, the Registration Rights Agreement and the Indenture, and to perform
its obligations thereunder. The Company is qualified to transact business, and
is in good standing as a foreign corporation, in California, Connecticut,
Florida, Massachusetts, Minnesota, North Carolina and Oklahoma; the states of
California, Connecticut, Florida, Massachusetts, Minnesota, North Carolina and
Oklahoma, being the only jurisdictions in the United States in which the Company
owns or leases real property. In-Flight Entertainment, LLC is qualified to
transact business, and is in good standing as a foreign limited liability
company, in California and Washington; California and Washington being the only
jurisdictions in which In-Flight Entertainment, LLC owns or leases property. SMR
Aerospace, Inc. is qualified to transact business, and is in good standing as a
foreign corporation, in the state of West Virginia; the states of Ohio and West
Virginia being the only jurisdictions in which SMR Aerospace, Inc. owns or
leases real property.
(ii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Capitalization table in the Offering Memorandum
under the caption "Actual", except for issuances or forfeitures subsequent to
the date of the information provided in such table, if any, pursuant to the
Company's stock option plans. The shares of the Company's common stock, $.01 par
value (the "Common Stock") issued and outstanding on this date have been duly
authorized and validly issued and are fully paid and nonassessable. None of the
outstanding shares of Common Stock was issued in violation of any preemptive
rights under the Delaware General Corporation Law or the Restated Certificate of
Incorporation of the Company or, to the best of my knowledge, any preemptive
rights pursuant to any contract to which the Company is a party or by which it
is bound.
(iii) To the best of my knowledge, (i) none of the Company, SMR
Aerospace, Inc. nor In-Flight Entertainment, LLC is in violation of its
certificate of incorporation or certificate of registration or by-laws or
limited liability company agreement, as the case may be, or in default in
- 2 -
<PAGE>
the
performance of any obligation, agreement or condition in any agreement or
instrument known to us to which the Company, SMR Aerospace, Inc. or In-Flight
Entertainment, LLC is a party or by which any of them is bound and which default
could have a material adverse effect on the business or financial condition of
the Company and its subsidiaries taken as a whole and (ii) neither the Company,
SMR Aerospace, Inc. nor In-Flight Entertainment, LLC is in violation of any
applicable law, rule or regulation, or, to our knowledge after having made
inquiry of the Company, any order, writ, injunction or decree, of any
jurisdiction, court or governmental instrumentality, where such violation or
default could have a material adverse effect on the business or financial
condition of the Company and its subsidiaries taken as a whole.
(iv) The statements made in the Offering Memorandum under the captions
"Business-Legal Proceedings," to the extent that they constitute matters of law
or legal conclusions or descriptions of legal proceedings, have been reviewed by
me and fairly present the information disclosed therein in all material
respects.
(v) To the best of my knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
is subject, before or brought by any court or governmental agency or body, which
might reasonably be expected to result in a material adverse effect on the
Company and its subsidiaries, taken as a whole, or which might reasonably be
expected to materially and adversely affect the consummation of the transactions
contemplated in the Purchase Agreement or the performance by the Company of its
obligations thereunder.
I have reviewed and participated in the preparation of the
Offering Memorandum with other officers or employees of the Company, with its
counsel and its auditors, and with representatives of the Initial Purchasers and
I advise you that, on the basis of the information I gained in the course of
performing the services referred to above, no facts came to my attention which
gave me reason to believe that the Offering Memorandum (other than the financial
statements and other financial data contained therein or omitted therefrom, as
to which I have not been requested to comment), as of its date or the date
hereof, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
This opinion is being furnished by me as General Counsel for the
Company to you solely for your benefit, and is not to be used, circulated,
quoted or otherwise referred to for any other purpose.
Very truly yours,
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<PAGE>
EXHIBIT B-2
FORM OF OPINION OF LOVELL WHITE DURRANT
[Lovell White Durrant Letterhead]
November 2, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT Alex. Brown Incorporated
Chase Securities Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporation
PaineWebber Incorporated
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, NY 10281-1201
USA
Dear Sirs
BE Aerospace Holdings (UK) Limited
1. We have acted as English legal advisers to BE Aerospace Holdings (UK)
Limited (formerly BE Aerospace (UK) Limited and Flight Equipment and
Engineering Limited), a company registered in England and Wales under
registered number 516846, the registered office of which is located at
Nissen House, Grovebury Road, Leighton Buzzard, Bedfordshire
("BEAH(UK)"), since its acquisition by BE Aerospace, Inc. (formerly BE
Avionics, Inc.) (the "Issuer") on 2 April, 1992. We have been asked by
the Issuer, a Delaware corporation, to provide this opinion in
connection with the issue and sale by the Issuer of US$200,000,000
principal amount of 9 1/2% Senior Subordinated Notes due 2008
(together, the "Securities").
We have been provided with copies of:
(a) an offering memorandum dated 28 October, 1998, relating to the
Issuer and the Securities (the "Offering Memorandum";
(b) a draft dated 22 October, 1998 of an indenture to be dated as
of 2 November, 1998 between the Issuer and the trustee named
therein (the "Indenture") which we have been advised is the
final form thereof;
(c) the purchase agreement dated as of 28 October, 1998, between
the Issuer and you relating to the issue and sale of the
Securities (the "Purchase Agreement"); and
<PAGE>
(d) the registration rights agreement to be dated as of 2
November, 1998 between the Issuer and you relating to the
filing of a registration statement with respect to the
Securities (the "Registration Rights Agreement).
2. We understand that this opinion is required by you pursuant to Section
5(b) of the Purchase Agreement.
3. For the purposes of giving this opinion, we have examined the following
documents relating to BEAH(UK):-
(a) the statutory books, including the register of members and the
minutes of board meetings and general meetings of the
shareholders contained therein;
(b) copies of the Memorandum and Articles of Association,
Certificate of Incorporation and Certificates of Incorporation
on Change of Name; and
(c) certificate of good standing issued by the Registrar of
Companies on 29 October, 1998, copies of which are annexed
hereto marked "A".
4. We have carried out a search of the microfiche relating to BEAH(UK)
supplied to us by the Companies Registration Office on Friday 30
October, 1998, which revealed no order or resolution to wind up
BEAH(UK) and no notice of the appointment of an administrator or
receiver of BEAH(UK). We have also carried out a search at the Central
Registry of Winding Up Petitions, London on Friday 30 October, 1998,
which shows no pending petition to wind up BEAH(UK). We have not
conducted any further search, or any search in any District Registry of
the High Court where winding-up and administration petitions may also
be presented in certain cases, and accordingly this opinion is given on
the assumption that such searches (if made) would not reveal any
circumstances which would require amendment of this opinion.
5. Except for the documents listed in paragraphs 1 and 3 above, we have
not examined for the purposes of this opinion any contracts or other
documents entered into by or affecting BEAH(UK) or any corporate
records of BEAH(UK). We have not made any other enquiries or searches
concerning BEAH(UK) (whether within this firm or otherwise), except as
mentioned in paragraph 4 above. For the purposes of this opinion, we
have relied as to factual matters upon certificates of officers and
directors of the Issuer and of BEAH(UK) (copies of which are annexed
hereto marked "B") and have relied on representations made by the
Issuer in the Purchase Agreement.
6. This opinion is given only with respect to English law in force at the
date of this letter as applied by English Courts and is given on the
basis that it will be governed by and construed in accordance with
English law. No opinion is expressed or implied as to the laws of any
other territory.
7. This opinion is based on the assumptions set out in the appendix to
this letter, which we have taken no steps to verify independently.
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<PAGE>
8. Based upon and subject to the foregoing, and subject as stated herein
and to any matters not disclosed to us, we are of the opinion that:
(a) BEAH(UK) is duly incorporated under the Companies Act 1948 as
a private company with limited liability under English law, is
validly existing under English law and has the necessary
corporate power under the Companies Acts 1985 and 1989 and its
Memorandum and Articles of Association to conduct its business
and to own, lease and operate its properties as described in
the Offering Memorandum at pages 61, 62 and 63 (copies of
which are annexed hereto marked "C");
(b) as reflected in the register of members of BEAH(UK), the
Issuer is the registered holder of all of the 500,000 issued
ordinary shares of British Pound 1 each of BEAH(UK) and all of
the 916,900 issued 3% cumulative redeemable preference shares
of British Pound 1 each of BEAH(UK). Pursuant to Section 361
Companies Act 1985, the register of members of a company (as
defined in that Act) is prima facie evidence of any matters
which are by that Act directed or authorised to be inserted in
it, and of legal ownership of shares;
(c) in the absence of any circumstance by which a member of a
company limited by shares (as defined in the Companies Act
1985) may become liable for the company's debts, the liability
of the member (including, with respect to BEAH(UK), the
Issuer) for such debts will be limited to the par value of the
shares held and any premium agreed to be paid, to the extent
that such amounts have not previously been paid. According to
the register of members of BEAH(UK), the search of the
microfiche relating to BEAH(UK) referred to in paragraph 4
above and the certificates of the officers and directors of
the Issuer, BEAH(UK), but having made no other enquiry,
investigation or verification, we are of the opinion that the
issued ordinary shares and preference shares of British Pound
1 each in the capital of BEAH(UK) are fully paid;
(d) the issued cumulative redeemable preference shares of British
Pound 1 each of BEAH(UK) have been duly authorised and validly
issued;
(e) the issued cumulative redeemable preference shares of British
Pound 1 each of BEAH(UK) were not issued in violation of any
pre-emptive rights under statute or under the Memorandum and
Articles of Association of BEAH(UK);
(f) none of the following will result in any breach of the
Memorandum and Articles of Association of BEAH(UK):-
(i) the execution and delivery by the Issuer of the
Purchase Agreement, the consummation by the Issuer of
the transactions therein contemplated and the
compliance by the Issuer with its terms;
(ii) the execution and delivery by the Issuer of the
Registration Rights Agreement and the compliance by
the Issuer with its terms;
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(iii) the execution and delivery by the Issuer of the
Indenture and the compliance by the Issuer with its
terms;
(iv) the issue and delivery by the Issuer of the
Securities as contemplated by the Offering
Memorandum; and
(v) the consummation by the Issuer of the transactions
contemplated in the Offering Memorandum.
(g) the matters referred to in paragraph 8(f)(i) to (v) inclusive
above do not and will not conflict with, or result in a breach
of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of BEAH(UK)
under:-
(i) any existing English law, rule or regulation; or
(ii) to our knowledge (based solely upon written
notification by BEAH(UK)) and on the basis of the
certificates of the officers and directors of
BEAH(UK) and the Issuer, any judgment, order or
decree of any government, governmental
instrumentality or court having jurisdiction over
BEAH(UK) or any of its properties.
9. This opinion is addressed to you in connection with the Issuer. It is
given for your benefit for the purpose of the issue of the Securities
only, and may not be disclosed or quoted to or relied upon by any other
person, without our prior written consent in each specific case, or
used for any other purpose. No person (other than you) into whose
possession a copy of this opinion may come may rely on this opinion
without our express written consent addressed to him.
Yours faithfully
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<PAGE>
Appendix to Opinion
In this opinion, we have assumed that:-
(a) All documents submitted to us as originals are authentic and complete
and all signatures and seals are genuine.
(b) All documents supplied to us as photocopies or facsimile transmitted
copies or other copies conform to the originals and such originals are
authentic and complete.
(c) All documents, forms, notices and information which should have been
delivered to the Companies Registration Office and the Central Registry
of Winding Up Petitions on behalf of or relating to BEAH(UK) have been
so delivered and the file of records maintained at the Companies
Registration Office and the Central Registry of Winding Up Petitions
concerning BEAH(UK), and reproduced on microfiche for public inspection
or disclosed to us orally, was complete, accurate and up-to-date at the
time of the respective searches referred to in paragraph 4 of this
opinion letter and there has been no change in the information filed or
the oral disclosure made since the date on which those searches were
made.
(d) All documents dated earlier than the date of this opinion letter on
which we have expressed reliance remain accurate, complete and in full
force and effect at the date of this opinion.
(e) BEAH(UK) has not passed a resolution for its winding-up and no
proceedings have been instituted or steps taken for the winding-up of
BEAH(UK) or the appointment of an administrator or receiver in respect
of all or any assets of BEAH(UK).
(f) No law (other than English law) affects any of the conclusions stated
in this opinion.
(g) Each of the resolutions contained in the minutes referred to in
paragraph 3(a) of this opinion was duly passed at a properly convened,
constituted and conducted meeting of duly appointed directors or, as
the case may be, shareholders, of BEAH(UK) at which all constitutional,
statutory and other formalities were duly observed (including, if
applicable, those relating to the declaration of directors' interests
or the power of interested directors to vote); such resolutions have
not been amended or rescinded and are in full force and effect; and the
minutes of such meetings referred to in paragraph 3(a) of this opinion
are a true record of the proceedings at such meetings.
(h) The certificates of the officers and directors of the Issuer and
BEAH(UK) provided for the purposes of this opinion letter are true and
accurate in all respects.
BE AEROSPACE, INC.
TO
THE BANK OF NEW YORK
Trustee
-----------------
Indenture
Dated as of November 2, 1998
----------------
$200,000,000
9 1/2% Senior Subordinated Notes due 2008
and
9 1/2% Series B Senior Subordinated Notes due 2008
<PAGE>
BE AEROSPACE, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of November 2, 1998
Trust Indenture Indenture
Act Section Section
310(a)(1) ....................................... 607
(a)(2) ....................................... 607
(b) ....................................... 608
312(c) ....................................... 701
314(a)(4) ....................................... 1008(a)
(c)(1) ....................................... 103
(c)(2) ....................................... 103
(e) ....................................... 103
315(b) ....................................... 601
316(a)(last
sentence) ....................................... 101 ("Outstanding")
(a)(1)(A) ....................................... 502, 512
(a)(1)(B) ....................................... 513
(b) ....................................... 508
(c) ....................................... 105(d)
317(a)(1) ....................................... 503
(a)(2) ....................................... 504
(b) ....................................... 1003
318(a) ....................................... 112
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
PARTIES........................................................................1
RECITALS.......................................................................1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION............1
SECTION 101. Definitions.....................................................1
Acquired Indebtedness...........................................2
Act.............................................................2
AET.............................................................2
Affiliate.......................................................2
Agent Bank......................................................2
Asset Acquisition...............................................2
Asset Sale......................................................2
Average Life....................................................3
Bank Credit Agreement...........................................3
Banks...........................................................3
BEAH(UK)........................................................3
Board of Directors..............................................3
Board Resolution................................................3
Business Day....................................................3
Capital Stock...................................................3
Capitalized Lease Obligation....................................3
Cash Equivalents................................................3
Change of Control...............................................4
Closing Date....................................................4
Commission......................................................4
Common Stock....................................................4
Company.........................................................5
Company Request or Company Order................................5
Consolidated Adjusted Net Income................................5
Consolidated Fixed Charge Coverage Ratio........................5
Consolidated Income Tax Expense.................................6
Consolidated Interest Expense...................................6
Consolidated Net Worth..........................................6
Consolidated Non-cash Charges...................................6
Corporate Trust Office..........................................6
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corporation.....................................................6
Default.........................................................6
Defaulted Interest..............................................6
Depositary......................................................6
Designated Senior Indebtedness..................................7
Disinterested Director..........................................7
Eligible Inventories............................................7
Eligible Receivables............................................7
Event of Default................................................7
Exchange Act....................................................7
Exchange Offer..................................................7
Exchange Offer Registration Statement...........................7
Exchange Securities.............................................7
Fair Market Value...............................................8
Federal Bankruptcy Code.........................................8
Fully Traded Common Stock.......................................8
GAAP............................................................8
guarantee.......................................................8
Guarantee.......................................................8
Guarantor.......................................................8
Holder..........................................................8
Indebtedness....................................................8
Indenture.......................................................9
Initial Securities..............................................9
Interest Payment Date...........................................9
Interest Rate Protection Obligations............................9
Investment.....................................................10
Lien...........................................................10
Maturity.......................................................10
Moody's........................................................10
Net Cash Proceeds..............................................10
Non-payment Event of Default...................................10
Officers' Certificate..........................................11
Opinion of Counsel.............................................11
Outstanding....................................................11
Pari Passu Indebtedness........................................12
Paying Agent...................................................12
Payment Event of Default.......................................12
Permitted Indebtedness.........................................12
Permitted Investments..........................................13
Permitted Liens................................................13
Permitted Subsidiary Indebtedness..............................14
Person.........................................................14
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Predecessor Security...........................................15
Preferred Stock................................................15
QIB............................................................15
Qualified Capital Stock........................................15
Redeemable Capital Stock.......................................15
Redemption Date................................................15
Redemption Price...............................................15
Registration Rights Agreement..................................15
Registration Statement.........................................15
Regular Record Date............................................15
Responsible Officer............................................15
Restricted Subsidiary..........................................16
Rule 144A......................................................16
S&P............................................................16
Securities.....................................................16
Securities Act.................................................16
Security Register and Security Registrar.......................16
Senior Indebtedness............................................16
Shelf Registration Statement...................................17
Significant Subsidiary.........................................17
Special Record Date............................................17
Stated Maturity................................................17
Subordinated Indebtedness......................................17
Subsidiary.....................................................17
Trust Indenture Act or TIA.....................................17
Trustee........................................................17
Unrestricted Subsidiary........................................17
Vice President.................................................18
Voting Stock...................................................18
wholly-owned...................................................18
8% Notes.......................................................18
8% Notes Indenture.............................................18
9 7/8% Notes...................................................18
9 7/8% Notes Indenture.........................................18
SECTION 102. Incorporation by Reference of Trust Indenture Act..............18
SECTION 103. Compliance Certificates and Opinions...........................19
SECTION 104. Form of Documents Delivered to Trustee.........................19
SECTION 105. Acts of Holders................................................20
SECTION 106. Notices, Etc., to Trustee, Company.............................21
SECTION 107. Notice to Holders; Waiver......................................22
SECTION 108. Effect of Headings and Table of Contents.......................23
SECTION 109. Successors and Assigns.........................................23
SECTION 110. Separability Clause............................................23
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SECTION 111. Benefits of Indenture..........................................23
SECTION 112. Governing Law..................................................23
SECTION 113. Legal Holidays.................................................24
ARTICLE TWO SECURITY FORMS....................................................25
SECTION 201. Forms Generally................................................25
SECTION 202. Restrictive Legends............................................25
ARTICLE THREE THE SECURITIES.................................................26
SECTION 301. Title and Terms................................................26
SECTION 302. Denominations..................................................26
SECTION 303. Execution, Authentication, Delivery and Dating.................26
SECTION 304. Temporary Securities...........................................29
SECTION 305. Registration, Registration of Transfer and Exchange............29
SECTION 306. Book-Entry Provisions for U.S. Global Security.................30
SECTION 307. Special Transfer Provisions....................................31
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities...............32
SECTION 309. Payment of Interest; Interest Rights Preserved.................33
SECTION 310. Persons Deemed Owners..........................................34
SECTION 311. Cancellation...................................................34
SECTION 312. Computation of Interest........................................35
SECTION 313. CUSIP Numbers..................................................35
ARTICLE FOUR SATISFACTION AND DISCHARGE......................................36
SECTION 401. Satisfaction and Discharge of Indenture........................36
SECTION 402. Application of Trust Money.....................................37
ARTICLE FIVE REMEDIES........................................................38
SECTION 501. Events of Default..............................................38
SECTION 502. Acceleration of Maturity; Rescission and Annulment.............39
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee........................................................41
SECTION 504. Trustee May File Proofs of Claim...............................41
SECTION 505. Trustee May Enforce Claims Without Possession of Securities....42
SECTION 506. Application of Money Collected.................................42
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SECTION 507. Limitation on Suits............................................43
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.......................................................43
SECTION 509. Restoration of Rights and Remedies.............................43
SECTION 510. Rights and Remedies Cumulative.................................44
SECTION 511. Delay or Omission Not Waiver...................................44
SECTION 512. Control by Holders.............................................44
SECTION 513. Waiver of Past Defaults........................................44
SECTION 514. Waiver of Stay or Extension Laws...............................45
ARTICLE SIX THE TRUSTEE.......................................................46
SECTION 601. Notice of Defaults.............................................46
SECTION 602. Certain Rights of Trustee......................................46
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.....................................................48
SECTION 604. May Hold Securities............................................48
SECTION 605. Money Held in Trust............................................48
SECTION 606. Compensation and Reimbursement.................................48
SECTION 607. Corporate Trustee Required; Eligibility........................49
SECTION 608. Resignation and Removal; Appointment of Successor..............49
SECTION 609. Acceptance of Appointment by Successor.........................50
SECTION 610. Merger, Conversion, Consolidation or Succession to Business....51
SECTION 610. Trustee Not Fiduciary for Holders of Senior Indebtedness.......51
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE..........................52
SECTION 701. Disclosure of Names and Addresses of Holders...................52
SECTION 702. Reports by Trustee.............................................52
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE............53
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms...........53
SECTION 802. Successor Substituted..........................................54
SECTION 803. Securities to Be Secured in Certain Events.....................54
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ARTICLE NINE SUPPLEMENTAL INDENTURES.........................................55
SECTION 901. Supplemental Indentures Without Consent of Holders.............55
SECTION 902. Supplemental Indentures with Consent of Holders................55
SECTION 903. Execution of Supplemental Indentures...........................56
SECTION 904. Effect of Supplemental Indentures..............................56
SECTION 905. Conformity with Trust Indenture Act............................57
SECTION 906. Reference in Securities to Supplemental Indentures.............57
SECTION 907. Notice of Supplemental Indentures..............................57
SECTION 908. Effect on Senior Indebtedness..................................57
ARTICLE TEN COVENANTS.........................................................58
SECTION 1001. Payment of Principal, Premium, If Any, and Interest............58
SECTION 1002. Maintenance of Office or Agency................................58
SECTION 1003. Money for Security Payments to Be Held in Trust................58
SECTION 1004. Corporate Existence............................................60
SECTION 1005. Payment of Taxes and Other Claims..............................60
SECTION 1006. Maintenance of Properties......................................60
SECTION 1007. Insurance......................................................60
SECTION 1008. Statement by Officers as to Default............................60
SECTION 1009. Provision of Financial Statements..............................61
SECTION 1010. Limitation on Indebtedness.....................................61
SECTION 1011. Limitation on Restricted Payments..............................62
SECTION 1012. Limitation on Issuances and Sales of Restricted Subsidiary
Stock..........................................................65
SECTION 1013. Limitation on Transactions with Affiliates.....................65
SECTION 1014. Limitation on Liens Securing Pari Passu Indebtedness or
Subordinated Indebtedness......................................66
SECTION 1015. Change of Control..............................................66
SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales...........67
SECTION 1017. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries...................................................68
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries..............................69
SECTION 1019. Limitation on Other Senior Subordinated Indebtedness...........70
SECTION 1020. Waiver of Certain Covenants....................................70
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ARTICLE ELEVEN REDEMPTION OF SECURITIES.......................................71
SECTION 1101. Right of Redemption............................................71
SECTION 1102. Applicability of Article.......................................71
SECTION 1103. Election to Redeem; Notice to Trustee..........................71
SECTION 1104. Selection by Trustee of Securities to Be Redeemed..............71
SECTION 1105. Notice of Redemption...........................................72
SECTION 1106. Deposit of Redemption Price....................................72
SECTION 1107. Securities Payable on Redemption Date..........................73
SECTION 1108. Securities Redeemed in Part....................................73
ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE............................74
SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance...74
SECTION 1202. Defeasance and Discharge.......................................74
SECTION 1203. Covenant Defeasance............................................74
SECTION 1204. Conditions to Defeasance or Covenant Defeasance................75
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions..........................76
SECTION 1206. Reinstatement..................................................77
ARTICLE THIRTEEN SUBORDINATION OF SECURITIES..................................78
SECTION 1301. Securities Subordinate to Senior Indebtedness..................78
SECTION 1302. Payment Over of Proceeds upon Dissolution, Etc.................78
SECTION 1303. Suspension of Payment When Senior Indebtedness in Default......79
SECTION 1304. Payment Permitted If No Default................................80
SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness........80
SECTION 1306. Provisions Solely to Define Relative Rights....................81
SECTION 1307. Trustee to Effectuate Subordination............................81
SECTION 1308. No Waiver of Subordination Provisions..........................81
SECTION 1309. Notice to Trustee..............................................82
SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating
Agent..........................................................83
SECTION 1311. Rights of Trustee As a Holder of Senior Indebtedness;
Preservation of Trustee's Rights...............................83
SECTION 1312. Article Applicable to Paying Agents............................83
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SECTION 1313. No Suspension of Remedies......................................83
SECTION 1314. Trust Moneys Not Subordinated..................................83
TESTIMONIUM...................................................................85
SIGNATURES....................................................................85
EXHIBITS
Exhibit A Form of Security
<PAGE>
INDENTURE, dated as of November 2, 1998 between BE AEROSPACE,
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 1400
Corporate Center Way, Wellington, Florida 33414, and THE BANK OF NEW YORK, a New
York banking corporation formed under the laws of the State of New York, as
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 9
1/2% Senior Subordinated Notes due 2008 (herein called the "Initial
Securities"), and 9 1/2% Series B Senior Subordinated Notes due 2008 (the
"Exchange Securities" and, together with the Initial Securities, the
"Securities") of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.
Upon the issuance of the Exchange Securities, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
All things necessary have been done to make the Securities,
when executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
<PAGE>
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Articles Two, Ten and
Twelve, are defined in those Articles.
"Acquired Indebtedness" means Indebtedness of a Person (a)
assumed in connection with an Asset Acquisition from such Person or (b) existing
at the time such Person becomes a subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a subsidiary).
"Act", when used with respect to any Holder, has the meaning
specified in Section 105.
"AET" means Applied Extrusion Technologies, Inc., a Delaware
corporation.
"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.
"Agent Bank" means The Chase Manhattan Bank, a New York
banking corporation, as Administrative Agent under the Bank Credit Agreement,
and any future agent under the Bank Credit Agreement.
"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company shall be merged with or into the Company or
any Restricted Subsidiary of the Company or (b) the acquisition by the Company
or any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person or any division
or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition to any Person other than the Company or a
wholly-owned Restricted Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary of the
Company held by the Company or any Restricted Subsidiary; (b) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary of the Company; or (c) any
other properties or assets of the Company or any Restricted Subsidiary other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset
- 2 -
<PAGE>
Sale" shall not include any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets (i) that is governed by the provisions of
Article Eight of this Indenture, (ii) to an Unrestricted Subsidiary, if
permitted under Section 1011 of this Indenture or (iii) having a Fair Market
Value of less than $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 August 7, 1998 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.
"BEAH(UK)" means BE Aerospace Holdings (UK) Limited, an
English corporation.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or the city in which the principal corporate trust office of the Trustee is
located are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any
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agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof); (ii) certificates
of deposit or acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; and
(iii) commercial paper with a maturity of 180 days or less issued by a
corporation that is not an Affiliate of the Company and is organized under the
laws of any state of the United States or the District of Columbia and rated at
least A-1 by S&P or at least P-1 by Moody's.
"Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 40% of the total Voting Stock of the Company; (b) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (i) the
outstanding Voting Stock of the Company is converted into or exchanged for (1)
Voting Stock (other than Redeemable Capital Stock) of the surviving or
transferee corporation or (2) cash, securities and other property in an amount
that could be paid by the Company as a Restricted Payment under this Indenture
and (ii) immediately after such transaction no "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total Voting Stock of the surviving or
transferee corporation; (c) during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of 66-2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (d) any
final order, judgment or decree of a court of competent jurisdiction shall be
entered against the Company decreeing the dissolution or liquidation of the
Company.
"Closing Date" means November 2, 1998.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting)
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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.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order in sufficient form and detail satisfactory to the Trustee signed in the
name of the Company by its Chairman, Chief Executive Officer, its President, any
Vice President, its Chief Financial Officer, its Treasurer or an Assistant
Treasurer, and delivered to the Trustee.
"Consolidated Adjusted Net Income" means, for any period, the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted by excluding (a)
net after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions, (c) the net income (or net loss) of
any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any of its Restricted
Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or its Restricted
Subsidiaries in cash by such other Person during such period, (d) net income (or
net loss) of any Person combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (e) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary 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 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
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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.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 101 Barclay Street, New York, New York 10286.
"corporation" includes corporations, associations, companies
and business trusts.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees
and successors.
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"Designated Senior Indebtedness" means (i) all Senior
Indebtedness under the Bank Credit Agreement and (ii) following the full
repayment of indebtedness under the Bank Credit Agreement and the termination of
the commitments thereunder, any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding of at least
$17,000,000 and is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of Directors
is required to deliver a resolution of the Board of Directors under this
Indenture, a member of the Board of Directors who does not have any material
direct or indirect financial interest in or with respect to such transaction or
series of transactions.
"Eligible Inventories" as of any date means the consolidated
inventories of the Company and its Restricted Subsidiaries (net of any reserve)
on the basis of the method of accounting (either last in/first out or first
in/first out) used by the Company in the preparation of its financial statements
included in the latest Form 10-K filed by the Company under the Securities Act,
as shown on a consolidated balance sheet of the Company and its Restricted
Subsidiaries, all in accordance with GAAP.
"Eligible Receivables" as of any date means the consolidated
accounts receivables (net of any reserve) of the Company and its Restricted
Subsidiaries that are not more than 60 days past their due date and that were
entered into on normal payment terms as shown on a consolidated balance sheet of
the Company and its Restricted Subsidiaries, all in accordance with GAAP.
"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 specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first
recital of this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to transfer restrictions) that
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are issued and exchanged for the Initial Securities pursuant to the Registration
Right Agreement and this Indenture.
"Fair Market Value" means, with respect to any asset, the
price which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"Fully Traded Common Stock" means Common Stock issued by any
corporation if (A) such Common Stock is listed on The New York Stock Exchange,
The American Stock Exchange or The London Stock Exchange or is included for
trading privileges in the National Market System of the National Association of
Securities Dealers Automated Quotation System; provided that such Common Stock
is freely tradeable under the Securities Act (or, in the case of The London
Stock Exchange, any applicable law, rule or regulation) upon issuance; and (B)
such Common Stock does not constitute more than 15% of the issued and
outstanding Common Stock of such corporation held by Persons other than 10%
holders of such Common Stock and Affiliates and insiders of such corporation.
"GAAP" means generally accepted accounting principles,
consistently applied, that are set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America, which are applicable as of the Closing Date.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of any Indebtedness of the
Company incurred by any Restricted Subsidiary pursuant to (1) paragraph (a) of
Section 1017, (2) clause (v) of Section 1018, (3) clause (y) of paragraph (b) of
Section 1010 or (4) clause (ii) of the definition of Permitted Investment. When
used as a verb, "Guarantee" shall have a corresponding meaning.
"Guarantor" means any Restricted Subsidiary which incurs a
Guarantee.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money or for the
deferred purchase price of property or services,
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excluding any trade payables and other accrued current liabilities incurred in
the ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with any
letters of credit, bankers' acceptance or other similar credit transaction and
in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or hereafter outstanding,
if, and to the extent, any of the foregoing would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, if, and to the extent, any of the foregoing would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, (c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (d) all Capitalized Lease Obligations of such Person, (e)
all Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees by such
Person of Indebtedness referred to in this definition, (g) all Redeemable
Capital Stock of such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations of such Person under or in respect of currency exchange contracts
and Interest Rate Protection Obligations and (i) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of such
Person of the types referred to in clauses (a) through (h) above. For purposes
hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Capital Stock as if such Redeemable Capital
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Securities" has the meaning stated in the first
recital of this Indenture.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Rate Protection Obligations" means the obligations
of any Person pursuant to any arrangement with any other Person whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such Person
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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", when used with respect to any Security, means the
date on which any principal of such Security 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 of the Company),
net of (i) brokerage commissions and other fees and expenses (including fees and
expenses of legal counsel and investment banks) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale, (iii) amounts
required to be paid to any Person (other than the Company or any Restricted
Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale
and (iv) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
consistently applied against any liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee.
"Non-payment Event of Default" means any event (other than a
Payment Event of Default) the occurrence of which entitles one or more Persons
to accelerate the maturity of any Designated Senior Indebtedness.
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"Officers' Certificate" means a certificate signed by the
Chairman, the Chief Executive Officer, the President, a Vice President or the
Chief Financial Officer, and by the Treasurer, the Chief Financial Officer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel in
form and substance reasonably satisfactory to the Trustee, who may be counsel
for the Company, including an employee of the Company, and who shall be
acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled pursuant to a Company
Order by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
irrevocably deposited with the Trustee or any Paying Agent (other than
the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Securities, except to the extent provided in Sections
1202 and 1203, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Twelve;
and
(iv) Securities which have been paid pursuant to Section 308
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented and
delivered to the Trustee proof satisfactory to it in its sole
discretion that such Securities are held by a bona fide purchaser in
whose hands the Securities are valid obligations of the Company;
provided, however, that, in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or such other obligor.
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"Pari Passu Indebtedness" means Indebtedness of the Company
which is pari passu with the Securities.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any, on) or interest on any Securities on behalf of the Company.
"Payment Event of Default" means any default in the payment of
Designated Senior Indebtedness.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company in an aggregate principal
amount at any one time outstanding not to exceed the greater of (i)
$200,000,000 and (ii) the sum of 80% of the aggregate amount of
Eligible Receivables and 50% of the aggregate amount of Eligible
Inventory, measured as of the most recent fiscal quarter preceding the
time such Indebtedness is incurred;
(ii) Indebtedness of the Company under the Securities;
(iii) Indebtedness of the Company outstanding on the date of
this Indenture (other than Indebtedness incurred pursuant to clause (i)
of this definition);
(iv) obligations of the Company pursuant to Interest Rate
Protection Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations and obligations under currency exchange
contracts entered into in the ordinary course of business;
(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees,
indemnities or obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets, including,
without limitation, shares of Capital Stock of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
the Company of any Indebtedness of the Company incurred pursuant to
Section 1010 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
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case of any refinancing of Pari Passu Indebtedness or Subordinated
Indebtedness, such new Indebtedness is made pari passu with or
subordinate to the Securities at least to the same extent as the
Indebtedness being refinanced and (C) such new Indebtedness has an
Average Life longer than the Average Life of the Securities and a final
Stated Maturity later than the final Stated Maturity of the Securities;
and
(viii) Indebtedness in an aggregate principal amount not in
excess of $30 million at any one time outstanding, less the amount of
Permitted Subsidiary Indebtedness then outstanding pursuant to clause
(vii) of the definition thereof.
"Permitted Investments" means any of the following: (i)
Investments in Cash Equivalents; (ii) Investments in the Company or wholly-owned
Restricted Subsidiaries; (iii) Investments in an amount not to exceed $15
million at any one time outstanding; (iv) Investments by the Company or any
Restricted Subsidiary of the Company in another Person, if as a result of such
Investment (A) such other Person becomes a wholly-owned Restricted Subsidiary or
(B) such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all of its assets to, the Company or a wholly-owned
Restricted Subsidiary; 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 Section 1011)
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:
(i) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Restricted Subsidiary;
(ii) Liens securing the Securities;
(iii) Liens securing the Guarantees;
(iv) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the incurrence of
such Indebtedness by the Company or any Restricted Subsidiary; provided
that any such Lien does not extend to any property or assets of the
Company or any Restricted Subsidiary other than the assets acquired in
connection with the incurrence of such Acquired Indebtedness; and
(v) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (i) through (iv);
provided that any such extension, renewal or replacement shall be no
more restrictive in any material respect that the Lien so extended,
renewed or replaced and shall not extend to any additional property or
assets.
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"Permitted Subsidiary Indebtedness" means any of the
following:
(i) Indebtedness of any Restricted Subsidiary outstanding on
the date of this Indenture;
(ii) obligations of any Restricted Subsidiary pursuant to
Interest Rate Protection Obligations, which obligations do not exceed
the aggregate principal amount of the Indebtedness covered by such
Interest Rate Protection Obligations;
(iii) Indebtedness of any Restricted Subsidiary to any
wholly-owned Restricted Subsidiary of the Company or to the Company;
(iv) Indebtedness of any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock of
Restricted Subsidiaries;
(v) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
any Restricted Subsidiary of any Indebtedness of such Restricted
Subsidiary incurred pursuant to clause (i) of this definition,
including any successive refinancings by such Restricted Subsidiary, so
long as any such new Indebtedness shall be in a principal amount that
does not exceed the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) so
refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably
determined by such Restricted Subsidiary as necessary to accomplish
such refinancing, plus the amount of expenses of such Restricted
Subsidiary incurred in connection with such refinancing and such new
Indebtedness has an Average Life longer than the Average Life of the
Securities and a final Stated Maturity later than the final Stated
Maturity of the Securities;
(vi) Indebtedness (as defined in clauses (e) and (f) of the
definition of Indebtedness) to the Holders incurred pursuant to
provisions of this Indenture;
(vii) Indebtedness in an amount not to exceed $30 million at
any one time outstanding, less the amount of Permitted Indebtedness
then outstanding pursuant to clause (viii) of the definition thereof;
and
(viii) Guarantees of Indebtedness of the Company permitted
under Section 1017.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 308 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's preferred or preference stock whether now outstanding, or
issued after the Closing Date, and including, without limitation, all classes
and series of preferred or preference stock of such Person.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Qualified Capital Stock" of any person means any and all
Capital Stock of such person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security into which
it is convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of November 2, 1998, relating to the Securities.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 15 or October (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee,
means any vice president, any assistant vice president, any assistant treasurer,
any trust officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above-designated officers,
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
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"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture. For all purposes of this Indenture, the term
"Securities" shall include any Exchange Securities to be issued and exchanged
for any Securities pursuant to the Registration Rights Agreement and this
Indenture and, for purposes of this Indenture, all Initial Securities and
Exchange Securities shall vote together as one series of Securities under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" means the principal of (and premium, if
any, on) and interest on (including interest accruing after the filing of a
petition by or against the Company under any bankruptcy law) and all other
amounts due on or in connection with any Indebtedness of the Company, whether
outstanding on the date of this Indenture or hereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Securities. Without limiting the generality of the foregoing,
"Senior Indebtedness" shall include the principal of (and premium, if any, on)
and interest (including interest accruing after the occurrence of an event of
default or after the filing of a petition 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. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include (A) Indebtedness evidenced by the Securities, the 8% Notes and the 9
7/8% Notes, (B) Indebtedness of the Company that is expressly subordinated in
right of payment to any Indebtedness of the Company, (C) Indebtedness of the
Company that by operation of law is subordinate to any general unsecured
obligations of the Company, (D) that portion of any Indebtedness of the Company
that at the time of incurrence thereof is incurred in violation of any covenant
of this Indenture, (E) any liability for federal, state or local taxes or other
taxes, owed or owing by the Company, (F) trade accounts payable owed or owing by
the Company, (G) Indebtedness of the Company to any Subsidiary or any other
Affiliate of the Company, (H) Redeemable Capital Stock of the Company and (I)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to the
Company or any Subsidiary of the Company.
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"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" of the Company means any Restricted
Subsidiary of the Company that is a "significant subsidiary" as defined in Rule
1.02(v) of Regulation S-X under the Securities Act, and in any event shall
include any Guarantor.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any
Security or any installment of interest thereon, the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of interest is due and payable, and, when used with respect to any
other Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
which is expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned by such Person, by one or more Subsidiaries of such Person or
by such Person and one or more Subsidiaries thereof or (ii) any other Person
(other than a corporation), including, without limitation, a joint venture, in
which such Person, one or more Subsidiaries thereof or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). Unless specifically provided to the contrary herein,
Unrestricted Subsidiaries shall not be included in the definition of
Subsidiaries for any purpose of this Indenture (other than for the purposes of
the definition of "Unrestricted Subsidiary" herein).
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force at the date as of which this Indenture was executed, except
as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (1) any Subsidiary of the
Company which at the time of determination shall be an Unrestricted Subsidiary
(as designated by the Board of Directors of the Company, as provided below) and
(2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any
property of the Company or any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated; provided that either (x) the
Subsidiary to be designated has total assets of $1,000 or less at the time of
its designation or (y) immediately after giving effect to such designation, the
Company could incur $1.00
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of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 1010. The Board of Directors may designate any Unrestricted Subsidiary
to be a Subsidiary; provided that immediately after giving effect to such
designation, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 1010.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective of whether or not, at the time,
stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"wholly-owned" with respect to any Subsidiary, means any
Subsidiary of any Person of which at least 99% of the outstanding Capital Stock
is owned by such Person or another wholly-owned Subsidiary of such Person. For
purposes of this definition, any directors' qualifying shares or investments by
foreign nationals mandated by applicable law shall be disregarded in determining
the ownership of a Subsidiary.
"8% Notes " means the Company's 8% Senior Subordinated Notes
due 2008.
"8% Notes Indenture" means the Indenture, dated as of February
13, 1998, between the Company and United States Trust Company of New York, or
its successors or assigns, in connection with the 8% Notes.
"9 7/8% Notes " means the Company's 9 7/8% Senior Subordinated
Notes due 2006.
"9 7/8% Notes Indenture" means the Indenture, dated as of
January 24, 1996, between the Company and Fleet National Bank of Connecticut, or
its successors or assigns, in connection with the 9 7/8% Notes.
SECTION 102. Incorporation by Reference of Trust Indenture
Act.
Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture. The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
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"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other Trust Indenture Act terms used in this Indenture
that are defined by the Trust Indenture Act, defined by reference in the Trust
Indenture Act to another statute or defined by a rule of the Commission and not
otherwise defined herein shall have the meanings assigned to them therein.
SECTION 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate and an Opinion of Counsel each
satisfactory in form and substance to the Trustee, which, taken together, state
that all conditions precedent, if any, provided for in this Indenture (including
any covenant compliance with which constitutes a condition precedent) relating
to the proposed action have been complied with, except that in the case of any
such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate
or opinion has read and understands such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such
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officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Company stating that the information with respect to such factual matters is
in the possession of the Company, unless such counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held
by any Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to Board
Resolution, fix in advance a record date, of which it shall notify the Trustee
and Paying Agent, for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act
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may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 106. Notices, Etc., to Trustee, Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at 101 Barclay Street, New
York, New York 10286, telefax: 212-____________, Attention: Corporate
Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at 1400 Corporate Center Way,
Wellington, Florida 33414, telefax: 561-791-3966, Attention: Chief
Financial Officer, or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 107. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, whether or
not such Holder actually receives such notice. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
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In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent, any Securities Registrar and their successors hereunder, the Holders and,
with respect to any provisions hereof relating to the subordination of the
Securities or the rights of holders of Senior Indebtedness, the holders of
Senior Indebtedness, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the principles of conflicts of law. Upon the issuance of the Exchange Securities
or the effectiveness of the Shelf Registration Statement, this Indenture shall
be subject to the provisions of the Trust Indenture Act of 1939, as amended,
that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
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SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date or at the
Stated Maturity or Maturity; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
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ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The definitive Securities shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
The Initial Securities shall be known as the "9 1/2% Senior
Subordinated Notes due 2008" and the Exchange Securities shall be known as the
"9 1/2% Series B Senior Subordinated Notes due 2008", in each case, of the
Company. The Securities and the Trustee's certificate of authentication shall be
in substantially the form annexed hereto as Exhibit A. The Securities may have
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by the Indenture and may have letters, notations or
other marks of identification and such notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. Any portion of the text of any Security may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Security. The
Company shall approve the form of the Securities and any notation, legend or
endorsement on the Securities. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the form of the
Securities annexed hereto as Exhibit A shall constitute, and are hereby
expressly made, a part of this Indenture. To the extent applicable, the Company
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A
shall be issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit A (the "U.S. Global Security")
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold other than as described in
the preceding paragraph shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities" or the "Physical Securities".)
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Security is sold under an
effective Registration Statement or (ii) an Initial Security is exchanged for an
Exchange Security in connection with an effective Registration Statement, in
each case pursuant to the Registration Rights Agreement, each such U.S.
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Global Security and each U.S. Physical Security shall bear the following legend
(the "Private Placement Legend") on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY, OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 (IF AVAILABLE), OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRUSTEE.
Each U.S. Global Security, whether or not an Initial Security,
shall also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER
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NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
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ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $200,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 307, 308, 906, 1015, 1016 or 1108.
The Initial Securities shall be known and designated as the "9
1/2% Senior Subordinated Notes due 2008" of the Company. The Exchange Securities
shall be known and designated as the "9 1/2% Series B Senior Subordinated Notes
due 2008" of the Company. The Stated Maturity of the Initial Securities and the
Exchange Securities shall be November 1, 2008, and, except as otherwise set
forth herein, they shall bear interest at the rate of 9 1/2% per annum from
November 2, 1998, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semi-annually in arrears on
May 1 and November 1 in each year and at said Stated Maturity, until the
principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; provided, however, that, at
the option of the Company, interest may be paid by check mailed to addresses of
the Persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article
Eleven.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Thirteen.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman, its President or a Vice President, and be notarized by a notary
public. The signature of any of these officers on the Securities may be manual
or facsimile signatures of the present or any future such authorized officer and
may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals
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or any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of such
Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Initial Securities executed
by the Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Initial Securities directing the
Trustee to authenticate the Securities and certifying that all conditions
precedent to the issuance of Securities contained herein have been fully
complied with, and the Trustee in accordance with such Company Order shall
authenticate and deliver such Initial Securities. On Company Order, the Trustee
shall authenticate for original issue Exchange Securities in an aggregate
principal amount not to exceed $200,000,000; provided that such Exchange
Securities shall be issuable only upon the valid surrender for cancellation of
Initial Securities of a like aggregate principal amount in accordance with an
Exchange Offer pursuant to the Registration Rights Agreement. In each case, the
Trustee shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel of the Company that it may reasonably request in connection with such
authentication of Securities. Such order shall specify the amount of Securities
to be authenticated and the date on which the original issue of Initial
Securities or Exchange Securities is to be authenticated.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
in Exhibit A duly executed by the Trustee by manual signature of a Responsible
Officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
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SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Security Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. At all reasonable times, the Security
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
Furthermore, any Holder of the U.S. Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial interest
in such Global Security may be effected only through a book-entry system
maintained by the Holder at such Global Security (or its agent), and that
ownership of a beneficial interest in the Security shall be required to be
reflected in a book entry.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange
(including an exchange of Initial Securities for Exchange Securities), the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is
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entitled to receive; provided that no exchange of Initial Securities for
Exchange Securities shall occur until an Exchange Offer Registration Statement
shall have been declared effective by the Commission and that the Initial
Securities to be exchanged for the Exchange Securities shall be cancelled by the
Trustee.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906, 1015, 1016 or
1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. Book-Entry Provisions for U.S. Global Security.
(a) The U.S. Global Security initially shall (i) be registered
in the name of the Depositary for such global Security or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any U.S.
Global Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the U.S. Global Security, and the Depositary may be treated
by the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such U.S. Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or shall impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a holder of any
Security.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of beneficial
owners in the U.S. Global Security may be transferred in accordance
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with the rules and procedures of the Depositary and the provisions of Section
307. Beneficial owners may obtain U.S. Physical Securities in exchange for their
beneficial interests in the U.S. Global Security upon request in accordance with
the Depositary's and the Registrar's procedures. In addition, U.S. Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in the U.S. Global Security if (i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for the
U.S. Global Security and a successor depositary is not appointed by the Company
within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depositary.
(c) In connection with any transfer of a portion of the
beneficial interest in the U.S. Global Security to beneficial owners pursuant to
subsection (b) of this Section, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial interest
in the U.S. Global Security to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more U.S. Physical
Securities of like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security to beneficial owners pursuant to subsection (b) of this Section, the
U.S. Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Security, an equal aggregate
principal amount of U.S. Physical Securities of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an
interest in the U.S. Global Security pursuant to subsection (c) or subsection
(d) of this Section shall, except as otherwise provided by paragraph (e) of
Section 307, bear the applicable legend regarding transfer restrictions
applicable to the U.S. Physical Security set forth in Section 202.
(f) The registered holder of the U.S. Global Security may
grant proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Securities.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Security is sold under an
effective Registration Statement, or (ii) an Initial Security is exchanged for
an Exchange Security in connection with an effective Registration Statement, in
each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial Security
to a QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of U.S.
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Initial Security stating, or has otherwise
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advised the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Initial Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Initial Security for
its own account or an account with respect to which it exercises sole
investment discretion and that it, or the person on whose behalf it is
acting with respect to any such account, is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Initial Security to be transferred consists of U.S. Physical
Securities, upon receipt by the Registrar of instructions given in
accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the U.S. Global Security in
an amount equal to the principal amount of the U.S. Physical
Securities, to be transferred, and the Trustee shall cancel the
Physical Security so transferred.
(b) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(c) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 306 or this Section
307. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or
the Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver, in exchange for any such mutilated
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Security or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002; provided, however, that each installment of interest may at the
Company's option be paid by (i) mailing a check for such interest, payable to or
upon the written order of the Person entitled thereto pursuant to Section 310,
to the address of such Person as it appears in the Security Register or (ii)
transfer to an account maintained by the payee located in the United States.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Securities
(such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall irrevocably deposit
with the
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Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
given in the manner provided for in Section 107, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so given, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any, on) and (subject to Sections 305 and 309) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
none of the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 311. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not
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operate as a redemption or satisfaction of the indebtedness represented by such
Securities unless and until the same are surrendered to the Trustee for
cancellation along with an Officers' Certificate and Company Order requesting
the cancellation. No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of by the Trustee in accordance with its customary procedures and
certification of their disposal delivered to the Company unless by Company Order
the Company shall direct that cancelled Securities be returned to it.
SECTION 312. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 313. CUSIP Numbers
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the identification numbers
printed on the Securities, and any such redemption shall not be affected by any
defect in or omission of such numbers. The Company will promptly notify the
Trustee of any change in the "CUSIP" numbers.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities herein expressly provided for) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(a) all Securities theretofore authenticated
and delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 308 and (ii) Securities for whose
payment money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and
payable, or
(ii) will become due and
payable at their Stated Maturity within one year, or
(iii) are to be called for
redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company or any Guarantor, in the case of (i),
(ii) or (iii) above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if
any) and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each satisfactory in form and
substance to the Trustee, which, taken
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together, state that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Thirteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of the principal of or premium, if
any, when due and payable, on any of the Securities; or
(2) default in the payment of an installment of interest on
any of the Securities, when due and payable, for 30 days; or
(3) default in the performance or breach of the provisions of
Article Eight of this Indenture, the failure to make or consummate a
Change of Control Offer in accordance with the provisions of Section
1015 or the failure to make or consummate an Excess Proceeds Offer in
accordance with the provisions of Section 1016; or
(4) the Company or any Guarantor shall fail to perform or
observe any other term, covenant or agreement contained in the
Securities, any Guarantee or this Indenture (other than a default
specified in (1), (2) or (3) above) for a period of 30 days after
written notice of such failure requiring the Company to remedy the same
shall have been given (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the holders of 25% in aggregate principal
amount of the Securities then outstanding; or
(5) default or defaults under one or more mortgages, bonds,
debentures or other evidences of Indebtedness under which the Company
or any Significant Subsidiary then has outstanding Indebtedness in
excess of $5,000,000, individually or in the aggregate, and either (a)
such Indebtedness is already due and payable in full or (b) such
default or defaults have resulted in the acceleration of the maturity
of such Indebtedness; or
(6) one or more final judgments, orders or decrees of any
court or regulatory or administrative agency of competent jurisdiction
for the payment of money in excess of $5,000,000, individually or in
the aggregate, shall be entered against the Company or any of its
Significant Subsidiaries or any of their respective properties and
shall not be discharged or fully bonded and there shall have been a
period of 60 days after the date on which any period for appeal has
expired and during which a stay of enforcement of such judgment, order
or decree, shall not be in effect; or
(7) (A) any holder of at least $5,000,000 in aggregate
principal amount of secured Indebtedness of the Company or of any
Significant Subsidiary as to which a default has
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occurred and is continuing shall commence judicial proceedings (which
proceedings shall remain unstayed for five Business Days) to foreclose
upon assets of the Company or any Significant Subsidiary having an
aggregate Fair Market Value, individually or in the aggregate, in
excess of $5,000,000 or shall have exercised any right under applicable
law or applicable security documents to take ownership of any such
assets in lieu of foreclosure or (B) any action described in the
foregoing clause (A) shall result in any court of competent
jurisdiction issuing any order for the seizure of such assets; or
(8) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other
than by reason of the termination of this Indenture or the release of
any such Guarantee in accordance with this Indenture) and such
condition shall have continued for a period of 30 days after written
notice of such failure requiring the Guarantor and the Company to
remedy the same shall have been given (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the holders of 25% in
aggregate principal amount of the Securities then outstanding; or
(9) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustments or
composition of or in respect of the Company or any Significant
Subsidiary under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or any
Significant Subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(10) the institution by the Company or any Significant
Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or
the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under the Federal Bankruptcy
Code or any other applicable federal or state law, or the consent by it
to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Company or any Significant Subsidiary or of any substantial part
of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(9) or 501(10) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Securities Outstanding may declare the principal amount of,
premium, if any, and accrued interest on all the Securities to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), upon which declaration all amounts payable in respect of
the Securities shall be immediately due and payable; provided, however, that,
for so long as the Bank Credit Agreement is in effect, such declaration shall
not become effective
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until the earlier of (i) five Business Days following delivery of notice to the
Agent Bank of the intention to accelerate the Securities or (ii) the
acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of
Default specified in Section 501(9) or 501(10) occurs and is continuing, then
the principal amount of, premium, if any, and accrued interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the Securities Outstanding, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or irrevocably deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest on all Outstanding
Securities,
(B) all unpaid principal of (and premium, if
any, on) any Outstanding Securities which has become due
otherwise than by such declaration of acceleration, and
interest on such unpaid principal at the rate borne by the
Securities,
(C) to the extent that payment of such
interest is lawful, interest on overdue interest at the rate
borne by the Securities which has become due otherwise than by
such declaration of acceleration, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) such rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and
(3) all Events of Default, other than the non-payment of
amounts of principal of (or premium, if any, on) or interest on
Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Securities because of an Event of
Default specified in Section 501(5) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned by
the holders of such Indebtedness or a trustee, fiduciary or agent for such
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holders, within 30 days after such declaration of acceleration in respect of the
Securities, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
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(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Thirteen, any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
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THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities
(including fees and expenses of its agents and counsel) to be incurred
in compliance with such request;
(4) the Trustee for 15 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 15-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment, as provided herein (including, if applicable,
Article Twelve) and in such Security of the principal of (and premium, if any,
on) and (subject to Section 309) interest on, such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
SECTION 509. Restoration of Rights and Remedies.
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If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 308, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might subject
it to personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
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The Holders of not less than a majority in principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a default
(1) in respect of the payment of the principal of (or premium,
if any, on) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
If any Default hereunder is actually known to the Trustee, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default within 5 days after the occurrence of any such
Default, unless such Default shall have been cured or waived; provided, however,
that, except in the case of a Default in the payment of the principal of (or
premium, if any, on) or interest on any Security, the Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders; and provided further that in the case
of any Default of the character specified in Section 501(4) no such notice to
Holders shall be given until at least 30 days after the occurrence thereof.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may conclusively rely and shall be protected
in acting or refraining from acting, pursuant to the terms of this
Indenture or otherwise, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
with sufficient detail as may be requested by the Trustee and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate and/or an Opinion of Counsel;
(4) the Trustee may consult with counsel of its selection and
the written advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
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indemnity against the costs, expenses and liabilities (including fees
and expenses of its agents and counsel) which might be incurred by it
in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into, and may conclusively rely upon, the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(9) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Securities of any series, determined as provided in
Sections 105 and 512, relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(10) notwithstanding anything else to the contrary contained
herein, the Trustee need perform only those duties as are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture as against the Trustee.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
Whether or not therein expressly so provided, every provision
of this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
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SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Securities.
The recitals contained herein and in the Securities, except
for the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and, upon the
effectiveness of the Registration Statement, that the statements made by it in a
Statement of Eligibility on Form T-1 supplied to the Company are true and
accurate, subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee (in its capacity as Trustee, Paying
Agent and Registrar) from time to time reasonable compensation for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel); and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
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The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder. As security for the performance of
such obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premium, if any,
on) or interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(9) or Section
501(10), the expenses and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy law.
The provisions of this Section shall survive the satisfaction
and discharge of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
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(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least
six months, except when the Trustee's duty to resign is stayed in
accordance with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided subject to TIA Section 315(e), any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 107. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign,
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transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder subject to the retiring Trustee's rights as
provided under the last sentence of Section 606. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities; and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture provided that the certificate of
the Trustee shall have; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
SECTION 611. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such holders
if the Trustee shall in good faith mistakenly pay over or distribute to Holders
of Securities or to the Company or to any other person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of Article Thirteen or otherwise. With respect to the holder of Senior
Indebtedness, the Trustee undertakes to perform or observe only such of its
covenants or obligations as are specifically set forth in this Indenture and no
implied covenants or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee.
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Securities, the Trustee shall transmit
to the Holders, in the manner and to the extent provided in TIA Section 313(c),
a brief report dated as of such May 15 if required by TIA Section 313(a) as
provided for in TIA Section 313(d). The Company will promptly notify the Trustee
when the Securities are listed on any stock exchange and any delisting thereof.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not, in any transaction or series of
transactions, merge or consolidate with or into, or sell, assign, transfer,
lease or otherwise dispose of all or substantially all of its properties and
assets as an entirety to, any Person or Persons, and the Company will not permit
any Restricted Subsidiary to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, transfer, lease or other disposition of all
or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a consolidated basis to any other Person or Persons,
unless at the time and after giving effect thereto:
(1) either (A) if the transaction or transactions is a merger
or consolidation, the Company shall be the surviving Person of such
merger or consolidation, or (B) the Person formed by such consolidation
or into which the Company or such Restricted Subsidiary is merged or to
which the properties and assets of the Company or such Restricted
Subsidiary, as the case may be, substantially as an entirety, are sold,
assigned, transferred, leased or otherwise disposed of (any such
surviving Person or transferee Person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia
and shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and the Indenture, and,
in each case, the Indenture shall remain in full force and effect;
(2) immediately before and immediately after giving effect to
such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing and the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or
series of transactions on a pro forma basis, could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 1010;
(3) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Consolidated Net Worth
of the Company, or the Surviving Entity, as the case may be, is at
least equal to the Consolidated Net Worth of the Company immediately
before such transaction or series of transactions; and
(4) the Company or such Person shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel satisfactory
in form and substance to the Trustee, which, taken together, state that
such consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
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SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 801, the Surviving Entity formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such Surviving Entity had been named as the Company herein,
and in the event of any such conveyance or transfer, the Company (which term
shall for this purpose mean the Person named as the "Company" in the first
paragraph of this Indenture or any Surviving Entity which shall theretofore
become such in the manner described in Section 801), except in the case of a
lease, shall be discharged of all obligations and covenants under this Indenture
and the Securities and may be dissolved and liquidated.
SECTION 803. Securities to Be Secured in Certain Events.
If, upon any such consolidation of the Company with or merger
of the Company into any other corporation, or upon any conveyance, lease or
transfer of the property of the Company substantially as an entirety to any
other Person, any property or assets of the Company would thereupon become
subject to any Lien, then unless such Lien could be created pursuant to Section
1014 without equally and ratably securing the Securities, the Company, prior to
or simultaneously with such consolidation, merger, conveyance, lease or
transfer, will as to such property or assets, secure the Securities Outstanding
(together with, if the Company shall so determine any other Indebtedness of the
Company now existing or hereinafter created which is not subordinate in right of
payment to the Securities) equally and ratably with (or prior to) the
Indebtedness which upon such consolidation, merger, conveyance, lease or
transfer is to become secured as to such property or assets by such Lien, or
will cause such Securities to be so secured.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action shall
not adversely affect the interests of the Holders in any material
respect; or
(6) to secure the Securities pursuant to the requirements of
Section 803 or 1014 or otherwise; or
(7) to qualify, or maintain the qualification of, this
Indenture under the Trust Indenture Act.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the coin or currency in which
any
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Security or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) release any Guarantor from any of its obligations under
its Guarantee or this Indenture other than in accordance with the terms
of this Indenture, or
(4) modify any of the provisions of this Section or Sections
513 and 1020, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
(5) modify any of the provisions of Section 1014 or Section
1019 or any of the provisions of this Indenture relating to the
subordination of the Securities in a manner adverse to the Holders
thereof, or
(6) amend, change or modify the obligation of the Company to
make and consummate a Change in Control Offer in the event of a Change
in Control or make and consummate an Offer with respect to any Asset
Sale or modify any of the provisions or definitions with respect
thereto.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof .
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form and substance approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 107, setting forth in general
terms the substance of such supplemental indenture.
SECTION 908. Effect on Senior Indebtedness.
No supplemental indenture shall adversely affect the rights of
the holders of Designated Senior Indebtedness under Article Thirteen without the
consent of the appropriate representatives of such holders.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and
Interest.
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any, on) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office
or agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Trust Office located at 101 Barclay Street, New
York, New York 10286 of the Trustee shall be such office or agency of the
Company, unless the Company shall designate and maintain some other office or
agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (and premium, if any,
on) or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Securities, it will, on or before each due date of the principal of (and
premium, if any, on), or interest on, any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such
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principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company will promptly notify the Trustee of such action or any failure so to
act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any, on) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any, on) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
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SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company will at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within (x) 120
days after the end of each fiscal year, (y) within 45 days after the end of each
fiscal quarter and (z) within 15 days of the
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date of receipt by the Company of the request of the Trustee, a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of compliance by the
Company and the Guarantors with all conditions and covenants under this
Indenture. For purposes of this Section 1008(a), such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $5,000,000), the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officers' Certificate specifying such event, notice or
other action within 10 days of its occurrence.
SECTION 1009. Provision of Financial Statements.
The Company will file on a timely basis with the Commission,
to the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company shall also (a) file with the Trustee, and provide to each holder of
Securities, without cost to such holder, copies of such reports and documents
within 15 days after the date on which the Company files such reports and
documents with the Commission or the date on which the Company would be required
to file such reports and documents if the Company were so required and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, the Company shall supply at
its cost copies of such reports and documents to any prospective holder of
Securities promptly upon written request therefor.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 1010. Limitation on Indebtedness.
(a) The Company will not create, incur, issue, assume,
guarantee or in any manner become directly or indirectly liable for the payment
of, or otherwise incur (collectively to "incur") any Indebtedness (including any
Acquired Indebtedness), other than Permitted Indebtedness, unless (x) the
Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal
quarters immediately preceding the incurrence of such Indebtedness, taken as one
period (and after giving pro forma effect to: (i) the incurrence of 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
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Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger
or otherwise) or disposition (whether by sale, merger or otherwise) of any
company, entity or business acquired or disposed of by the Company or its
Restricted Subsidiaries, as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition occurred at the
beginning of such four-quarter period, reflecting, in the case of such an
acquisition, any amount attributable to any operating expense that will be
eliminated or cost reduction that will be realized (in each case, net of any
operating expense or other cost increase) in connection with such acquisition,
as determined in good faith by the chief financial officer of the Company in
accordance with GAAP and the rules, regulations and guidelines of the
Commission, as if such elimination of operating expense or the realization of
such cost 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 Securities and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Securities.
(b) The Company will not permit any Restricted Subsidiary to
incur any Indebtedness (including any Acquired Indebtedness), other than
Permitted Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed
Charge Coverage Ratio for the four full fiscal quarters immediately preceding
the incurrence of such Indebtedness, taken as one period (and after giving pro
forma effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of this Section 1010), would have been at least
equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any
Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the
Securities in compliance with clause (i) of paragraph (b) and clauses (i)(A),
(ii) and (iii) of paragraph (a) of Section 1017.
SECTION 1011. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, take the following actions:
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Company's Capital Stock (other than
dividends or distributions payable in shares of its Capital Stock or in
options, warrants or other rights to purchase such Capital Stock, but
excluding dividends or distributions payable in Redeemable Capital
Stock or in options, warrants or other rights to purchase Redeemable
Capital Stock),
(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
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Restricted Subsidiary by the Company or (b) guarantees of Indebtedness
of the Company by any Restricted Subsidiary),
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010, and
(3) the aggregate amount of all Restricted Payments declared or made after the
date of 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 this extent such debt
securities were originally sold for cash, together with the aggregate cash
received by the Company at the time of such conversion or exchange, plus (D) to
the extent not otherwise included in the Company's Consolidated Adjusted Net
Income, the net reduction in Investments in Unrestricted Subsidiaries resulting
from the payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or a
Restricted Subsidiary after the date of 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) $10,000,000.
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (with respect
to clauses (ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default
shall have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such declaration date such declaration
complied with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the Company, in
exchange for, or out of the net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Restricted Subsidiary) of
shares of Capital Stock (other than Redeemable Capital Stock) of the
Company;
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(iii) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness
(other than Redeemable Capital Stock) in exchange for or out of the net
cash proceeds of a substantially concurrent issuance and sale (other
than to a Restricted Subsidiary) of shares of Capital Stock (other than
Redeemable Capital Stock) of the Company;
(iv) the repurchase of any Subordinated Indebtedness of the
Company at a purchase price not greater than 101% of the principal
amount of such Subordinated Indebtedness in the event of a Change of
Control pursuant to a provision similar to Section 1015; provided that
prior to such repurchase the Company has made the Change of Control
Offer as provided in such covenant with respect to the Securities and
has repurchased all Securities validly tendered for payment in
connection with such Change of Control Offer;
(v) the purchase, redemption or other acquisition or
retirement for value of Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for, or out of the net cash
proceeds of a substantially concurrent incurrence (other than to a
Restricted Subsidiary) of, Indebtedness of the Company so long as (A)
the principal amount of such new Indebtedness does not exceed the
principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount
as of the date of determination) of the Indebtedness being so
purchased, redeemed, acquired or retired, plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness refinanced or
the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus the amount of expenses
of the Company incurred in connection with such refinancing, (B) such
new Indebtedness is subordinated to the Securities to the same extent
as the Notes are subordinated to Senior Indebtedness and (C) such new
Indebtedness has an Average Life longer than the Average Life of the
Securities and a final Stated Maturity of principal later than the
final Stated Maturity of principal of the Securities; and
(vi) the purchase, redemption or other acquisition or
retirement for value of shares of Common Stock of the Company issued
pursuant to non-qualified options granted under stock option plans of
the Company, in order to pay withholding taxes due as a result of
income recognized upon the exercise of such options; provided that (1)
the Company is required, by the terms of such plans, to effect such
purchase, redemption or other acquisition or retirement for value of
such shares and (2) the aggregate consideration paid by the Company for
such shares so purchased, redeemed or otherwise acquired or retired for
value does not exceed $2,000,000 during any fiscal year of the Company.
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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 this Indenture, such Restricted Payment shall be deemed to have
been made in compliance with this Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Adjusted Net Income of the Company for any period.
SECTION 1012. Limitation on Issuances and Sales of Restricted
Subsidiary Stock.
The Company (i) will not permit any Restricted Subsidiary to
issue any Capital Stock (other than to the Company or a wholly-owned Restricted
Subsidiary) and (ii) will not permit any Person (other than the Company or a
wholly-owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant shall not prohibit (1) the
issuance and sale of all, but not less than all, of the issued and outstanding
Capital Stock of any Restricted Subsidiary owned by the Company or any of its
Restricted Subsidiaries in compliance with the other provisions of this
Indenture, (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 1013. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction with, or for the benefit of, any Affiliate of the Company or any
beneficial owner of 5% or more of any class of the Company's Capital Stock at
any time outstanding ("Interested Persons"), unless (i) such transaction is
among the Company and wholly-owned Restricted Subsidiaries or (ii) (A) such
transaction is on terms that are no less favorable
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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 1014. Limitation on Liens Securing Pari Passu
Indebtedness or Subordinated Indebtedness.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or
Subordinated Indebtedness of the Company on or with respect to any of its
property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (x) in the case of any Lien
securing Pari Passu Indebtedness of the Company, the Securities are secured by a
Lien on such property, assets or proceeds that is senior in priority to or pari
passu with such Lien and (y) in the case of any Lien securing Subordinated
Indebtedness of the Company, the Securities are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Lien.
(b) The Company will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) securing Indebtedness of such Restricted Subsidiary that
is pari passu to or subordinate in right of payment to the Guarantee of such
Subsidiary, on or with respect to any of such Restricted Subsidiary's properties
or assets, including any shares of stock or Indebtedness of any Subsidiary of
such Restricted Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the case of
any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu
in right of payment to the Guarantee of such Restricted Subsidiary, such
Guarantee is secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien and (y) in the case of any
Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in
right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee
is secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien.
SECTION 1015. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase all of the outstanding
Securities (a "Change of Control Offer"), and shall purchase, on a business day
(the "Change of Control Purchase Date") not more than 70 nor less than 60 days
following the Change of Control, all of the then outstanding Securities validly
tendered pursuant to such Change of Control Offer, at a purchase price (the
"Change of Control Purchase
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Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Purchase Date. The Change of Control
Offer is required to remain open for at least 20 Business Days and until the
close of business on the Change of Control Purchase Date.
(b) In order to effect such Change of Control Offer, the
Company shall, not later than the 30th day after the Change of Control, notify
the Trustee thereof and mail to each Holder and the Banks notice of the Change
of Control Offer in the manner provided in Section 107, which notice shall
govern the terms of the Change of Control Offer and shall state:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to repurchase such Holder's
Securities at the Change of Control Purchase Price.
(2) the circumstances and relevant facts regarding such Change
of Control (including but not limited to information with respect to
pro forma historical income, cash flow and capitalization after giving
effect to such Change of Control);
(3) the Change of Control Purchase Date; and
(4) the instructions a Holder must follow in order to have its
Securities repurchased in accordance with paragraph (c) of this
Section.
(c) Holders electing to have Securities purchased will be
required to surrender such Securities to the Company at the address specified in
the notice at least five Business Days prior to the Change of Control Purchase
Date. Holders will be entitled to withdraw their election if the Company
receives, not later than three Business Days prior to the Change of Control
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities delivered for
purchase by the Holder as to which his election is to be withdrawn and a
statement that such Holder is withdrawing his election to have such Securities
purchased. Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount of the unpurchased portion of the
Securities surrendered.
(d) The Company will comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that a Change of Control
occurs and the Company is required to purchase Securities as described above.
SECTION 1016. Limitation on Disposition of Proceeds of Asset
Sales.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company and
its Restricted Subsidiaries may engage in Asset Sales for consideration not in
the form of cash or Cash Equivalents in amounts in excess of that permitted in
this
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clause (ii), so long as (x) such excess consideration is in the form of Fully
Traded Common Stock, (y) the aggregate Fair Market Value of such Fully Traded
Common Stock received by the Company and its Restricted Subsidiaries (measured
as of the date of receipt) from all Asset Sales in reliance on this proviso
since the date of this Indenture that has not been converted into cash or Cash
Equivalents does not exceed $10,000,000 and (z) any Fully Traded Common Stock
that is converted into cash or Cash Equivalents shall be applied as provided in
paragraphs (b) and (c) of this Section 1016.
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months
after such Asset Sale, to (i) repay or prepay any then outstanding Senior
Indebtedness of the Company or Indebtedness of any Restricted Subsidiary or
Indebtedness represented by the 8% Notes or the 9 7/8% Notes 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 clause (i) or (ii) (without
regard to the parenthetical contained in such clause (ii)) above. The amount of
such Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds
$10,000,000, the Company shall, within 15 Business Days, make an offer to
purchase (an "Excess Proceeds Offer") from all holders of Securities, on a pro
rata basis, in accordance with the procedures set forth below, the maximum
principal amount (expressed as a multiple of $1,000) of Securities that may be
purchased with the Excess Proceeds. The offer price as to each Security shall be
payable in cash in an amount equal to 100% of the principal amount of such
Security plus accrued and unpaid interest, if any, to the date such Excess
Proceeds Offer is consummated. To the extent that the aggregate principal amount
of Securities tendered pursuant to an Excess Proceeds Offer is less than the
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount of Securities validly tendered and
not withdrawn by holders thereof exceeds the Excess Proceeds, Securities to be
purchased will be selected on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset to zero.
SECTION 1017. Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries.
(a) The Company will not permit any Restricted Subsidiary to
guarantee the payment of any Indebtedness of the Company or any Indebtedness of
any other Restricted Subsidiary unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Guarantee of payment of the Securities by such Restricted
Subsidiary except that (A) if the Securities are subordinated in right of
payment to such Indebtedness, the Guarantee under the supplemental indenture
shall be subordinated to such Restricted Subsidiary's guarantee with respect to
such Indebtedness substantially to the same extent as the Securities are
subordinated to such Indebtedness under this Indenture and (B) if such
Indebtedness is by its express terms subordinated in right of payment to the
Securities, any such guarantee by such Restricted Subsidiary with respect to
such Indebtedness shall be subordinated in right of payment to such Restricted
Subsidiary's Guarantee with respect to the Securities substantially to the same
extent as
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such Indebtedness is subordinated to the Securities; (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Guarantee; (iii)
such Restricted Subsidiary shall appoint CT Corporation in New York City as its
agent for the service of process; and (iv) such Restricted Subsidiary shall
deliver to the Trustee an Opinion of Counsel to the effect that (A) such
appointment of CT Corporation is valid, (B) such Guarantee of the Securities has
been duly executed and authorized and (C) such Guarantee of the Securities
constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy,
insolvency or similar laws (including, without limitation, all laws relating to
fraudulent transfers) and except insofar as enforcement thereof is subject to
general principles of equity; provided that this paragraph (a) shall not be
applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the
time such Person became a Restricted Subsidiary of the Company and (y) was not
incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary of the Company.
(b) Notwithstanding the foregoing and the other provisions of
this Indenture, any Guarantee by a Restricted Subsidiary of the Securities shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
SECTION 1018. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock or any
other interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary of the
Company, (c) make loans or advances to the Company or any other Restricted
Subsidiary of the Company, (d) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary of the Company or (e) guarantee any
Indebtedness of the Company or any other Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary non-assignment provisions of any lease governing
a leasehold interest of the Company or any Restricted Subsidiary of the Company,
(iii) any agreement or other instrument of a Person acquired by the Company or
any Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, (iv) any agreement in existence on the Closing Date (to the extent of
any encumbrances or restrictions in existence thereunder on the Closing Date)
and (v) any agreement providing for the incurrence of Indebtedness of Restricted
Subsidiaries pursuant to either clause (x) of paragraph (b) of Section 1010 or
clause (vii)
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of the definition of Permitted Subsidiary Indebtedness; provided that any
Restricted Subsidiary (including, without limitation, BEAH(UK)) that becomes
subject to any such encumbrances or restrictions pursuant to this clause (v)
shall Guarantee the Securities in compliance with the provisions of clause (i)
of paragraph (b) and clauses (i)(A), (ii) and (iii) of paragraph (a) of Section
1017.
SECTION 1019. Limitation on Other Senior Subordinated
Indebtedness.
The Company will not, and will not permit any Restricted
Subsidiary to, incur, create, assume, guarantee or in any other manner become
directly or indirectly liable with respect to or responsible for, or permit to
remain outstanding, any Indebtedness, other than the Securities, that is
subordinate or junior in right of payment to any Senior Indebtedness unless such
Indebtedness is also pari passu with, or subordinate in right of payment to, the
Securities pursuant to provisions substantially similar to those contained in
Article Thirteen.
SECTION 1020. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Section 803 or Sections 1007
through 1019, inclusive, if before or after the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding
Securities, by Act of such Holders, waive such compliance in such instance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company,
as a whole or from time to time in part, at any time after November 1, 2003,
subject to the conditions and at the Redemption Prices specified in the form of
Security, together with accrued interest to the Redemption Date.
In addition, at any time or from time to time, on or prior to
November 1, 2001, the Company may, at its option, redeem up to 35% of the
aggregate principal amount of the Securities originally issued under this
Indenture at a Redemption Price equal to 109 1/2% 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 Securities
issued under this Indenture 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.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 30 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions of the principal of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000.
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The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 107 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price (together
with accrued interest, if any, to the Redemption Date payable as
provided in Section 1107) will become due and payable upon each such
Security, or the portion thereof, to be redeemed, and that interest
thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price, and
(6) the CUSIP number.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
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SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest,
if any, to the Redemption Date; provided, however, that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 309.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
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ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either Section 1202 or
Section 1203 be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and the Guarantors shall be deemed
to have been discharged from their respective obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 1204 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Securities, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 1205 and the
other Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Securities to receive,
solely from the trust fund described in Section 1204 and as more fully set forth
in such Section, payments in respect of the principal of (and premium, if any,
on) and interest on such Securities when such payments are due, (B) the
Company's obligations with respect to such Securities under Sections 304, 305,
308, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option under this Section 1202
notwithstanding the prior exercise of its option under Section 1203 with respect
to the Securities.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company and the Guarantors shall be
released from their respective obligations under any covenant contained in
Section 801 and Section 803 and in Sections 1007 through 1019 with respect to
the Outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "covenant defeasance"), and the Securities shall
thereafter be deemed not to be "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Outstanding Securities, the Company
and the Guarantors may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default
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under Section 501(3) or Section 501(4), but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Twelve applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of (and premium, if any, on) and interest on the Outstanding
Securities on the Stated Maturity (or Redemption Date, if applicable)
of such principal (and premium, if any) or installment of interest;
provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations to
said payments with respect to the Securities. Before such a deposit,
the Company may give to the Trustee, in accordance with Section 1103
hereof, a notice of its election to redeem all of the Outstanding
Securities at a future date in accordance with Article Eleven hereof,
which notice shall be irrevocable. Such irrevocable redemption notice,
if given, shall be given effect in applying the foregoing. For this
purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit.
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(3) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest, as determined by the Trustee,
with respect to any securities of the Company or any Guarantor.
(4) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company or
any Guarantor is a party or by which it is bound.
(5) In the case of an election under Section 1202, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since November 2, 1998 there
has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred.
(6) In the case of an election under Section 1203, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred.
(7) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(8) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory to the
Trustee, which, taken together, state that all conditions precedent
provided for relating to either the defeasance under Section 1202 or
the covenant defeasance under Section 1203 (as the case may be) have
been complied with.
(9) No event or condition shall exist that pursuant to the
provisions of Section 1302 or 1303 would prevent the Company from
making payments of the principal of (and premium, if any, on) or
interest on the Securities on the date of such deposit or at any time
during the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period).
SECTION 1205. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
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Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1204 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1204 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1205 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1202 or 1203, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1205; provided, however, that if the Company makes any payment of
principal of (or premium, if any, on) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
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ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, for the
benefit of the holders, from time to time, of Senior Indebtedness that, to the
extent and in the manner hereinafter set forth in this Article, the Indebtedness
represented by the Securities and the payment of the principal of (and premium,
if any) and interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment as provided in this Article to the
prior payment in full of all Senior Indebtedness; provided, however, that the
Securities, the Indebtedness represented thereby and the payment of the
principal of (and premium, if any) and interest on the Securities in all
respects shall rank equally with, or prior to, all existing and future unsecured
indebtedness (including, without limitation, Indebtedness) of the Company that
is subordinated to Senior Indebtedness.
SECTION 1302. Payment Over of Proceeds upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relating to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets or liabilities of the Company, then
and in any such event
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment in
cash or Cash Equivalents, before the Holders of the Securities are
entitled to receive any payment or distribution of any kind or
character (other than any payment or distribution in the form of equity
securities or subordinated securities of the Company or any successor
obligor with respect to the Senior Indebtedness provided for by a plan
of reorganization or readjustment that, in the case of any such
subordinated securities, are subordinated in right of payment to all
Senior Indebtedness that may at the time be outstanding at least to the
same extent as the Securities are so subordinated as provided in this
Article (such equity securities or subordinated securities hereinafter
being "Permitted Junior Securities")) on account of principal of (or
premium, if any, on) or interest on the Securities; and
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other
than a payment or distribution in the form of Permitted Junior
Securities), by set-off or otherwise, to which the Holders or the
Trustee would be entitled but for the provisions of this Article shall
be paid by the liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under
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which any instruments evidencing any of such Senior Indebtedness may
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by
each, to the extent necessary to make payment in full in cash or Cash
Equivalents of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any Security
shall have received any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, in respect of principal of (and premium, if any) or
interest on the Securities before all Senior Indebtedness is paid in
full or payment thereof provided for, then and in such event such
payment or distribution (other than a payment or distribution in the
form of Permitted Junior Securities) shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article Eight shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in Article Eight.
SECTION 1303. Suspension of Payment When Senior Indebtedness
in Default.
(a) Unless Section 1302 shall be applicable, upon the
occurrence of a Payment Event of Default, no payment (other than payments made
pursuant to Article Twelve from monies or U.S. Government Obligations previously
deposited with the Trustee) or distribution of any assets of the Company of any
kind or character, whether in cash, property or securities (other than Permitted
Junior Securities), shall be made by or on behalf of the Company on account of
principal of (or premium, if any) or interest on the Securities or on account of
the purchase or redemption or other acquisition or defeasance of Securities
unless and until such Payment Event of Default shall have been cured or waived
in writing or shall have ceased to exist or the Designated Senior Indebtedness
to which the Payment Event of Default is related shall have been discharged or
paid in full in cash or Cash Equivalents, after which the Company shall resume
making any and all required payments in respect of the Securities, including any
missed payments.
(b) Unless Section 1302 shall be applicable, upon (1) the
occurrence of a Non-payment Event of Default and (2) receipt by the Trustee from
the Agent Bank or any other representative of holders of Designated Senior
Indebtedness of written notice of such occurrence, then no payment (other than
payments made pursuant to Article Twelve from monies or U.S. Government
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Obligations previously deposited with the Trustee) or distribution of any assets
of the Company of any kind or character, whether in cash, property or securities
(other than Permitted Junior Securities), shall be made by or on behalf of the
Company on account of any principal of (or premium, if any) or interest on the
Securities or on account of the purchase or redemption or other acquisition or
defeasance of Securities for a period ("Payment Blockage Period") commencing on
the date of receipt by the Trustee of such notice from the Agent Bank or such
other representative unless and until (subject to any blockage of payments that
may then be in effect under paragraph (a) of this Section) (x) more than 179
days shall have elapsed since receipt of such written notice by the Trustee
(provided that any Designated Senior Indebtedness as to which notice was given
shall not theretofore have been accelerated), (y) such Non-payment Event of
Default shall have been cured or waived in writing or shall have ceased to exist
or such Designated Senior Indebtedness shall have been discharged or paid in
full in cash or Cash Equivalents or (z) such Payment Blockage Period, shall have
been terminated by written notice to the Company or the Trustee from the Agent
Bank or such other representative initiating such Payment Blockage Period, after
which, in the case of clause (x), (y) or (z), the Company shall resume making
any and all required payments in respect of the Securities, including any missed
payments. Notwithstanding any other provision of this Agreement, only one
Payment Blockage Period may be commenced within any consecutive 365-day period,
and no event of default with respect to Designated Senior Indebtedness which
existed or was continuing on the date of the commencement of any Payment
Blockage Period initiated by or behalf of such Designated Senior Indebtedness
shall be, or be made, the basis for the commencement of a subsequent Payment
Blockage Period, whether or not within a period of 365 consecutive days, unless
such event of default shall have been cured or waived for a period of not less
than 90 consecutive days subsequent to the commencement of such initial Payment
Blockage Period (it being acknowledged that any breach of any financial covenant
for the period commencing after the date of commencement of such Payment
Blockage Period which would give rise to a Non-payment Default pursuant to any
provision under which a Non-payment Default previously existed or was continuing
shall constitute a new Non-payment Default). In no event will a Payment Blockage
Period extend beyond 179 days.
(c) In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or the Holder of any Security
prohibited by the foregoing provisions of this Section, then and in such event
such payment shall be paid over and delivered forthwith to the Company.
SECTION 1304. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent the Company, at any time
except during the pendency of any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshalling
of assets and liabilities of the Company referred to in Section 1302 or under
the conditions described in Section 1303, from making payments at any time of
principal of (and premium, if any, on) or interest on the Securities.
SECTION 1305. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities shall be subrogated (equally and ratably with the
holders of all indebtedness of the Company which by
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its express terms is subordinated to Senior Indebtedness of the Company to the
same extent as the Securities are subordinated and which is entitled to like
rights of subrogation) to the rights of the holders of such Senior Indebtedness
to receive payments and distributions of cash, property and securities
applicable to the Senior Indebtedness until the principal of (and premium, if
any) and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the Holders of the Securities or
the Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among
the Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
SECTION 1306. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as between the Company and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of (and premium, if any)
and interest on the Securities as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of
any Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Indebtedness.
SECTION 1307. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1308. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph
(a) of this Section, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Senior Indebtedness, do any
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one or more of the following: (1) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection of Senior Indebtedness; and (4)
exercise or refrain from exercising any rights against the Company and any other
Person.
SECTION 1309. Notice to Trustee.
(a) The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company, the Agent Bank or a holder of Senior Indebtedness or
from any trustee, fiduciary or agent therefor; and, prior to the receipt of any
such written notice, the Trustee, subject to TIA Sections 315(a) through 315(d),
shall be entitled in all respects to assume that no such facts exist; provided,
however, that, if the Trustee shall not have received the notice provided for in
this Section at least three Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest on
any Security), then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within three
Business Days prior to such date.
(b) Subject to TIA Sections 315(a) through 315(d), the Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
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SECTION 1310. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to TIA Sections 315(a) through
315(d), and the Holders of the Securities shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1311. Rights of Trustee As a Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 606.
SECTION 1312. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1311 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1313. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law.
SECTION 1314. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary,
payments from cash or the proceeds of U.S. Government Obligations held in trust
under Article Thirteen hereof by the Trustee (or other qualifying trustee) and
which were deposited in accordance with the terms of Article Thirteen hereof and
not in violation of Section 1303 hereof for the payment of principal of (and
premium, if any) and interest on the Securities shall not be subordinated to the
prior payment of any Senior Indebtedness or subject to the restrictions set
forth in this Article Thirteen, and none of the
- 83 -
<PAGE>
Holders shall be obligated to pay over any such amount to the Company or any
holder of Senior Indebtedness or any other creditor of the Company.
- 84 -
<PAGE>
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
BE AEROSPACE, INC.
By
--------------------------------
Title:
THE BANK OF NEW YORK
By
--------------------------------
Title:
- 85 -
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the 2nd day of November 1998, before me personally came
Thomas P. McCaffrey to me known who, being by me duly sworn, did depose and say
that he is Chief Financial Officer of BE Aerospace, Inc., one of the
corporations described in and which executed the foregoing instrument, and that
he signed his name thereto by like authority.
----------------------------------
- 86 -
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the 2nd day of November, 1998, before me personally came
______________________, to me known who, being by me duly sworn, did depose and
say that he is ________________________ of The Bank of New York, one of the
corporations described in and which executed the foregoing instrument; and that
he signed his name thereto by like authority.
----------------------------------
- 87 -
<PAGE>
Exh. A-12
Exhibit A
[FACE OF SECURITY]
BE AEROSPACE, INC.
_____% [Series B]** Senior Subordinated Note due 2008
CUSIP _________________
No. _______ $______________________
BE AEROSPACE, INC., a Delaware corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ________________________________, or its
registered assigns, the principal sum of ____________________________________
($___________), on ____________, 2008.
[Initial Interest Rate: 9 1/2% per annum.]*
[Interest Rate: 9 1/2% per annum.]**
Interest Payment Dates: May 1 and November 1 of each year
commencing May 1 1999.
Regular Record Dates: April 15 and October 15 of each
year.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
- ------------------
* Include only for Initial Securities.
** Include only for Exchange Securities.
Exh. A-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Date: BE AEROSPACE, INC.
By:
--------------------------------
Title:
Exh. A-2
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the 9 1/2% [Series B]** Senior Subordinated Notes due
2008 described in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
Date: November 2, 1998 By:
--------------------------------
Authorized Signatory
- ------------------
** Include only for Exchange Securities.
Exh. A-3
<PAGE>
[REVERSE SIDE OF SECURITY]
BE AEROSPACE, INC.
9 1/2% [Series B]** Senior Subordinated Note due 2008
1. Principal and Interest; Subordination.
The Company will pay the principal of this Security on
November 1, 2008.
The Company promises to pay interest on the principal amount
of this Security on each Interest Payment Date, as set forth below, at the rate
of [9 1/2% per annum (subject to adjustment as provided below)]* [9 1/2% per
annum, except that interest accrued on this Security pursuant to the penultimate
paragraph of this Section 1 for periods prior to the applicable Exchange Date
(as such term is defined in the Registration Rights Agreement referred to below)
will accrue at the rate or rates borne by the Securities from time to time
during such periods.]**
Interest will be payable semiannually (to the holders of
record of the Securities (or any predecessor Securities) at the close of
business on the April 15 or October 15 immediately preceding the Interest
Payment Date) on each Interest Payment Date, commencing May 1, 1999.
[The Holder of this Security is entitled to the benefits of
the Registration Rights Agreement, dated November 2, 1998, between the Company
and the Purchasers named therein (the "Registration Rights Agreement"). In the
event that either (a) the Exchange Offer Registration Statement (as such term is
defined in the Registration Rights Agreement) is not filed with the Securities
and Exchange Commission on or prior to the 30th calendar day following the date
of original issue of the Securities, (b) the Exchange Offer Registration
Statement has not been declared effective on or prior to the 120th calendar day
following the date of original issue of the Securities or (c) the Exchange Offer
(as such term is defined in the Registration Rights Agreement) is not
consummated or a Shelf Registration Statement (as such term is defined in the
Registration Rights Agreement) is not declared effective on or prior to the
150th calendar day following the date of original issue of the Securities, the
interest rate borne by this Security shall be increased by one-half of one
percent per annum following such 30-day period in the case of (a) above,
following such 120-day period in the case of (b) above or following such 150-day
period in the case of (c) above. The aggregate amount of such increase from the
original interest rate pursuant to these provisions shall in no event exceed
one-half of one percent per annum. Upon (x) the filing of the Exchange Offer
Registration Statement after the 30-day period described in clause (a) above,
(y) the effectiveness of the Exchange Offer Registration Statement after the
120-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 150-day period described in clause (c) above, the
interest rate borne by this Security from the date of such filing, effectiveness
or consummation, as the case may be, will be reduced to the interest rate set
forth above.]*
- ------------------
* Include only for Initial Securities.
** Include only for Exchange Securities.
* Include only for Initial Securities.
Exh. A-4
<PAGE>
Interest on this Security will accrue from the most recent
date to which interest has been paid [on this Security or the Security
surrendered in exchange herefor]** or, if no interest has been paid, from
November 2, 1998; provided that, if there is no existing default in the payment
of interest and if this Security is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum equal to the rate of interest applicable to the
Securities.
The indebtedness evidenced by the Securities is, to the extent
and in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness, and this
Security is issued subject to such provisions. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on
the principal amount of the Securities on each May 1 and November 1 to the
persons who are Holders (as reflected in the Security Register at the close of
business on the April 15 and October 15 immediately preceding the Interest
Payment Date), in each case, even if the Security is cancelled on registration
of transfer or registration of exchange after such record date; provided that,
with respect to the payment of principal, the Company will make payment to the
Holder that surrenders this Security to any Paying Agent on or after November 1,
2008.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by its check payable in such money. The Company
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.
- ------------------
** Include only for Exchange Securities.
Exh. A-5
<PAGE>
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar upon written notice
thereto. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Securities under an Indenture dated as
of November 2, 1998 (the "Indenture"), between the Company and The Bank of New
York, as trustee (the "Trustee"). Capitalized terms herein are used as defined
in the Indenture unless otherwise indicated. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The Securities are subject to all such terms, and
Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Security and the terms of
the Indenture, the terms of the Indenture shall control.
The Securities are general unsecured obligations of the
Company. The Indenture limits the aggregate principal amount of the Securities
to $200,000,000.
5. Redemption.
Optional Redemption. The Securities may be redeemed at the
option of the Company, in whole or in part, at any time and from time to time on
or after November 1, 2003, at the following Redemption Prices (expressed in
percentages of principal amount), plus accrued and unpaid interest, if any, to
the Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the 12-month period
beginning November 1 of each of the years set forth below:
Redemption
Year Price
---- -----
2003 104.750%
2004 103.167%
2005 101.583%
2006 and thereafter 100.000%
Redemption with Proceeds of Offering. In addition, at any time
or from time to time, on or prior to November 1, 2001, the Company may, at its
option, redeem up to 35% of the aggregate principal amount of the Securities
originally issued under this Indenture at a Redemption Price equal to 109 1/2%
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 Securities issued under this Indenture 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.
Exh. A-6
<PAGE>
Procedures. Notice of a redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder to be
redeemed at such Holder's last address as it appears in the Security Register.
Securities in original denominations larger than $1,000 may be redeemed in part
in integral multiples of $1,000. On and after the Redemption Date, interest
ceases to accrue on Securities or portions of Securities called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon a Change in Control and Asset Sales.
(a) Upon the occurrence of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Securities at a
redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase and (b) upon Asset Sales, the
Company may be obligated to make offers to purchase Securities with a portion of
the Net Cash Proceeds of such Asset Sales at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase.
7. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Securities selected for redemption (except the
unredeemed portion of any Security being redeemed in part). Also, it need not
register the transfer or exchange of any Securities for a period of 15 days
before a selection of Securities to be redeemed is made.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Security for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be
deposited, with the Trustee money or U.S. Government Obligations sufficient to
pay the then outstanding principal of, premium, if any, and accrued interest on
the Securities (a) to redemption or maturity, the Company will be discharged
from the Indenture and the Securities, except in certain
Exh. A-7
<PAGE>
circumstances for certain sections thereof, and (b) to the Stated Maturity, the
Company will be discharged from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing default or compliance with any provision may be waived with the
consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency and make any
change that does not materially adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Restricted Subsidiary
stock; (iv) transactions with Affiliates; (v) Liens; (vi) guarantees of
Indebtedness by Restricted Subsidiaries; (vii) disposition of proceeds of Asset
Sales; (viii) dividends and other payment restrictions affecting Restricted
Subsidiaries; (ix) merger and certain transfers of assets and (x) issuance of
other senior subordinated indebtedness. Within 120 days after the end of each
fiscal year and within 45 days after each fiscal quarter, the Company must
report to the Trustee on compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Securities and the Indenture, the
predecessor person will be released from those obligations.
14. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Securities then outstanding may declare all the Securities to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Securities automatically become immediately due and payable. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at least
a majority in principal amount of the Securities then outstanding may direct the
Trustee in its exercise of any trust or power.
Exh. A-8
<PAGE>
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may make loans
to, accept deposits from, perform services for, and otherwise deal with, the
Company and its Affiliates as if it were not the Trustee.
16. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
17. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to BE
Aerospace, Inc., 1400 Corporate Center Way, Wellington, Florida 33414,
Attention: Chief Executive Officer.
Exh. A-9
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
In connection with any transfer of this Security occurring
prior to the date which is the earlier of the date of an effective Registration
Statement or ____________, 2000, the undersigned confirms that without utilizing
any general solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date:
----------------------------
----------------------------------------
NOTICE: The signature to this assignment
must
Exh. A-10
<PAGE>
correspond with the name as written upon
the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
---------------------------- ------------------------------------
NOTICE: To be executed by an
executive officer.
Exh. A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 1015 or Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 1015 or Section 1016 of the Indenture, state the
amount (in original principal amount) below:
$
----------------------.
Date:
-----------------------------
Your Signature:
---------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
----------------------------
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
Exh. A-12
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment ("Amendment"), dated as of November 12, 1998 is
between BE Aerospace, Inc., a Delaware corporation (the "Company"), and Amin J.
Khoury ("the Executive"). The parties agree as follows:
1. Reference to Agreement: Definitions. Reference is made to
an Employment Agreement dated as of May 29, 1998, between the Company
and the Executive (the "Agreement"). Terms defined in the Agreement and
not otherwise defined herein are used herein with the meanings so
defined.
2. Amendments to Agreement. The Agreement is amended as
follows, effective upon the date first written above:
2.1 Amendment to Section 7.4. Section 7.4 of the
Agreement is amended by deleting the word "; and" at the end
of paragraph 7.4(iii), adding the word ("; and") at the end of
paragraph 7.4(iv), and adding a new paragraph (v) as follows:
"(v) the amount of any Gross-Up Payment (as
defined below) payable by the Company to the
Executive under Section 7.8 hereof."
2.3 Amendment to Section 7. Section 7 of the
Agreement is amended by adding a new paragraph 7.8 as follows:
"7.8 Certain Additional Payments by the
Company.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for
the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (including without limitation any
additional payments required under this Section 7.8) (a
"Payment") would be subject to an excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by the
Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the
Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, the Executive retains (or has had paid
to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax
imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up
Payment in the
<PAGE>
2
Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive
shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made, and (ii) pay
applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction
of such state and local taxes.
(ii) Subject to the provisions of paragraph (iii) of
this Section 7.8, all determinations required to be made under
this Section 7.8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Company. In the even that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Executive appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 7.8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 7.8 and
the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
<PAGE>
3
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company relating to such
claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith
in order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 7.8(iii), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such
payment to the
<PAGE>
4
Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect
thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such
advance; and further provided that any extension of
the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 7.8(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 7.8(iii))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 7.8(iii), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
3. Miscellaneous. Except as amended by this Amendment, all
terms and conditions of the Agreement shall remain in full force and
effect. This Amendment may be executed in any number of counterparts
which together shall constitute one instrument, shall be governed by
and construed in accordance with the laws (other than the conflict of
laws rules) of the State of Florida and shall bind and inure to the
benefit of the parties hereto and their respective successors, assigns
and heirs.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands, as of the date first written above.
AMIN J. KHOURY
/s/ Amin J. Khoury
-------------------------------------------
BE AEROSPACE, INC.
By: /s/ Robert J. Khoury
-------------------------------------------
Title: Vice Chairman of the Board
BE AEROSPACE, INC.
By: /s/ Paul E. Fulchino
-------------------------------------------
Title: President and Chief Operating
Officer
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment ("Amendment"), dated as of November 12, 1998 is
between BE Aerospace, Inc., a Delaware corporation (the "Company"), and Robert
J. Khoury ("the Executive"). The parties agree as follows:
1. Reference to Agreement: Definitions. Reference is made to
an Employment Agreement dated as of May 29, 1998, between the Company
and the Executive (the "Agreement"). Terms defined in the Agreement and
not otherwise defined herein are used herein with the meanings so
defined.
2. Amendments to Agreement. The Agreement is amended as
follows, effective upon the date first written above:
2.1 Amendment to Section 7.4. Section 7.4 of the
Agreement is amended by deleting the word "; and" at the end
of paragraph 7.4(iii), adding the word ("; and") at the end of
paragraph 7.4(iv), and adding a new paragraph (v) as follows:
"(v) the amount of any Gross-Up Payment
payable (as defined below) by the Company to the
Executive under Section 7.8 hereof."
2.3 Amendment to Section 7. Section 7 of the
Agreement is amended by adding a new paragraph 7.8 as follows:
"7.8 Certain Additional Payments by the
Company.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for
the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (including without limitation any
additional payments required under this Section 7.8) (a
"Payment") would be subject to an excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by the
Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the
Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, the Executive retains (or has had paid
to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax
imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up
Payment in the
<PAGE>
2
Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive
shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made, and (ii) pay
applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction
of such state and local taxes.
(ii) Subject to the provisions of paragraph (iii) of
this Section 7.8, all determinations required to be made under
this Section 7.8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Company. In the even that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Executive appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 7.8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 7.8 and
the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
<PAGE>
3
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company relating to such
claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith
in order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 7.8(iii), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free
<PAGE>
4
basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 7.8(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 7.8(iii))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 7.8(iii), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
3. Miscellaneous. Except as amended by this Amendment, all
terms and conditions of the Agreement shall remain in full force and
effect. This Amendment may be executed in any number of counterparts
which together shall constitute one instrument, shall be governed by
and construed in accordance with the laws (other than the conflict of
laws rules) of the State of Florida and shall bind and inure to the
benefit of the parties hereto and their respective successors, assigns
and heirs.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands, as of the date first written above.
ROBERT J. KHOURY
/s/ Robert J. Khoury
------------------------------------------
BE AEROSPACE, INC.
By: /s/ Robert J. Khoury
------------------------------------------
Title: Vice Chairman of the Board
BE AEROSPACE, INC.
By: /s/ Paul E. Fulchino
------------------------------------------
Title: President and Chief Operating
Officer
AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment ("Amendment"), dated as of November 12, 1998 is
between BE Aerospace, Inc., a Delaware corporation (the "Company"), and Thomas
P. McCaffrey ("the Executive"). The parties agree as follows:
1. Reference to Agreement: Definitions. Reference is made to
an Employment Agreement dated as of May 29, 1998, between the Company
and the Executive (the "Agreement"). Terms defined in the Agreement and
not otherwise defined herein are used herein with the meanings so
defined.
2. Amendments to Agreement. The Agreement is amended as
follows, effective upon the date first written above:
2.1 Amendment to Section 5(e). Section 5(e) of the
Agreement is amended by adding a new paragraph (vi) as
follows:
"(vi) pay the amount of any Gross-Up Payment
payable (as defined below) by the Company to the
Executive under Section 5(h) hereof."
2.3 Amendment to Section 5. Section 5 of the
Agreement is amended by adding a new paragraph 5(h) as
follows:
"(h) Certain Additional Payments by the
Company.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for
the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (including without limitation any
additional payments required under this Section 5(h)) (a
"Payment") would be subject to an excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by the
Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the
Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, the Executive retains (or has had paid
to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax
imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up
Payment in the Executive's adjusted gross income and the
highest applicable marginal rate of
<PAGE>
2
federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be
deemed to (i) pay federal income taxes at the highest marginal
rates of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made, and (ii) pay
applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction
of such state and local taxes.
(ii) Subject to the provisions of paragraph (iii) of
this Section 5(h), all determinations required to be made
under this Section 5(h), including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Company. In the even that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Executive appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 5(h), shall be paid by the Company to the
Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 5(h) and
the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the
<PAGE>
3
Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but not later than ten business
days after the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest
such claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company relating to such
claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith
in order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 5(h)(iii), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income
<PAGE>
4
tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such
advance; and further provided that any extension of
the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(h)(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section
5(h)(iii)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 5(h)(iii), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
3. Miscellaneous. Except as amended by this Amendment, all
terms and conditions of the Agreement shall remain in full force and
effect. This Amendment may be executed in any number of counterparts
which together shall constitute one instrument, shall be governed by
and construed in accordance with the laws (other than the conflict of
laws rules) of the State of Florida and shall bind and inure to the
benefit of the parties hereto and their respective successors, assigns
and heirs.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands, as of the date first written above.
THOMAS P. McCAFFREY
/S/ Thomas P. McCaffrey
BE AEROSPACE, INC.
By: /s/ Robert J. Khoury
-------------------------------------
Title: Vice Chairman of the Board and
Chief Executive Officer
AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment ("Amendment"), dated as of November 12, 1998 is
between BE Aerospace, Inc., a Delaware corporation (the "Company"), and Paul E.
Fulchino ("the Executive"). The parties agree as follows:
1. Reference to Agreement: Definitions. Reference is made to
an Employment Agreement dated as of May 29, 1998, between the Company
and the Executive (the "Agreement"). Terms defined in the Agreement and
not otherwise defined herein are used herein with the meanings so
defined.
2. Amendments to Agreement. The Agreement is amended as
follows, effective upon the date first written above:
2.1 Amendment to Section 5(e). Section 5(e) of the
Agreement is amended by adding a new paragraph (vi) as
follows:
"(vi) pay the amount of any Gross-Up Payment
payable (as defined below) by the Company to the
Executive under Section 5 (h) hereof."
2.3 Amendment to Section 5. Section 5 of the
Agreement is amended by adding a new paragraph 5(h) as
follows:
"(h) Certain Additional Payments by the
Company.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for
the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (including without limitation any
additional payments required under this Section 5(h)) (a
"Payment") would be subject to an excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by the
Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the
Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, the Executive retains (or has had paid
to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax
imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up
Payment in the Executive's adjusted gross income and the
highest applicable marginal rate of
<PAGE>
2
federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be
deemed to (i) pay federal income taxes at the highest marginal
rates of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made, and (ii) pay
applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction
of such state and local taxes.
(ii) Subject to the provisions of paragraph (iii) of
this Section 5(h), all determinations required to be made
under this Section 5(h), including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Company. In the even that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Executive appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 5(h), shall be paid by the Company to the
Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 5(h) and
the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the
<PAGE>
3
Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but not later than ten business
days after the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest
such claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company relating to such
claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith
in order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 5(h)(iii), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income
<PAGE>
4
tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such
advance; and further provided that any extension of
the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(h)(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section
5(h)(iii)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 5(h)(iii), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
3. Miscellaneous. Except as amended by this Amendment, all
terms and conditions of the Agreement shall remain in full force and
effect. This Amendment may be executed in any number of counterparts
which together shall constitute one instrument, shall be governed by
and construed in accordance with the laws (other than the conflict of
laws rules) of the State of Florida and shall bind and inure to the
benefit of the parties hereto and their respective successors, assigns
and heirs.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands, as of the date first written above.
PAUL E. FULCHINO
/S/ Paul E. Fulchino
BE AEROSPACE, INC.
By: /s/ Robert J. Khoury
-------------------------------------
Title: Vice Chairman of the Board and
Chief Executive Officer
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment ("Amendment"), dated as of November 12, 1998 is
between BE Aerospace, Inc., a Delaware corporation (the "Company"), and Marco
Lanza ("the Executive").
The parties agree as follows:
1. Reference to Agreement: Definitions. Reference is made to
an Employment Agreement dated as of March 1, 1992 and Amendment No. 1
to such Agreement dated as of January 1, 1996, both between the Company
and the Executive (the "Agreement"). Terms defined in the Agreement and
not otherwise defined herein are used herein with the meanings so
defined.
2. Amendments to Agreement. The Agreement is amended as
follows, effective upon the date first written above:
2.1 Amendment to Section 4(f). Section 4(f) of the
Agreement is amended by adding a new paragraph (iv) as
follows:
"(iv) pay the amount of any Gross-Up Payment
payable (as defined below) by the Company to the
Executive under Section 4(g) hereof."
2.2 Amendment to Section 4. Section 4 of the
Agreement is amended by adding a new paragraph 4(g) as
follows:
"(g) Certain Additional Payments by the
Company.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for
the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (including without limitation any
additional payments required under this Section 4(g)) (a
"Payment") would be subject to an excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by the
Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the
Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, the Executive retains (or has had paid
to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax
imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up
Payment in the
<PAGE>
2
Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive
shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made, and (ii) pay
applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction
of such state and local taxes.
(ii) Subject to the provisions of paragraph (iii) of
this Section 4(g), all determinations required to be made
under this Section 4(g), including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Company. In the even that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Executive appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 4(g), shall be paid by the Company to the
Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 4(g) and
the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
<PAGE>
3
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company relating to such
claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith
in order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 7.8(iii), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such
payment to the
<PAGE>
4
Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect
thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such
advance; and further provided that any extension of
the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 4(g)(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section
4(g)(iii) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 4(g)(iii), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
3. Miscellaneous. Except as amended by this Amendment, all
terms and conditions of the Agreement shall remain in full force and
effect. This Amendment may be executed in any number of counterparts
which together shall constitute one instrument, shall be governed by
and construed in accordance with the laws (other than the conflict of
laws rules) of the State of Florida and shall bind and inure to the
benefit of the parties hereto and their respective successors, assigns
and heirs.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands, as of the date first written above.
MARCO LANZA
/S/ Marco Lanza
BE AEROSPACE, INC.
By: /s/ Robert J. Khoury
-------------------------------------
Title: Vice Chairman of the Board and
Chief Executive Officer
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
BE Aerospace, Inc. on Form S-4 of our report dated April 15, 1998, appearing in
and incorporated by reference in the Annual Report on Form 10-K of BE Aerospace,
Inc. for the year ended February 28, 1998, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
November 20, 1998
[LETTERHEAD OF ZALICK, TOROK, KIRGESNER, COOK & CO.]
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated February 7, 1998, except for Note 20,
as to which the date is August 7, 1998, relating to the consolidated and
combined financial statements of SMR Aerospace, Inc. (an S Corporation), its
affiliates, and subsidaries, which appears in the Form 8-K of B/E Aerospace,
Inc. dated August 7, 1998, and to the reference to our Firm under the caption
"Experts" in the Form S-4.
/s/ Zalik, Torok, Kirgesner, Cook & Co.
Cleveland, Ohio
November 19, 1998
================================================================================
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) |__|
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-------------
BE AEROSPACE, INC.
(Exact name of obligor 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
Wellington, Florida 33414
(Address of principal executive offices) (Zip code)
----------------------
9-1/2% Series B Senior Subordinated Notes due 2008
(Title of the indenture securities)
================================================================================
<PAGE>
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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State 2 Rector Street, New York,
of New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank 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 16th day of November, 1998.
THE BANK OF NEW YORK
By: /s/ THOMAS C. KNIGHT
------------------------------------
Name: THOMAS C. KNIGHT
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Exhibit 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business June 30, 1998, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ..................................... $ 7,301,241
Interest-bearing balances .............................. 1,385,944
Securities:
Held-to-maturity securities ............................ 1,000,737
Available-for-sale securities .......................... 4,240,655
Federal funds sold and Securities purchased
under agreements to resell.............................. 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned
income .....................................38,788,269
LESS: Allowance for loan and
lease losses ..................................632,875
LESS: Allocated transfer risk
reserve..............................................0
Loans and leases, net of unearned
income, allowance, and reserve........................ 38,155,394
Assets held in trading accounts .......................... 1,307,562
Premises and fixed assets (including
capitalized leases) .................................... 670,445
Other real estate owned .................................. 13,598
Investments in unconsolidated
subsidiaries and associated companies .................. 215,024
Customers' liability to this bank on
acceptances outstanding ................................ 974,237
Intangible assets ........................................ 1,102,625
Other assets ............................................. 1,944,777
-----------
Total assets ............................................. $59,283,692
===========
LIABILITIES
Deposits:
In domestic offices .................................... $26,930,258
Noninterest-bearing ..........................11,579,390
Interest-bearing .............................15,350,868
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....................... 16,117,854
Noninterest-bearing .............................187,464
Interest-bearing .............................15,930,390
Federal funds purchased and Securities
sold under agreements to repurchase..................... 2,170,238
Demand notes issued to the U.S. Treasury.................. 300,000
Trading liabilities ...................................... 1,310,867
Other borrowed money:
With remaining maturity of one year or less............. 2,549,479
With remaining maturity of more than
one year through three years.......................... 0
With remaining maturity of more than
three years .......................................... 46,654
Bank's liability on acceptances executed and
outstanding .......................................... 983,398
Subordinated notes and debentures ........................ 1,314,000
Other liabilities ........................................ 2,295,520
----------
Total liabilities ........................................ 54,018,268
----------
EQUITY CAPITAL
Common Stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital reserves ................... 3,385,227
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 51,233
Cumulative foreign currency translation
adjustments ............................................ ( 37,639)
-----------
Total equity capital ..................................... 5,265,424
-----------
Total liabilities and equity capital ..................... $59,283,692
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to the best
of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true and correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
- -------------------------------------------------------------------------------
