<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BE AEROSPACE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3728 06-1209796
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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1400 CORPORATE CENTER WAY
WELLINGTON, FLORIDA 33414
(561) 791-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AMIN J. KHOURY
CHAIRMAN OF THE BOARD
BE AEROSPACE, INC.
1400 CORPORATE WAY
WELLINGTON FLORIDA 33414
(561) 791-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
WITH COPIES TO:
ROHAN S. WEERASINGHE
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
<TABLE>
<CAPTION>
==============================================================================================================================
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
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8% Series B Senior Subordinated
Notes due 2008.................. $250,000,000 100% $250,000,000 $73,750
==============================================================================================================================
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED , 1998
OFFER TO EXCHANGE
ALL OUTSTANDING 8% SENIOR
[LOGO] SUBORDINATED NOTES DUE 2008
($250,000,000 AGGREGATE PRINCIPAL
AMOUNT OUTSTANDING)
FOR
8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2008 OF
BE AEROSPACE, INC.
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1998, UNLESS EXTENDED
BE Aerospace, Inc., a Delaware corporation ("B/E" or the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal"), to exchange $1,000 principal amount of its 8% Series B Senior
Subordinated Notes due March 1, 2008, (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for each $1,000 principal amount of the
outstanding 8% Senior Subordinated Notes due March 1, 2008 (the "Old Notes") of
the Company of which $250,000,000 aggregate principal amount is outstanding. The
New Notes and the Old Notes are collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1998, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for payment. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions which
may be waived by the Company and to the terms and provisions of the Registration
Rights Agreement (as defined herein). See "The Exchange Offer." Old Notes may be
tendered only in denominations of $1,000 and integral multiples thereof. The
Company has agreed to pay the expenses of the Exchange Offer.
The New Notes will be obligations of the Company entitled to the benefits
of the Indenture (as defined herein) relating to the Old Notes. The form and
terms of the New Notes are identical in all material respects to the form and
terms of the Old Notes except that the New Notes have been registered under the
Securities Act. Following the completion of the Exchange Offer, none of the
Notes will be entitled to the benefits of the Registration Rights Agreement (as
defined herein) relating to contingent increases in the interest rates provided
for pursuant thereto. See "The Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
The New Notes will bear interest from February 13, 1998. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from February 13, 1998 to the date of the issuance of the New Notes. Interest on
the New Notes is payable semiannually on March 1 and September 1 of each year,
commencing September 1, 1998, accruing from February 13, 1998 at a rate of 8%
per annum.
The New Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after March 1, 2003 at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to March 1, 2001, the Company
may redeem up to 35% of the aggregate principal amount of the Notes originally
issued with the net proceeds of one or more Equity Offerings (as defined
herein), at 108% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption; provided that at least 65% of the
aggregate principal amount of the Notes originally issued remains outstanding
after such redemption. Upon the occurrence of a Change of Control (as defined
herein), each holder of the New Notes shall have the option to require the
Company to make an offer to repurchase such holder's Notes at a redemption price
of 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption.
The Company used approximately $111.9 million of the net proceeds from the
offering of the Old Notes (the "Offering") to acquire approximately $101.8
million aggregate principal amount (plus accrued and unpaid interest) of the
Company's outstanding 9 3/4% Senior Notes due 2003 (the "9 3/4% Notes") tendered
pursuant to the Company's tender offer for all outstanding 9 3/4% Notes, which
commenced on January 28, 1998 and expired at 12:00 midnight, New York City time,
on February 25, 1998 (the "Tender Offer"), and to pay a consent fee in
connection with the Tender Offer to holders of the 9 3/4% Notes who consented to
the adoption of certain amendments to the indenture pursuant to which the 9 3/4%
Notes were issued. The Company intends to use approximately $24.4 million of the
net proceeds of the Offering to redeem the remaining $23.2 million aggregate
principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes
that were not tendered in the Tender Offer on March 16, 1998 at a redemption
price equal to 104.875% of the principal amount of such 9 3/4% Notes (the
"Redemption"). The balance of the net proceeds from the Offering will be used
for general corporate purposes including potential strategic acquisitions. The
Company expects to incur an estimated $9.2 million extraordinary charge for
unamortized debt issuance costs, tender and redemption premiums and fees and
expenses in connection with the Tender Offer and the Redemption.
The New Notes are unsecured senior subordinated obligations of B/E and will
be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of B/E, including indebtedness under its Bank
Credit Facility (as defined herein). The New Notes will rank pari passu with the
Company's 9 7/8% Notes (as defined herein). In addition, the New Notes will be
effectively subordinated to the obligations of B/E's subsidiaries. As of
November 29, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the aggregate outstanding amount of
Senior Indebtedness of B/E would have been approximately $7.2 million, the
aggregate outstanding amount of the 9 7/8% Notes would have been $100 million
and the aggregate outstanding amount of indebtedness of B/E's subsidiaries would
have been approximately $7.2 million.
The ability of the Company to incur additional Indebtedness in the future
is limited by the provisions of the Indenture relating to the Notes. See
"Description of New Notes -- Certain Covenants -- Limitation on Indebtedness."
Old Notes initially purchased by qualified institutional buyers, as defined
pursuant to Rule 144A under the Securities Act ("Qualified Institutional
Buyers"), were initially represented by four global Notes in registered form,
registered in the name of a nominee of The Depository Trust Company ("DTC"), as
depository. The New Notes exchanged for Old Notes represented by the global
Notes will be represented by four global New Notes in registered form,
registered in the name of the nominee of DTC, unless the beneficial holders
thereof request otherwise. The global New Note will be exchangeable for New
Notes in registered form, in denomination of $1,000 and integral multiples
thereof. See "Description of the New Notes -- Book-Entry Delivery and Form."
2
<PAGE> 4
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for resale, resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the New Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company that such conditions have been met. In the event that the
Company's belief is inaccurate, holders of New Notes who transfer New Notes in
violation of the prospectus delivery provisions of the Securities Act and
without an exemption from registration thereunder may incur liability under the
Securities Act. The Company does not assume or indemnify holders against such
liability, although the Company does not believe any such liability should
exist.
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by such broker-dealer in connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus and any amendment or
supplement to this Prospectus available to any such broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
The Company believes that no registered holder of the Old Notes is an
affiliate (as such term is defined in Rule 405 under the Securities Act) of the
Company.
The Company will not receive any proceeds from the Exchange Offer, and no
underwriter is being utilized in connection with the Exchange Offer.
Upon completion of the Exchange Offer, Old Notes which have not been
exchanged for New Notes will remain outstanding. See "Risk
Factors -- Consequences of Failure to Exchange."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to the Exchange Offer, there has been no public market for the Old
Notes or New Notes. If a market for the New Notes should develop, the New Notes
could trade at a discount from their principal amount. The Company does not
intend to list the New Notes on a national securities exchange or to apply for
quotation of the New Notes through the National Association of Securities
Dealers Automated Quotation System. There can be no assurance that an active
public market for the New Notes will develop.
The Company has been advised by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse
First Boston Corporation and Morgan Stanley & Co. Incorporated, the initial
purchasers (the "Initial Purchasers") of the Old Notes, that, following
completion of the Exchange Offer, they intend to make a market in the New Notes;
however, such entities are under no obligation to do so and any market
activities with respect to the New Notes may be discontinued at any time.
3
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files periodic reports, proxy statements and
other information with the Commission. Reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Suite
1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
by writing to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such information may also be accessed electronically by
means of the Commission's web page on the Internet at http://www.sec.gov, which
contains reports, proxy statements and other information regarding registrants,
including the Company, that file electronically with the Commission.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
The Indenture (as defined herein) provides that the Company will furnish
copies of the periodic reports required to be filed with the Commission under
the Exchange Act to the holders of the Notes. If the Company is not subject to
the periodic reporting and informational requirements of the Exchange Act, it
will, to the extent such filings are accepted by the Commission, and whether or
not the Company has a class of securities registered under the Exchange Act,
file with the Commission, and provide the Trustee and the holders of the Notes
within 15 days after such filings with, annual reports containing the
information required to be contained in Form 10-K promulgated under the Exchange
Act, quarterly reports containing the information required to be contained in
Form 10-Q promulgated under the Exchange Act and from time to time such other
information as is required to be contained in Form 8-K promulgated under the
Exchange Act. If filing such reports with the Commission is not accepted by the
Commission or prohibited by the Exchange Act, the Company will also provide
copies of such reports, at its cost, to prospective purchasers of the Notes
promptly upon written request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
February 22, 1997 filed May 9, 1997 (the "Form 10-K");
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 29, 1997 filed December 23, 1997 (the "November 10-Q");
(c) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 30, 1997 filed October 7, 1997 (the "August 10-Q");
(d) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 31, 1997 filed June 30, 1997 (the "May 10-Q"); and
(e) all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934, as amended (the "Exchange
Act") subsequent to the date of the Registration
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<PAGE> 6
Statement of which this Prospectus is part and prior to the effectiveness
thereof or subsequent to the date of this Prospectus and prior to the
termination of the offering made hereby.
Any statement contained herein or in any documents incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM THOMAS P. MCCAFFREY, CHIEF FINANCIAL OFFICER OF THE
COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT 1400 CORPORATE
CENTER WAY, WELLINGTON, FLORIDA 33414, TELEPHONE NUMBER (561) 791-5000.
The Indenture (as defined herein) provides that the Company will furnish
copies of the periodic reports required to be filed with the Commission under
the Exchange Act to the holders of the Notes. If the Company is not subject to
the periodic reporting and informational requirements of the Exchange Act, it
will, to the extent such filings are accepted by the Commission, and whether or
not the Company has a class of securities registered under the Exchange Act,
file with the Commission, and provide the Trustee and the holders of the Notes
within 15 days after such filings with, annual reports containing the
information required to be contained in Form 10-K promulgated under the Exchange
Act, quarterly reports containing the information required to be contained in
Form 10-Q promulgated under the Exchange Act and from time to time such other
information as is required to be contained in Form 8-K promulgated under the
Exchange Act. If filing such reports with the Commission is not accepted by the
Commission or prohibited by the Exchange Act, the Company will also provide
copies of such reports, at its cost, to prospective purchasers of the Notes
promptly upon written request.
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<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. As used in
this Prospectus, unless the context otherwise requires, the "Company" or "B/E"
refers to BE Aerospace, Inc., a Delaware corporation. References herein to a
fiscal year end relate to a year ending on the last Saturday in February (for
example, fiscal 1997 refers to the Company's fiscal year ended February 22,
1997). Market share information presented herein does not include markets in the
former Soviet Union and will vary, sometimes significantly, from year to year.
Investors should carefully consider the information set forth under the heading
"Risk Factors."
THE COMPANY
B/E is the world's largest manufacturer of commercial aircraft cabin
interior products, serving virtually all major airlines with a broad line of
products, including aircraft seats, food and beverage preparation and storage
equipment, galley structures and in-flight entertainment systems. In addition,
B/E provides upgrade, maintenance and repair services for the products which it
manufactures as well as for those supplied by other manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories. B/E is the largest
manufacturer of airline seats in the world, offering an extensive line of first
class, business class, tourist class and commuter seats. The Company is also the
world's largest manufacturer of galley equipment for both narrow- and wide-body
aircraft, including a wide selection of coffee and beverage makers, water
boilers, ovens, liquid containers, refrigeration equipment and galley
structures. In addition, the Company is the leading manufacturer of passenger
entertainment and service systems, including passenger control systems and
individual passenger in-flight entertainment systems. The Company believes that
in-flight entertainment systems, including the emerging live broadcast
television market for domestic narrow-body aircraft, will be one of the fastest
growing and among the largest product categories in the commercial aircraft
cabin interior products industry.
As of November 29, 1997, B/E's backlog was approximately $560 million and,
during the nine months ended November 29, 1997, the Company had revenues of
$362.7 million and EBITDA of $64.1 million, an increase of 17.7% and 38.2%,
respectively, over the nine months ended November 30, 1996. The Company's common
stock is listed on the Nasdaq National Market, and based on the closing price of
$29.50 per share on March 6, 1998, the Company had a total equity market
capitalization of approximately $670 million.
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
- Leading Market Share and Significant Installed Base. Management believes
that the Company has achieved leading global market positions in each of
its major product categories, with worldwide market shares, based upon
industry sources, of approximately 50% in aircraft seats, 90% in coffee
makers, 90% in refrigeration equipment and 50% in ovens, based on dollar
sales for the nine months ended November 29, 1997, and 37% in individual
passenger in-flight entertainment systems, determined on the basis of
installed base as of November 29, 1997. The Company believes these market
shares provide it with significant competitive advantages in serving its
customers, including economies of scale and the ability to commit greater
product development, global product support and marketing resources.
Furthermore, because of economies of scale, in part attributable to its
large market shares and its approximate $3.3 billion installed base of
cabin interior equipment (valued at replacement prices as of November 29,
1997), the Company believes it is among the lowest cost producers in the
cabin interior products industry. The Company also believes that its
large installed base provides B/E with a significant advantage over
competitors in obtaining orders for retrofit and refurbishment programs,
principally because airlines tend to purchase equipment from the original
supplier. In
6
<PAGE> 8
addition, because of the need for compatible spare parts at airline
maintenance depots and the desire of airlines to maximize fleet
commonality, a single vendor is typically used for all aircraft of the
same type operated by a particular airline.
- Broadest Product Line in the Industry. Management believes the Company
offers the broadest and the most technologically advanced line of
products for the cabin interiors of commercial aircraft. With an
established reputation for quality, service and product innovation, the
Company enjoys broad recognition among the world's commercial airlines.
The Company maintains a constant dialogue with a wide array of existing
and potential customers, enabling it to become aware of emerging industry
trends and needs and thereby play a leading role in product development.
The Company has continued to expand its product line, believing that the
airline industry increasingly will seek an integrated approach to the
development, testing and sourcing of the aircraft's cabin interior.
- Technological Leadership/New Product Development. Management believes
that the Company is a technological leader in its industry, with the
largest R&D organization in the industry comprised of approximately 500
engineers. The Company believes that its R&D effort and its on-site
engineers at both the airlines and airframe manufacturers enable B/E to
consistently introduce innovative products and thereby gain early entrant
advantages and substantial market shares. Examples of such product
development include: the introduction of several premium and main cabin
class seats, which the Company believes provide greater comfort and are
lighter in weight as a result of their ergonomic design and
pre-engineered individual passenger comfort features; the Company's
family of in-flight entertainment systems, which it believes to be
superior to existing operational systems in terms of performance,
reliability, weight, heat generation and flexibility to adapt to changing
technology; a cappuccino/espresso maker; a quick chill wine cooling
system; and a constant-pressure, steam cooking oven, which the Company
believes substantially improves the appearance, aroma and taste of
airline food.
- Proven Track Record of Integration. The Company has demonstrated the
ability to make strategic acquisitions and successfully integrate such
acquired businesses by identifying opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. The Company has purchased nine businesses
over the last nine years, for an aggregate purchase price of
approximately $290 million. Since 1989, the Company has integrated each
of its acquisitions by reducing the number of operating facilities
acquired from 20 to 9 and consolidating personnel at the acquired
businesses, resulting in headcount reductions of approximately 1,300
employees.
GROWTH OPPORTUNITIES
B/E believes that it is benefiting from three major growth trends occurring
in the commercial aircraft cabin interior products industry:
- Increase in Refurbishment and Upgrade Orders. B/E's substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and spare parts. Approximately 60% of B/E's revenues
for the nine months ended November 29, 1997 were derived from
refurbishment and upgrade orders. In the late 1980s and early 1990s, the
airline industry suffered a significant downturn, which resulted in a
deferral of cabin interior maintenance expenditures. Since early 1994,
the airlines have experienced a turnaround in operating results, leading
the domestic airline industry to record operating earnings during
calendar years 1995 through 1997. Deterioration of cabin interior product
functionality and aesthetics occurred within the commercial airline
fleets during the industry downturn because of maintenance deferrals.
Since the turnaround began, the airlines have experienced greater
utilization resulting from higher load factors, which has encouraged
airlines to increase spending on refurbishments and upgrades. The Company
believes that it is well positioned to benefit over the next several
years as a result of the airlines' dramatically improved financial
condition and liquidity and the need to refurbish and upgrade cabin
interiors. A significant portion of the Company's recent growth in
backlog, revenues and operating earnings has been from refurbishment and
upgrade programs, and the Company is currently experiencing a high level
of new order quote activity related to such programs.
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<PAGE> 9
- Expansion of Worldwide Fleet and Shift Toward Wide-Body
Aircraft. Airlines have recently been purchasing a significant number of
new aircraft in part due to current high load factors and the projected
growth in worldwide air travel. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1997 (the "Boeing
Report"), worldwide air travel is projected to increase by 75% by
calendar 2006 and the worldwide fleet of commercial passenger aircraft is
projected to expand from approximately 10,300 at the end of 1996 to
approximately 15,300 by the end of 2006 and to more than 21,200 by 2016.
Related growth in aircraft interior product shipments associated with new
aircraft deliveries began during calendar 1996. In 1997, Boeing shipped
375 aircraft versus 218 in 1996. In addition Boeing has stated plans to
ship 550 aircraft in each of calendar years 1998 and 1999. The Company
generally receives orders related to new aircraft deliveries
approximately six months before the delivery date. Furthermore, according
to the July 1997 Airline Monitor, the percentage of new Boeing aircraft
deliveries projected to be wide-body aircraft for 1997 through 2001 is
39% as compared to 33% for the five year period ended December 31, 1996.
This shift toward wide-body aircraft is significant to the Company since
these aircraft require as much as seven times the dollar value of cabin
interior products as narrow-body aircraft, including substantially more
seats, galley equipment and in-flight entertainment products.
- Emergence of Individual Passenger In-flight Entertainment Systems as a
Major New Product Category. Airlines increasingly are demanding
individual passenger in-flight entertainment systems as a method to
attract and retain customers, as the availability of such service affects
passengers' decisions on airline selection. These systems also provide
the airlines with the opportunity to generate increased revenues, without
raising ticket prices, by charging passengers for the services used. In
June 1997, the Company announced a joint venture with Harris Corporation
to develop and deliver live broadcast television (LiveTV(TM)) to domestic
narrow-body commercial aircraft. The Company expects that in-flight
entertainment systems, including the new technology designed to deliver
live broadcast television on domestic narrow-body aircraft, will be one
of the fastest growing and among the largest product categories in the
commercial aircraft cabin interior products industry.
- The Company has developed a number of individual in-flight entertainment
systems that are designed to meet the varying technological and price
specifications of the airlines. The Company's two current systems are (i)
the B/E 2000, with an installed base of approximately 28,000 units, which
is a system that provides non-interactive video programming and (ii) the
B/E 2000M, with an installed base of approximately 6,000 units, which
offers similar functionality to the B/E 2000 but can be upgraded to the
Company's Multimedia Digital Distribution System ("MDDS") product. The
MDDS product, which is in its final development stage, is a fully
interactive entertainment system with the capacity to provide movies on
demand, telecommunications, gaming and other services. The Company has
completed the initial development and testing of the MDDS product and
anticipates delivery of the first MDDS product to its launch customer,
Japan Airlines ("JAL"), in 1998. The Company also anticipates completing
the engineering necessary to enable installation of the MDDS as a line
fit (standard) option on Boeing aircraft in 1998. As of November 29, 1997
B/E had an in-flight entertainment systems backlog of approximately $139
million.
BUSINESS STRATEGY
The Company's business strategy is to maintain its leadership position and
best serve its airline customers by (i) offering the broadest and most
integrated product line in the industry for both new product sales and follow-on
products and services; (ii) pursuing a worldwide marketing approach focused by
airline and encompassing the Company's entire product line; (iii) remaining the
technological leader, as well as significantly growing its installed base of
products, in the developing in-flight individual passenger entertainment market;
(iv) enhancing its position in the growing upgrade, maintenance, inspection and
repair services market; and (v) pursuing selective strategic acquisitions in the
commercial aircraft cabin interior products industry.
8
<PAGE> 10
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $250 million aggregate
principal amount of Old Notes for an equal aggregate principal amount of New
Notes. The New Notes will be obligations of the Company entitled to the benefits
of the Indenture relating to the Old Notes. The form and terms of the New Notes
are identical in all material respects to the form and terms of the Old Notes
except that the New Notes have been registered under the Securities Act, and
therefore are not entitled to the benefits of the registration rights (the
"Registration Rights") granted under the registration rights agreement dated
February 13, 1998 among the Company and the Initial Purchasers (the
"Registration Rights Agreement") relating to the contingent increases in the
interest rates provided for pursuant thereto.
The Exchange Offer......... $1,000 principal amount of New Notes will be issued
in exchange for each $1,000 principal amount of Old
Notes validly tendered pursuant to the Exchange
Offer. As of the date hereof, $250 million in
aggregate principal amount of Old Notes are
outstanding. The Company will issue the New Notes
to tendering holders of Old Notes on or promptly
after the Expiration Date.
Resale of the New Notes.... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), "Morgan
Stanley & Co. Incorporated" (available June 5,
1991), "Mary Kay Cosmetics, Inc." (available June
5, 1991) and "Warnaco, Inc." (available October 11,
1991), the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than (i) a broker-dealer who purchased such Old
Notes directly from the Company for resale pursuant
to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of
the Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that the holder is acquiring the New Notes in its
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate, in
the distribution of the New Notes. In the event
that the Company's belief is inaccurate, holders of
New Notes who transfer New Notes in violation of
the prospectus delivery provisions of the
Securities Act and without an exemption from
registration thereunder may incur liability under
the Securities Act. The Company does not assume or
indemnify holders against such liability, although
the Company does not believe that any such
liability should exist.
Each broker-dealer that receives New Notes in
exchange for Old Notes held for its own account, as
a result of market-making activities or other
trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, such broker-dealer will not be deemed
to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by such broker-dealer in
connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed
that, for a period of 180 days after the date of
this Prospectus, it will make this Prospectus and
any amendment or supplement to this Prospectus
available to any such broker-dealer for use in
connection with any such resales. See "Plan
9
<PAGE> 11
of Distribution." The Company believes that no
registered holder of the Old Notes is an affiliate
(as such term is defined in Rule 405 of the
Securities Act) of the Company.
The Exchange Offer is not being made to, nor will
the Company accept surrenders for exchange from,
holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue
sky laws of such jurisdiction.
Expiration of Exchange
Offer...................... 5:00 p.m., New York City time, on
, 1998, unless the Exchange Offer is extended,
in which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer
is extended. See "The Exchange Offer -- Expiration
Date; Extension; Amendments."
Accrued Interest on the New
Notes and the Old
Notes.................... The New Notes will bear interest from February 13,
1998. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived
the right to receive any payment in respect of
interest on such Old Notes accrued from February
13, 1998 to the date of the issuance of the New
Notes. Consequently, holders who exchange their Old
Notes for New Notes will receive the same interest
payment on September 1, 1998 (the first interest
payment date with respect to the Old Notes and the
New Notes) that they would have received had they
not accepted the Exchange Offer. See "The Exchange
Offer -- Interest on the New Notes."
Termination of the Exchange
Offer.................... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, new law, statute,
rule or regulation or any interpretation of the
staff of the Commission of any existing law,
statute, rule or regulation. The Company does not
expect any of the foregoing conditions to occur,
although there can be no assurance that such
conditions will not occur. Holders of Old Notes
will have certain rights against the Company under
the Registration Rights Agreement should the
Company fail to consummate the Exchange Offer. See
"The Exchange Offer -- Termination."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any other
required documentation to United States Trust
Company of New York, as Exchange Agent, at the
address set forth herein and therein or effect a
tender of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See
"The Exchange Offer -- Procedures for Tendering."
By executing the Letter of Transmittal, each holder
will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New
Notes, whether or not such person is the holder,
(ii) neither the holder nor any such other person
10
<PAGE> 12
has an arrangement or understanding with any person
to participate in the distribution of such New
Notes and (iii) neither the holder nor any such
other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company.
Special Procedures for
Beneficial Holders......... Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on its
behalf. If such beneficial holder wishes to tender
on his own behalf, such beneficial holder must,
prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either
make appropriate arrangements to register ownership
of the Old Notes in such holder's name or obtain a
properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Deliver
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
who cannot complete the procedure for book-entry
transfer on a timely basis) and a properly
completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date may
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Old Notes may be withdraw at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer -- Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes.... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully under the "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- General."
Certain Tax
Consideration.............. The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal income
tax purposes. See "The Exchange Offer -- Certain
Income Tax Consequences."
Exchange Agent............. United States Trust Company of New York, the
Trustee under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection with the
Exchange Offer. The address of the Exchange Agent
is: United States Trust Company of New York, 114
West 47th Street, New York, NY 10036, Attention:
Margaret Ciesmelewski. For information with respect
to the Exchange Offer, the telephone number for the
Exchange Agent is (800) 548-6565 and the facsimile
number for the Exchange Agent is (212) 420-6152.
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the New Notes pursuant
to the Exchange Offer. The
11
<PAGE> 13
proceeds to the Company from the sale of the Old
Notes were approximately $241.8 million, net of the
Initial Purchasers' discount and certain fees and
expenses relating to the offering of the Old Notes.
The Company used approximately $111.9 million of
such net proceeds to acquire the Company's
outstanding 9 3/4% Senior Notes (including accrued
and unpaid interest) tendered pursuant to the
Tender Offer and to pay a consent fee to holders of
9 3/4% Notes who consented to certain amendments to
the indenture pursuant to which the 9 3/4% Notes
were issued, in connection with the Tender Offer.
The Company intends to use an additional $24.4
million of such net proceeds to redeem the
remaining $23.2 million aggregate principal amount
(plus accrued and unpaid interest) of outstanding
9 3/4% Notes that were not tendered in the Tender
Offer on March 16, 1998 in the Redemption. The
balance of the net proceeds from the Offering will
be used for general corporate purposes including
potential strategic acquisitions. See "Use of
Proceeds."
12
<PAGE> 14
SUMMARY DESCRIPTION OF THE NEW NOTES
Notes Offered.............. $250 million principal amount of 8% Senior
Subordinated Notes due 2008.
Maturity Date.............. March 1, 2008.
Interest Payment Dates..... March 1 and September 1 of each year, commencing
September 1, 1998.
Optional Redemption........ The Notes are redeemable at the option of the
Company, in whole or in part, on or after March 1,
2003 at the redemption prices set forth herein,
together with accrued and unpaid interest to the
date of redemption. In addition, at any time on or
prior to March 1, 2001, the Company may redeem up
to 35% of the aggregate principal amount of the
Notes originally issued with the net proceeds of
one or more Equity Offerings at 108% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption;
provided that at least 65% of the aggregate
principal amount of the Notes originally issued
remains outstanding after such redemption. See
"Description of the New Notes -- Optional
Redemption."
Mandatory Redemption....... None.
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of the Notes shall have the option to
require the Company to repurchase such holder Notes
at a redemption price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest to the date of redemption, pursuant to a
Change of Control offer to be made by the Company.
See "Description of the New Notes -- Certain
Definitions" for the definition of a Change of
Control.
Ranking.................... The Notes will be unsecured senior subordinated
obligations of the Company and will be subordinated
to all existing and future Senior Indebtedness of
the Company, including indebtedness under the Bank
Credit Facility. The Notes will rank pari passu
with the Company's 9 7/8% Senior Subordinated Notes
due 2006 (the "9 7/8% Notes"). As of November 29,
1997, after giving pro forma effect to the Offering
and the application of the net proceeds therefrom,
the aggregate outstanding principal amount of
Senior Indebtedness of the Company would have been
approximately $7.2 million. As of November 29,
1997, after giving pro forma effect to the Offering
and the application of the net proceeds therefrom,
the aggregate outstanding amount of the 9 7/8%
Notes would have been $100 million. In addition,
the Notes will be effectively subordinated to the
obligations of the Company's subsidiaries. As of
November 29, 1997, after giving pro forma effect to
the Offering and the application of the net
proceeds therefrom, the Company's subsidiaries
would have had approximately $7.2 million of
indebtedness outstanding. Subject to certain
limitations, the Company and its Restricted
Subsidiaries may incur additional indebtedness in
the future. See "Risk Factors -- Adverse
Consequences of Financial Leverage," "Description
of the New Notes -- Subordination -- Limitation on
Indebtedness, and -- Limitation on Other Senior
Subordinated Indebtedness."
Certain Covenants.......... The Indenture contains certain covenants, including
without limitation, covenants with respect to the
following matters: (i) limitation on indebtedness;
(ii) limitation on other senior subordinated
indebtedness; (iii) limitation on restricted
payments; (iv) limitation on issuances and
13
<PAGE> 15
sales of restricted subsidiary stock; (v)
limitation on transactions with affiliates; (vi)
limitation on liens securing pari passu or
subordinated indebtedness; (vii) limitation on
disposition of proceeds of asset sales; (viii)
limitation on guarantees of indebtedness by
restricted subsidiaries; (ix) limitation on
dividends and other payment restrictions affecting
restricted subsidiaries; and (x) restrictions on
mergers and certain transfers of assets. See
"Description of the New Notes -- Certain
Covenants."
Registration Rights........ In connection with the sale of the Old Notes, the
Company agreed in the Registration Rights Agreement
to use its best efforts to (i) file within 30 days,
and cause to become effective within 90 days, of
the date of the original issues of the Old Notes, a
registration statement (the "Registration
Statement") of which this Prospectus is a part with
respect to a registered offer to exchange the Old
Notes for the New Notes with terms identical in all
material respects to the Old Notes and (ii) cause
the Exchange Offer to be consummated within 120
days of the original issue of the Old Notes.
In the event that any changes in law or the
applicable interpretations of the staff of the
Commission do not permit the Company to effect the
Exchange Offer, or if for any other reason the
Exchange Offer is not consummated within 120 days
following the date of the original issue of the Old
Notes, or if any holder of the Old Notes (other
than the Initial Purchasers) is not eligible to
participate in the Exchange Offer, or upon the
request of any Initial Purchaser under certain
circumstances, the Company will use its best
efforts to cause to become effective by the 120th
day after the original issue of the Old Notes a
shelf registration statement pursuant to the
Securities Act with respect to the resale of the
Old Notes (the "Shelf Registration Statement") and
to keep the Shelf Registration Statement effective
until three years after the effective date thereof
(or until one year after such effective date if
such Shelf Registration Statement is filed at the
request of the Initial Purchasers under certain
circumstances).
In the event that either (i) the Registration
Statement is not filed with the Commission on or
prior to the 30th calendar day following the date
of original issue of the Old Notes, (ii) the
Registration Statement is not declared effective on
or prior to the 90th calendar day following the
date of original issue of the Old Notes or (iii)
the Exchange Offer is not consummated or a Shelf
Registration Statement with respect to the Old
Notes is not declared effective on or prior to the
120th calendar day following the date of original
issue of the Old Notes, the interest rate borne by
the Old Notes shall be increased by one-half of one
percent per annum following such 30-day period in
the case of clause (i) above, following such 90-day
period in the case of clause (ii) above, or
following such 120-day period in the case of clause
(iii) above. The aggregate amount of such increase
from the original interest rate pursuant to these
provisions will in no event exceed one-half of one
percent per annum. Upon (x) the filing of the
registration statement for the Exchange Offer after
the 30-day period described in clause (i) above,
(y) the effectiveness of the Registration Statement
after the 90-day period described in clause (ii)
above, or (z) the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration
Statement as
14
<PAGE> 16
the case may be, after the 120-day period described
in clause (iii) above, the interest rate borne by
the Old Notes from the date of such filing,
effectiveness or the day before the date of
consummation, as the case may be, will be reduced
to the original interest rate if the Company is
otherwise in compliance with such requirements. See
"Exchange Offer."
Common Stock Listing....... The Company's common stock is listed on the Nasdaq
National Market (Symbol: BEAV) and, based on the
closing price of $29.50 per share on March 6, 1998,
the Company had a total equity market
capitalization of approximately $670 million.
Risk Factors............... See "Risk Factors" for a discussion of certain
factors which should be considered by prospective
investors in evaluating an investment in the New
Notes.
15
<PAGE> 17
SUMMARY FINANCIAL DATA
The financial data as of and for the fiscal years ended February 22, 1997,
February 24, 1996, and February 25, 1995, except backlog and pro forma
information, have been derived from financial statements which have been audited
by B/E's independent auditors. The financial data as of and for the nine months
ended November 29, 1997 and November 30, 1996 have been derived from financial
statements which are unaudited, but, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for such
periods. Operating results for the nine months ended November 29, 1997 and
November 30, 1996 are not necessarily indicative of results that may be expected
for a full year. The following financial information is qualified by reference
to, and should be read in conjunction with, B/E's financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
----------------------------------------------------- ------------------------------
FEB. 25, 1995 FEB. 24, 1996(a) FEB. 22, 1997(a) NOV. 30, 1996 NOV. 29, 1997
------------- ---------------- ---------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales....................... $229,347 $ 232,582 $412,379 $308,151 $362,687
Cost of sales................... 154,863 160,031 270,557 204,655 230,825
-------- --------- -------- -------- --------
Gross profit.................... 74,484 72,551 141,822 103,496 131,862
Operating expenses:
Selling, general and
administrative.............. 31,787 42,000 51,734 37,619 43,017
Research, development and
engineering................. 12,860 58,327(b) 37,083 27,759 34,988
Amortization expenses......... 9,954 9,499 10,607 8,021 8,195
Other expenses................ 23,736(c) 4,170(c) -- -- --
-------- --------- -------- -------- --------
Operating earnings (loss)....... (3,853) (41,445) 42,398 30,097 45,662
Interest expense, net........... 15,019 18,636 27,167 21,845 16,899
-------- --------- -------- -------- --------
Earnings (loss) before income
taxes (benefit) and cumulative
effect of accounting change... (18,872) (60,081) 15,231 8,252 28,763
Income taxes (benefit).......... (6,806) -- 1,522 825 4,311
-------- --------- -------- -------- --------
Earnings (loss) before
cumulative effect of
accounting change............. (12,066) (60,081) 13,709 7,427 24,452
Cumulative effect of accounting
change........................ -- (23,332)(b) -- -- --
-------- --------- -------- -------- --------
Net earnings (loss)............. $(12,066) $ (83,413) $ 13,709 $ 7,427 $ 24,452
======== ========= ======== ======== ========
OTHER DATA:
Gross margin.................... 32.5% 31.2% 34.4% 33.6% 36.4%
EBITDA(d)....................... $ 36,029 $ (18,840) $ 66,545 $ 46,422 $ 64,144
Depreciation and amortization... 16,146 18,435 24,147 16,325 18,482
Capital expenditures............ 12,172 13,656 14,471 8,675 21,099
Ratio of earnings to
fixed charges(e).............. NM(f) NM(f) 1.6x 1.4x 2.7x
Ratio of EBITDA to interest
expense, net.................. 2.4x NM 2.4x 2.1x 3.8x
Ratio of EBITDA to pro forma
interest expense(g)........... -- -- -- -- 2.8x
Backlog, at period end.......... $221,000(h) $ 340,000(h) $415,000(h) $420,000(h) $560,000
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 29, 1997
--------------------------
CONSOLIDATED BALANCE SHEET DATA ACTUAL AS ADJUSTED(i)
(END OF PERIOD): -------- --------------
<S> <C> <C>
Working capital............................................. $153,282 $263,532
Total assets................................................ 546,711 662,976
Long-term debt.............................................. 225,339 349,789
Stockholders' equity........................................ 200,200 190,964
</TABLE>
(footnotes on following page)
16
<PAGE> 18
(footnotes to table)
(a) On January 24, 1996, the Company acquired all of the stock of Burns
Aerospace Corporation ("Burns"), an industry leader in commercial aircraft
seating. The acquisition of Burns was accounted for as a purchase, and the
results of Burns are included in B/E's historical financial data from the
date of acquisition.
(b) In fiscal 1996, the Company changed its method of accounting relating to the
capitalization of pre-contract engineering costs that were previously
included as a component of inventories and amortized to earnings as the
product was shipped. Effective February 26, 1995, such costs have been
charged to research and development and expensed as incurred and, as a
result, periods prior to fiscal 1996 are not comparable. In connection with
such change in accounting, the Company recorded a charge to earnings of
$23.3 million. See Note 2 of Notes to the Consolidated Financial Statements.
(c) In fiscal 1996, in conjunction with the Company's rationalization of its
seating business and as a result of the Burns acquisition, the Company
recorded a charge to earnings of $4.2 million related to costs associated
with the integration and consolidation of the Company's European seating
operations. In fiscal 1995, the Company charged to earnings $23.7 million of
expenses primarily related to intangible assets and inventories associated
with the Company's earlier generations of passenger entertainment systems.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(d) EBITDA represents net earnings before deducting extraordinary items, income
tax expenses, interest expense, net, other expenses and depreciation and
amortization expense. EBITDA is not a measurement in accordance with GAAP
and is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net income
(loss) or operating cash flow as a measure of B/E's profitability.
(e) For purposes of computing this ratio, earnings consist of earnings before
extraordinary items, income taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest and amortization of deferred debt
issuance costs.
(f) Earnings were insufficient to cover fixed charges by approximately $18.0
million and $59.7 million for the fiscal years ended February 25, 1995 and
February 24, 1996, respectively.
(g) The ratio of EBITDA to pro forma interest expense is computed on a pro forma
basis giving effect to the Offering and use of proceeds therefrom as if the
Offering had occurred as of February 23, 1997. The ratio of EBITDA to pro
forma interest expense, net, would have been 3.5x had interest earned on any
unused net proceeds of the Offering been taken into account. See
"Capitalization."
(h) As adjusted on a similar basis to exclude certain backlog which was debooked
in August 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Bookings and Backlog Information."
(i) As adjusted to reflect the application of the net proceeds from the Offering
to acquire the 9 3/4% Notes pursuant to the Tender Offer and the Redemption,
assuming 100% of the 9 3/4% Notes are tendered or redeemed, and related
costs associated with the issuance of the Notes and an estimated $9.2
million extraordinary charge for unamortized debt issuance costs, tender and
redemption premiums and fees and expenses.
17
<PAGE> 19
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider carefully the following factors in evaluating the
Company and its business before purchasing the Notes offered hereby.
ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE
As of November 29, 1997, after giving pro forma effect to the Offering and
the application of the net proceeds therefrom, the Company would have had
approximately $357.0 million aggregate amount of indebtedness outstanding,
representing 65.2% of total capitalization. See "Use of Proceeds" and
"Capitalization."
The degree of the Company's leverage could have important consequences to
purchasers of the Notes, including: (i) limiting the Company's ability to obtain
additional financing to fund future working capital requirements, capital
expenditures, acquisitions or other general corporate requirements; (ii)
requiring a substantial portion of the Company's cash flow from operations to be
dedicated to debt service requirements, thereby reducing the funds available for
operations and further business opportunities; and (iii) increasing the
Company's vulnerability to adverse economic and industry conditions. In
addition, since any borrowings under the Company's bank credit facilities will
be at variable rates of interest, the Company will be vulnerable to increases in
interest rates. The Company may incur additional indebtedness in the future,
although its ability to do so will be restricted by the Indenture, the indenture
governing the 9 7/8% Notes, and the Company's bank credit facilities. The
ability of the Company to make scheduled payments under its present and future
indebtedness will depend on, among other things, the future operating
performance of the Company and the Company's ability to refinance its
indebtedness when necessary. Each of these factors is to a large extent subject
to economic, financial, competitive and other factors beyond the Company's
control.
The Company's bank credit facilities, the indenture governing the 9 7/8%
Notes and the Indenture contain numerous financial and operating covenants that
will limit the discretion of the Company's management with respect to certain
business matters. These covenants will place significant restrictions on, among
other things, the ability of the Company to incur additional indebtedness, to
create liens or other encumbrances, to make certain payments and investments,
and to sell or otherwise dispose of assets and merge or consolidate with other
entities. The Company's bank credit facilities also require the Company to meet
certain financial ratios and tests. A failure to comply with the obligations
contained in the Company's bank credit facilities, or the indenture governing
the 9 7/8% Notes and the Indenture, could result in an event of default under
the Company's bank credit facilities, or such indentures, which could permit
acceleration of the related debt and acceleration of debt under other
instruments that may contain cross-acceleration or cross-default provisions. See
"Description of Certain Indebtedness."
SUBORDINATION OF THE NOTES; ASSETS ENCUMBRANCES; CHANGE OF CONTROL OFFER
The Notes will be subordinated in right of payment in full to all existing
and future Senior Indebtedness of the Company, which includes all indebtedness
under the Bank Credit Facility. As of November 29, 1997, on a pro forma basis
after giving effect to the Offering and the application of the net proceeds
therefrom, the aggregate amount of Senior Indebtedness of the Company would have
been approximately $7.2 million. In addition, upon consummation of the Offering,
approximately $120 million was available under the Bank Credit Facility which,
if borrowed, would be included as Senior Indebtedness. Further, the Notes will
be effectively subordinated to indebtedness of the Company's subsidiaries. As of
November 29, 1997, on a pro forma basis after giving effect to the Offering and
the application of the net proceeds therefrom, the aggregate amount of
indebtedness of the Company's subsidiaries would have been approximately $7.2
million. See "Description of Certain Indebtedness."
In the event of the liquidation, dissolution, reorganization or any similar
proceeding regarding the Company, the assets of the Company will be available to
pay obligations on the Notes only after Senior Indebtedness of the Company has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on all or any of the Notes. In addition, the Company may not pay
principal of, premium, if any,
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or interest on the Notes or purchase, redeem or otherwise retire the Notes, if
any principal, premium, if any, or interest on any Designated Senior
Indebtedness (as defined) is not paid when due (whether at final maturity, upon
scheduled installment, acceleration or otherwise) unless such default has been
cured or waived or such Designated Senior Indebtedness has been repaid in full.
In addition, under certain circumstances, if any non-payment default exists with
respect to Designated Senior Indebtedness, the Company may not make any payments
on the Notes for a specified period of time, unless such default is cured or
waived or such Designated Senior Indebtedness has been repaid in full. See
"Description of the New Notes -- Subordination."
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the Notes will not be secured by any of the
Company's assets. The obligations of the Company under the Bank Credit Facility
are secured by substantially all the Company's assets. If the Company becomes
insolvent or is liquidated, or if payment under the Bank Credit Facility is
accelerated, the lenders under the Bank Credit Facility would be entitled to
exercise the remedies available to a secured lender under applicable law and
pursuant to such agreement. Accordingly, such lenders will have a prior claim
with respect to such assets. See "Description of Certain Indebtedness."
Upon a Change of Control (as defined), the Company is required to offer to
purchase all outstanding Notes. The ability of the Company to purchase the Notes
upon a Change of Control is restricted by the terms of the indenture governing
the 9 7/8% Notes and the terms of the Bank Credit Facility. The Company, in such
circumstance, may be required immediately to repay the outstanding principal of,
and pay any accrued interest on, the loans made under the Bank Credit Facility
and the 9 7/8% Notes and pay any other amounts owed by the Company thereunder.
In the case of any such offer to purchase the outstanding Notes, there can be no
assurance that the Company would be able to repay amounts outstanding under the
Bank Credit Facility and the 9 7/8% Notes or obtain necessary consents
thereunder in order to consummate such purchase. In addition, upon a Change of
Control, the Company will be required to offer to purchase all of the 9 7/8%
Notes. Any requirement to offer to purchase outstanding Notes may result in the
Company having to refinance the indebtedness outstanding under these agreements.
There can be no assurance that the Company would be able to refinance such
indebtedness or, if such refinancing were to occur, that such refinancing would
be on terms favorable to the Company. See "Description of the New Notes" and
"Description of Certain Indebtedness."
DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY
The Company's customers are the world's commercial airlines. As a result,
the Company's business is directly dependent upon the conditions in the highly
cyclical and competitive commercial airline industry. In the late 1980s and
early 1990s, the airline industry suffered a severe downturn, which resulted in
record losses and several air carriers seeking protection under bankruptcy laws.
As a consequence, during such period, airlines sought to conserve cash by
reducing or deferring scheduled cabin interior refurbishment and upgrade
programs and delaying purchases of new aircraft. This led to a significant
contraction in the commercial aircraft cabin interior products industry, and a
decline in the Company's business and profitability. The airline industry has
now experienced five consecutive years of profitability including record
profitability in each of the last three calendar years. This financial
turnaround has, in part, been driven by record load factors, rising fare prices
and declining fuel costs. The airlines have substantially restored their balance
sheets through cash generated from operations and debt and equity placements. As
a result, the levels of airline spending on refurbishment and new aircraft
purchases have expanded. However, due to the volatility of the airline industry
there can be no assurance that the current profitability of the airline industry
will continue or that the airlines will maintain or increase expenditures on
cabin interior products for refurbishments or new aircraft.
In addition, the airline industry is undergoing a process of consolidation
and significantly increased competition. Such consolidation could result in a
reduction in future aircraft orders as overlapping routes are eliminated and
airlines seek greater economies through higher aircraft utilization. Increased
airline competition may also result in airlines seeking to reduce costs by
promoting greater price competition from airline cabin interior products
manufacturers, thereby adversely affecting the Company's revenues and margins.
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Recently, turbulence in the financial and currency markets of many Pacific
Rim countries has led to uncertainty with respect to the economic outlook for
these countries. Of the Company's $560 million of backlog at November 29, 1997,
the Company had $69 million with Asian carriers deliverable in fiscal 1999 and a
further $74 million deliverable in subsequent fiscal years. Of such Asian
carrier backlog, approximately $48 million was with JAL, Singapore Airlines and
Cathay Pacific. Although not all Asian carriers have been affected by the
current economic events in the Pacific Rim, certain carriers could cancel or
defer their existing orders and future orders from airlines in these countries
for the Company's cabin interior products may be adversely affected.
NEW PRODUCT INTRODUCTIONS AND TECHNOLOGICAL CHANGE
Airlines currently are taking delivery of a new generation of aircraft and
demanding increasingly sophisticated cabin interior products. As a result, the
cabin interior configurations of commercial aircraft are becoming more complex
and will require more technologically advanced and integrated products. For
example, airlines increasingly are seeking sophisticated in-flight entertainment
systems, such as the MDDS interactive individual passenger in-flight
entertainment system being developed by B/E. The Company expects that in-flight
entertainment systems, including live broadcast television on narrow-body
aircraft, will provide a significant percentage of its future revenues.
Development of the MDDS and related in-flight entertainment systems required
substantial investment by the Company and third parties in research, development
and engineering. MDDS is not yet in commercial production. The future success of
the Company may depend, to a significant extent, on its ability to manufacture
successfully and deliver, on a timely basis, in-flight entertainment products
and to have the these products perform at the level expected by B/E's customers
and their passengers, as well as the Company's ability to continue to develop,
profitably manufacture and deliver, on a timely basis, other technologically
advanced, reliable high-quality products which can be readily integrated into
complex cabin interior configurations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Bookings and Backlog
Information" and "Business -- Products and Services."
COMPETITION
The Company competes with a number of established companies that have
significantly greater financial, technological and marketing resources than the
Company. Although the Company has achieved a significant share of the market for
a number of its cabin interior products, there can be no assurance that the
Company will be able to maintain this market share. The ability of the Company
to maintain its market share will depend not only on its ability to remain the
supplier of retrofit and refurbishment products and spare parts on the
commercial fleets on which its products are currently in service but also on its
success in having its products selected for installation in new aircraft,
including next generation aircraft, expected to be purchased by the airlines
over the next decade, and in avoiding product obsolescence.
The Company's primary competitors in the market for new passenger
entertainment products, including individual seat video and in-flight
entertainment and cabin management systems are Matsushita Electronics ("MAS")
and Rockwell Collins, each of which has significantly greater technological
capabilities and financial and marketing resources than the Company. See
"Business -- Competition."
REGULATION
The Federal Aviation Administration (the "FAA") prescribes standards and
licensing requirements for aircraft components, including virtually all
commercial airline cabin interior products, and licenses component repair
stations within the United States. Comparable agencies regulate these matters in
other countries. If the Company fails to obtain a required license for one of
its products or services or loses a license previously granted, the sale of the
subject product or service would be prohibited by law until such license is
obtained or renewed. In addition, designing new products to meet existing FAA
requirements and retrofitting installed products to comply with new FAA
requirements can be both expensive and time consuming. See "Business --
Government Regulation."
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ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The Notes are new securities for which there currently is no trading market
and there can be no assurance as to the liquidity of any market for the Notes
that may develop, the ability of holders of the Notes to sell their Notes, or
the prices at which holders of the Notes would be able to sell their Notes. If
such markets were to exist, the Notes could trade at prices higher or lower than
their initial purchase prices depending on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Notes and, if issued, the Exchange
Notes, the Initial Purchasers are not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Notes and,
if issued, the Exchange Notes. The Notes are eligible for trading in the Private
offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The
Company does not intend to apply for listing of the Notes on any securities
exchange or for quotation on the National Association of Securities Dealers
Automated Quotation System.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities. Old Notes will continue to be
subject to the following restrictions on transfer: (i) Old Notes may be resold
only if registered pursuant to the Securities Act, if an exemption from
registration is available thereunder, or if neither such registration nor such
exemption is required by law, (ii) Old Notes shall bear a legend restricting
transfer in the absence of registration or an exemption therefrom and (iii) a
holder of Old Notes who desires to sell or otherwise dispose of all or any part
of its Old Notes under an exemption from registration under the Securities Act,
if requested by the Company, must deliver to the Company an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to the Company, that such exemption is
available.
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THE COMPANY
The Company is the world's largest supplier of commercial aircraft cabin
interior products, serving virtually all major airlines with a broad line of
products, including aircraft seats, galley products and structures and in-flight
entertainment systems. B/E's executive offices are located at 1400 Corporate
Center Way, Wellington, Florida 33414, and its telephone number is (561)
791-5000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Old Notes were
approximately $241.8 million, net of Initial Purchasers' discount and certain
fees and expenses relating to the Offering. The Company used approximately
$111.9 million of the net proceeds from the Offering to acquire approximately
$101.8 million aggregate principal amount (plus accrued and unpaid interest) of
the 9 3/4% Notes tendered pursuant to the Tender Offer and to pay a consent fee
in connection with the Tender Offer to holders of the 9 3/4% Notes who consented
to the adoption of certain amendments to the indenture pursuant to which the
9 3/4% Notes were issued. The Company intends to use an additional $24.4 million
of the net proceeds of the Offering to redeem the remaining $23.2 million
aggregate principal amount (plus accrued and unpaid interest) of outstanding
9 3/4% Notes that were not tendered in the Tender Offer on March 16, 1998 in the
Redemption. The 9 3/4% Notes bear interest at the rate of 9 3/4% and mature on
March 1, 2003. The remainder of the net proceeds will be used for general
corporate purposes, including working capital requirements to support increased
sales, and possible investments in strategic acquisitions. Pending application
as described above, the net proceeds of the Offering will be invested in
short-term, fixed income investments. The Company expects to incur an estimated
$9.2 million extraordinary charge for unamortized debt issuance costs, tender
and redemption premiums and fees and expenses in connection with the Tender
Offer and the Redemption.
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights. Pursuant to the
Registration Rights Agreement, the Company agreed to (i) file within 30 days,
and cause to become effective within 90 days of the date of original issue of
the Old Notes, the Registration Statement of which this Prospectus is a part
with respect to the exchange of the Old Notes for the New Notes and (ii) cause
the Exchange Offer to be consummated within 120 days of the original issue of
the Old Notes. The New Notes have terms identical in all material respects to
the terms of the Old Notes. However, in the event that any changes in law or
applicable interpretation of the staff of the Commission do not permit the
Company to effect the Exchange Offer, or if for any other reason the Exchange
Offer is not consummated within 120 days following the date of the original
issue of the Old Notes, or if any holder of the Old Notes (other than the
Initial Purchasers) is not eligible to participate in the Exchange Offer, or
upon the request of any Initial Purchaser under certain circumstances, the
Company has agreed to use its best efforts to cause to become effective the
120th day after the original issue of the Old Notes, a Shelf Registration
Statement with respect to the resale of the Old Notes and to keep the Shelf
Registration Statement effective until three years after the effective date
thereof (or until one year after such effective date if such Shelf Registration
Statement is filed at the request of the Initial Purchasers under certain
circumstances). The Company also had agreed that in the event that either (i)
the Registration Statement is not filed with the Commission on or prior to the
30th calendar day following the date of the original issue of the Old Notes or
(ii) the Registration Statement is not declared effective on or prior to the
90th calendar day following the date of the original issue of the Old Notes or
(iii) the Exchange Offer is not consummated or a Shelf Registration Statement is
not declared effective on or prior to the 120th calendar day following the
original issue of the Old Notes, the interest rate borne by the Old Notes shall
be increased by one-half of one percent per annum after such 30-day period in
the case of clause (i) above after such 90-day period in the case of clause (ii)
above or after such 120-day period in the case of clause (iii) above. The
aggregate amount of such increase from the original interest rate pursuant to
those provisions will in no event exceed one-half of one percent per annum. Upon
(x) the effectiveness of the Registration Statement after the 90-day period in
clause (ii) above or
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<PAGE> 24
(y) the consummation of the Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, after the 120-day period outlined in
clause (iii) above, the interest rate borne by the Old Notes from the date of
such filing or effectiveness or the day before the date of consummation, as the
case may be, will be reduced to the original interest rate if the Company is
otherwise in compliance with such requirements.
In the event the Exchange Offer is consummated, the Company will not be
required to file a Shelf Registration Statement relating to any outstanding Old
Notes other than those held by persons not eligible to participate in the
Exchange Offer, and the interest rate on such Old Notes will remain at its
initial level of 8%. The Exchange Offer shall be deemed to have been consummated
upon the earlier to occur of (i) the Company having exchanged New Notes for all
outstanding Old Notes (other than Old Notes held by persons not eligible to
participate in the Exchange Offer) pursuant to the Exchange Offer and (ii) the
Company having exchanged, pursuant to the Exchange Offer, New Notes for all Old
Notes that have been tendered and not withdrawn on the Expiration Date. Upon
consummation, holders of Old Notes seeking liquidity in their investment would
have to rely on exemptions to registration requirements under the securities
laws, including the Securities Act. See "Risk Factors -- Consequences of Failure
to Exchange."
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of outstanding Old Notes accepted in the
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer in denominations of $1,000 and integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Old Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that the holder is acquiring the
New Notes in its ordinary course of business and is not participating, and has
no arrangements or understanding with any person to participate, in the
distribution of the New Notes. Holders of Old Notes wishing to accept the
Exchange Offer must represent to the Company that such conditions have been met.
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The Prospectus,
as it may be amended or supplemented from time to time, may be used by such
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus and any amendment or supplement to
this Prospectus available to any such broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
As of the date of this Prospectus, $250 million aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes initially purchased by Qualified
Institutional Buyers to be issued and transferable in book-entry form through
the facilities of DTC, acting as depositary. The New Notes will also be issuable
and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 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
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Exchange Agent will act as agent for the tendering holders of Old Notes for the
purpose of receiving New Notes from the Company and delivering New Notes to such
holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expenses, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
EXPIRATION DATES; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1998 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "-- Termination" shall have occurred and shall not have been waived
by the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner by which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones New Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from February 13, 1998, payable
semiannually on March 1 and September 1 of each year commencing on September 1,
1998, at the rate of 8% per annum. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued from February 13, 1998
until the date of the issuance of the New Notes. Consequently, holders who
exchange their Old Notes for New Notes will receive the same interest payment on
September 1, 1998 (the first interest payment date with respect to the Old Notes
and the New Notes) that they would have received had they not accepted the
Exchange Offer.
PROCEDURE FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such 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.
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Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at its
addresses set forth herein under "-- Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also requests that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letters of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office of correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which
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<PAGE> 27
determinations will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not validly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable flowing the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
By tendering, each holder of Old Notes will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, that neither the Holder nor
any other person has an arrangement or understanding with any person to
participate in the distribution of the New Notes and that neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act.
GUARANTEED DELIVERY PROCEDURE
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal, or any other required documents to the Exchange Agent prior to the
Expiration Date, or if such Holder cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, [within five business days after the Expiration Date],
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange.
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To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfers
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) for such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly tendered. Any Old
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be tendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
therefore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer, which, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute rule or regulation is interpreted by
the staff of the Commission or court of competent jurisdiction in a manner,
which, in the Company's judgment, might materially impair the Company's ability
to proceed with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
EXCHANGE AGENT
United States Trust Company of New York, the Trustee under the Indenture,
has been appointed as Exchange Agent for the Exchange Offer. Questions and
requests for assistance and requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent addressed
as follows:
By Mail or Hand Delivery: United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Services
Facsimile Transmission: (212) 420-6152
Confirm by Telephone: (800) 548-6565
27
<PAGE> 29
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizing the federal income tax consequences of
the Exchange Offer reflects the opinion of Shearman & Sterling, counsel to the
Company, as to material federal income tax consequences expected to result from
the Exchange Offer. An opinion of counsel is not binding on the Internal Revenue
Service ("IRS") or the courts, and there can be no assurances that the IRS will
not take, and that a court would not sustain, a position to the contrary to that
described below. Moreover, the following discussion does not constitute
comprehensive tax advice to any particular Holder of Old Notes. The summary is
based on the current provisions of the Internal Revenue Code of 1986, as
amended, and applicable Treasure regulations, judicial authority and
administrative pronouncements. The tax consequences described below could be
modified by future changes in the relevant law, which could have retroactive
effect. Each Holder of Old Notes should consult its own tax advisor as to these
and any other federal income tax consequences of the Exchange Offer as well as
any tax consequences to it under foreign, state, local or other law.
In the opinion of Shearman & Sterling, exchanges of Old Notes for New Notes
pursuant to the Exchange Offer will be treated as a modification of the Old
Notes that does not constitute a material change in their terms, and the Company
intends to treat the exchanges in that manner. Therefore an exchanging Holder,
will not recognize any gain or loss, in respect of an exchange of an Old Note
for a New Note, and such Holder's basis and holding period in the New Note will
be the same as such Holder's basis and holding period in the Old Note. The
Exchange Offer will result in no federal income tax consequences to a
non-exchanging Holder.
28
<PAGE> 30
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 29, 1997 and as adjusted to give effect to the sale of the Notes after
deducting discounts, commissions and other offering expenses, and the
application of the net proceeds of the Offering as described in "Use of
Proceeds." The table should be read in conjunction with the financial
statements, including notes thereto, included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
AS OF NOVEMBER 29, 1997
--------------------------
ACTUAL As Adjusted(a)
-------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term
debt...................................................... $ 7,222 $ 7,222
Long-term debt, excluding current maturities:
9 3/4% Senior Notes due 2003.............................. 124,925 --
9 7/8 Senior Subordinated Notes due 2006.................. 100,000 100,000
8% Senior Subordinated Notes due 2008..................... -- 249,375
Other..................................................... 414 414
-------- --------
Total long-term debt.............................. 225,339 349,789
Stockholders' equity
Preferred Stock, $.01 par value, 1,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized; 22,792,892 shares issued and outstanding... 228 228
Additional paid-in capital................................ 238,578 238,578
Accumulated deficit....................................... (37,834) (47,070)(b)
Currency translation adjustment........................... (772) (772)
-------- --------
Total stockholders' equity............................. 200,200 190,964
-------- --------
Total capitalization.............................. $432,761 $547,975
======== ========
</TABLE>
- ---------------
(a) Adjusted to reflect the sale the Notes. The Company used approximately
$111.9 million of the net proceeds from the Offering to acquire
approximately $101.8 million aggregate principal amount (plus accrued and
unpaid interest) of the Company's outstanding 9 3/4% Notes tendered pursuant
to the Tender Offer, and to pay a consent fee in connection with the Tender
Offer to holders of the 9 3/4% Notes who consented to the adoption of
certain amendments to the indenture pursuant to which the 9 3/4% Notes were
issued. The Company intends to use approximately $24.4 million of the net
proceeds of the Offering to redeem the remaining $23.2 million aggregate
principal amount (plus accrued and unpaid interest) of outstanding 9 3/4%
Notes that were not tendered in the Tender Offer on March 16, 1998 in the
Redemption. Following the Offering, the Company would have available under
its Bank Credit Facility approximately $120 million for subsequent
borrowings.
(b) Reflects the effect of an estimated $9.2 million extraordinary charge for
unamortized debt issuance costs, tender and redemption premiums and fees and
expenses in connection with the Tender Offer and the Redemption.
29
<PAGE> 31
SELECTED FINANCIAL DATA
On February 28, 1992, B/E acquired from the Pullman Company certain assets
and liabilities of PTC Aerospace, Inc. ("PTC") and Aircraft Products Company
("APC") and changed its fiscal year-end to the last Saturday in February. On
April 2, 1992, B/E acquired the stock of Flight Equipment Engineering Limited
("FEEL"). During fiscal 1994, B/E completed the following acquisitions: (a) on
April 29, 1993, B/E acquired all of the stock of Royal Inventum, B.V.
("Inventum"); (b) on August 23, 1993, B/E acquired all of the stock of Nordskog
Industries ("Nordskog"); (c) on August 26, 1993, B/E acquired all of the stock
of Acurex Corporation ("Acurex"); and (d) on October 13, 1993, B/E acquired
substantially all of the assets of Philips Airvision ("Airvision"). On January
24, 1996, the Company acquired all of the stock of Burns Aerospace Corporation
("Burns"), an industry leader in commercial aircraft seating. The financial data
as of and for the fiscal years ended February 22, 1997, February 24, 1996,
February 25, 1995, February 26, 1994 and February 27, 1993, have been derived
from financial statements which have been audited by B/E's independent auditors.
The financial data as of and for the nine months ended November 29, 1997 and
November 30, 1996 have been derived from financial statements which are
unaudited, but, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. Operating results for the nine months ended November 29, 1997 and
November 30, 1996 are not necessarily indicative of results that may be expected
for a full year. The following financial information is qualified by reference
to, and should be read in conjunction with, B/E's financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------- -------------------
FEB. 27, FEB. 26, FEB. 25, FEB. 24, FEB. 22, NOV. 30, NOV. 29,
1993 1994 1995 1996(A) 1997(A) 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................... $198,019 $203,364 $229,347 $232,582 $412,379 $308,151 $362,687
Cost of sales........................... 137,690 136,307 154,863 160,031 270,557 204,655 230,825
-------- -------- -------- -------- -------- -------- --------
Gross profit............................ 60,329 67,057 74,484 72,551 141,822 103,496 131,862
Operating expenses:
Selling, general and administrative... 21,698 28,164 31,787 42,000 51,734 37,619 43,017
Research, development and
engineering......................... 11,299 9,876 12,860 58,327(b) 37,083 27,759 34,988
Amortization expense.................. 4,551 7,599 9,954 9,499 10,607 8,021 8,195
Other expenses........................ -- -- 23,736(c) 4,170(c) -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating earnings (loss)............... 22,781 21,418 (3,853) (41,445) 42,398 30,097 45,662
Interest expense, net................... 3,955 12,581 15,019 18,636 27,167 21,845 16,899
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income taxes
(benefit), extraordinary item and
cumulative effect of accounting
change................................ 18,826 8,837 (18,872) (60,081) 15,231 8,252 28,763
Income taxes (benefit).................. 6,676 3,481 (6,806) -- 1,522 825 4,311
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before extraordinary
item and cumulative effect of
accounting change..................... 12,150 5,356 (12,066) (60,081) 13,709 7,427 24,452
Extraordinary item, net of tax effect... (522)(d) -- -- -- -- -- --
Cumulative effect of accounting
change................................ -- -- -- (23,332)(b) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..................... $ 11,628 $ 5,356 $(12,066) $(83,413) $ 13,709 $ 7,427 $ 24,452
======== ======== ======== ======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) before cumulative effect
of accounting change.................. $ 1.03 $ 0.35 $ (0.75) $ (3.71) $ 0.72 $ 0.42 $ 1.04
Extraordinary item, net of tax effect... (0.05)(d) -- -- -- -- -- --
Cumulative effect of accounting
change................................ -- -- -- (1.44)(b) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..................... $ 0.98 $ 0.35 $ (0.75) $ (5.15) $ 0.72 $ 0.42 $ 1.04
======== ======== ======== ======== ======== ======== ========
Common and common equivalent shares..... 11,847 15,438 16,021 16,185 19,107 17,786 23,414
</TABLE>
(continued on following page)
30
<PAGE> 32
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
--------------------------------------------------- -----------------------------
FEB. 25, 1995 FEB. 24, 1996(A) FEB. 22, 1997(A) NOV. 30, 1996 NOV. 29, 1997
------------- ---------------- ---------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross margin.............................. 32.5% 31.2% 34.4% 33.6% 36.4%
EBITDA(e)................................. $ 36,029 $(18,840) $ 66,545 $ 46,422 $ 64,144
Depreciation and amortization............. 16,146 18,435 24,147 16,325 18,482
Capital expenditures...................... 12,172 13,656 14,471 8,675 21,099
Ratio of earnings to fixed charges(f)..... NM(g) NM(g) 1.6x 1.4x 2.7x
Ratio of EBITDA to interest expense,
net..................................... 2.4x NM 2.4x 2.1x 3.8x
Ratio of EBITDA to pro forma interest
expense(h).............................. -- -- -- -- 2.8x
Backlog, at period end.................... $221,000(i) $340,000(i) $415,000(i) $420,000(i) $560,000
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 29, 1997
--------------------------
ACTUAL AS ADJUSTED(J)
-------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA (END OF
PERIOD):
Working capital........................... $153,282 $263,532
Total assets.............................. 546,711 662,976
Long-term debt............................ 225,339 349,789
Stockholders' equity...................... 200,200 190,964
</TABLE>
- ---------------
(a) On January 24, 1996, the Company acquired all of the stock of Burns, an
industry leader in commercial aircraft seating. The acquisition of Burns was
accounted for as a purchase, and the results of Burns are included in B/E's
historical financial data from the date of acquisition.
(b) In fiscal 1996, the Company changed its method of accounting relating to the
capitalization of precontract engineering costs that were previously
included as a component of inventories and amortized to earnings as the
product was shipped. Effective February 26, 1995, such costs have been
charged to research and development and expensed as incurred and, as a
result, periods prior to fiscal 1996 are not comparable. In connection with
such change in accounting, the Company recorded a charge to earnings of
$23.3 million. See Note 2 of Notes to the Consolidated Financial Statements.
(c) In fiscal 1996, in conjunction with the Company's rationalization of its
seating business and as a result of the Burns acquisition, the Company
recorded a charge to earnings of $4.2 million related to costs associated
with the integration and consolidation of the Company's European seating
operations. In fiscal 1995, the Company charged to earnings $23.7 million of
expenses primarily related to intangible assets and inventories associated
with the Company's earlier generations of passenger entertainment systems.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(d) As a result of the sale of 9 3/4% Notes in 1993, the Company wrote off the
unamortized portion of certain debt issuance costs related to its prior
credit agreement.
(e) EBITDA represents net earnings before deducting extraordinary items, income
tax expenses, interest expense, net, other expenses and depreciation and
amortization expense. EBITDA is not a measurement in accordance with GAAP
and is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net income
(loss) or operating cash flow as a measure of B/E's profitability.
(f) For purposes of computing this ratio, earnings consist of earnings before
extraordinary items, income taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest and amortization of deferred debt
issuance costs.
(g) Earnings were insufficient to cover fixed charges by approximately $18.0
million and $59.7 million for the fiscal years ended February 25, 1995 and
February 24, 1996, respectively.
(h) The ratio of EBITDA to pro forma interest expense is computed on a pro forma
basis giving effect to the Offering and use of proceeds therefrom as if the
Offering had occurred as of February 23, 1997. The ratio of EBITDA to pro
forma interest expense, net, would have been 3.5x had interest earned on any
unused net proceeds of the Offering been taken into account. See
"Capitalization."
(i) As adjusted on a similar basis to exclude certain backlog which was debooked
in August 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Bookings and Backlog Information."
(j) As adjusted to reflect the application of the net proceeds from the Offering
to acquire the 9 3/4% Notes pursuant to the Tender Offer and the Redemption,
assuming 100% of the 9 3/4% Notes are tendered or redeemed, and related
costs associated with the issuance of the Notes and an estimated $9.2
million extraordinary charge for unamortized debt issuance costs, tender and
redemption premiums and fees and expenses.
31
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
INTRODUCTION
B/E has become the world's leading manufacturer of commercial aircraft
interior products through the strategic acquisitions of seating, in-flight
passenger entertainment and services systems and galley products businesses.
B/E's products include an extensive line of first class, business class, tourist
class and commuter seats, a broad range of galley products including coffee and
beverage makers, ovens, liquid containers, refrigeration equipment and galley
structures, as well as a broad line of in-flight entertainment products
including both non-interactive and interactive entertainment systems, as well as
passenger control service systems. B/E markets and sells its products to its
customers, the airlines, through an integrated worldwide approach, focused by
airline and encompassing B/E's entire product line.
B/E's revenues are generally derived from two primary sources:
refurbishment or upgrade programs for the airlines' existing worldwide fleets,
and new aircraft deliveries. B/E believes its large installed base of products,
estimated to be approximately $3.3 billion as of November 29, 1997 (valued at
replacement prices), gives it a significant advantage over competitors in
obtaining orders for refurbishment programs, principally due to the tendency of
the airlines to purchase equipment for such programs from the original supplier.
With the exception of spare parts sales, B/E's revenues are generated from
programs initiated by the airlines which may vary significantly from year to
year in terms of size, mix of products and length of delivery. As a result,
B/E's revenues and margins may fluctuate from period to period based upon the
size and timing of the program and the type of products sold. Historically, B/E
experienced certain trends in its two revenue drivers: as the airlines took
deliveries of large numbers of new aircraft, refurbishment programs as a
percentage of revenues declined and, similarly, when new aircraft deliveries
declined, refurbishment programs tended to increase in number and size. During
the most recent airline industry recession, which ended in 1994, the airlines
significantly depleted their cash reserves and incurred record losses. In an
effort to improve their liquidity, the airlines conserved cash by reducing or
deferring cabin interior refurbishment and upgrade programs and purchases of new
aircraft. As a result, in contrast with historical experience, B/E experienced
declines in the number of both new orders and refurbishments.
Since early 1994, the airlines have experienced a significant turnaround in
operating results, with the domestic airline industry achieving record operating
earnings during calendar years 1995 through 1997. Consequently, during fiscal
1997 and the nine months ended November 29, 1997, B/E has experienced
significant growth in backlog of seating and galley products, and, during the
nine months ended November 29, 1997 has experienced significant growth in
revenues and operating earnings. This growth is a reflection of the airlines'
need to begin refurbishing worn fleets and their ability to do so as a result of
the strengthening of the airlines' balance sheets.
B/E has substantially expanded the size, scope and nature of its business
as a result of a number of acquisitions. During the fiscal year ended February
26, 1994, B/E completed the following acquisitions: (a) on April 29, 1993, the
Company acquired, through a Dutch holding company, all of the capital stock of
Inventum, a supplier of galley inserts including ovens, beverage makers and
water boilers to airlines located primarily in Europe and the Pacific Rim; (b)
on August 23, 1993, the Company acquired all of the capital stock of Nordskog,
an industry pioneer in galley structures and inserts; (c) on August 26, 1993,
the Company acquired all of the capital stock of Acurex, the leading worldwide
supplier of commercial aircraft refrigeration products; and (d) on October 13,
1993, the Company acquired substantially all of the assets and certain of the
liabilities of Airvision, a manufacturer of in-flight entertainment equipment.
On January 24, 1996, the Company acquired all of the stock of Burns, an industry
leader in commercial aircraft seating. While the Company will continue to be
susceptible to industry-wide conditions, management believes that the Company's
significantly more diversified product line and revenue base achieved through
acquisitions has reduced its exposure to demand fluctuations in any one product
area.
32
<PAGE> 34
The Burns acquisition has had a significant impact on B/E's results of
operations. Burns, with calendar 1995 revenues of $99,800, was one of the three
leading North American suppliers of commercial aircraft passenger seats and had
a base of airline customers that was largely complementary to that of B/E. B/E's
and Burns' approximate share of the worldwide seating products market at the
time of acquisition were 30% and 20%, respectively, based on fiscal 1995 unit
sales. By consolidating engineering, marketing, administration and manufacturing
operations of the two companies, B/E has been able to reduce fixed costs,
thereby enhancing its low-cost position.
Over the last two fiscal years, the Company's gross margins have improved
substantially, increasing from 31.2% in fiscal 1996 to 34.4% in fiscal 1997 and
to 36.4% for the nine months ended November 29, 1997. The primary reasons for
the improvement in gross margins include: (a) shift in product mix in all
divisions toward higher margin products; (b) higher unit volumes; and (c) a
company-wide re-engineering program which has resulted in higher employee
productivity and better manufacturing efficiency.
B/E's business strategy is to maintain its market leadership position
through various initiatives, including new product development. In fiscal 1997,
research, development and engineering expenses totaled $37,083 or 9% of net
sales, primarily consisting of costs related to the development of the MDDS,
with the balance attributable to its seating and galley products businesses.
During the nine months ended November 29, 1997, primarily as a result of the
substantial completion of the engineering associated with the development of the
MDDS and related Boeing line fit expenditures, such expenses were $34,988, or
10% of net sales.
The Company has two subsidiaries that are "Unrestricted Subsidiaries" as
defined under the Indenture, one of which holds the Company's in-flight
entertainment business and the other of which is a start-up company that holds
assets unrelated to the Company's core business. Under the terms of the
Indenture, Unrestricted Subsidiaries are not restricted by the terms of the
covenants. These two subsidiaries had net assets of approximately $18,000 as of
November 29, 1997.
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran, which will result in
a charge of approximately $4,000 in its current quarter, which ends February 28,
1998. See "Business -- Legal Proceedings."
RESULTS OF OPERATIONS -- NINE MONTHS ENDED NOVEMBER 29, 1997 COMPARED TO THE
NINE MONTHS ENDED NOVEMBER 30, 1996
Sales for the nine months ended November 29, 1997 were $362,687, or 18%
higher than sales of $308,151 for the comparable period in the prior year and
reflected a 26% increase in product sales, offset by a $14,790 decline in
service revenues. The increase in sales is attributable to substantially higher
unit volume shipments of all the Company's products.
Gross profit was $131,862 (36.4% of sales) for the nine months ended
November 29, 1997 and was $28,366 or 27.4% greater than the comparable period in
the prior year of $103,496, which represented 33.6% of sales. The increase in
gross profit, while primarily the result of the higher sales volume, was also
positively impacted by the improved gross margin.
At November 29, 1997 the Company's backlog was approximately $560,000, up
33% from backlog of $420,000 at November 30, 1996. Backlog at both dates have
been adjusted on a similar basis to exclude backlog debooked in August 1997. See
"-- Bookings and Backlog Information."
Selling, general and administrative and other expenses were $43,017 or
11.9% of sales for the nine months ended November 29, 1997. This was $5,398
higher than selling, general and administrative expenses for the comparable
period in the prior year of $37,619, or 12.2% of sales, and is primarily due to
the higher level of sales and quotation activity as well as a higher level of
customer service, product support and information technology activities.
Research, development and engineering expenses were $34,988, or 9.6% of
sales, for the nine months ended November 29, 1997. For the comparable period in
the prior year, research and development expense was $27,759 or 9.0% of sales.
33
<PAGE> 35
Amortization expense of $8,195 for the nine months ended November 29, 1997
was $174 more than the amount recorded in the comparable period for fiscal 1996.
Net interest expense was $16,899 for the nine months ended November 29,
1997, or $4,946 less than the net interest expense of $21,845 recorded for the
comparable period in the prior year, and is due to the decrease in the Company's
long-term debt.
The increase in gross profit offset by somewhat higher operating expenses
and lower interest expense in the current year resulted in earnings before
income taxes of $28,763, an increase of $20,511 over the comparable period in
the prior year.
Income taxes for the nine months ended November 29, 1997 were $4,311, or
15% of earnings before income taxes as compared to $825 or 10% of earnings
before income taxes in the prior year.
Net earnings were $24,452, or $1.04 per share for the nine months ended
November 29, 1997 as compared to $7,427 or $.42 per share for the comparable
period in the prior year.
RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 22, 1997 COMPARED TO YEAR ENDED
FEBRUARY 24, 1996
Sales for the year ended February 22, 1997 were $412,379, or 77% higher
than sales of $232,582 for the comparable period in the prior year. The increase
in sales is attributable to substantially higher volume shipments of all the
Company's products and services as a result of improving industry conditions. Of
the $179,797 increase in sales for the year, $103,800 was due to increased
seating and services revenues directly related to the acquisition of Burns.
Excluding the effect of the Burns acquisition, sales increased 33% year over
year.
At February 22, 1997, the Company's backlog was approximately $570,000, up
from $450,000 at February 24, 1996. New order bookings in the year ended
February 22, 1997 of $532,000 were $305,000 greater than new order bookings of
$227,000 for the comparable period in the prior year. Management estimates that
approximately 44% of its backlog is deliverable during fiscal 1998. See
"-- Bookings and Backlog Information."
Gross profit was $141,822, or 34.4% of sales, for the year ended February
22, 1997 and was $69,271 higher than gross profit for the comparable period in
the prior year of $72,551, which represented 31.2% of sales. The increase in
gross profit is primarily the result of the higher sales volumes and the mix of
products and services sold.
Selling, general and administrative expenses were $51,734, or 12.5% of
sales, for the year ended February 22, 1997. This was $9,734 higher than
selling, general and administrative expenses for the comparable period in the
prior year of $42,000, or 18.1% of sales, principally due to the substantial
increases in revenues and the acquisition of Burns.
Research, development and engineering expenses were $37,083, or 9.0% of
sales, for the year ended February 22, 1997. For the comparable period in the
prior year, research and development expense was $58,327, or 25.1% of sales. The
decrease in expenses during the current year is the result of a decrease in the
level of activity associated with the MDDS interactive entertainment system,
offset somewhat by an increase in product development activity in the Seating
Products Group.
Amortization expense for the year ended February 22, 1997 of $10,607 was
$1,108 more than the amount recorded in fiscal 1996 as a result of the Burns
acquisition.
Net interest expense was $27,167 for the year ended February 22, 1997, or
$8,531 higher than the net interest expense of $18,636 recorded for the
comparable period in the prior year, and is due to the increase in the Company's
long-term debt outstanding throughout most of fiscal 1997 as a result of the
9 7/8% Notes issued at the time of the Burns acquisition.
Earnings before income taxes of $15,231 for the year ended February 22,
1997 were $75,312 more than the loss before income taxes of $60,081 in the prior
year.
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Income taxes for the year ended February 22, 1997 were $1,522, or 10% of
earnings before income taxes, as compared to no tax provision in fiscal 1996.
Net earnings were $13,709, or $.72 per share, for the year ended February
22, 1997 as compared to a net loss of ($83,413) or ($5.15) per share for the
comparable period in the prior year, which included the cumulative effect of an
accounting change of $23,332.
RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 24, 1996 COMPARED TO YEAR ENDED
FEBRUARY 25, 1995
Sales for the year ended February 24, 1996 were $232,582 or 1% greater than
sales of $229,347 in the prior year. This increase in sales is primarily related
to the inclusion of results of operations of Burns, which was acquired during
the fourth quarter of fiscal 1996. Offsetting this increase in revenues was the
negative impact of a ten-week strike at Boeing, which ended December 14, 1995.
At February 24, 1996, the Company's backlog stood at approximately
$450,000, up from $331,000 at February 25, 1995. The increase in backlog is
attributable to the acquisition of Burns, along with solid growth from orders
placed by the airlines. During the year ended February 24, 1996, and for the
first time in over two years, the airlines placed orders for the Company's
seating and galley products in excess of its shipment levels, resulting in an
increase in its seating and galley products backlog. See "-- Bookings and
Backlog Information."
Gross profit was $72,551 or 31.2% of sales for the year ended February 24,
1996 and was $1,933 less than gross profit for the prior year of $74,484 which
represented 32.5% of sales. The decrease in gross profit during the year ended
February 24, 1996 is primarily the result of the mix of products sold.
Selling, general and administrative expenses were $42,000 (18.1% of sales)
for the year ended February 24, 1996. This was $10,213 higher than the
comparable period in the prior year of $31,787 (13.9% of sales), principally due
to costs associated with the Burns acquisition and related organizational
changes brought about by this acquisition, higher promotional and selling costs
associated with B/E's participation in annual industry trade shows, and higher
medical benefits and legal costs during fiscal 1996.
Effective as of the beginning of fiscal 1996 the Company changed its method
of accounting for pre-contract engineering expenditures associated with customer
orders. These expenditures, which previously were carried in inventory for
amortization over future deliveries, are now expensed as incurred. As a result
of this change in accounting method, research, development and engineering for
the year ended February 24, 1996 increased by $45,467 to $58,327, as compared to
$12,860 in the prior year.
Amortization expense for the year ended February 24, 1996 of $9,499 was
$455 less than the amount recorded in the prior year and is due to the lower
level of intangible assets being amortized during fiscal 1996.
Other expenses were $4,170 for the year ended February 24, 1996 and relate
to costs associated with the integration and consolidation of the Company's
European seating business. Other expenses for the fiscal year ended February 25,
1995 consisted of a charge of $23,736 related primarily to intangible assets and
inventories associated with B/E's earlier generations of passenger entertainment
systems.
Interest expense, net was $18,636 for the year ended February 24, 1996 or
$3,617 higher than the prior year. This increase is the result of an increase in
the amount of the Company's long-term debt outstanding, as well as higher
interest rates.
No income tax benefit was provided for the year ended February 24, 1996 as
compared to a tax benefit of $6,806 (36%) for the prior year.
The Company recorded the cumulative effect of an accounting change of
$23,332 during the year ended February 24, 1996. Such amount represents the
total amount of capitalized pre-contract engineering costs which were included
in inventories as of February 25, 1995.
The net loss for fiscal 1996 was ($83,413) or ($5.15) per share as compared
to a net loss of ($12,066) or ($.75) per share in the prior year.
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BOOKINGS AND BACKLOG INFORMATION
On September 15, 1997, British Airways ("BA") notified the Company of its
decision not to conduct a flight trial of B/E's MDDS interactive video system.
As a result, the Company believes that BA will ultimately select a competitor's
system for their in-flight entertainment equipment needs.
As a result of BA's decision not to move forward with the interactive
program, as of August 1997, the Company debooked approximately $155,000 of
backlog related to the MDDS program. At November 1997, the Company's backlog,
after debooking the BA backlog, stood at approximately $560,000, which
represents a year-to-year increase of approximately $140,000 or 33% versus the
Company's backlog at the end of its fiscal 1997 third quarter, as similarly
adjusted to exclude the amount then attributable to the BA MDDS backlog.
Although the Company has debooked the BA backlog, the Company is continuing
to complete the initial development and testing of the MDDS product and
anticipates delivery of the first MDDS product to its launch customer, JAL, in
1998. See "Business -- Products and Services."
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs and scheduled payments of interest on its indebtedness. B/E's primary
requirements for working capital have been directly related to increased
accounts receivable and inventory levels as a result of revenue growth. B/E's
working capital was $153,282 as of November 29, 1997, compared to $122,174 as of
February 22, 1997.
At November 29, 1997, the Company's cash and cash equivalents were $58,221
as compared to $44,149 at February 22, 1997. Cash provided from operating
activities during the nine months ended November 29, 1997 was $27,792 and cash
used in operating activities in the nine months ended November 30, 1996 was
$10,147. The primary source of cash during the nine months ended November 29,
1997 was net earnings of $24,452, non-cash charges for depreciation and
amortization of $18,482 and increases in accounts payable of $13,638 offset by a
use of cash of $25,671 related to increases in inventories and receivables and
$4,360 related to net decreases in other assets and liabilities.
In May 1997, the Company amended its existing credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder to $125,000 (the "Bank Credit Facility"). The Bank Credit
Facility consists of a $25,000 Reducing Revolver and a $100,000 Revolving
Facility. The amount of the Reducing Revolver will be reduced automatically by
12.5% on August 26, 2000 and on each of the seven succeeding quarterly
anniversaries of such date. The Reducing Revolver is collateralized by all of
the issued and outstanding capital stock of a wholly owned subsidiary and has a
five-year maturity. The Revolving Facility is collateralized by all of the
Company's accounts receivable, all of its inventory and substantially all of its
other personal property and has a five-year maturity. The Bank Credit Facility
contains customary affirmative covenants, negative covenants and conditions of
borrowing. At November 29, 1997 indebtedness under the Bank Credit Facility were
letters of credit amounting to approximately $4,572. The Company has
approximately $120,000 available for subsequent borrowings under the Bank Credit
Facility.
Long-term debt consists of the 9 3/4% Notes and the 9 7/8% Notes which are
due March 1, 2003 and February 1, 2006, respectively. The Company completed the
Tender Offer for all outstanding 9 3/4% Notes on February 25, 1998. The Company
intends to redeem the remaining outstanding 9 3/4% Notes that were not tendered
in the Tender Offer on March 16, 1998 at a redemption price of 104.875% of the
principal amount. Purchase of the 9 3/4% Notes pursuant to the Tender Offer and
the Redemption will be funded with a portion of the proceeds from the Offering.
The Company estimates that it will take a $9,200 extraordinary charge for
unamortized debt issue costs, tender and redemption premiums and fees and
expenses related to the repurchase of the 9 3/4% Notes.
The Company's capital expenditures were $21,099, and $8,675 during the nine
months ended November 29, 1997, and November 30, 1996, respectively. The
increase in capital expenditures was primarily attributable to (i) the
development of a new management information system to replace the Company's
existing systems, many of which were inherited in acquisitions, and (ii)
expenditures for plant modernization.
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<PAGE> 38
The management information system is expected to be installed over the next 18
months and will be year 2000 compliant. The Company anticipates ongoing capital
expenditures of approximately $25,000 per year for the next several years to be
in line with expanded growth in business.
The Company believes that cash flow from operations, proceeds from the sale
of the Notes offered hereby and availability under the Bank Credit Facility will
provide adequate funds for its working capital needs, planned capital
expenditures and debt service obligations through the term of the Bank Credit
Facility. The Company believes that it will be able to refinance the Bank Credit
Facility prior to its termination, although there can be no assurance that it
will be able to do so. The Company's ability to fund its operations and make
planned capital expenditures, to make scheduled payments and to refinance its
indebtedness depends on its future operating performance and cash flow, which,
in turn, are subject to prevailing economic conditions and to financial,
business and other factors, some of which are beyond its control.
INDUSTRY CONDITIONS
The Company's customers are the world's commercial airlines. As a result,
the Company's business is directly dependent upon the conditions in the
commercial airline industry. In the late 1980s and early 1990s the world airline
industry suffered a severe downturn which resulted in record losses and several
air carriers seeking protection under bankruptcy laws. As a consequence, during
such period, airlines sought to conserve cash by reducing or deferring scheduled
cabin interior refurbishment and upgrade programs and delaying purchases of new
aircraft. This led to a significant contraction in the commercial aircraft cabin
interior products industry, and a decline in the Company's business and
profitability. The airline industry has now experienced five consecutive years
of profitability including record profitability in each of the last three
calendar years. This financial turnaround has, in part, been driven by record
load factors, rising fare prices and declining fuel costs. The airlines have
substantially restored their balance sheets through cash generated from
operations and debt and equity placements. As a result, the levels of airline
spending on refurbishment and new aircraft purchases have expanded. However, due
to the volatility of the airline industry there can be no assurance that the
current profitability of the airline industry will continue or that the airlines
will maintain or increase expenditures on cabin interior products for
refurbishments or new aircraft.
In addition, the airline industry is undergoing a process of consolidation
and significantly increased competition. Such consolidation could result in a
reduction in future aircraft orders as overlapping routes are eliminated and
airlines seek greater economics through higher aircraft utilization. Increased
airline competition may also result in airlines seeking to reduce costs by
producing greater price competition from airline cabin interior products
manufacturers, thereby adversely affecting the Company's margins.
Recently, turbulence in the financial and currency markets of many Pacific
Rim Countries has led to uncertainty with respect to the economic outlook for
these countries. Of the Company's $560,000 of backlog at November 29, 1997, the
Company had $69,000 with Asian carriers deliverable in fiscal 1999 and a further
$74,000 deliverable in subsequent fiscal years. Of such existing Asian carrier
backlog, approximately $48,000 is with JAL, Singapore Airlines and Cathay
Pacific. Although not all Asian carriers have been affected by the current
economic events in the Pacific Rim, certain carriers could cancel or defer their
existing orders and future orders from airlines in these countries for the
Company's cabin interior products may be adversely affected.
The foregoing statements include forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors," as well as future
events that have the effect of reducing the Company's operating income and
available cash balances, such as unexpected operating losses or delays in the
integration of the Company's seating business, the delivery of the MDDS
interactive video system, new or expected refurbishments, or cash expenditures
related to possible future acquisitions.
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BUSINESS
INTRODUCTION
B/E is the world's largest manufacturer of commercial aircraft cabin
interior products, serving virtually all major airlines with a broad line of
products, including aircraft seats, food and beverage preparation and storage
equipment, galley structures and in-flight entertainment systems. In addition,
B/E provides upgrade, maintenance and repair services for the products which it
manufactures as well as for those supplied by other manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories. B/E is the largest
manufacturer of airline seats in the world, offering an extensive line of first
class, business class, tourist class and commuter seats. The Company is also the
world's largest manufacturer of galley equipment for both narrow- and wide-body
aircraft, including a wide selection of coffee and beverage makers, water
boilers, ovens, liquid containers, refrigeration equipment and galley
structures. In addition, the Company is the leading manufacturer of passenger
entertainment and service systems, including passenger control systems and
individual passenger in-flight entertainment systems. The Company believes that
individual passenger in-flight entertainment systems will be one of the fastest
growing and among the largest product categories in the commercial aircraft
cabin interior products industry.
INDUSTRY OVERVIEW
The commercial aircraft cabin interior products industry encompasses a
broad range of products and services, including not only aircraft seating
products, passenger entertainment and service systems, and food and beverage
preparation and storage systems, but also lavatories, lighting systems,
evacuation equipment and overhead bins. Management estimates that the industry
had annual sales in excess of $1.5 billion dollars during fiscal 1997.
Historically, revenues in the cabin interior products industry have been
derived from five sources: (i) retrofit programs in which airlines purchase new
components to overhaul completely the interiors of aircraft already in service;
(ii) refurbishment programs in which airlines purchase components and services
to improve the appearance and functionality of certain cabin interior equipment;
(iii) new installation programs in which airlines purchase new equipment to
outfit a newly delivered aircraft; (iv) spare parts; and (v) equipment to
upgrade the functionality or appearance of the aircraft interior. The retrofit
and refurbishment cycles for commercial aircraft cabin interior products differ
by product category. Aircraft seating typically has a refurbishment cycle of one
to two years and a retrofit cycle of seven to eight years, although during the
industry downturn, these periods tended to be extended. See "-- Recent Industry
Conditions." Galley structures and products are periodically upgraded or
repaired, and require a continual flow of spare parts, but may be retrofitted
only once or twice during the life of the aircraft.
The various product categories currently manufactured by the Company
include:
- AIRCRAFT SEATS. This is the largest single product category in the
industry and includes first class, business class, tourist class and
commuter seats. Management estimates that the aggregate size of the
worldwide aircraft seat market (including spare parts) during fiscal 1998
was in excess of $530 million. Approximately ten companies worldwide,
including the Company, supply aircraft seats, although the Company (which
has an approximately 50% market share) and two other competitors share
approximately 90% of the market.
- PASSENGER ENTERTAINMENT AND SERVICE SYSTEMS ("PESS"). This product
category includes individual seat video systems, overhead video projection
systems, audio distribution systems, passenger control units ("PCUs") and
related wiring and harness assemblies and sophisticated interactive
telecommunications and entertainment systems. Management estimates that the
aggregate size of the worldwide PESS market was approximately $300 million
during fiscal 1998. Industry sources expect the PESS market to increase
substantially in the near term as individual passenger entertainment
systems become standard in-flight entertainment equipment in first,
business and tourist classes on wide-body
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and, with the further development of live broadcast television on many
narrow-body, aircraft. PESS products are currently supplied by
approximately five companies worldwide. The Company has a market share of
approximately 37% in individual passenger in-flight entertainment systems,
determined on the basis of installed units as of November 29, 1997.
- GALLEY PRODUCTS. This product category includes complete galley
systems for both narrow- and wide-body aircraft, including a wide selection
of coffee and beverage makers, water boilers, ovens, liquid containers, air
chillers, wine coolers and other refrigeration equipment and other galley
components. Management estimates that the aggregate size of the worldwide
galley equipment market during fiscal 1998 was in excess of $360 million.
The majority of the Company's sales of galley products have been associated
with deliveries of new aircraft to the airlines (particularly galley
structures and refrigeration equipment). While there are approximately 20
companies worldwide who supply galley equipment to the airline industry,
the Company is the only manufacturer with a complete line of galley
equipment.
The Company operates in the commercial aircraft cabin interior products
segment of the commercial airlines supplier industry. Revenues for similar
classes of products or services within this business segment for the nine months
ended November 1997 and 1996, and for the three most recent fiscal years are
presented below (in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
NOVEMBER FISCAL YEAR
------------ --------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Seating products.............................. $197 $165 $217 $ 97 $100
Galley products............................... 96 75 101 79 81
Passenger entertainment and service systems... 48 32 52 33 34
Services...................................... 22 36 42 23 14
---- ---- ---- ---- ----
Total revenues...................... $363 $308 $412 $232 $229
==== ==== ==== ==== ====
</TABLE>
RECENT INDUSTRY CONDITIONS
The Company's principal customers are the world's commercial airlines. The
airlines, particularly the U.S. carriers, incurred record losses during the
three-year period ended December 31, 1993. The losses incurred during the
downturn seriously impaired airline balance sheets and negatively influenced
airline purchasing decisions with respect to both new aircraft and refurbishment
programs. The domestic airlines in large part returned to profitable operations
during calendar year 1994, and have achieved record operating earnings during
calendar years 1995 through 1997, and have substantially restored their balance
sheets since then through cash generated from operations and debt and equity
placements. This improvement in the airlines' profitability and liquidity has,
in turn, led to an increase in refurbishment and retrofit programs, which
coupled with spares revenues generated approximately 60% of the Company's
revenues for the nine months ended November 1997. Further, throughout calendar
1997, the aircraft manufacturers began experiencing a significant increase in
new aircraft orders. Among those factors expected to affect the cabin interior
products industry are the following:
- Large Existing Installed Base. According to the Boeing Report, the
world commercial passenger aircraft fleet, as of the end of 1996, consisted
of 10,300 aircraft, including 3,000 aircraft with fewer than 120 seats,
4,511 aircraft with between 120 and 240 seats and 2,760 aircraft with more
than 240 seats. Based on such fleet numbers, management estimates that the
total worldwide installed base of commercial aircraft cabin interior
products, valued at replacement prices, was approximately $9.5 billion at
the end of 1997. This existing installed base will generate continued
retrofit, refurbishment and spare parts revenue, particularly in light of
the deterioration of existing interior cabin functionality and aesthetics
resulting from the airlines' deferral of refurbishment programs in recent
years.
- Expanding Worldwide Fleet. Worldwide air traffic has grown in every
year since 1946 (except in 1990) and, according to the Boeing Report, is
projected to grow at a compounded average rate of
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<PAGE> 41
approximately five percent per year through 2016, increasing annual revenue
passenger miles from approximately 1.7 trillion in 1996 to approximately
4.4 trillion by 2016. Airlines have recently been purchasing a significant
number of new aircraft due in part to the current high load factors and the
projected growth in worldwide air travel. According to the Boeing Report,
the worldwide fleet of commercial passenger aircraft is projected to expand
from approximately 10,300 at the end of 1996 to approximately 21,200 by the
end of 2016. Related growth in aircraft interior product shipments
associated with new aircraft deliveries began during calendar 1996. In
1997, Boeing shipped 375 aircraft versus 218 in 1996. In addition, Boeing
has stated plans to ship 550 aircraft in each of calendar years 1998 and
1999. The Company generally receives orders related to new deliveries
approximately six months before an aircraft is delivered. According to
Airbus Industrie Global Market Forecast published in March 1997 (the
"Airbus Industrie Report"), the worldwide installed seat base, which
management considers to be a good indicator for potential growth in the
aircraft cabin interior products industry, is expected to increase from
approximately 1.7 million passenger seats at the end of 1996 to
approximately 4.0 million passenger seats at the end of 2016. The expanding
worldwide fleet will generate additional revenues from new installation
programs, and the increase in the size of the installed base will generate
additional and continual retrofit, refurbishment and spare parts revenue.
- Wide-body Aircraft Orders. Orders for wide-body, long-haul aircraft
constitute an increasing share of total new airframe orders. According to
the July 1997 Airline Monitor, the percentage of Boeing aircraft deliveries
projected to be wide-body aircraft for 1997 through 2001 is 39%, as
compared to 33% for the three-year period ended December 31, 1995.
Wide-body aircraft currently carry up to three times the number of seats as
narrow-body aircraft, and because of multiple classes of service, including
large first class and business class configurations, the Company's average
revenue per seat on wide-body aircraft is also higher. Aircraft crews on
wide-body aircraft may make and serve between 300 and 900 meals and may
brew and serve more than 2,000 cups of coffee on a single flight. As a
result, wide-body aircraft may require as much as seven times the dollar
value of cabin interior products as narrow-body aircraft, as well as
products which are technically more sophisticated and typically more
expensive. Further, individual passenger in-flight entertainment systems
are installed principally on wide-body aircraft. Airlines are increasingly
demanding such systems for long-haul flights to attract and retain
customers, especially as the quality of in-flight entertainment has become
a differentiating factor in passengers' airline selection decisions. Such
systems also provide the airlines with the opportunity to increase revenues
per passenger mile, without raising ticket prices, by charging individually
for services used. For these reasons, management believes that in the
future, interactive in-flight entertainment systems will be installed on
essentially all wide-body aircraft and, with the further development of
live broadcast in-flight television, many narrow-body planes.
- New Product Development. The commercial aircraft cabin interior
products industry is engaged in intensive development and marketing efforts
for a number of new products, including convertible seats, interactive
individual passenger entertainment systems, live broadcast television for
narrow-body domestic aircraft, advanced telecommunications equipment and
new galley equipment. Interactive video technology provides a passenger
with a wide range of computer capabilities, which are designed to accept
information generated by the passenger and communicate such information to
the cabin crew for assisting passengers and crew with food service
selection, the purchase of duty-free goods, information in connection with
the arrival time, connecting flights, gate and other passenger information,
as well as facilitate effective on-board inventory control and provide
individual entertainment. Live TV(TM), a new product line being developed
by a joint venture between the Company and Harris Corporation, will provide
live broadcast television via satellite to narrow-body aircraft allowing
passengers the capability to view up to 48 different channels of television
service. New cabin interior products will generate new installation and
retrofit revenues as well as service revenues from equipment maintenance,
inspection and repair.
- Growing Upgrade, Maintenance, Inspection and Repair Service
Markets. Historically the airlines have relied on their airframe and
engine mechanics to repair or replace cabin interior products that have
become damaged or otherwise non-functional. As cabin interior product
configurations have become
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<PAGE> 42
increasingly sophisticated and the airline industry increasingly
competitive, the airlines have begun to outsource such services in order to
increase productivity and reduce costs and overhead. Outsourced services
include product upgrades (such as the installation of a telecommunications
module or individual passenger entertainment unit in an aircraft seat not
originally designed to accommodate such equipment), cabin interior product
maintenance and inspection, as well as other repair services.
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors including the following:
- Leading Market Share and Significant Installed Base. Management
believes that the Company has achieved leading global market positions in
each of its major product categories, with market shares, based upon
industry sources, of approximately 50% in aircraft seats, 90% in coffee
makers, 90% in refrigeration equipment and 50% in ovens, based on dollar
sales for the nine months ended November 29, 1997, and 37% in individual
passenger in-flight entertainment systems, determined on the basis of
installed base as of November 29, 1997. The Company believes these market
shares provide it with significant competitive advantages in serving its
customers, including economies of scale and the ability to commit greater
product development, global product support and marketing resources.
Furthermore, because of economies of scale, in part attributable to its
large market shares and its approximate $3.3 billion installed base of
cabin interior equipment (valued at replacement prices as of November 29,
1997), the Company believes it is among the lowest cost producers in the
cabin interior products industry. The Company also believes that its large
installed base provides B/E with a significant advantage over competitors
in obtaining orders for retrofit and refurbishment programs, principally
because airlines tend to purchase equipment from the original supplier. In
addition, because of the need for compatible spare parts at airline
maintenance depots and the desire of airlines to maximize fleet
commonality, a single vendor is typically used for all aircraft of the same
type operated by a particular airline.
- Broadest Product Line in the Industry. Management believes the
Company offers the broadest and the most technologically advanced line of
products for the cabin interiors of commercial aircraft. With an
established reputation for quality, service and product innovation, the
Company enjoys broad recognition among the world's commercial airlines. The
Company maintains a constant dialogue with a wide array of existing and
potential customers, enabling it to become aware of emerging industry
trends and needs and thereby play a leading role in product development.
The Company has continued to expand its product line, believing that the
airline industry increasingly will seek an integrated approach to the
development, testing and sourcing of the aircraft's cabin interior.
- Technological Leadership/New Product Development. Management
believes that the Company is a technological leader in its industry, with
the largest R&D organization in the industry currently comprised of
approximately 500 engineers. The Company believes that its R&D effort and
its on-site engineers at both the airlines and airframe manufacturers
enable B/E to consistently introduce innovative products and thereby gain
early entrant advantages and substantial market shares. Examples of such
product development include: the introduction of several premium and main
cabin class seats, which the Company believes provide greater comfort and
are lighter in weight as a result of their ergonomic design and
pre-engineered individual passenger comfort features; the Company's family
of in-flight entertainment systems, which it believes to be superior to
existing operational systems in terms of performance, reliability, weight,
heat generation and flexibility to adapt to changing technology; a
cappuccino/espresso maker; a quick chill wine cooling system; and a
constant-pressure, steam cooking oven, which the Company believes
substantially improves the appearance, aroma and taste of airline food.
- Proven Track Record of Integration. The Company has demonstrated
the ability to make strategic acquisitions and successfully integrate such
acquired businesses by identifying opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. The Company has purchased nine businesses over
the last nine years, for an aggregate purchase price of approximately $290
million. Since 1989, the Company has integrated each of its acquisitions by
reducing
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<PAGE> 43
the number of operating facilities acquired from 20 to nine and
consolidating personnel at the acquired businesses, resulting in headcount
reductions of approximately 1,300 employees.
GROWTH OPPORTUNITIES
B/E believes that it is benefiting from three major growth trends occurring
in the commercial aircraft cabin interior products industry:
- Increase in Refurbishment and Upgrade Orders. B/E's substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and spare parts. Approximately 60% of B/E's revenues for
the nine months ended November 29, 1997 were derived from refurbishment and
upgrade orders. In the late 1980s and early 1990s, the airline industry
suffered a significant downturn, which resulted in a deferral of cabin
interior maintenance expenditures. Since early 1994, the airlines have
experienced a turnaround in operating results, leading the domestic airline
industry to record operating earnings during calendar years 1995 through
1997. Deterioration of cabin interior product functionality and aesthetics
occurred within the commercial airline fleets during the industry downturn
because of maintenance deferrals. Since the turnaround began, the airlines
have experienced greater utilization resulting from higher load factors,
which has encouraged airlines to increase spending on refurbishments and
upgrades. The Company believes that it is well positioned to benefit over
the next several years as a result of the airlines' dramatically improved
financial condition and liquidity and the need to refurbish and upgrade
cabin interiors. A significant portion of the Company's recent growth in
backlog, revenues and operating earnings has been from refurbishment and
upgrade programs, and the Company is currently experiencing a high level of
new order quote activity related to such programs.
- Expansion of Worldwide Fleet and Shift Toward Wide-Body
Aircraft. Airlines have recently been purchasing a significant number of
new aircraft in part due to current high load factors and the projected
growth in worldwide air travel. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1997 (the "Boeing
Report"), worldwide air travel is projected to increase by 75% by calendar
2006 and the worldwide fleet of commercial passenger aircraft is projected
to expand from approximately 10,300 at the end of 1996 to approximately
15,300 by the end of 2006 and to more than 21,200 by 2016. Related growth
in aircraft interior product shipments associated with new aircraft
deliveries began during calendar 1996. In 1997, Boeing shipped 375 aircraft
versus 218 in 1996. In addition Boeing has stated plans to ship 550
aircraft in each of calendar years 1998 and 1999. The Company generally
receives orders related to new aircraft deliveries approximately six months
before the delivery date. Furthermore, according to the July 1997 Airline
Monitor, the percentage of new Boeing aircraft deliveries projected to be
wide-body aircraft for 1997 through 2001 is 39% as compared to 33% for the
five year period ended December 31, 1996. This shift toward wide-body
aircraft is significant to the Company since these aircraft require as much
as seven times the dollar value of cabin interior products as narrow-body
aircraft, including substantially more seats, galley equipment and
in-flight entertainment products.
- Emergence of Individual Passenger In-flight Entertainment Systems as
a Major New Product Category. Airlines increasingly are demanding
individual passenger in-flight entertainment systems as a method to attract
and retain customers, as the availability of such service affects
passengers' decisions on airline selection. These systems also provide the
airlines with the opportunity to generate increased revenues, without
raising ticket prices, by charging passengers for the services used. In
June 1997, the Company announced a joint venture with Harris Corporation to
develop and deliver live broadcast television (LiveTV(TM)) to domestic
narrow-body commercial aircraft. The Company expects that in-flight
entertainment systems, including the new technology designed to deliver
live broadcast television on domestic narrow-body aircraft, will be one of
the fastest growing and among the largest product categories in the
commercial aircraft cabin interior products industry.
The Company has developed a number of individual in-flight
entertainment systems that are designed to meet the varying technological
and price specifications of the airlines. The Company's two current systems
are (i) the B/E 2000, with an installed base of approximately 28,000 units,
which is a
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<PAGE> 44
system that provides non-interactive video programming and (ii) the B/E
2000M, with an installed base of approximately 6,000 units, which offers
similar functionality to the B/E 2000 but can be upgraded to the Company's
Multimedia Digital Distribution System ("MDDS") product. The MDDS product,
which is in its final development stage, is a fully interactive
entertainment system with the capacity to provide movies on demand,
telecommunications, gaming and other services. The Company has completed
the initial development and testing of the MDDS product and anticipates
delivery of the first MDDS product to its launch customer, Japan Airlines
("JAL"), in 1998. The Company also anticipates completing the engineering
necessary to enable installation of the MDDS as a line fit option on Boeing
aircraft in 1998. As of November 29, 1997 B/E had an in-flight
entertainment systems backlog of approximately $139 million.
BUSINESS STRATEGY
The Company's business strategy is to maintain its leadership position and
best serve its airline customers by (i) offering the broadest and most
integrated product line in the industry for both new product sales and follow-on
products and services; (ii) pursuing a worldwide marketing approach focused by
airline and encompassing the Company's entire product line; (iii) remaining the
technological leader, as well as significantly growing its installed base of
products, in the developing in-flight individual passenger entertainment market;
(iv) enhancing its position in the growing upgrade, maintenance, inspection and
repair services market; and (v) pursuing selective strategic acquisitions in the
commercial aircraft cabin interior products industry.
PRODUCTS AND SERVICES
Seating Products
The Company is the world's leading manufacturer of aircraft seats, offering
a wide selection of first class, business class, tourist class and commuter
seats. A typical seat manufactured and sold by the Company includes the seat
frame, cushions, armrests and tray table, together with a variety of optional
features such as in-flight entertainment systems, oxygen masks and telephones.
Management estimates that the Company has an aggregate installed base as of
November 29, 1997 of aircraft seats, valued at replacement prices, of
approximately $1.8 billion comprised of more than 900,000 seats.
- Tourist Class. The Company is the leading worldwide manufacturer of
tourist class seats. B/E has designed tourist class seats which incorporate
features not previously utilized in that class, such as top-mounted
passenger control units, footrests and improved oxygen systems.
- First and Business Classes. First class and business class seats
are generally larger, heavier and more complicated in design, and are
substantially more expensive than tourist class aircraft seats. The
Company's first class seats and certain of its business class seats are
equipped with articulating bottom cushion suspension systems, sophisticated
hydraulic leg-rests, lumbar massage devices, adjustable thigh support
cushions, reading lights, adjustable head and neck supports and large
tables.
- Convertible Seats. The Company has developed two types of seats
which can be converted from tourist class triple-row seats to business
class double-row seats with minimal conversion complexity. Convertible
seats allow airline customers to optimize the ratio of business class to
tourist class seats for a given aircraft configuration.
- Commuter Seats. The Company is the leading manufacturer of commuter
seats in both the U.S. and worldwide markets. The Company's Silhouette(TM)
Composite commuter seats are similar to commercial jet seats in comfort and
performance but are lightweight and require minimal maintenance.
- Spares. Aircraft seats are exposed to significant stress in the
course of normal passenger activity, and certain seat parts are
particularly susceptible to damage from continued use. As a result, a
significant market exists for spare parts.
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<PAGE> 45
Passenger Entertainment and Service Systems
Management estimates that the Company has the largest installed base of
PESS products in the world, which, valued at replacement prices, is
approximately $340 million. The Company has the leading share of the market for
PCUs and related wiring and harness assemblies, and has developed products aimed
at other portions of the PESS market, including individual seat video systems,
advanced multiplexer and hard-wired distribution systems and other products. The
Company believes that it is a market leader in individual passenger in-flight
entertainment systems and that this product category will be the fastest
growing, and among the largest, product categories in the commercial aircraft
cabin interior products industry in the future.
- Individual Passenger Entertainment. The Company has developed a
number of in-flight entertainment systems that are designed to meet the
technological and price specifications of the airlines:
B/E 2000. The B/E 2000, introduced in 1991, is one of the
Company's first-generation individual inflight video systems and offers
centralized electronic distribution of a limited range of programming.
Since its introduction, the Company has installed approximately 28,000
units of the B/E 2000 and earlier generation individual passenger video
systems with 10 airlines.
MDDS Family. The Company has developed a family of
next-generation, individual passenger in-flight entertainment products,
which includes the 2000M and the MDDS:
B/E 2000M -- The B/E 2000M is an in-flight entertainment system
that offers similar functionality to the 2000 but can be upgraded to
the Company's fully interactive MDDS. Since its introduction in 1994,
the Company has installed approximately 6,000 units.
MDDS -- B/E's MDDS is being developed as a state-of-the-art,
fully interactive individual passenger in-flight entertainment system
which has the capacity to offer numerous movies on demand,
telecommunications, gaming, Nintendo(TM), Sega(TM) and PC-based
games, in-flight shopping and, in the future, live television, among
other services. The Company has completed the initial development and
testing of the MDDS product and anticipates delivery of the first
MDDS product to its launch customer, JAL, in 1998. The Company also
anticipates completing the engineering necessary to enable
installation of the MDDS as a line fit option on Boeing aircraft in
1998.
As of November 29, 1997, B/E had entered into agreements to supply
individual passenger entertainment systems to a number of airlines, including
United Airlines, JAL, Asiana Airlines, Air France and KLM, and had an in-flight
entertainment systems backlog of approximately $139 million.
- LiveTV(TM). In June 1997, the Company announced a joint venture
with Harris Corporation to develop and market a system which will allow
airline passengers to receive in-flight, live broadcast television aboard
narrow-body commercial aircraft at each individual passenger seat. The
Company will control a 51 percent voting interest in the joint venture.
Under the joint venture agreement, B/E will provide its individual-seat
video distribution system as its part of the overall LiveTV(TM) reception
system, while Harris Corporation will provide the specialized aircraft
antenna and receiver system to enable in-the-air reception. The Company
expects to be in a position to commence deliveries to a launch customer for
LiveTV(TM) in 1998.
- PCUs, Wiring and Harness Assemblies. The Company's PCU product line
is the broadest in the industry, including over 300 different designs which
are functionally similar but differ widely due to the style preferences and
technical requirements of the various airlines. Wiring and harness
assemblies (which stabilize installed wiring) are sold as a package with
PCUs and vary as widely as PCU types.
- Distribution Systems. The Company has manufactured hard-wired audio
(since 1963) and video distribution systems (since 1992) and is currently
the principal supplier of such systems to the airline industry. The Company
also offers frequency division multiplex distribution systems which deliver
substantially improved audio performance compared to competitors' multiplex
systems.
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<PAGE> 46
Galley Equipment and Structures
The Company is the world's largest manufacturer of galley equipment for
both narrow and wide-body aircraft, offering a wide selection of galley
structures, coffee and beverage makers, water boilers, ovens, liquid containers,
refrigeration equipment and other galley components. Management estimates that
the Company has an aggregate installed base of galley equipment and structures,
valued at replacement prices, of approximately $1.1 billion.
- Coffee Makers. The Company is the leading manufacturer of aircraft
coffee makers, with the Company's equipment currently installed in
virtually every type of aircraft for almost every major airline. The
Company manufactures a broad line of coffee makers, coffee warmers and
water boilers including the Flash Brew Coffee Maker, with the capability to
brew 54 ounces of coffee in one minute, a Combi(TM) unit which will both
brew coffee and boil water for tea while utilizing 25% less electrical
power than traditional 5,000 watt water boilers, and a recently introduced
cappuccino/espresso maker.
- Ovens. The Company is the leading supplier of a broad line of
specialized ovens, including high-heat efficiency ovens, high-heat
convection ovens, and warming ovens. The Company's newest offering, the
DS-2000 Steam Oven, represents a new method of preparing food in-flight by
maintaining constant temperature and moisture in the food. It addresses the
airlines' need to provide a wider range of foods than can be prepared by
convection ovens.
- Refrigeration Equipment. The Company is the worldwide industry
leader in the design, manufacture, and supply of commercial aircraft
refrigeration equipment. The Company recently introduced a self-contained
wine and beverage chiller, the first unit specifically designed to rapidly
chill wine and beverages on board an aircraft.
- Galley Structures. Galley structures are generally custom designed
to accommodate the unique product specifications and features required by a
particular carrier. Galley structures require intensive design and
engineering work and are among the most sophisticated and expensive of the
aircraft's cabin interior products. The Company provides a variety of
galley structures, closets and class dividers, emphasizing sophisticated
and higher value-added galleys for wide-body aircraft.
Services and Specialty Products
The Company is an active participant in the growing service and custom
products markets. Management believes that the Company's broad and integrated
product line and close relationships with its airline and leasing customers
position the Company to become a leading service provider in this market. Most
participants in this market are small, and management believes that the Company
is the only major product manufacturer in the industry currently participating
in this market.
- Services. The Company provides a comprehensive compliment of
services for cabin interior products on board aircraft either between
flights or on an overnight basis, or at one of more of seven service
centers in the worldwide service network. The spectrum of services includes
systems check and components repair, parts inventory and management,
refurbishment of seating products, on board surveys regarding status and
product installations, as well as data support functions such as loading
and updating of in-flight systems entertainment software, direct satellite
broadcast systems support and systems integration.
- Specialty Products. The Company manufacturers several specialty
products for the commercial airline industry including flight attendant
seats, observer seats, and custom products in the passenger seating area.
The Company maintains a staff of engineers to design and certify various
modules and kits to accommodate individual passenger video and
telecommunications modules in seat backs and center consoles which were
originally not designed for such applications. The Company believes it is
able to provide products for unique applications more rapidly than original
manufacturers.
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<PAGE> 47
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company works closely with commercial airlines to improve existing
products and identify customers' emerging needs. B/E's expenditures in research,
development and engineering totaled $35.0 million, $27.8 million, $37.1 million,
$58.3 million, and $12.9 million for the nine months ended November 29, 1997 and
November 30, 1996 and the fiscal years ended February 22, 1997, February 24,
1996, and February 25, 1995, respectively. The increase in expenses during the
current period is the result of the substantial completion of the Boeing Line
Fit certification activities for MDDS and ongoing product development activity
in the seating and galley products groups. B/E employs approximately 500
professionals in the engineering and product development areas. The Company
believes that it has the largest engineering organization in the cabin interior
products industry, with not only software, electronic, electrical and mechanical
design skills but also substantial expertise in materials composition and custom
cabin interior layout design.
MARKETING AND CUSTOMERS
The Company markets and sells its products directly to virtually all of the
world's major airlines. B/E has a sales and marketing organization of 107
persons, along with 15 independent sales representatives. B/E sales to non-US
airlines were $164.1 million, $152.6 million, $203.4 million, $124.5 million,
and $114.5 million for the nine months ended November 29, 1997 and November 30,
1996 and the fiscal years ended February 22, 1997, February 24, 1996, and
February 25, 1995, respectively, or approximately 45%, 49%, 49%, 54%, 50%,
respectively, of net sales during such periods.
Airlines select manufacturers of cabin interior products primarily on the
basis of custom design capabilities, product quality and performance, on time
delivery, after-sales service and price. B/E believes that its large installed
base, its timely responsiveness in connection with the custom design,
manufacture, delivery and after-sales service of its products and its broad
product line and stringent customer and regulatory requirements all present
barriers to entry for potential new competitors in the cabin interior products
market.
The Company believes that its integrated worldwide marketing approach,
focused by airline and encompassing the Company's entire product line, is
preferred by airlines. Led by a B/E senior executive, teams representing each
product line serve designated airlines which together accounted for
approximately 60% of the purchases of products manufactured by B/E during fiscal
1997. These airline customer teams have developed customer specific strategies
to meet each airline's product and service needs. The Company also staffs
"on-site" customer engineers at major airlines and airframe manufacturers to
represent its entire product line and work closely with the customers to develop
specifications for each successive generation of products required by the
airlines. These engineers help customers integrate the wide range of cabin
interior products and assist in obtaining the applicable regulatory
certification for each particular product or cabin configuration. Through its
on-site customer engineers, the Company expects to be able to more efficiently
design and integrate products which address the requirements of its customers.
The Company provides program management services, integrating all on-board cabin
interior equipment and systems, including installation and FAA certification,
allowing airlines to substantially reduce costs. The Company believes that it is
one of the only suppliers in the commercial aircraft cabin interior products
industry with the size, resources, breadth of product line and global product
support capability to operate in this manner.
At the beginning of fiscal 1998, the Company initiated a program management
discipline under which a program manager is assigned for each significant
contract. The program manager is responsible for all aspects of the specific
contract, including management of change orders and negotiation of the related
non-recurring engineering charges, monitoring the progress of the contract
through its scheduled delivery dates, and overall profitability associated with
the contract. The Company believes that it and its customers derive substantial
benefit from its program management approach, including better on-time delivery
and higher service levels. The Company also believes its program management
approach results in better customer satisfaction and higher profitability over
the life of the contract.
During the nine month period ended November 29, 1997, one customer
accounted for approximately 17% of the Company's total revenues, and no other
customer accounted for more than 10% of such revenues.
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<PAGE> 48
Because of differing schedules of various airlines for purchases of new aircraft
and for retrofit and refurbishment of existing aircraft, the portion of the
Company's revenues attributable to particular airlines varies from year to year.
BACKLOG
Management estimates that B/E's backlog at November 29, 1997 was
approximately $560 million, approximately 49% of which management believes to be
deliverable over the next 12 months, compared with a backlog of $420 million on
November 30, 1996 (as similarly adjusted for the debooking of the British
Airways MDDS program in August 1997).
CUSTOMER SERVICE
The Company believes that it provides the highest level of customer service
and product support available in the commercial aircraft cabin interior products
industry and that such service is a critical factor in the Company's success.
The key elements of such service include (i) rapid response to requests for
engineering designs, proposal requests and technical specifications; (ii)
flexibility with respect to customized features; (iii) on-time delivery; (iv)
immediate availability of spare parts for a broad range of products; and (v)
prompt attention to customer problems, including onsite customer training.
Customer service is particularly important to airlines due to the high cost to
the airlines of late delivery, malfunctions and other problems.
WARRANTY AND PRODUCT LIABILITY
The Company warrants its products, or specific components thereof, for
periods ranging from one to ten years, depending upon product type and
component. The Company generally establishes reserves for product warranty
expense on the basis of the ratio of warranty costs incurred by the product over
the warranty period to sales of the product over the warranty period. Actual
warranty costs reduce the warranty reserve as they are incurred. Management
periodically reviews the adequacy of accrued product warranty reserves; and
revisions of such reserves are recognized in the period in which such revisions
are determined.
The Company also carries product liability insurance. The Company believes
that its insurance is generally sufficient to cover product liability claims.
COMPETITION
The commercial aircraft cabin interior products market is relatively
fragmented with a number of competitors in each of the individual product
categories. Due to the global nature of the commercial airline industry,
competition in product categories comes from both U.S. and foreign
manufacturers. However, as aircraft cabin interiors have become increasingly
sophisticated and technically complex, airlines have demanded higher levels of
engineering support and customer service than many smaller cabin interior
products suppliers can provide. At the same time, airlines have recognized that
cabin interior product suppliers must be able to integrate a wide range of
products, including sophisticated electronic components, particularly in wide-
body aircraft. Management believes that these increasing demands of airlines
upon their suppliers will result in a number of suppliers leaving the cabin
interior products industry and a consolidation of those suppliers which remain.
The Company has participated in this consolidation through strategic
acquisitions and internal growth and intends to continue to participate in the
consolidation.
The Company's principal competitors for seating products include Group
Zodiac S.A., Keiper Recaro GmbH, and a number of other producers in the European
community and Japan. The Company's principal competitors for PESS products are
MAS and Rockwell Collins. The Company's primary competitors for galley products
are JAMCO Limited and Britax, PLC.
MANUFACTURING AND RAW MATERIALS
The Company's manufacturing operations consist of both the in-house
manufacturing of component parts and sub-assemblies and the assembly of Company
specified and designed component parts which are
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<PAGE> 49
purchased from outside vendors. The Company maintains state-of-the-art
facilities, and management has an on-going strategic manufacturing improvement
plan utilizing focused factories and cellular production technologies.
Management expects that continuous improvement from implementation of this plan
for each of its product lines will occur over the next several years and should
lower production costs, cycle times and inventory requirements and at the same
time improve product quality and customer response.
GOVERNMENT REGULATION
The FAA prescribes standards and licensing requirements for aircraft
components, and licenses component repair stations within the United States.
Comparable agencies regulate such matters in other countries. The Company holds
several FAA component certificates and performs component repairs at a number of
its US facilities under FAA repair station licenses. The Company also holds an
approval issued by the UK Civil Aviation Authority to design, manufacture,
inspect and test aircraft seating products in Leighton Buzzard, England and in
Kilkeel, Northern Ireland and the necessary approvals to design, manufacture,
inspect, test and repair its galley products in Nieuwegein, The Netherlands and
to inspect, test and repair products at its six service centers throughout the
world.
In March 1992, the FAA adopted Technical Standard Order C127 which requires
that all seats on certain new generation commercial aircraft installed after
such date be certified to meet a number of new safety requirements, including an
ability to withstand a 16G force. Management understands that the FAA plans to
adopt in the near future additional regulations which will require that within
the next five years all seats, including those on existing older commercial
aircraft which are subject to the FAA's jurisdiction, will have to comply with
similar seat safety requirements. At November 29, 1997, the Company had
developed eleven different seat models which meet these new seat safety
regulations.
PATENTS
B/E currently holds 43 United States patents and 14 international patents,
covering a variety of products. However, the Company believes that the
termination, expiration or infringement of one or more of such patents would not
have a material adverse effect on the Company.
EMPLOYEES
As of November 29, 1997, B/E had approximately 3,481 employees.
Approximately 72% of these employees are engaged in manufacturing, 14% in
engineering, research and development, and 14% in sales, marketing, product
support and general administration. Approximately 19% of the employees are
represented by a union. On April 25, 1997, the Company completed negotiations
with its only domestic union which represents 12% of the Company's employees.
This contract, which covers a period of three years, was ratified by the members
of the union on April 26, 1997. B/E considers its employee relations to be good.
PROPERTY
As of November 29, 1997, B/E had 15 principal facilities, comprising an
aggregate of approximately 1,088,100 square feet of space. The following table
describes the principal facilities and indicates the location, function,
approximate size and ownership status of each:
<TABLE>
<CAPTION>
FACILITY
SIZE
LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
CORPORATE
Wellington, Florida.................... Corporate headquarters, finance, 17,700 Owned
marketing sales
Longwood, Florida...................... Administration 1,300 Leased
SEATING PRODUCTS
Litchfield, Connecticut................ Manufacturing, service and warehousing 147,700 Owned
</TABLE>
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<PAGE> 50
<TABLE>
<CAPTION>
FACILITY
SIZE
LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
Winston-Salem, North Carolina.......... Seating products group headquarters, 264,800 Owned
research and development, finance,
marketing, sales and manufacturing
Leighton Buzzard, England.............. Manufacturing, service, research and 114,000 Owned(a)
development, sales support, finance
and warehousing
Kilkeel, Northern Ireland.............. Manufacturing, sales support and 38,500 Owned
warehousing
GALLEY PRODUCTS:
Anaheim, California.................... Manufacturing, service, research and 57,100 Leased
development, sales support, finance
and warehousing
Delray Beach, Florida.................. Manufacturing, service, research and 52,000 Owned
development, sales support, finance
and warehousing; galley products group
headquarters
Jacksonville, Florida.................. Manufacturing, service, engineering, 75,000 Owned
and warehousing
Nieuwegein, The Netherlands............ Manufacturing, service, research and 39,000 Leased
development, sales support, finance
and warehousing
PESS PRODUCTS:
Irvine, California..................... Manufacturing, service, research and 106,700 Leased
development, sales support, finance
and warehousing; In-flight
entertainment group headquarters
SERVICES:
Orange, California..................... Upgrade, maintenance, inspection and 106,300 Leased
repair, finance, sales support and
warehousing; service group
headquarters
Burnsville, Minnesota.................. Upgrade, maintenance, inspection and 7,200 Leased
repair
Woodville, Washington.................. Upgrade, maintenance, inspection and 26,800 Leased
repair
Chesham, England....................... Upgrade, maintenance, inspection and 34,000 Owned(a)
repair
</TABLE>
- ---------------
(a) B/E's owned properties in England are mortgaged to Barclays Bank PLC to
collateralize credit facilities of FEEL in aggregate amounts of up to
approximately (pound sterling)5.0 million.
The Company believes that its facilities are suitable for their present
intended purposes and adequate for the Company's present and anticipated level
of operations. As a result of recent conditions in the airline industry as
described in "-- Industry Overview" and "-- Recent Industry Conditions," B/E's
facilities have been substantially underutilized for the past several years. The
Company believes that its ongoing facility integration program, together with
anticipated continued growth in airline profitability, should result in
significant improvement in the degree of utilization in the Company's
facilities.
LEGAL PROCEEDINGS
The Company is not a party to litigation or other legal proceedings which
the Company believes could reasonably be expected to have a material adverse
effect on the Company's business, financial condition and results of operations.
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The dispute
centered on shipments of aircraft seats and related spare parts for five
civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and
arranged for them to be installed by a contractor in France. At the time, Iran
was not the subject of a U.S. trade embargo. In
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<PAGE> 51
connection with its sale of seats to Iran Air, B/E applied for and was granted a
validated export license by the U.S. Department of Commerce (the "DOC"). The
dispute with the U.S. Government centered on whether seats were delivered to
Iran Air before the formal license was issued by the DOC, some seven months
after B/E first applied for the license. This action resolved all disputes
between B/E Aerospace and the Department of Justice as well as the DOC's Bureau
of Export Enforcement. As part of the settlement, B/E plead guilty to a
violation of the International Economic Emergency Powers Act and was placed on
probation for a three-year period. In addition, B/E entered into a consent order
with the DOC under which the DOC has agreed to suspend the imposition of a
three-year export denial order on PTC Aerospace, a member of B/E's U.S. Seating
Products Group, provided no further violations of the export laws occur. The
Company will record a charge of approximately $4 million in its fourth quarter
of fiscal 1998, which ends February 28, 1998, related to fines, civil penalties
and associated legal fees arising from the settlement.
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<PAGE> 52
MANAGEMENT
The following table sets forth information regarding the directors and
executive officers of the Company. Officers of the Company are elected annually
by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Amin J. Khoury............................ 58 Chairman of the Board
Robert J. Khoury.......................... 55 Vice Chairman of the Board and Chief
Executive Officer and Director
Paul E. Fulchino.......................... 51 President, Chief Operating Officer and
Director
Marco C. Lanza............................ 41 Executive Vice President, Marketing and
Product Development
Thomas P. McCaffrey....................... 43 Corporate Senior Vice President of
Administration, Chief Financial Officer
and Assistant Secretary
E. Ernest Schwartz........................ 61 Corporate Senior Vice President,
Development and Planning
Edmund J. Moriarty........................ 54 Corporate Vice President -- Law, General
Counsel and Secretary
Jeffrey P. Holtzman....................... 42 Vice President, Treasurer and Assistant
Secretary
Sam G. Ayoub.............................. 55 Group Vice President and General Manager,
Services Group
G. Bernard Jewell......................... 56 Group Vice President and General Manager,
Seating Products Group
Roman G. Ptakowski........................ 49 Group Vice President and General Manager,
Galley Products Group
Jim C. Cowart............................. 45 Director**
Richard G. Hamermesh...................... 49 Director*
Brian H. Rowe............................. 65 Director**
Hansjoerg Wyss............................ 61 Director*
</TABLE>
- ---------------
* Member, Audit Committee.
** Member, Stock Option and Compensation Committee.
The Company's Restated Certificate of Incorporation provides that the Board
of Directors is classified into three classes, as nearly as equal in number as
possible, so that each director (after a transitional period) will serve for
three years, with one class of directors being elected each year. The Board is
currently comprised of three Class I Directors (Brian H. Rowe, Jim C. Cowart and
Paul E. Fulchino), two Class II Directors (Robert J. Khoury and Hansjoerg Wyss)
and two Class III Directors (Amin J. Khoury and Richard G. Hamermesh). The terms
of the Class I, Class II and Class III Directors expire upon the election and
qualification of successor directors at annual meetings of stockholders held
following the end of fiscal years 1998, 1996 and 1997, respectively. The
executive officers of the Company are elected annually by the Board of Directors
following the annual meeting of stockholders and serve at the discretion of the
Board of Directors.
Amin J. Khoury has been Chairman of the Board of the Company since July
1987 and was Chief Executive Officer until April 1, 1996. Since 1986, Mr. Khoury
has also been the Managing Director of The K.A.D. Companies, Inc., an
investment, venture capital and consulting firm. Mr. Khoury is currently the
Chairman of the Board of Directors of Applied Extrusion Technologies, Inc., a
manufacturer of oriented polypropylene films used in consumer products labeling
and packaging applications, and a member of the Board of Directors of Brooks
Automation, Inc., the leading manufacturer in the U.S. of vacuum central wafer
handling systems for semiconductor manufacturing. Mr. Khoury is employed by the
Company pursuant to an Employment Agreement extending through December 31, 2001.
Mr. Khoury is the brother of Robert J. Khoury.
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<PAGE> 53
Robert J. Khoury has been a Director of the Company since July 1987. Mr.
Khoury was elected Vice Chairman and Chief Executive Officer effective April 1,
1996; from July 1987 until that date, Mr. Khoury served as the Company's
President and Chief Operating Officer. From 1986 to 1987, Mr. Khoury was Vice
President of The K.A.D. Companies, Inc. The Company has entered into an
Employment Agreement with Mr. Khoury extending through February 28, 2001. Mr.
Khoury is the brother of Amin J. Khoury.
Paul E. Fulchino was elected a Director and President and Chief Operating
Officer of the Company effective April 1, 1996. From 1990 to 1996, Mr. Fulchino
served as President and Vice Chairman of Mercer Management Consulting, Inc.
("Mercer"), a general management consulting firm with over 1,100 employees. In
addition to his management responsibilities as President of Mercer, Mr. Fulchino
also had responsibility for advising clients throughout the world, particularly
with respect to the transportation industry, including a number of major
airlines. The Company has entered into an Employment Agreement with Mr. Fulchino
extending through March 31, 1999.
Marco C. Lanza has been the Executive Vice President, Marketing and Product
Development since January 1994. From March 1992 through January 1994, Mr. Lanza
was Vice President and General Manager of the In-flight Entertainment Group of
the Company. From 1987 through February 1992, Mr. Lanza was Vice President,
Marketing and Product Development of the Company. The Company has entered into
an Employment Agreement with Mr. Lanza extending through December 31, 1999.
Thomas P. McCaffrey has been Corporate Senior Vice President of
Administration, Chief Financial Officer and Assistant Secretary since May 1993.
From August 1989 through May 1993, Mr. McCaffrey was an Audit Director with
Deloitte & Touche LLP, and from 1976 through 1989 served in several capacities,
including Audit Partner, with Coleman & Grant. The Company has entered into an
Employment Agreement with Mr. McCaffrey extending through December 31, 1999.
E. Ernest Schwartz has been Corporate Senior Vice President -- Development
and Planning since December 1997. From March 1997 through November 1997 was Vice
President and General Manager of the Galley Products Group of the Company since
March 1992. From 1986 through February 1992, Mr. Schwartz was President of
Aircraft Products Company, which was acquired by the Company in 1992.
Edmund J. Moriarty has been Corporate Vice President, General Counsel and
Secretary since November 16, 1995. From 1991 to 1995, Mr. Moriarty served as
Vice President and General Counsel to Rollins, Inc., a national service company.
From 1982 through 1991, Mr. Moriarty served as Vice President and General
Counsel to Old Ben Coal Company, a wholly owned coal subsidiary of The Standard
Oil Company.
Jeffrey P. Holtzman has been Treasurer since September 1993 and Vice
President since November 1996. From June 1986 to July 1993, Mr. Holtzman served
in several capacities at FPL Group, Inc., including Assistant Treasurer and
Manager of Financial Planning. Mr. Holtzman previously worked for Mellon Bank,
Gulf Oil and Arthur Young & Company.
Sam G. Ayoub has been Vice President and General Manager of the Company's
Services Group since May 1996 and from November 1994 through April 1996, was
Executive Vice President-Services. From 1984 to 1994 Mr. Ayoub served in several
capacities with AAR Corp. including Corporate Vice President Marketing and
President-Technical Services Division. Prior to that Mr. Ayoub was with United
Airlines for 20 years with his last position being General Manager of their
Cargo Division.
G. Bernard Jewell has been Vice President and General Manager of the
Company's Seating Products Group since March 1996. From February 1994 through
February 1996, Mr. Jewell was Group Vice President, Services Group of the
Company. From April 1992 through January 1994, Mr. Jewell was Group Vice
President, Marketing and Product Development of the Company. From 1988 to 1992,
Mr. Jewell was President of Burns Aerospace Corporation, a manufacturer of
commercial aircraft cabin interior products.
Roman G. Ptakowski has been the Vice President and General Manager of the
Galley Products Group since December 1997. From September 1995 through December
1997, Mr. Ptakowski was Vice President, Sales and Marketing of the Galley
Products Group of the Company. From January 1995 through August 1995, Mr.
Ptakowski served as Senior Vice President, Marketing for Farrel Corporation.
Prior to that he was
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<PAGE> 54
with the ABB Power T&D Company Inc. and Westinghouse Electric Corp. for 25 years
with his last position being General Manager of their Protective Relay Division.
Jim C. Cowart has been a Director of the Company since November 1989. Since
January 1993, Mr. Cowart has been the Chairman of the Board of Directors and
Chief Executive Officer of Aurora Electronics, Inc. Since January 1992, Mr.
Cowart has also been a Director of EOS Capital, Inc., a private capital firm
retained by the Company for strategic planning, competitive analysis, financial
relations and other services. From 1987 until 1991, Mr. Cowart was a general
partner of Capital Resource Partners, a private capital investment manager. From
1982 to 1987, Mr. Cowart was a Senior Vice President of Investment Banking at
Shearson Lehman Brothers and was the President of Shearson Venture Capital, Inc.
Richard G. Hamermesh has been a Director of the Company since July 1987.
Since August 1987, Dr. Hamermesh has been the Managing Partner of the Center for
Executive Development, an independent executive education consulting company,
and, from December 1986 to August 1987, Dr. Hamermesh was an independent
consultant. Prior to such time, Dr. Hamermesh was on the faculty at the Harvard
Business School. Dr. Hamermesh is also a Director of Applied Extrusion
Technologies, Inc.
Brian H. Rowe has been a Director of the Company since July 1995. Mr. Rowe
is currently Chairman Emeritus of GE Aircraft Engines, a principal business unit
of the General Electric Company, where he also served as Chairman from September
1993 through January 1995 and as President from 1979 through 1993. From March
1994 to November 1995, Mr. Rowe served as a Director of Astrostructures Hamble
Limited, a manufacturer of military and civil aircraft components. Since March
1995, Mr. Rowe has also been a Director of Atlas Air Inc., an air cargo carrier.
Since January 1980 Mr. Rowe has been a Director of Fifth Third Bank, an Ohio
banking corporation. Since October 1995, Mr. Rowe has been a Director of
Cincinnati Bell Inc., a communications services company. Since December 1996,
Mr. Rowe has also been a Director of Stewart & Stevenson Services, Inc., a
custom packager of engine systems, and Textron Inc., a manufacturer of
mechanical devices for aircraft and other applications. Since January 1996, Mr.
Rowe has served as Executive Vice Chairman of American Regional Aircraft
Industries, Inc.
Hansjoerg Wyss has been a Director of the Company since October 1989. Since
1977, Mr. Wyss has been a Director and the Chairman and Chief Executive Officer
of Synthes (U.S.A.) and Synthes (Canada), Ltd., manufacturers and distributors
of orthopedic implants and instruments.
53
<PAGE> 55
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information with
respect to the beneficial ownership of the Company's Common Stock as of January
31, 1998 by (i) each person who is known to the Company to beneficially own more
than 5% of the outstanding shares of Common Stock of the Company; (ii) each of
the chief executive officer and the four other most highly paid executive
officers of the Company in fiscal 1997 (collectively, the "Named Executive
Officers") and each director of the Company; and (iii) all Named Executive
Officers and directors of the Company as a group. Except as otherwise indicated,
each of the stockholders named below has sole voting and investment power with
respect to the shares of Common Stock beneficially owned:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
------------------------
NUMBER PERCENT OF
OF OUTSTANDING
NAME SHARES SHARES(A)
---- --------- -----------
<S> <C> <C>
Fidelity Management & Research.............................. 3,145,900 13.8%
82 Devonshire Street
Boston, MA 02109
AIM Management Group, Inc. ................................. 1,318,200 5.8
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Hansjorg Wyss*.............................................. 147,359(b) **
Amin J. Khoury+*............................................ 110,000(c) **
Paul E. Fulchino+*.......................................... 106,783(d) **
Thomas P. McCaffrey+........................................ 73,496(e) **
Jim C. Cowart*.............................................. 69,250(f) **
Robert J. Khoury+*.......................................... 61,555(g) **
E. Ernest Schwartz+......................................... 35,000(h) **
Brian H. Rowe*.............................................. 22,500(i) **
Richard G. Hamermesh*....................................... 18,600(j) **
All Directors and Named Executive Officers as a group (15
persons).................................................. 970,667(k) 4.1%
</TABLE>
- ---------------
+ Named Executive Officer
* Director of the Company
** Less than 1 percent
(a) The number of shares of Common Stock deemed outstanding includes: (i)
22,846,399 shares of Common Stock outstanding as of January 31, 1998; and
(ii) shares of Common Stock subject to outstanding stock options which are
exercisable by the named individual or group in the next sixty days
(commencing January 31, 1998).
(b) Includes 6,250 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 11,250
shares of Common Stock which are not exercisable in the next sixty days.
(c) Represents shares issuable upon the exercise of stock options exercisable
in the next sixty days. Excludes options to purchase 180,000 shares of
Common Stock which are not exercisable in the next sixty days.
(d) Includes 105,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 165,000 shares of Common Stock
which are not exercisable in the next sixty days.
(e) Includes 67,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 97,500 shares of Common Stock
which are not exercisable in the next sixty days.
54
<PAGE> 56
(f) Includes 20,000 shares acquired by a profit sharing plan in which Mr.
Cowart has a fifty percent interest and 46,250 shares issuable upon the
exercise of stock options exercisable in the next sixty days. Excludes
options to purchase 13,750 shares of Common Stock which are not exercisable
in the next sixty days.
(g) Includes 60,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 130,000 shares of Common Stock
which are not exercisable in the next sixty days.
(h) Includes 35,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 50,000
shares of Common Stock which are not exercisable in the next sixty days.
(i) Includes 22,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 27,500
shares of Common Stock which are not exercisable in the next sixty days.
(j) Includes 2,000 shares held in trusts for the benefit of Mr. Hamermesh's two
children, of which trust Mr. Hamermesh and his wife are trustees and in
which shares Mr. Hamermesh disclaims all beneficial interest. Also includes
10,000 shares issuable upon the exercise of stock options exercisable in
the next sixty days. Excludes options to purchase 11,250 shares of Common
Stock which are not exercisable in the next sixty days.
(k) Includes 749,250 shares issuable upon the exercise of stock options in the
next sixty days. Excludes options to purchase 887,500 shares of Common
Stock which are not exercisable in the next sixty days.
55
<PAGE> 57
DESCRIPTION OF CERTAIN INDEBTEDNESS
The Company currently has existing bank credit facilities that aggregate
$125 million. The Bank Credit Facility consists of a $25 million Reducing
Revolver and a $100 million Revolving Facility. The amount of the Reducing
Revolver will be reduced automatically by 12.5% on August 26, 2000 and on each
of the seven succeeding quarterly anniversaries of such date. The Reducing
Revolver is collateralized by all of the issued and outstanding capital stock of
a wholly owned subsidiary and has a five-year maturity. The Revolving Facility
is collateralized by all of the Company's accounts receivable, all of its
inventory and substantially all of its other personal property and has a
five-year maturity. The Bank Credit Facility contains customary affirmative
covenants, negative covenants and conditions of borrowing. At November 29, 1997
indebtedness under the Bank Credit Facility were letters of credit amounting to
approximately $4.6 million. The Company has approximately $120.4 million
available for subsequent borrowings under the Bank Credit Facility.
The Company also has outstanding approximately $23.2 million of 9 3/4%
Notes, which are senior unsecured obligations of the Company ranking equally
with future senior unsecured obligations of the Company. Interest on the 9 3/4%
Notes is payable semiannually in arrears on March 1 and September 1 of each
year. The 9 3/4% Notes are redeemable at the option of the Company, in whole or
in part, on or after March 1, 1998 at predetermined redemption prices, together
with accrued and unpaid interest to the date of redemption. In addition, upon a
Change of Control, the Company is obligated to make an offer to purchase all
outstanding 9 3/4% Notes at a redemption price of 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase. Similarly,
upon the sale or disposition of certain assets, the Company may be obligated to
make offers to purchase the 9 3/4% Notes with a portion of the cash proceeds
from such sale or disposition at a redemption price of 100% of the principal
amount thereof, plus accrued and unpaid interest to date of purchase.
The Company intends to redeem the 9 3/4% Notes that continue to remain
outstanding after completion of the Tender Offer on March 16, 1998 in the
Redemption. Purchase of the 9 3/4% Notes pursuant to the Tender Offer and the
Redemption, or will be, funded with a portion of the proceeds from the sale of
the Old Notes in the Offering. The Company estimates that it will take a $9.2
million extraordinary charge for unamortized debt issue costs, tender and
redemption premiums and fees and expenses related to the repurchase of the
9 3/4% Notes. See "Use of Proceeds."
The Company also has outstanding the $100 million of 9 7/8% Notes which are
unsecured senior subordinated obligations of the Company and are subordinated in
all senior indebtedness of the Company and mature on February 1, 2006. Interest
on the 9 7/8% Notes is payable semiannually in arrears February 1 and August 1
of each year. The 9 7/8% Notes are redeemable at the option of the Company, in
whole or in part, at any time after February 1, 2001 at predetermined redemption
prices together with accrued and unpaid interest through the date of redemption.
Upon a change of control (as defined), each holder of the 9 7/8% Notes may
require the Company to repurchase such holder's 9 7/8% Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of such
purchase. The 9 7/8% Notes contain certain restrictive covenants, all of which
were met by the Company as of February 22, 1997, including limitations on future
indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers and transfers of assets.
FEEL, a subsidiary of the Company, has a revolving line of credit agreement
aggregating approximately $8.4 million (the "FEEL Credit Agreement"). The FEEL
Credit Agreement is collateralized by substantially all of the assets of FEEL.
Aggregate borrowings outstanding under the FEEL Credit Agreement were
approximately $7.2 million as of November 29, 1997. The Company has guaranteed a
portion of the indebtedness outstanding under the FEEL Credit Agreement.
Inventum, another subsidiary of the Company, has a revolving line of credit
agreement for approximately $1 million (the "Inventum Credit Agreement"). The
Inventum Credit Agreement is collateralized by substantially all of the assets
of Inventum. There were no borrowings outstanding under the Inventum Credit
Agreement as of November 29, 1997.
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<PAGE> 58
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued under an indenture dated as of February 13, 1998
(the "Indenture") between the Company, as issuer, and United States Trust
Company of New York, as trustee (the "Trustee"), a copy of the form of which
will be made available upon request. Upon the issuance of the New Notes, the
Indenture will be subject to and governed by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by, reference to the provisions of the Indenture,
including the definitions of certain terms contained therein and those terms
made part of the Indenture by reference to the Trust Indenture Act.
GENERAL
The New Notes will be unsecured, senior subordinated obligations of the
Company limited to $250,000,000 aggregate principal amount. The New Notes will
be issued solely in exchange for an equal principal amount of Old Notes pursuant
to the Exchange Offer. The form and terms of the New Notes will be identical in
all material respects to the form and terms of the Old Notes except that: (i)
the New Notes will have been registered under the Securities Act and (ii) the
Registration Rights and contingent interest reset provisions applicable to the
Old Notes are not applicable to the New Notes. The New Notes will be issued only
in registered form without coupons, in denominations of $1,000 and integral
multiples thereof. (Section 302) Principal of, premium, if any, and interest on
the Notes will be payable, and the Notes will be transferable (subject to
compliance with transfer restrictions imposed by applicable securities laws for
so long as the Notes are not registered for resale under the Securities Act), at
the corporate trust office or agency of the Trustee in The City of New York
maintained for such purposes at 114 West 47th Street. (Sections 301 and 305) In
addition, interest may be paid, at the option of the Company, by check mailed to
the Person entitled thereto as shown on the Note Register. (Section 309) No
service charge will be made for any transfer, exchange or redemption of Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith. (Section 305)
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Notes will mature on March 1, 2008. Except as otherwise described
below, each Note will bear interest at the applicable rate set forth on the
cover page hereof from February 13, 1998 or from the most recent interest
payment date to which interest has been paid, payable in cash semiannually in
arrears on March 1 and September 1 of each year, commencing September 1, 1998,
to the Person in whose name the Note (or any predecessor Note) is registered in
the Note Register at the close of business on the February 15 or August 15 next
preceding such interest payment date.
As discussed under "Exchange Offer," pursuant to the Registration Rights
Agreement, the Company has agreed for the benefit of the holders of the Old
Notes, at the Company's cost, either (i) to effect a registered Exchange Offer
under the Securities Act to exchange the Old Notes for Exchange Notes, which
will have terms identical in all material respects to the Old Notes (except that
the Exchange Notes will not contain terms with respect to transfer restrictions)
or (ii) in the event that any changes in law or applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
120 days following the date of the original issue of the Old Notes, or if any
holder of the Old Notes (other than the Initial Purchasers) is not eligible to
participate in the Exchange Offer, or upon the request of any Initial Purchaser
in certain circumstances, to register the Old Notes for resale under the
Securities Act through a shelf registration statement (the "Shelf Registration
Statement"). In the event that either (a) the Registration Statement is not
filed with the Commission on or prior to the 30th calendar day following the
date of original issue of the Old Notes, (b) the Registration Statement has not
been declared effective on or prior to the 90th calendar day following the date
of original issue of the Old Notes or (c) the Exchange Offer is not consummated
or a Shelf Registration Statement is not declared effective on or prior to the
120th calendar day following the date of original issue of the Old Notes, the
interest rate borne by the Old Notes shall be increased by one-half of one
percent per annum following such 30-day period in the case of (a) above,
following such 90-day period in the case of
57
<PAGE> 59
clause (b) above or following such 120-day period in the case of clause (c)
above. The aggregate amount of such increase from the original interest rate
pursuant to these provisions will in no event exceed one-half of one percent per
annum. Upon (x) the filing of the Registration Statement after the 30-day period
described in clause (a) above, (y) the effectiveness of the Registration
Statement after the 90-day period described in clause (b) above or (z) the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, after the 120-day period described in clause (c)
above, the interest rate borne by the Notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest if the Company is otherwise in compliance with this paragraph.
See "Exchange Offer."
Notes that remain outstanding after the consummation of the Exchange Offer
and New Notes issued in connection with the Exchange Offer will be treated as a
single class of securities under the Indenture.
SUBORDINATION
The payment of the principal of, premium, if any, interest on and all other
amounts owing in respect of, the Notes will be subordinated, as set forth in the
Indenture, in right of payment to the prior payment in full in cash or cash
equivalents of all Senior Indebtedness; provided, however, that the Notes shall
rank equal with, or prior to, all existing and future unsecured indebtedness of
the Company that is subordinated to any Senior Indebtedness. (Section 1301)
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its creditors, as such, or
its assets, or any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Company (except in connection with
the consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety upon the terms and conditions described under
"Merger, Consolidation and Sale of Assets, etc." below), the holders of Senior
Indebtedness will first be entitled to receive payment in full in cash or cash
equivalents of all amounts due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in cash or cash equivalents, before the
holders of the Notes will be entitled to receive any payment or distribution of
any kind or character (other than any payment or distribution in the form of
equity securities or subordinated securities of the Company or any successor
obligor provided for by a plan of reorganization or readjustment that, in the
case of any such subordinated securities, are subordinated in right of payment
to all Senior Indebtedness that may at the time be outstanding to at least the
same extent as the Notes are so subordinated (such equity securities or
subordinated securities hereinafter being "Permitted Junior Securities")) on
account of principal of (or premium, if any) or interest on the Notes; and any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than a payment or distribution in
the form of Permitted Junior Securities) by set-off or otherwise, to which the
holders or the Trustee would be entitled but for the provisions of the Indenture
shall be paid by the liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior Indebtedness
or their representative or representatives ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness to the extent
necessary to make payment in full in cash or cash equivalents of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. (Section 1302)
No payment (other than any payments made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture" from monies
or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character, whether in
cash, property or securities (other than Permitted Junior Securities), may be
made by or on behalf of the Company on account of principal of (or premium, if
any) or interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes upon the occurrence of any default in payment of Designated
Senior Indebtedness (a "Payment Default") until such Payment Default shall have
been cured or waived in writing or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full in cash or cash
equivalents. (Section 1303(a))
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<PAGE> 60
No payment (other than any payments made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture" from monies
or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character, whether in
cash, property or securities (other than Permitted Junior Securities), may be
made by or on behalf of the Company on account of principal (or premium, if any)
or interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes for the period specified below (a "Payment Blockage
Period") upon the occurrence of any default or event of default with respect to
any Designated Senior Indebtedness other than any Payment Default pursuant to
which the maturity thereof may be accelerated (a "Non-payment Default") and
after the receipt by the Trustee of written notice thereof from the Agent Bank
or any other representative of a holder of Designated Senior Indebtedness.
(Section 1303(b))
The Payment Blockage Period will commence upon the date of receipt by the
Trustee of written notice from the Agent Bank or such other representative of
the Designated Senior Indebtedness in respect of which the Non-payment Default
exists and shall end on the earliest of (i) 179 days thereafter (provided any
Designated Senior Indebtedness as to which notice was given shall not
theretofore have been accelerated), (ii) the date on which such Non-payment
Default is cured, waived or ceased to exist or such Designated Senior
Indebtedness is discharged or paid in full in cash or cash equivalents or (iii)
such Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from the Agent Bank or such other representative
initiating such Payment Blockage Period, after which the Company will resume
making any and all required payments in respect of the Notes, including any
missed payments. In any event, not more than one Payment Blockage Period may be
commenced during any period of 365 consecutive days. No event of default with
respect to Designated Senior Indebtedness that existed or was continuing on the
date of the commencement of any Payment Blockage Period will be, or can be made,
the basis for the commencement of a subsequent Payment Blockage Period, unless
such default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment Blockage
Period (it being acknowledged that any breach of any financial covenant for a
period commencing after the date of commencement of such Payment Blockage Period
which would give rise to a Non-payment Default pursuant to any provision under
which a Non-payment Default previously existed or was continuing shall
constitute a new Non-payment Default for this purpose).
Failure by the Company to make any required payment in respect of the Notes
when due or within any applicable grace period, whether or not occurring during
a Payment Blockage Period, would result in an Event of Default and, thereafter,
holders of the Notes would have the right to accelerate the maturity thereof.
See "-- Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency of the Company, creditors of the Company who are
holders of Senior Indebtedness may recover more, ratably, than the holders of
the Notes, and assets which would otherwise be available to pay obligations in
respect of the Notes will be available only after all Senior Indebtedness has
been paid in full in cash or cash equivalents, at which time there may not be
sufficient assets remaining to pay any amounts due on any or all of the Notes.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on (including interest accruing after the filing of a petition by or against the
Company under any bankruptcy laws) and all other amounts due on or in connection
with any Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
the principal of (and premium, if any, on) and interest (including interest
accruing after the occurrence of an event of default or after the filing of a
petition by or against the Company under any bankruptcy law) on all
Indebtedness, and all other amounts and obligations of every nature of the
Company, from time to time owed under, the Bank Credit Agreement and the Senior
Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(i) Indebtedness evidenced by the Notes and the 9 7/8% Notes, (ii) Indebtedness
of the Company that is expressly subordinated in right of payment to any
Indebtedness of the Company, (iii) Indebtedness of the Company that by operation
of law is subordinate to any general unsecured obligations of the Company, (iv)
that portion of any
59
<PAGE> 61
Indebtedness of the Company that at the time of incurrence is incurred in
violation of any covenant of the Indenture, (v) any liability for federal, state
or local taxes or other taxes, owed or owing by the Company, (vi) trade accounts
payable owed or owing by the Company, (vii) Indebtedness of the Company to any
Subsidiary or any other Affiliate of the Company, (viii) Redeemable Capital
Stock of the Company and (ix) Indebtedness which when incurred and without
respect to any election under Section 1111(b) of Title 11 ecourse to the Company
or any Subsidiary.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Bank Credit Agreement and the Senior Notes and (ii) following the full
repayment of indebtedness under the Bank Credit Agreement and the termination of
the commitments thereunder, any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding of at least $17
million and is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by the Company.
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after March 1, 2003, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest to the redemption date, if redeemed
during the 12-month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003...................................................... 104.00%
2004...................................................... 102.00%
2005 and thereafter....................................... 100.00%
</TABLE>
In addition, at any time or from time to time, on or prior to March 1,
2001, the Company may, at its option, redeem up to 35% of the aggregate
principal amount of Notes originally issued under the Indenture at a redemption
price equal to 108% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date, with the net cash
proceeds of one or more Equity Offerings; provided that at least 65% of the
aggregate principal amount of Notes issued under the Indenture on the Issuance
Date remains outstanding immediately after the occurrence of such redemption;
provided further such redemption occurs within 60 days of the date of closing of
each such Equity Offering. The Trustee shall select the Notes to be purchased in
the manner described under "-- Selection and Notice."
As described below, (a) upon the occurrence of a Change of Control, the
Company is obligated to make an offer to purchase all outstanding Notes at a
redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase and (b) upon certain sales or other
dispositions of assets, the Company may be obligated to make offers to purchase
Notes with a portion of the Net Cash Proceeds of such sales or other
dispositions at a redemption price of 100% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase. See "Certain
Covenants -- Change of Control" and "-- Limitation on Disposition of Proceeds of
Asset Sales." (Section 1101)
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate; provided, however, that no Note of a principal amount
of $1,000 or less shall be redeemed in part. Notice of redemption shall be
mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the
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original Note. On and after the redemption date, interest will cease to accrue
on Notes or portions thereof called for redemption and accepted for payment.
(Sections 1104, 1105, 1107 and 1108)
CERTAIN COVENANTS
The Indenture will contain, among others, the covenants described below.
LIMITATION ON INDEBTEDNESS. (a) The Indenture will provide that the
Company will not create, incur, issue, assume, guarantee or in any manner become
directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired Indebtedness),
other than Permitted Indebtedness, unless (x) the Company's Consolidated Fixed
Charge Coverage Ratio for the four full fiscal quarters immediately preceding
the incurrence of such Indebtedness, taken as one period (and after giving pro
forma effect to: (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred and the application of such
proceeds occurred at the beginning of such four-quarter period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company or
its Restricted Subsidiaries since the first day of such four-quarter period as
if such Indebtedness was incurred, repaid or retired at the beginning of such
four-quarter period; and (iii) notwithstanding clause (d) of the definition of
Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger
or otherwise) or disposition (whether by sale, merger or otherwise) of any
company, entity or business acquired or disposed of by the Company or its
Restricted Subsidiaries, as the case may be, since the first day of such four
quarter period, as if such acquisition or disposition occurred at the beginning
of such four-quarter period, reflecting, in the case of such an acquisition, any
amount attributable to operating expense that will be eliminated or cost
reduction that will be realized (in each case, net of any operating expense or
other cost increase) in connection with such acquisition, as determined in good
faith by the chief financial officer of the Company in accordance with GAAP and
the rules, regulations and guidelines of the Commission, as if such elimination
of operating expense or the realization of such cost reduction were achieved at
the beginning of such four-quarter period), would have been at least equal to
2.0 to 1 and (y) if such Indebtedness is Subordinated Indebtedness, such
Indebtedness shall have an Average Life longer than the Average Life of the
Notes and a final Stated Maturity of principal later than the final Stated
Maturity of principal of the Notes.
(b) The Company will not permit any Restricted Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro forma
effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of the "Limitation on Indebtedness" covenant),
would have been at least equal to 3.0 to 1, and (y) any Restricted Subsidiary
which incurs any Indebtedness pursuant to clause (x) of this paragraph (b) shall
Guarantee the Notes in compliance with clause (i) of paragraph (b) and clauses
(i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on Guarantees of
Indebtedness by Restricted Subsidiaries" covenant. (Section 1010)
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture will
provide that the Company will not, and will not permit any Restricted Subsidiary
to, incur, create, assume, guarantee or in any other manner become directly or
indirectly liable with respect to or responsible for, or permit to remain
outstanding, any Indebtedness that is subordinate or junior in right of payment
to any Senior Indebtedness unless such Indebtedness is also pari passu with, or
subordinate in right of payment to, the Notes pursuant to subordination
provisions substantially similar to those contained in the Indenture. (Section
1019)
LIMITATION ON RESTRICTED PAYMENTS. (a) The Indenture will provide that the
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, take the following actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable in shares of its Capital Stock or in options,
warrants or other rights to purchase such Capital Stock, but excluding
dividends or distributions payable in Redeemable Capital Stock or in
options, warrants or other rights to purchase Redeemable Capital Stock),
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(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any options, warrants or other rights to
acquire such Capital Stock,
(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to a scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness,
(iv) make any Investment (other than any Permitted Investment) in any
Person, or
(v) incur any guarantee of Indebtedness of any Affiliate, including
any Unrestricted Subsidiary (other than with respect to (a) guarantees of
Indebtedness of any wholly owned Restricted Subsidiary by the Company or
(b) guarantees of Indebtedness of the Company by any Restricted
Subsidiary),
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on
Indebtedness" covenant, and (3) the aggregate amount of all Restricted Payments
declared or made after the date of the 9 7/8% Notes Indenture shall not exceed
the sum of (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income
of the Company accrued on a cumulative basis during the period beginning on the
first day after the date of the 9 7/8% Notes Indenture and ending on the last
day of the Company's last fiscal quarter ending prior to the date of such
proposed Restricted Payment (or, if such aggregate cumulative Consolidated
Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the
aggregate net cash proceeds received after the date of the 9 7/8% Notes
Indenture by the Company from the issuance or sale (other than to any Restricted
Subsidiary) of shares of Capital Stock of the Company (other than Redeemable
Capital Stock) or warrants, options or rights to purchase such shares of Capital
Stock of the Company, plus (C) the aggregate net cash proceeds received after
the date of the 9 7/8% Notes Indenture by the Company from the issuance or sale
(other than to any Restricted Subsidiary) of debt securities that have been
converted into or exchanged for Capital Stock of the Company (other than
Redeemable Capital Stock) to the extent such debt securities were originally
sold for cash, together with the aggregate cash received by the Company at the
time of such conversion or exchange, plus (D) to the extent not otherwise
included in the Company's Consolidated Adjusted Net Income, the net reduction in
Investments in Unrestricted Subsidiaries resulting from the payments of interest
on Indebtedness, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or a Restricted Subsidiary after the date
of the 9 7/8% Notes Indenture from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued
in each case as provided in the definition of Investment), not to exceed in the
case of any Unrestricted Subsidiary the total amount of Investments (other than
Permitted Investments), after the date of the 9 7/8% Notes Indenture in such
Unrestricted Subsidiary by the Company and its Restricted Subsidiaries, plus (E)
$10 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (with respect to clauses
(ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such declaration complied
with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of, a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of shares of Capital Stock
(other than Redeemable Capital Stock) of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for or out of the net
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cash proceeds of a substantially concurrent issuance and sale (other than
to a Restricted Subsidiary) of shares of Capital Stock (other than
Redeemable Capital Stock) of the Company;
(iv) the repurchase of any Subordinated Indebtedness of the Company at
a purchase price not greater than 101% of the principal amount of such
Subordinated Indebtedness in the event of a Change of Control pursuant to a
provision similar to the "Change of Control" covenant; provided that prior
to such repurchase the Company has made the Change of Control Offer as
provided in such covenant with respect to the Notes and has repurchased all
Notes validly tendered for payment in connection with such Change of
Control Offer;
(v) the purchase, redemption or other acquisition or retirement for
value of Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for, or out of the net cash proceeds of a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) of the Indebtedness being so purchased,
redeemed, acquired or retired, plus the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of the
Subordinated Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) such new Indebtedness is subordinated
to the Notes to the same extent as the Notes are subordinated to Senior
Indebtedness and (C) such new Indebtedness has an Average Life longer than
the Average Life of the Notes and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Notes; and
(vi) the purchase, redemption or other acquisition or retirement for
value of shares of Common Stock of the Company issued pursuant to
non-qualified options granted under stock option plans of the Company, in
order to pay withholding taxes due as a result of income recognized upon
the exercise of such options; provided that (1) the Company is required, by
the terms of such plans, to effect such purchase, redemption or other
acquisition or retirement for value of such shares and (2) the aggregate
consideration paid by the Company for such shares so purchased, redeemed or
otherwise acquired or retired for value does not exceed $2 million during
any fiscal year of the Company.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
(provided that any dividend paid pursuant to clause (i) of this paragraph (b)
shall reduce the amount that would otherwise be available under clause (3) of
paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i)) and the actions described in clause (v) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph (b) and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the Company under
clause (3)(A) of paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
the Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period. (Section 1011)
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LIMITATION ON ISSUANCES AND SALES OF RESTRICTED SUBSIDIARY STOCK. The
Indenture will provide that the Company (i) will not permit any Restricted
Subsidiary to issue any Capital Stock (other than to the Company or a
wholly-owned Restricted Subsidiary) and (ii) will not permit any Person (other
than the Company or a wholly owned Restricted Subsidiary) to own any Capital
Stock of any Restricted Subsidiary; provided, however, that this covenant shall
not prohibit (1) the issuance and sale of all, but not less than all, of the
issued and outstanding Capital Stock of any Restricted Subsidiary owned by the
Company or any of its Restricted Subsidiaries in compliance with the other
provisions of the Indenture, (2) the ownership by directors of director's
qualifying shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent mandated by applicable law or (3) the
issuance and sale of Capital Stock by a Restricted Subsidiary, or the ownership
by any Person of any Capital Stock of a Restricted Subsidiary, if, in each case,
the Company has made, or is making, an Investment in such Restricted Subsidiary
pursuant to clause (v) of the definition of "Permitted Investment." (Section
1012)
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture will provide
that the Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company or any beneficial owner of 5%
or more of any class of the Company's Capital Stock at any time outstanding
("Interested Persons"), unless (i) such transaction is among the Company and
wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms
that are no less favorable to the Company, or such Restricted Subsidiary, as the
case may be, than those which could have been obtained in an arm's length
transaction with third parties who are not Interested Persons, (B) with respect
to any transaction involving aggregate consideration equal to or greater than $2
million, the Company has delivered an Officers' Certificate to the Trustee
certifying that such transaction complies with clause (ii)(A) above, and (C)
with respect to any transaction involving aggregate consideration equal to or
greater than $5 million, such transaction has been approved by the Board of
Directors (including a majority of the Disinterested Directors); provided,
however, that this covenant will not restrict the Company from paying reasonable
and customary regular compensation and fees to directors of the Company or any
Restricted Subsidiary who are not employees of the Company or any Restricted
Subsidiary. (Section 1013)
LIMITATION ON LIENS SECURING PARI PASSU INDEBTEDNESS OR SUBORDINATED
INDEBTEDNESS. (a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or
Subordinated Indebtedness of the Company on or with respect to any of its
property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (x) in the case of any Lien
securing Pari Passu Indebtedness of the Company, the Notes are secured by a Lien
on such property, assets or proceeds that is senior in priority to or pari passu
with such Lien and (y) in the case of any Lien securing Subordinated
Indebtedness of the Company, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Lien.
(b) The Company will not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is
pari passu or subordinate in right of payment to the Guarantee of such
Subsidiary, on or with respect to any of such Restricted Subsidiary's properties
or assets, including any shares of stock or Indebtedness of any Subsidiary of
such Restricted Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the case of
any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu
in right of payment to the Guarantee of such Restricted Subsidiary, such
Guarantee is secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien and (y) in the case of any
Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in
right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee
is secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien. (Section 1014)
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase all of the then outstanding
Notes (a "Change of Control Offer"), and shall purchase, on a business day (the
"Change of Control Purchase Date") not more than 70 nor less than 60 days
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following the Change of Control, all of the then outstanding Notes validly
tendered pursuant to such Change in Control Offer, at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the Change of Control
Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each Noteholder and
the Banks notice of the Change of Control Offer, which notice shall govern the
terms of the Change of Control Offer and shall state, among other things, the
procedures that Noteholders must follow to accept the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by Noteholders
seeking to accept the Change of Control Offer. The Bank Credit Agreement
prohibits the purchase of the Notes by the Company prior to full repayment of
indebtedness under the Bank Credit Agreement and the termination of the
commitments thereunder and, upon a Change of Control, all amounts outstanding
under the Bank Credit Agreement may become due and payable. In addition, under
the terms of the indenture governing the Senior Notes, the repurchase of the
Notes by the Company would constitute a restricted payment that may be
prohibited at the time of a Change of Control. There can be no assurance that in
the event of a Change of Control the Company will be able to obtain the
necessary consents from the lenders under the Bank Credit Agreement, or, if
necessary, from the holders of the Senior Notes, to consummate a Change of
Control Offer. The failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due would result
in an Event of Default and would give the Trustee and the holders of the Notes
the rights described under "-- Events of Default."
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to purchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "-- Certain Definitions" for the definition of "Change
of Control."
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above. (Section 1015)
LIMITATION ON DISPOSITION OF PROCEEDS OF ASSET SALES. (a) The Indenture
will provide that the Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company and
its Restricted Subsidiaries may engage in Asset Sales for consideration not in
the form of cash or Cash Equivalents in amounts in excess of that permitted in
this clause (ii), so long as (x) such excess consideration is in the form
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of Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully
Traded Common Stock received by the Company and its Restricted Subsidiaries
(measured as of the date of receipt) from all Asset Sales in reliance on this
proviso since the date of the Indenture that has not been converted into cash or
Cash Equivalents does not exceed $10 million and (z) any Fully Traded Common
stock that is converted into cash or Cash Equivalents shall be applied as
provided in paragraphs (b) and (c) of this "Limitation on Disposition of
Proceeds of Asset Sales" covenant.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may use the Net Cash Proceeds thereof, within 12 months after such
Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness of
the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date or in
businesses reasonably related thereto. If any such legally binding agreement to
invest such Net Cash Proceeds is terminated, then the Company may, within 90
days of such termination or within 12 months of such Asset Sale, whichever is
later, invest such Net Cash Proceeds as provided in clauses (i) or (ii) (without
regard to the parenthetical contained in such clause (ii)) above. The amount of
such Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall, within 15 business days, make an offer to purchase (an "Excess
Proceeds Offer") from all holders of Notes, on a pro rata basis, in accordance
with the procedures set forth below, the maximum principal amount (expressed as
a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds.
The offer price as to each Note shall be payable in cash in an amount equal to
100% of the principal amount of such Note plus accrued and unpaid interest, if
any, to the date such Excess Proceeds Offer is consummated. To the extent that
the aggregate principal amount of Notes tendered pursuant to an Excess Proceeds
Offer is less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Notes
to be purchased will be selected on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset to zero.
(Section 1016)
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES. (a) The Indenture will provide that the Company will not permit
any Restricted Subsidiary to guarantee the payment of any Indebtedness of the
Company or any Indebtedness of any other Restricted Subsidiary unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a Guarantee of payment of the Notes by
such Restricted Subsidiary except that (A) if the Notes are subordinated in
right of payment to such Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such Restricted Subsidiary's guarantee with
respect to such Indebtedness substantially to the same extent as the Notes are
subordinated to such Indebtedness under the Indenture and (B) if such
Indebtedness is by its express terms subordinated in right of payment to the
Notes, any such guarantee of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated in right of payment to such Restricted
Subsidiary's Guarantee with respect to the Notes substantially to the same
extent as such Indebtedness is subordinated to the Notes; (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Guarantee; (iii)
such Restricted Subsidiary shall appoint CT Corporation in New York City as its
agent for the service of process: and (iv) such Restricted Subsidiary shall
deliver to the Trustee an Opinion of Counsel to the effect that (A) such
appointment of CT Corporation is valid, (B) such Guarantee of the Notes has been
duly executed and authorized and (C) such Guarantee of the Notes constitutes a
valid, binding and enforceable obligation of such Restricted Subsidiary, except
insofar as enforcement thetcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; provided that
this paragraph (a) shall not be applicable to any Guarantee of any Restricted
Subsidiary that (x) existed at the time such Person became a
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Restricted Subsidiary of the Company and (y) was not incurred in connection
with, or in contemplation of, such Person becoming a Restricted Subsidiary of
the Company.
(b) Notwithstanding the foregoing and the other provisions of the
Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide
by its terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such Guarantee.
(Section 1017)
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture will provide that the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary of the Company, (e) make loans or advances to the
Company or any other Restricted Subsidiary of the Company, (d) transfer any of
its properties or assets to the Company or any other Restricted Subsidiary of
the Company or (e) guarantee any Indebtedness of the Company or any other
Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Restricted Subsidiary of the Company, (iii) any agreement or
other instrument of a Person acquired by the Company or any Restricted
Subsidiary of the Company in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (iv) any
agreement in existence on the Closing Date (to the extent of any encumbrances or
restrictions in existence thereunder on the Closing Date) and (v) any agreement
providing for the incurrence of Indebtedness of Restricted Subsidiaries pursuant
to either clause (x) of paragraph (b) of the "Limitation of Indebtedness"
covenant or clause (vii) of the definition of Permitted Subsidiary Indebtedness;
provided that any Restricted Subsidiary that becomes subject to any such
encumbrances or restrictions pursuant to this clause (v) shall Guarantee the
Notes in compliance with the provisions of clause (i) of paragraph (b) and
clauses (i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on Guarantees
of Indebtedness by Restricted Subsidiaries" covenant. (Section 1018)
REPORTS. The Indenture will require that the Company file on a timely
basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the Company has a class of securities registered
under the Exchange Act, the annual reports, quarterly reports and other
documents that the Company would be required to file if it were subject to
Section 13 or 15 of the Exchange Act. The Company will also be required (a) to
file with the Trustee, and provide to each holder of Notes, without cost to such
holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective holder of Notes promptly upon written request.
(Section 1009)
MERGER, CONSOLIDATION AND SALE OF ASSETS, ETC.
The Company will not, in any transaction or series of transactions, merge
or consolidate with or into, or sell, assign, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any Person or Persons, and the Company will not permit any Restricted
Subsidiary to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or
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Persons, unless at the time and after giving effect thereto (i) either (A) if
the transaction or transactions is a merger or consolidation, the Company shall
be the surviving Person of such merger or consolidation, or (B) the Person
formed by such consolidation or into which the Company or such Restricted
Subsidiary is merged or to which the properties and assets of the Company or
such Restricted Subsidiary, as the case may be, substantially as an entirety,
are sold, assigned, transferred, leased or otherwise disposed of (any such
surviving Person or transferee Person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia and shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under the
Notes and the Indenture, and, in each case, the Indenture shall remain in full
force and effect; (ii) immediately before and immediately after giving effect to
such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or series of
transactions on a pro forma basis, could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness"
covenant; and (iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Consolidated Net Worth of the
Company or the Surviving Entity, as the case may be, is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
series of transactions. (Section 801)
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in the form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate stating that such consolidation, merger,
transfer, lease or other disposition and the supplemental indenture in respect
thereto comply with the requirements under the Indenture and an Opinion of
Counsel stating that the requirements of clause (i) of the preceding paragraph
have been complied with.
Upon any consolidation or merger or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with the immediately preceding paragraphs in
which the Company is not the continuing obligor under the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the Company therein. When a successor
assumes all the obligations of its predecessor under the Indenture or the Notes,
the predecessor shall be released from those obligations; provided that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Notes.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Notes; or
(ii) default in the payment of an installment of interest on any of
the Notes, when due and payable, for 30 days; or
(iii) default in the performance or breach of the provisions of the
"Merger, Consolidation and Sale of Assets" section of the Indenture, the
failure to make or consummate a Change of Control Offer in accordance with
the provisions of the "Change of Control" covenant or the failure to make
or consummate an Excess Proceeds Offer in accordance with the provisions of
the "Limitation on Disposition of Proceeds of Asset Sales" covenant; or
(iv) the Company or any Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in the Notes, any Guarantee or
the Indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 30 days after written notice of such failure requiring the
Company
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to remedy the same shall have been given (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the holders of 25% in aggregate
principal amount of the Notes then outstanding; or
(v) default or defaults under one or more mortgages, bonds, debentures
or other evidences of Indebtedness under which the Company or any
Significant Subsidiary then has outstanding Indebtedness in excess of $5
million, individually or in the aggregate, and either (a) such Indebtedness
is already due and payable in full or (b) such default or defaults have
resulted in the acceleration of the maturity of such Indebtedness; or
(vi) one or more final judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5 million, either individually or in the
aggregate, shall be entered against the Company or any of its Significant
Subsidiaries or any of their respective properties and shall not be
discharged or fully bonded and there shall have been a period of 60 days
after the date on which any period for appeal has expired and during which
a stay of enforcement of such judgment, order or decree shall not be in
effect: or
(vii) (A) any holder of at least $5 million in aggregate principal
amount of secured Indebtedness of the Company or of any Significant
Subsidiary as to which a default has occurred and is continuing shall
commence judicial proceedings (which proceedings shall remain unstayed for
5 Business Days) to foreclose upon assets of the Company or any Significant
Subsidiary having an aggregate Fair Market Value, individually or in the
aggregate, in excess of $5 million or shall have exercised any right under
applicable law or applicable security documents to take ownership of any
such assets in lieu of foreclosure or (B) any action described in the
foregoing clause (A) shall result in any court of competent jurisdiction
issuing any order for the seizure of such assets; or
(viii) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other than
by reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the Indenture) and such condition shall have
continued for a period of 30 days after written notice of such failure
requiring the Guarantor and the Company to remedy the same shall have been
given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the holders of 25% in aggregate principal amount of the Notes
then outstanding; or
(ix) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
(Section 501)
If an Event of Default (other than as specified in clause (ix) above) shall
occur and be continuing, the Trustee, by notice to the Company, or the holders
of at least 25% in aggregate principal amount of the Notes then outstanding, by
notice to the Trustee and the Company, may declare the principal of, premium, if
any, and accrued interest on all of the outstanding Notes due and payable
immediately, upon which declaration all amounts payable in respect of the Notes
shall be immediately due and payable, provided, however, that, for so long as
the Bank Credit Agreement is in effect, such declaration shall not become
effective until the earlier of (i) five Business Days following delivery of
notice to the Agent Bank of the intention to accelerate the Notes or (ii) the
acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of
Default specified in clause (ix) above occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the outstanding
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes.
(Section 502)
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest
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upon overdue interest at the rate borne by the Notes which has become due
otherwise than by such declaration of acceleration; (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction; and
(c) all Events of Default, other than the nonpayment of principal of, premium,
if any, and interest on the Notes that has become due solely by such declaration
of acceleration, have been cured or waived. (Section 502)
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Securities because an Event of Default shall have
occurred and be continuing, such declaration of acceleration shall be
automatically annulled if the Indebtedness that is the subject of such Event of
Default has been discharged or the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such discharge or rescission, as the case may be, shall have been given to
the Trustee by the Company and countersigned by the holders of such Indebtedness
or a trustee, fiduciary or agent for such holders, within 30 days after such
declaration of acceleration in respect of the Securities, and no other Event of
Default has occurred during such 30-day period which has not been cured or
waived during such period. (Section 502)
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding. (Section 513)
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 15 days after receipt of such notice
and the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note. (Section 507)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
under the Indenture is not under any obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Noteholders
unless such holders shall have offered to the Trustee reasonable security or
indemnity. Subject to certain provisions concerning the rights of the Trustee,
the holders of a majority in aggregate principal amount of the outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee under the Indenture. (Sections 512 and 602)
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 5 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the holders of such Notes if a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of the Noteholders.
(Section 601)
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within ten days
of any Default.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated. destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and any Guarantor with respect to certain
covenants that are set forth in the Indenture, some of which are described under
"Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance"). The Company is permitted to exercise defeasance or
covenant defeasance only with the consent of the Banks. (Sections 1202 and 1203)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes to redemption or maturity; (ii) the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
or covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit; (iv)
such defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of the Company or any
Guarantor; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument to which the Company or any Guarantor is a party or by which it is
bound; (vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Osfactory to the Trustee, which, taken together,
state that all conditions precedent under the Indenture to either defeasance or
covenant defeasance, as the case may be, have been complied with. (Section 1204)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel satisfactory to the Trustee, which, taken together, state
that all
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conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with. (Section 401)
AMENDMENTS AND WAIVERS
From time to time, the Company and the Trustee may, without the consent of
the Noteholders, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act of 1939, or making any change that does
not adversely affect the rights of any Noteholder; provided, however, that the
Company has delivered to the Trustee an Opinion of Counsel stating that such
change does not adversely affect the rights of any Noteholder. Other amendments
and modifications of the Indenture or the Notes may be made by the Company and
the Trustee with the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby, (i) reduce the principal amount of, extend
the fixed maturity of or alter the redemption provisions of, the Notes, (ii)
change the currency in which any Notes or any premium or the interest thereon is
payable, (iii) reduce the percentage in principal amount of outstanding Notes
that must consent to an amendment, supplement or waiver or consent to take any
action under the Indenture or the Notes, (iv) modify the "Limitation on Other
Senior Subordinated Indebtedness" covenant or any of the provisions in the
Indenture relating to the subordination of the Notes in a manner adverse to the
holders; (v) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes, (vi) waive a default in payment with
respect to the Notes, (vii) alter the Company's obligation to purchase the Notes
in accordance with the Indenture or waive any default in the performance
thereof, (viii) reduce or change the rate or time for payment of interest on the
Notes, or (ix) release any Guarantor from any of its obligations under its
Guarantee or the Indenture other than in accordance with the terms of the
Indenture. (Sections 901 and 902) The ability of the Company to amend the
Indenture will be restricted by the terms of the Bank Credit Agreement.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent Person would exercise under the circumstances in the conduct of such
Person's own affairs. (Section 602)
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined) it must eliminate such conflict
or resign.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of
New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a subsidiary).
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"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and, in the case of the Company and
its Restricted Subsidiaries, also means AET and The K.A.D. Companies, Inc.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or any Restricted Subsidiary shall be merged with
or into the Company or any Restricted Subsidiary or (b) the acquisition by the
Company or any Restricted Subsidiary of the assets of any Person which
constitute all or substantially all of the assets of such Person or any division
or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or a wholly owned Restricted
Subsidiary, in one or a series of related transactions, of (a) any Capital Stock
of any Restricted Subsidiary held by the Company or any Restricted Subsidiary;
(b) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary; or (c) any other
properties or assets of the Company or any Restricted Subsidiary other than in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any sale, issuance, conveyance, transfer, lease
or other disposition of properties or assets (i) that is governed by the
provisions of the Indenture governing "Merger, Consolidation and Sale of
Assets," (ii) to an Unrestricted Subsidiary, if permitted under the "Limitation
on Restricted Payments" covenant or (iii) having a Fair Market Value of less
than $250,000.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as of October 29,
1993, amended and restated as of May 29, 1997, as further amended on November
19, 1997, between the Company and the Banks as in effect on the date hereof and
as such Agreement may be amended, restated, supplemented, replaced, refinanced,
substituted or otherwise modified from time to time.
"Banks" means the banks and other financial institutions from time to time
that are lenders under the Bank Credit Agreement.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of 180
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500,000,000; and (iii) commercial paper with a maturity of 180 days
or less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-1 by Moody's.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed
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to have "beneficial ownership" of all securities that such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 40% of the total Voting
Stock of the Company; (b) the Company consolidates with, or merges with or into,
another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction where (i) the outstanding Voting Stock of the Company
is converted into or exchanged for (1) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could be paid by the Company as
a Restricted Payment under the Indenture and (ii) immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total Voting Stock of
the surviving or transferee corporation; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (d) any final order, judgment or decree of a court of competent jurisdiction
shall be entered against the Company decreeing the dissolution or liquidation of
the Company.
"Closing Date" means the date of the closing of the offering of the Notes.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Closing Date or issued after the Closing Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and its Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding (a) net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions, (c) the net income (or net loss) of
any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any of its Restricted
Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or its Restricted
Subsidiaries in cash by such other Person during such period, (d) net income (or
net loss) of any Person combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (e) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that net income is not at the date of
determination permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders and (f) income resulting from transfers of assets received by the
Company or any Restricted Subsidiary from an Unrestricted Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges, in each case, for such period, of such Person and its
subsidiaries on a consolidated basis, all determined in accordance with GAAP, to
(b) the sum of such Consolidated Interest Expense for such period; provided that
(i) in making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness computed on a pro forma
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basis and bearing a floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period, (ii) in making such computation, the Consolidated Interest Expense of
such Person attributable to interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period, and
(iii) notwithstanding clauses (i) and (ii) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed to
have accrued at the rate per annum resulting after giving effect to the
operation of such agreements. If such Person or any of its subsidiaries directly
or indirectly guarantees Indebtedness of a third Person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such Person
or such subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Income Tax Expense" means, with respect to any Person for any
period, the provision for federal, state, local and foreign income taxes of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and (e) all accrued interest, (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP and (iii) the aggregate dividends paid or accrued on
Preferred Stock of such Person or its Subsidiaries, to the extent such Preferred
Stock is owned by Persons other than such Person and its Subsidiaries.
"Consolidated Net Tangible Assets" of any Person means, as of any date, (a)
all amounts that would be shown on the latest consolidated balance sheet of such
Person and its Subsidiaries prepared in accordance with GAAP, at the date of
determination less (b) the amount thereof constituting goodwill and other
intangible assets as calculated in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholders' equity of such Person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock or treasury stock
of such Person and its Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Eligible Inventories" as of any date means the consolidated inventories of
the Company and its Restricted Subsidiaries (net of any reserve) on the basis of
the method of accounting (either last in/first out or first in/first out) used
by the Company in the preparation of its financial statements included in the
latest Form 10-K filed by the Company under the Securities Act, as shown on a
consolidated balance sheet of the Company and its Restricted Subsidiaries, all
in accordance with GAAP.
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"Eligible Receivables" as of any date means the consolidated accounts
receivables (net of any reserve) of the Company and its Restricted Subsidiaries
that are not more than 60 days past their due date and that were entered into on
normal payment terms as shown on a consolidated balance sheet of the Company and
its Restricted Subsidiaries, all in accordance with GAAP.
"Equity Offering" means any public or private sale of common stock of the
Company, other than (i) any public offerings with respect to the Company's
Common Stock registered on Form S-8 or Form S-4 and (ii) any private placement
occurring in connection with or after the occurrence of a Change of Control when
the Company's Common Stock is eligible for delisting from a national securities
exchange or automated quotation dealer system on which such Common Stock was
trading or quoted prior to such Change of Control.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction.
"FEEL" means Flight Equipment and Engineering Limited, an English
corporation.
"Fully Traded Common Stock" means Common Stock issued by any corporation if
(A) such Common Stock is listed on either The New York Stock Exchange, The
American Stock Exchange, The London Stock Exchange or the Nasdaq National
Market; provided that such Common Stock is freely tradeable under the Securities
Act (or, in the case of The London Stock Exchange, any applicable law, rule or
regulation) upon issuance; and (B) such Common Stock does not constitute more
than 15% of the issued and outstanding Common Stock of such corporation held by
Persons other than 10% holders of such Common Stock and Affiliates and insiders
of such corporation.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the Closing Date.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of any Indebtedness of the Company incurred
by any Restricted Subsidiary pursuant to (1) paragraph (a) of the "Limitation on
Guarantees of Indebtedness by Restricted Subsidiaries" covenant, (2) clause (v)
of the "Limitation on Dividends and other Payment Restrictions Affecting
Restricted Subsidiaries" covenant, (3) clause (y) of paragraph (b) of the
"Limitation on Indebtedness" covenant, or (4) clause (ii) of the definition of
Permitted Investment. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Restricted Subsidiary which incurs a Guarantee.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit, bankers' acceptance or other similar
credit transaction and in connection with any agreement to purchase, redeem,
exchange, convert or otherwise acquire for value any Capital Stock of such
Person, or any warrants, rights or options to acquire such Capital Stock, now or
hereafter outstanding, if, and to the extent, any of the foregoing would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, (b) all obligations of such Person evidenced by bonds, notes, debentures
or other similar instruments, if, and
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to the extent, any of the foregoing would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, (c) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business, (d)
all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred
to in the preceding clauses of other Persons and all dividends of other Persons,
the payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Inh obligation being deemed to be the lesser of the value of
such property or asset or the amount of the obligation so secured), (f) all
guarantees by such Person of Indebtedness referred to in this definition, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
(h) all obligations of such Person under or in respect of currency exchange
contracts and Interest Rate Protection Obligations and (i) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of such Person of the types referred to in clauses (a) through (h)
above. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the net assets of any Restricted Subsidiary of the Company at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note or an installment of interest becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses
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(including fees and expenses of legal counsel and investment banks) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP consistently applied against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee.
"Pari Passu Indebtedness" means Indebtedness of the Company which is pari
passu with the Notes.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company in an aggregate principal amount at
any one time outstanding not to exceed the greater of (i) $200 million and
(ii) the sum of 80% of the aggregate amount of Eligible Receivables and 50%
of the aggregate amount of Eligible Inventory, measured as of the most
recent fiscal quarter preceding the time such Indebtedness is incurred;
(ii) Indebtedness of the Company under the Notes;
(iii) Indebtedness of the Company outstanding on the date of the
Indenture (other than Indebtedness incurred pursuant to clause (i) of this
definition);
(iv) obligations of the Company pursuant to Interest Rate Protection
Obligations, which obligations do not exceed the aggregate principal amount
of the Indebtedness covered by such Interest Rate Protection Obligations
and obligations under currency exchange contracts entered into in the
ordinary course of business;
(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees, indemnities
or obligations in respect of purchase price adjustments in connection with
the acquisition or disposition of assets, including, without limitation,
shares of Capital Stock of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Indebtedness of the Company incurred pursuant to the
"Limitation on Indebtedness" covenant or clauses (ii) and (iii) of this
definition, including any successive refinancings by the Company, so long
as (A) any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) in the case of any refinancing of
Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness
is made pari passu with or subordinate to the Notes at least to the same
extent as the Indebtedness being refinanced and (C) such new Indebtedness
has an Average Life longer than the Average Life of the Notes and a final
Stated Maturity later than the final Stated Maturity of the Notes; and
(viii) Indebtedness in an aggregate principal amount not in excess of
$30 million at any one time outstanding, less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the
definition thereof.
"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or wholly owned Restricted
Subsidiaries; (iii) Investments in an amount not to exceed $15 million at any
one time outstanding; (iv) Investments by the Company or any Restricted
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Subsidiary of the Company in another Person, if as a result of such Investment
(A) such other Person becomes a wholly owned Restricted Subsidiary or (B) such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, the Company or a wholly-owned Restricted
Subsidiary; or (v) Investments from the date of the Indenture in a Restricted
Subsidiary that is less than wholly owned in an aggregate amount measured at the
time of Investment (less payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary, to the extent not included in clause
(D) of the last paragraph of Subsection (a) of the "Limitation on Restricted
Payments" covenant) not to exceed 5% of Consolidated Net Tangible Assets of the
Company. In connection with any assets or property contributed or transferred to
any Person as an Investment, such property and assets shall be equal to the Fair
Market Value (as determined by the Company's Board of Directors) at the time of
Investment.
"Permitted Liens" means the following types of Liens:
(a) Liens on any property or assets of a Restricted Subsidiary granted
in favor of the Company or any Restricted Subsidiary;
(b) Liens securing the Notes;
(c) Liens securing the Guarantees;
(d) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary; provided that any such Lien
does not extend to any property or assets of the Company or any Restricted
Subsidiary other than the assets acquired in connection with the incurrence
of such Acquired Indebtedness; and
(e) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a) through (d); provided that any
such extension, renewal or replacement shall be no more restrictive in any
material respect that the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(i) Indebtedness of any Restricted Subsidiary outstanding on the date
of the Indenture;
(ii) obligations of any Restricted Subsidiary pursuant to Interest
Rate Protection Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations;
(iii) Indebtedness of any Restricted Subsidiary to any wholly owned
Restricted Subsidiary of the Company or to the Company;
(iv) Indebtedness of any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock of Restricted
Subsidiaries;
(v) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary
incurred pursuant to clause (i) of this definition, including any
successive refinancings by such Restricted Subsidiary, so long as any such
new Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by such Restricted Subsidiary as necessary to accomplish such refinancing,
plus the amount of expenses of such Restricted Subsidiary incurred in
connection with such refinancing and such new Indebtedness has an Average
Life longer than the Average Life of the Notes and a final Stated Maturity
later than the final Stated Maturity of the Notes;
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(vi) Indebtedness (as defined in clauses (e) and (f) of the definition
of Indebtedness) to the Noteholders incurred pursuant to provisions of the
Indenture;
(vii) Indebtedness in an amount not to exceed $30 million at any one
time outstanding, less the amount of Permitted Indebtedness then
outstanding pursuant to clause (viii) of the definition thereof; and
(viii) Guarantees of Indebtedness of the Company permitted under the
"Limitation on Guarantees of Indebtedness by Restricted Subsidiaries"
covenant.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc. and its successors.
"Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company issued
under the Senior Notes Indenture.
"Significant Subsidiary" of the Company means any Restricted Subsidiary of
the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of
Regulation S-X under the Securities Act, and in any event shall include any
Guarantor.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). Unless specifically provided to the contrary herein,
Unrestricted Subsidiaries shall not be included in the definition of
Subsidiaries for any purpose of the Indenture (other than for the purposes of
the definition of "Unrestricted Subsidiary" herein).
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (2) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary) to be an
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Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns, or holds any Lien on, any property of the Company or any other Subsidiary
of the Company which is not a Subsidiary of the Subsidiary to be so designated;
provided that either (x) the Subsidiary to be designated has total assets of
$1,000 or less at the time of its designation or (y) immediately after giving
effect to such designation, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on
Indebtedness" covenant. The Board of Directors may designate any Unrestricted
Subsidiary to be a Subsidiary; provided that immediately after giving effect to
such designation, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness"
covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned" with respect to any Subsidiary, means any Subsidiary of any
Person of which at least 99% of the outstanding Capital Stock is owned by such
Person or another wholly owned Subsidiary of such Person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"9 7/8% Notes" means the Company's 9 7/8% Senior Subordinated Notes due
2006.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form, without coupons. Except as described in the next paragraph, the Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), and registered in the name of Cede & Co., as DTC's nominee in the
form of a global Note certificate (the "Global Certificate") or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between DTC and the Trustee.
Notes originally purchased by or transferred to (i) except as described
below, persons outside the United States pursuant to sales in accordance with
Regulation S under the Securities Act or (ii) any other Persons who are not QIBs
(collectively, "Non-Global Purchasers") will be issued in registered form
without coupons (the "Certificated Notes"). Upon the transfer to a QIB of
Certificated Notes initially issued to a Non-Global Purchaser, such Certificated
Notes will be exchanged for an interest in the Global Certificate or in the
Notes in the custody of the Trustee representing the principal amount of notes
being transferred.
Notes originally purchased by persons outside the United States pursuant to
sales in accordance with Regulations S under the Securities Act will be
represented upon issuance by a temporary global Note certificate (the "Temporary
Certificate") which will not be exchangeable for Certificated Notes until the
expiration of the "40-day restricted period" within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act. The Temporary Certificate
will be registered in the name of, and held by, a temporary certificate holder
until the expiration of such 40-day period, at which time the Temporary
Certificate will be delivered to the Trustee in exchange for Certificated Notes
registered in the names requested by such temporary certificate holder. In
addition, until the expiration of such 40-day period, transfers of interest in
the Temporary Certificate can only be effected through such temporary
certificate holder in accordance with the requirements set forth in "Notice to
Investors."
81
<PAGE> 83
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resales. In
addition, the Company agreed that it would not for a period of 120 days from
February 6, 1998, the date of the Offering Memorandum distributed in connection
with the sale of the Old Notes, directly or indirectly offer, sell, grant any
options to purchase or otherwise dispose of any debt securities other than in
connection with this Exchange Offer.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
New Notes being offered hereby will be passed upon for the Company by Shearman &
Sterling, New York, New York.
EXPERTS
The financial statements of BE Aerospace, Inc. as of February 22, 1997 and
February 24, 1996 and for each of the three fiscal years in the period ended
February 22, 1997 (which includes an explanatory paragraph relating to the
Company's change in its method of accounting for engineering expenditures),
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing elsewhere herein and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
82
<PAGE> 84
BE AEROSPACE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
(Unaudited)
Consolidated Balance Sheet, November 29, 1997............. F-2
Consolidated Statements of Earnings for the Nine Months
Ended November 29, 1997 and November 30, 1996
(Unaudited)............................................ F-3
Consolidated Statements of Cash Flows for the Nine Months
Ended November 29, 1997 and November 30, 1996
(Unaudited)............................................ F-4
Notes to Consolidated Financial Statements for the Nine
Months Ended November 29, 1997 and November 30, 1996
(Unaudited)............................................ F-5
FISCAL YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND
FEBRUARY 25, 1995
Independent Auditors' Report.............................. F-7
Consolidated Balance Sheets, February 22, 1997 and
February 24, 1996...................................... F-8
Consolidated Statements of Operations for the Years Ended
February 22, 1997, February 24, 1996 and February 25,
1995................................................... F-9
Consolidated Statements of Stockholders' Equity for the
Years Ended February 22, 1997, February 24, 1996, and
February 25, 1995...................................... F-10
Consolidated Statements of Cash Flows for the Years Ended
February 22, 1997, February 24, 1996 and February 25,
1995................................................... F-11
Notes to Consolidated Financial Statements for the Years
Ended February 22, 1997, February 24, 1996, and
February 25, 1995...................................... F-12
</TABLE>
F-1
<PAGE> 85
BE AEROSPACE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 29, FEBRUARY 22,
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 58,221 $ 44,149
Receivables -- trade, less allowance for doubtful accounts
of $2,696 (November 29, 1997) and $4,864 (February 22,
1997).................................................. 79,970 73,489
Inventories, net.......................................... 113,869 92,900
Other current assets...................................... 6,935 2,781
-------- --------
Total current assets................................... 258,995 213,319
-------- --------
Property and Equipment, net................................. 98,753 87,888
Intangibles and Other Assets, net........................... 188,963 189,882
-------- --------
$546,711 $491,089
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 55,913 $ 42,889
Accrued expenses.......................................... 42,578 43,837
Current portion of long-term debt......................... 7,222 4,419
-------- --------
Total current liabilities.............................. 105,713 91,145
-------- --------
Long-Term Debt.............................................. 225,339 225,402
Deferred Income Taxes....................................... 1,310 1,667
Other Liabilities........................................... 14,149 7,114
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding......................
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,792,892 (November 29, 1997) 21,893,392
(February 22, 1997) issued and outstanding............. 228 219
Additional paid-in capital................................ 238,578 228,710
Accumulated deficit....................................... (37,834) (62,286)
Cumulative foreign exchange translation adjustment........ (772) (882)
-------- --------
Total stockholders' equity............................. 200,200 165,761
-------- --------
$546,711 $491,089
======== ========
</TABLE>
F-2
<PAGE> 86
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Net Sales................................................... $362,687 $308,151
Cost of Sales............................................... 230,825 204,655
-------- --------
Gross Profit................................................ 131,862 103,496
Operating Expenses:
Selling, general and administrative....................... 43,017 37,619
Research, development and engineering..................... 34,988 27,759
Amortization expense...................................... 8,195 8,021
-------- --------
Total operating expenses............................... 86,200 73,399
-------- --------
Operating Earnings.......................................... 45,662 30,097
Interest Expense, net....................................... 16,899 21,845
-------- --------
Earnings Before Income Taxes................................ 28,763 8,252
Income Taxes................................................ 4,311 825
-------- --------
Net Earnings................................................ $ 24,452 $ 7,427
======== ========
Earnings Per Common Share:
Net Earnings Per Common Share............................. $ 1.04 $ 0.42
======== ========
Common and Common Equivalent Shares....................... 23,414 17,786
======== ========
</TABLE>
F-3
<PAGE> 87
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings.............................................. $ 24,452 $ 7,427
Adjustments to reconcile net earnings to net cash flows
provided by (used in) operating activities:
Depreciation and amortization.......................... 18,482 16,325
Deferred income taxes.................................. (413) 637
Non cash employee benefit plan contributions........... 1,251 783
Changes in operating assets and liabilities:
Accounts receivable.................................. (5,886) (15,193)
Inventories.......................................... (19,785) (15,106)
Other current assets................................. (4,168) 3,266
Accounts payable..................................... 13,638 1,370
Other liabilities.................................... 221 (9,683)
-------- --------
Net cash flows provided by (used in) operating
activities...................................... 27,792 (10,174)
-------- --------
Cash Flows from Investing Activities:
Capital expenditures...................................... (21,099) (8,675)
Change in intangibles and other assets -- net............. (3,836) (2,177)
-------- --------
Net cash flows used in investing activities....... (24,935) (10,852)
-------- --------
Cash Flows from Financing Activities:
Net borrowings under revolving lines of credit............ 2,518 7,903
Proceeds from issuances of stock.......................... 8,647 11,229
-------- --------
Net cash flows provided by financing activities... 11,165 19,132
-------- --------
Effect of exchange rate changes on cash flows............... 50 188
-------- --------
Net increase (decrease) in cash and cash equivalents........ 14,072 (1,706)
Cash and cash equivalents, beginning of period.............. 44,149 15,376
-------- --------
Cash and cash equivalents, end of period.................... $ 58,221 $ 13,670
======== ========
Supplemental disclosures of cash flow information:
Cash paid during period for interest...................... $ 17,716 $ 20,935
Cash paid during period for income taxes, net............. $ 1,871 $ 1,183
</TABLE>
F-4
<PAGE> 88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
The information set forth in these consolidated financial statements as of
November 29, 1997 and for the nine months ended November 29, 1997 and November
30, 1996 is unaudited and may be subject to normal year-end adjustments. In the
opinion of management, the unaudited consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial position of B/E Aerospace, Inc. (the "Company" or
"B/E") for the periods indicated. Results of operations for the interim periods
ended November 29, 1997 are not necessarily indicative of the results of
operations for the full fiscal year. For further information, including
information with regard to conditions in the airline industry and their possible
impact on the Company, please refer to the Company's annual report on Form 10-K
for the fiscal year ended February 22, 1997.
The accompanying consolidated financial statements consolidate all of the
Company's subsidiaries. All significant intercompany transactions have been
eliminated. Certain amounts in the prior year's Consolidated Financial
Statements have been reclassified to conform to the current fiscal year's
presentation.
Certain information normally included in footnote disclosures to the annual
financial statements has been condensed or omitted in accordance with the rules
and regulations of the Securities and Exchange Commission.
NOTE 2. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share which is
effective for financial statements issued for periods ending after December 15,
1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per
share. Earnings per share, as reported and as would be reportable under SFAS No.
128 for the nine months ended November 29, 1997 and November 30, 1996 are as
follows:
<TABLE>
<CAPTION>
AS REPORTED
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Primary earnings per share............... $1.04 $.42
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Basic earnings per share................. $1.10 $.44
Diluted earnings per share............... $1.04 $.41
</TABLE>
NOTE 3. NEW ACCOUNTING PRONOUNCEMENTS
Comprehensive Income -- During 1997 the FASB issued SFAS No. 130,
"Reporting Comprehensive Income," which established standards for the reporting
and displaying of comprehensive income. Comprehensive income is defined as all
changes in a Company's net assets except changes resulting from transactions
with shareholders. It differs from net income in that certain items currently
recorded to equity would be a part of comprehensive income. Comprehensive income
must be reported in a financial statement with the cumulative total presented as
a component of equity. This statement will be adopted by the Company in its
fiscal 1999 quarterly financial statements.
Segment Information -- In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
will be effective for the Company beginning March 1, 1998. SFAS No. 131
redefines how
F-5
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996 -- (CONTINUED)
(UNAUDITED)
operating segments are determined and requires disclosure of certain financial
and descriptive information about a company's operating segments. The Company
believes the segment information required to be disclosed under SFAS No. 131
will be more comprehensive than previously provided, including expanded
disclosure of income statement and balance sheet items. The Company has not yet
completed its analysis of which operating segments it will report on.
NOTE 4. LONG-TERM DEBT
In May 1997, the Company amended its existing credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder to $125,000 (the "Bank Credit Facility"). The Bank Credit
Facility consists of a $25,000 Reducing Revolver and a $100,000 Revolving
Facility. The amount of the Reducing Revolver will be reduced automatically by
12.5% on August 26, 2000 and on each of the seven succeeding quarterly
anniversaries of such date. The Reducing Revolver is collateralized by all of
the issued and outstanding capital stock of a wholly owned subsidiary and has a
five-year maturity. The Revolving Facility is collateralized by all of the
Company's accounts receivable, all of its inventory and substantially all of its
other personal property and has a five-year maturity. The Bank Credit Facility
contains customary affirmative covenants, negative covenants and conditions of
borrowing. At November 29, 1997 indebtedness under the Bank Credit Facility were
letters of credit amounting to approximately $4,572. The Company has
approximately $120,428 available for subsequent borrowings under its Bank Credit
Facility.
NOTE 5. SUBSEQUENT EVENTS
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The dispute
centered on shipments of aircraft seats and related spare parts for five
civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and
arranged for them to be installed by a contractor in France. At the time, Iran
was not the subject of a U.S. trade embargo. In connection with its sale of
seats to Iran Air, B/E applied for and was granted a validated export license by
the U.S. Department of Commerce (the "DOC"). The dispute with the U.S.
Government centered on whether seats were delivered to Iran Air before the
formal license was issued by the DOC, some seven months after B/E first applied
for the license. This action resolved all disputes between B/E Aerospace and the
Department of Justice as well as the DOC's Bureau of Export Enforcement. As part
of the settlement, B/E plead guilty to a violation of the International Economic
Emergency Powers Act and entered into a consent order with the DOC under which
the DOC has agreed to suspend the imposition of a three-year export denial order
on PTC Aerospace, a member of B/E's U.S. Seating Products Group, provided no
further violations of the export laws occur. The Company will record a charge of
approximately $4 million in its fourth quarter of fiscal 1998, which ends
February 28, 1998, related to fines, civil penalties and associated legal fees
arising from the settlement.
F-6
<PAGE> 90
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
B/E Aerospace, Inc.
Wellington, Florida
We have audited the accompanying consolidated balance sheets of B/E
Aerospace, Inc. and subsidiaries as of February 22, 1997 and February 24, 1996,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended February 22, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of B/E Aerospace, Inc. and
subsidiaries as of February 22, 1997 and February 24, 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended February 22, 1997, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, in the
year ended February 24, 1996, the Company changed its method of accounting for
engineering expenditures.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 10, 1997
F-7
<PAGE> 91
CONSOLIDATED BALANCE SHEETS,
FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 44,149 $ 15,376
Accounts receivable -- trade, less allowance for doubtful
accounts of $4,864 (1997) and $4,973 (1996)............ 73,489 54,242
Inventories, net.......................................... 92,900 72,569
Other current assets...................................... 2,781 7,621
-------- --------
Total current assets................................... 213,319 149,808
-------- --------
Property and Equipment, net................................. 87,888 86,357
Intangibles and Other Assets, net........................... 189,882 197,421
-------- --------
$491,089 $433,586
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 42,889 $ 45,102
Accrued liabilities....................................... 43,837 56,400
Current portion of long-term debt and borrowings.......... 4,419 6,482
-------- --------
Total current liabilities.............................. 91,145 107,984
-------- --------
Long-term debt.............................................. 225,402 273,192
Deferred income taxes....................................... 1,667 1,257
Other liabilities........................................... 7,114 6,996
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding
Common stock, $.01 par value; 30,000,000 shares
authorized; 21,893,392 (1997) and 16,392,994 (1996)
shares issued and outstanding.......................... 219 164
Additional paid-in capital................................ 228,710 121,366
Accumulated deficit....................................... (62,286) (75,995)
Cumulative foreign exchange translation adjustment........ (882) (1,378)
-------- --------
Total stockholders' equity............................. 165,761 44,157
-------- --------
$491,089 $433,586
======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 92
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996,
AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
FEBRUARY 22, FEBRUARY 24, FEBRUARY 25,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $412,379 $232,582 $229,347
Cost of sales......................................... 270,557 160,031 154,863
-------- -------- --------
Gross profit.......................................... 141,822 72,551 74,484
Operating expenses:
Selling, general and administrative................. 51,734 42,000 31,787
Research, development and engineering............... 37,083 58,327 12,860
Amortization of intangible assets................... 10,607 9,499 9,954
Other expenses...................................... -- 4,170 23,736
-------- -------- --------
Total operating expenses......................... 99,424 113,996 78,337
-------- -------- --------
Operating earnings (loss)............................. 42,398 (41,445) (3,853)
Interest expense, net................................. 27,167 18,636 15,019
-------- -------- --------
Earnings (loss) before income taxes
(benefit) and cumulative effect
of change in accounting principle................... 15,231 (60,081) (18,872)
Income taxes (benefit)................................ 1,522 -- (6,806)
-------- -------- --------
Earnings (loss) before cumulative
effect of change in accounting principle............ 13,709 (60,081) (12,066)
Cumulative effect of change in
accounting principle................................ -- (23,332) --
-------- -------- --------
Net earnings (loss)................................... $ 13,709 $(83,413) $(12,066)
======== ======== ========
Earnings (loss) per common share:
Earnings (loss) before cumulative effect
of change in accounting principle................ $ .72 $ (3.71) $ (0.75)
Cumulative effect of change in
accounting principle............................. -- (1.44) --
-------- -------- --------
Net earnings (loss)................................. $ .72 $ (5.15) $ (0.75)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 93
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL
--------------- PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------ ------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 26, 1994........... 15,985 $159 $118,357 $ 19,484 $(4,007) $133,993
Sale of stock under employee stock
purchase plan................... 15 -- 132 -- -- 132
Employee benefit plan matching
contribution.................... 96 1 720 -- -- 721
Net loss........................... -- -- -- (12,066) -- (12,066)
Foreign currency translation
adjustment...................... -- -- -- -- 2,551 2,551
------ ---- -------- -------- ------- --------
Balance, February 25, 1995........... 16,096 160 119,209 7,418 (1,456) 125,331
Sale of stock under employee stock
purchase plan................... 74 1 403 -- -- 404
Exercise of stock options.......... 121 2 896 -- -- 898
Employee benefit plan matching
contribution.................... 102 1 858 -- -- 859
Net loss........................... -- -- -- (83,413) -- (83,413)
Foreign currency translation
adjustment...................... -- -- -- -- 78 78
------ ---- -------- -------- ------- --------
Balance, February 24, 1996........... 16,393 164 121,366 (75,995) (1,378) 44,157
Sale of stock under employee stock
purchase plan................... 58 482 -- -- 482
Exercise of stock options.......... 1,362 14 11,650 -- -- 11,664
Employee benefit plan matching
contribution.................... 75 1 1,316 -- -- 1,317
Sale of common stock under public
offering, net of expenses....... 4,005 40 93,896 -- -- 93,936
Net earnings....................... -- -- -- 13,709 -- 13,709
Foreign currency translation
adjustment...................... -- -- -- -- 496 496
------ ---- -------- -------- ------- --------
Balance, February 22, 1997........... 21,893 $219 $228,710 $(62,286) $ (882) $165,761
====== ==== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 94
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).................................... $ 13,709 $(83,413) $(12,066)
Adjustments to reconcile net earnings (loss) to net
cash flows (used in) provided by operating
activities:
Cumulative effect of accounting change.............. -- 23,332 --
Depreciation and amortization....................... 24,147 18,435 16,146
Change in intangible assets......................... -- -- 8,588
Deferred income taxes............................... 410 (3,453) (6,764)
Non cash employee benefit plan contributions........ 1,317 859 721
Changes in operating assets and liabilities, net of
effects from acquisitions:
Accounts receivable............................... (19,366) 6,068 6,226
Inventories....................................... (19,536) (11,929) (16,863)
Other current assets.............................. 5,059 (638) (585)
Accounts payable.................................. (4,767) 3,008 7,295
Other liabilities................................. (11,564) 13,169 (642)
-------- -------- --------
Net cash flows (used in) provided by operating
activities................................... (10,591) (34,562) 2,056
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment........ (14,471) (13,656) (12,172)
Change in other assets................................. (1,331) (5,914) (8,610)
Acquisitions........................................... -- (42,500)
-------- -------- --------
Net cash flows used in investing activities.... (15,802) (62,070) (20,782)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving lines of
credit.............................................. (38,882) 2,000 9,080
Proceeds from issuance of stock, net of expenses....... 106,082 1,302 132
Principal payments on long-term debt................... (11,968) (942)
Proceeds from long-term debt........................... -- 101,252 3,873
-------- -------- --------
Net cash flows provided by financing
activities................................... 55,232 103,612 13,085
-------- -------- --------
Effect of exchange rate changes on cash flows.......... (66) 77 222
-------- -------- --------
Net increase (decrease) in cash and cash equivalents... 28,773 7,057 (5,419)
Cash and cash equivalents, beginning of year........... 15,376 8,319 13,738
-------- -------- --------
Cash and cash equivalents, end of year................. $ 44,149 $ 15,376 $ 8,319
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during year for:
Interest............................................... $ 26,097 $ 16,967 $ 16,664
Income taxes -- net.................................... 1,209 (3,292) (1,096)
SCHEDULE OF NON-CASH TRANSACTIONS:
Liabilities assumed and accrued acquisition costs
incurred in connection with the acquisitions (See
Note 3)............................................. -- 27,532 --
Liabilities incurred in connection with purchase of
land and buildings.................................. -- -- 4,000
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation -- B/E Aerospace, Inc. (the
"Company") operates in a single business segment and designs, manufactures,
sells and services a broad line of commercial aircraft cabin interior products
consisting of a broad range of aircraft seating products, passenger
entertainment and service systems, and galley products, including structures as
well as all food and beverage storage and preparation equipment. The Company's
customers are the world's commercial airlines. As a result, the Company's
business is directly dependent upon the conditions in the commercial airline
industry.
Consolidation -- The accompanying financial statements consolidate the
accounts of B/E Aerospace, Inc. and its wholly-owned subsidiaries. All
intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Income Taxes -- In accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, the Company provides deferred income taxes for
temporary differences between amounts of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for income tax
purposes.
Warranty Costs -- Estimated costs related to product warranties are accrued
at the time products are sold.
Revenue Recognition -- Sales of assembled products, equipment or services
are recorded on the date of shipment or, if required, upon acceptance by the
customer. The Company sells its products primarily to airlines worldwide,
including occasional sales collateralized by letters of credit. The Company
performs ongoing credit evaluations of its customers and maintains reserves for
potential credit losses. Actual losses have been within management's
expectations.
Cash Equivalents -- The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
Intangible Assets -- The Company accounts for the impairment and
disposition of long-lived assets in accordance with SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed. In
accordance with SFAS No. 121, long-lived assets to be held are reviewed for
events or changes in circumstances which indicate that their carrying value may
not be recoverable. The Company annually evaluates the carrying value of the
intangible assets versus the cash benefit expected to be realized and adjusts
for any impairment of value. As discussed in Note 15, the Company introduced a
new product to the in-flight entertainment industry, causing the industry in
general to re-evaluate its product offerings and, in the process, impairing the
value of certain assets, including certain earlier Company technology.
Accordingly, intangible assets related to these product offerings were written
down to their estimated realizable value during the year ended February 25,
1995.
Research and Development -- Research and development expenditures are
expensed as incurred.
Stock-Based Compensation -- In October 1995, the Financial Accounting
Standards Board (FASB) issued SFAS No. 123, Accounting for Stock-Based
Compensation, which became effective for the Company beginning during fiscal
1997. SFAS No. 123 requires extended disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based
F-12
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
on the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply Accounting Principles Board (APB) Opinion No. 25,
which recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company continues to apply APB Opinion No. 25 to its
stock-based compensation awards to employees and discloses the required pro
forma effect on net income and earnings per share. See Note 12.
Earnings (Loss) per Common Share -- Earnings (loss) per common share
amounts are computed using the weighted average number of common and common
equivalent (where not anti-dilutive) shares outstanding during each period. The
number of weighted average shares of common stock outstanding amounted to
19,107,000, 16,185,000, and 16,021,000 for the years ended February 22, 1997,
February 24, 1996 and February 25, 1995, respectively.
In February 1997, the FASB issued SFAS No. 128, Earnings per Share which is
effective for financial statements issued for period ending after December 15,
1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per
share. The amount reported as net income per common and common equivalent share
for the year ended February 22, 1997 would not be materially different than that
which would have been reported for basic and diluted earnings per share in
accordance with SFAS No. 128.
Foreign Currency Translation -- In accordance with the provisions of SFAS
No. 52, Foreign Currency Translation, the assets and liabilities located outside
the United States are translated into U.S. dollars at the rates of exchange in
effect at the balance sheet dates. Income and expense items are translated at
the average exchange rates prevailing during the period. Gains and losses
resulting from foreign currency transactions are recognized currently in income,
and those resulting from translation of financial statements are accumulated as
a separate component of stockholders' equity.
Reclassifications -- Certain items in prior years' financial statements
have been reclassified to conform with the presentation used in the year ended
February 22, 1997.
2. ACCOUNTING CHANGE
In fiscal 1996, the Company undertook a comprehensive review of the
engineering capitalization policies followed by its competitors and others in
its industry peer group. The results of this study and an evaluation of the
Company's policy led the Company to conclude that it should adopt the accounting
method that it believes is followed by most of its competitors and certain
members of its industry peer group. Previously, the Company had capitalized
precontract engineering costs as a component of inventories, which were then
amortized to earnings as the product was shipped. The Company now expenses such
costs as they are incurred. While the accounting policy for precontract
engineering expenditures previously followed by the Company was in accordance
with generally accepted accounting principles, the changed policy is preferable.
The effect of this change in accounting for periods through February 25,
1995 was a charge of $23,332 ($1.44 per share); the effect of expensing
engineering costs for the year ended February 24, 1996 was a charge of $42,114
($2.60). The following table summarizes the pro forma net earnings (loss) and
per share amounts for each period presented. Primarily as a result of this
accounting change, inventories decreased by $65,446 as of February 24, 1996.
F-13
<PAGE> 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
Pro forma amounts assuming the change in application of accounting
principle applied retroactively (unaudited):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
FEBRUARY 24, FEBRUARY 25,
1996 1995
------------ ------------
<S> <C> <C>
Net loss.................................... $(60,081) $(35,398)
Net loss per share.......................... $ (3.71) $ (2.20)
</TABLE>
3. ACQUISITIONS
On January 24, 1996, the Company acquired all of the outstanding capital
stock of Burns Aerospace Corporation, which designs, manufactures, sells and
services aircraft seating products to commercial airlines worldwide. The
aggregate acquisition cost of $70,032 includes the payment of $42,500 to the
seller, the assumption of approximately $27,532 of liabilities, including
related acquisition costs, and certain liabilities arising from the acquisition.
Funds for the acquisition were obtained from proceeds of the long-term debt
issuance described in Note 8.
The aggregate purchase price for the Burns acquisition has been allocated
to the net assets acquired based on appraisals and management's estimates as
follows:
<TABLE>
<S> <C>
Receivables................................................ $11,396
Inventories................................................ 12,624
Other current assets....................................... 806
Property and equipment..................................... 21,695
Intangible and other assets................................ 23,511
-------
$70,032
=======
</TABLE>
The following table presents unaudited proforma operating results for the
fiscal years ended February 1996 and 1995, respectively, as if the acquisition
had occurred on February 27, 1994:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net sales.............................................. $327,073 $322,841
Net loss............................................... $(88,113) $(15,061)
Net loss per share..................................... $ (5.44) $ (.94)
</TABLE>
4. INVENTORIES
Inventories are stated at the lower of cost or market, cost is determined
using the weighted average cost method. Finished goods and work in process
inventories include material, labor and manufacturing overhead costs.
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials.................................... $45,947 $28,252
Work-in-process.................................. 41,399 39,045
Finished goods................................... 7,929 5,272
Less customer advances........................... (2,375) --
------- -------
$92,900 $72,569
======= =======
</TABLE>
F-14
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciated and amortized
generally on the straight-line method over their estimated useful lives of two
to thirty years (term of lease as to leasehold improvements). Property and
equipment consist of the following:
<TABLE>
<CAPTION>
YEARS 1997 1996
----- -------- --------
<S> <C> <C> <C>
Land, buildings and improvements.............. 10-30 $ 42,966 $ 39,979
Machinery..................................... 3-13 45,444 46,374
Tooling....................................... 3-10 17,179 14,819
Furniture and equipment....................... 2-10 18,327 12,758
-------- --------
123,916 113,930
Less accumulated depreciation and
amortization........................... (36,028) (27,573)
-------- --------
$ 87,888 $ 86,357
======== ========
</TABLE>
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
STRAIGHT-LINE
AMORTIZATION
PERIOD (YEARS) 1997 1996
-------------- -------- --------
<S> <C> <C> <C>
Covenants not-to-compete................ 14 $ 10,198 $ 10,198
Product technology, production plans and
drawings.............................. 7-20 59,484 60,201
Replacement parts annuity............... 20 29,778 29,416
Product approvals and technical
manuals............................... 20 18,331 18,529
Goodwill................................ 30 78,913 77,256
Debt issue costs........................ 10 13,431 12,592
Trademarks and patents.................. 20 10,820 10,470
Other................................... 14,271 11,761
-------- --------
235,226 230,423
Less accumulated amortization...... (45,344) (33,002)
-------- --------
$189,882 $197,421
======== ========
</TABLE>
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued product warranties....................... $ 5,231 $ 3,455
Accrued salaries, vacation and related
benefits....................................... 12,868 10,479
Accrued acquisition expenses..................... 5,488 11,105
Accrued interest................................. 6,585 7,449
Customer advances................................ -- 5,940
Accrued income taxes............................. 6,563 7,315
Other accrued liabilities........................ 7,102 10,657
------- -------
$43,837 $56,400
======= =======
</TABLE>
F-15
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
8. LONG-TERM DEBT AND BORROWINGS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Senior notes................................... $124,411 $124,313
Senior subordinated notes...................... 100,000 100,000
Revolving lines of credit...................... 4,419 42,967
Term loan...................................... -- 11,968
Other long-term debt........................... 991 696
-------- --------
229,821 279,674
Less current portion of long-term debt.... (4,419) (6,482)
-------- --------
$225,402 $273,192
======== ========
</TABLE>
In January 1996, the Company amended its existing credit facilities by
increasing the aggregate principal amount that may be borrowed thereunder to
$100,000 (the "Bank Credit Facility"). The Bank Credit Facility consists of a
$25,000 Reducing Revolver and a $75,000 Revolving Facility. The amount of the
Reducing Revolver will be reduced automatically by 12.5% on April 19, 1999 and
on each of the seven succeeding quarterly anniversaries of such date. The
Reducing Revolver is collateralized by all of the issued and outstanding capital
stock of a wholly owned subsidiary and has a five-year maturity, with the
commitments of the lenders thereunder reducing during such five-year period. The
Revolving Facility is collateralized by all of the Company's accounts
receivable, all of its inventory and substantially all of its other personal
property and has a five-year maturity. The Bank Credit Facility contains
customary affirmative covenants, negative covenants and conditions of borrowing,
all of which were met by the Company as of February 22, 1997.
Borrowings under the Bank Credit Facility currently bear interest at LIBOR
plus 1.75% or prime (as defined) plus .5%. The interest to be charged on the
Bank Credit Facility can increase or decrease based upon specified operating
performance criteria set forth in the Bank Credit Facility Agreement. Amounts
may be borrowed or repaid in $1,000 increments. At February 22, 1997,
approximately $5,100 of letters of credit were outstanding, reducing the
aggregate Bank Credit Facility availability to approximately $94,900.
On January 24, 1996, the Company sold $100,000 of 9 7/8% Senior
Subordinated Notes (the "Senior Subordinated Notes"). The proceeds from the
Senior Subordinated Notes were utilized to acquire Burns and refinance the
Company's then outstanding Bank credit facilities.
The Senior Subordinated Notes are unsecured senior subordinated obligations
of the Company and are subordinated to all senior indebtedness of the Company
and mature on February 1, 2006. Interest on the Senior Subordinated Notes is
payable semi-annually in arrears on February 1 and August 1 of each year. The
Senior Subordinated Notes are redeemable at the option of the Company, in whole
or in part, at any time after February 1, 2001 at predetermined redemption
prices together with accrued and unpaid interest through the date of redemption.
Upon a change of control (as defined), each holder of the Senior Subordinated
Notes may require the Company to repurchase such holder's Senior Subordinated
Notes at 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of such purchase. The Senior Subordinated Notes contain certain
restrictive covenants, all of which were met by the Company as of February 22,
1997, including limitations on future indebtedness, restricted payments,
transactions with affiliates, liens, dividends, mergers and transfers of assets.
On February 24, 1993, the Company sold $125,000 of 9 3/4% Senior Notes (the
"Senior Notes"), which were priced to yield 9 7/8%. The Company received the
proceeds from the Senior Notes on March 3, 1993 and utilized $32,545 thereof to
repay the outstanding balance of the Company's then outstanding bank
obligations. The Senior Notes are senior unsecured obligations of the Company,
ranking equally with any future senior
F-16
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
obligations of the Company and mature on March 1, 2003. Interest on the Senior
Notes is payable semi-annually in arrears on March 1 and September 1 of each
year. The Senior Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after March 1, 1998 at predetermined redemption
prices, together with accrued and unpaid interest through the date of
redemption. Upon a change of control (as defined), each holder of the Senior
Notes may require the Company to repurchase such holder's Senior Notes at 101%
of the principal amount thereof, plus accrued and unpaid interest to the date of
such purchase. The Senior Notes contain certain restrictive covenants, all of
which were met by the Company as of February 22, 1997, including limitations on
future indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers and transfers of assets.
Terms of the Senior Notes provide that, among other things, the payment of
cash dividends on common stock is limited to a cumulative amount that equals 50%
of the Company's consolidated adjusted net earnings since the date of the Senior
Notes' issuance, plus the sum of $10,000 and other equity adjustments (as
defined therein). The payment of cash dividends may only be made if the Company
is not in default under the terms of the Senior Notes. The Bank Credit Facility
also contains restrictions on the cumulative amount of dividends that may be
paid. As of February 22, 1997, approximately $3,400 of dividends could have been
declared by the Company.
The Company has a U.K. revolving line of credit agreement for approximately
$4,800 (the FEEL Credit Agreement). The FEEL Credit Agreement is collateralized
by substantially all of the assets of FEEL. Borrowings may be made under the
line of credit, provided FEEL is in compliance with certain covenants, all of
which were met as of February 22, 1997. Aggregate borrowings outstanding under
the FEEL Credit Agreement were approximately $4,419 as of February 22, 1997.
Such borrowings will be repaid in pounds sterling.
The Company also has a Netherlands revolving line of credit agreement for
approximately $1,000 (the Inventum Credit Agreement). The Inventum Credit
Agreement is collateralized by substantially all of the assets of Inventum.
Borrowings may be made under the line of credit, provided Inventum is in
compliance with certain covenants, all of which were met by Inventum as of
February 22, 1997. There were no borrowings outstanding under the Inventum
Credit Agreement as of February 22, 1997.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Fiscal year ending February:
1998.................................................. $ 4,419
1999.................................................. 177
2000.................................................. 138
2001.................................................. 315
2002.................................................. --
Thereafter.............................................. 224,772
--------
$229,821
========
</TABLE>
Interest expense amounted to $28,369, $18,788 and $17,225 for the years
ended February 22, 1997, February 24, 1996 and February 25, 1995, respectively.
F-17
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
9. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Current:
Federal.............................. $ -- $ 1,972 $ (786)
State................................ -- 818 105
Foreign.............................. 1,112 663 639
------ ------- -------
1,112 3,453 (42)
------ ------- -------
Deferred:
Federal.............................. -- (2,635) (5,146)
State................................ -- (818) (904)
Foreign.............................. 410 -- (714)
------ ------- -------
410... (3,453) (6,764)
------ ------- -------
$1,522 $ -- $(6,806)
====== ======= =======
</TABLE>
The difference between income tax expense (benefit) and the amount computed
by applying the statutory U.S. federal income tax rate (35%) to the pretax
earnings before change in accounting principle consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Statutory U.S. federal income tax expense
(benefit).......................................... $ 5,331 $(21,028) $(6,605)
Operating loss (with) without tax benefit............ (6,164) 14,569 --
Foreign tax rate differential........................ 1,267 3,324 --
Goodwill amortization................................ 566 558 708
Other, net........................................... 522 2,577 (909)
------- -------- -------
$ 1,522 $ -- $(6,806)
======= ======== =======
</TABLE>
F-18
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
The tax effects of temporary differences and carryforwards that give rise
to the Company's deferred income tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Engineering costs........................................... $ -- $ 22,182
Inventory reserves.......................................... 3,145 5,164
Acquisition reserves........................................ (1,740) 991
Inventory costs capitalized for tax purposes................ 1,236 815
Bad debt reserves........................................... 948 658
Warranty reserve............................................ 1,452 --
Other....................................................... 2,840 1,611
-------- --------
Net current deferred income tax assets...................... 7,881 31,421
Intangible assets........................................... (13,565) (14,701)
Depreciation................................................ (2,074) (1,556)
Net operating loss carryforward............................. 26,309 9,254
Research credit carryforward................................ 2,941 600
Other....................................................... -- 1,137
-------- --------
Net noncurrent deferred income tax asset (liabilities)...... 13,611 (5,266)
Valuation allowance......................................... (23,159) (27,412)
-------- --------
Net deferred tax liabilities................................ $ (1,667) $ (1,257)
======== ========
</TABLE>
Due to uncertainty surrounding the realization of the benefits of its net
deferred tax asset, the Company has established a valuation allowance of $23,159
against its otherwise recognizable net deferred tax asset.
As of February 22, 1997, the Company had approximately $63,022 of federal
operating loss carryforwards which expire at various dates through 2011, federal
research credit carryforwards of $2,941 which expire at various dates through
2011, and alternative minimum tax credit carryforwards of $658 which have no
expiration date. Approximately $6,000 of the Company's net operating loss
carryforward related to non-qualified stock options will be credited to
paid-in-capital rather than income tax expense.
The Company has not provided for any residual U.S. income taxes on the
approximately $3,651 of earnings from its foreign subsidiaries because such
earnings are intended to be indefinitely reinvested. Such residual U.S. income
taxes, if provided for, would be immaterial.
The Internal Revenue Service completed its examination of the Company's
federal tax returns for the years ended February 26, 1994 and February 27, 1993.
The resolution of the examination did not have a material adverse effect on the
Company's results of operations or its financial condition.
The Company's federal tax returns for the years ended February 24, 1996 and
February 25, 1995 are currently under examination by the Internal Revenue
Service. Management believes that the resolution of this examination will not
have a material adverse effect on the Company's results of operations or its
financial condition.
10. COMMITMENTS AND CONTINGENCIES
Leases -- The Company leases certain of its office, manufacturing and
service facilities under operating leases which expire at various times through
August 2003. Rent expense for fiscal 1997, 1996 and 1995 was
F-19
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
approximately $7,021, $2,943 and $2,276, respectively. Future payments under
leases with terms currently greater than one year are as follows:
<TABLE>
<S> <C>
Year ending February:
1998....................................................... $ 6,075
1999....................................................... 4,239
2000....................................................... 3,058
2001....................................................... 2,306
2002....................................................... 1,462
Thereafter................................................. 702
-------
$17,842
=======
</TABLE>
Contingencies -- B/E has been advised that the U.S. Attorney's Office for
the District of Connecticut, in conjunction with the Department of Commerce and
the U.S. Customs Service, is conducting a grand jury investigation focused on
possible noncompliance by B/E with certain statutory and regulatory provisions
relating to export licensing and controls. The investigation relates primarily
to the sale of passenger seats and related spare parts for civilian commercial
passenger aircraft to Iran Air from 1992 through mid-1995. B/E has been advised
that it is a target of the investigation. An employee of a foreign based
subsidiary of B/E has been charged with offenses relating to the investigation.
The investigation is continuing, while the Company intends to defend itself
vigorously, the ultimate outcome of the investigation cannot presently be
determined. An adverse outcome could have a material adverse effect upon the
operations and/or financial condition of the Company.
The Company is also a defendant in various other legal actions arising in
the normal course of business, the outcome of which, in the opinion of
management, neither individually nor in the aggregate are likely to result in a
material adverse effect to the Company's financial statements.
Employment Agreements -- The Company has employment and compensation
agreements with two key officers of the Company. One of the agreements provides
for an officer to earn a minimum of $450 adjusted annually for changes in the
consumer price index (as defined) per year through 2002, as well as a deferred
compensation benefit equal to the aggregate annual compensation earned through
termination and payable thereafter. Such deferred compensation will be payable
in equal monthly installments over the same number of years it was earned. The
other agreement provides for an officer to receive annual minimum compensation
of $450, and an incentive bonus not to exceed 100% of the officer's then-current
salary through 2001. In addition, if the officer terminates his employment after
April 28, 1996, the Company is obligated to pay the officer annually, as
deferred compensation, an amount equal to 100% of the officer's annual salary
(as defined) for a period of ten years from the date of termination. Such
deferred compensation has been accrued at the present value of the obligation at
February 22, 1997.
The Company has other employment agreements with certain key members of
management that provide for aggregate minimum annual base compensation of $1,825
expiring on various dates through 1999.
Supply Agreement -- The Company has entered into a supply agreement with
Applied Extrusion Technologies, Inc. ("AET"), a related party by way of common
management. Under this agreement, the Company has agreed to purchase its
requirements for certain component parts through March 1998 at a price that
results in a 33 1/3% gross margin to AET. The Company's purchases under this
contract for the years ended February 22, 1997, February 24, 1996, and February
25, 1995, were $1,642, $1,301 and $984, respectively.
F-20
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
11. EMPLOYEE RETIREMENT PLAN
In August 1988, the Company established a non-qualified contributory
profit-sharing plan. Effective August 1, 1989, this plan was amended to
incorporate a 401(k) Plan which permits the Company to match a portion of
employee contributions. Commencing in 1995, the Company's 401(k) Plan was
amended to permit the Company's matching contribution to be made in common stock
of the Company. The Company recognized expenses of $1,317, $859 and $721 related
to this plan for the years ended February 22, 1997, February 24, 1996 and
February 25, 1995, respectively.
12. STOCKHOLDERS' EQUITY
On December 18, 1996, the Company issued approximately 4,005,000 shares of
common stock to the public at a price of $25.00 per share. The net proceeds of
the offering were $93,936. The Company used approximately $57,600 of the net
proceeds to repay outstanding balances under various credit facilities.
Had this sale and the corresponding repayment of the credit facilities
taken place on February 26, 1995, earnings per common and common equivalent
shares would have been $.87 and $(4.24), respectively, for the years ended
February 22, 1997 and February 24, 1996.
As required by APB 15, the supplemental earnings (loss) per common share
data give effect to: (I) the assumed issuance of 2,566,559 shares of Common
Stock by the Company which would be necessary to generate proceeds (using an
assumed share price of $25), net of estimated offering costs, sufficient to
repay $57.6 million of indebtedness; and (ii) the elimination of interest
expense related to such borrowings for each period, net of tax. The supplemental
data do not give effect to the issuance of an additional 1,433,441 shares of
Common Stock sold by the Company.
Stock Option Plans -- The Company has various stock option plans, including
the 1989 Stock Option Plan, the 1991 Directors Stock Option Plan, the 1992 Share
Option Scheme and the 1996 Stock Option Plan (collectively the Option Plans),
under which shares of the Company's common stock may be granted to key employees
and directors of the Company. The Option Plans provide for granting key
employees options to purchase the Company's common stock. Options are granted at
the discretion of the compensation and stock option committee of the Board of
Directors. Options granted generally vest at the rate of 25% per year from the
date of grant and are exercisable to the extent vested and the option term
cannot exceed ten years.
The following table sets forth options granted, canceled, forfeited and
outstanding:
<TABLE>
<CAPTION>
FEBRUARY 22, 1997 FEBRUARY 24, 1996 FEBRUARY 25, 1995
-------------------------- ------------------------ ------------------------
OPTION PRICE OPTION PRICE OPTION PRICE
OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE
---------- ------------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning
of period.......... 2,720,350 $ 0.81-$13.00 2,871,287 $0.81-$13.00 2,493,162 $0.81-$13.00
Options granted...... 1,313,500 $10.25-$24.94 731,925 $7.37-$10.37 484,500 $7.44-$ 8.75
Options exercised.... (1,361,925) $ 0.81-$16.13 (139,750) $0.81-$ 8.75 (375) $0.81
Options forfeited.... (224,500) $ 7.38-$16.13 (743,112) $7.00-$13.00 (106,000) $8.25-$11.75
---------- --------- ---------
Outstanding, end of
period............. 2,447,425 $ 0.81-$24.93 2,720,350 $0.81-$13.00 2,871,287 $0.81-$13.00
========== ========= =========
Exercisable at end of
year............... 1,374,927 $ 0.81-$24.93 2,223,225 $0.81-$13.00 694,737 $0.81-$13.00
========== ========= =========
</TABLE>
F-21
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
At February 22, 1997 options were available for grant under each of the
Company's option plans.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
AT FEBRUARY 22, 1997
- --------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE OPTIONS
RANGE OF OPTIONS WEIGHTED AVERAGE REMAINING EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE FEBRUARY 22, 1997 EXERCISE PRICE
- -------------- ----------- ---------------- ---------------- ----------------- ----------------
(YEARS)
<S> <C> <C> <C> <C> <C>
$ .81-$ 8.50 641,625 $ 7.84 6.51 513,000 $ 7.75
$ 8.63-$ 8.75 637,750 $ 8.72 5.87 566,500 $ 8.74
$ 8.88-$16.13 373,050 $12.05 8.65 101,675 $12.19
$19.00-$24.94 795,000 $20.06 9.68 193,752 $19.94
</TABLE>
The estimated fair value of options granted during 1997 was $16.60 per
share. The estimated fair value of options granted during 1996 was $7.69 per
share. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock option and purchase plans. Accordingly, no compensation
cost has been recognized for its stock option plans and its stock purchase plan
other than that described above. Had compensation cost for the Company's stock
option plans and its stock purchase plans been determined consistent with SFAS
No. 123, the Company's net earnings (loss) and net earnings (loss) per share for
the year ended February 22, 1997 and February 24, 1996 would have been reduced
to the pro forma amounts indicated in the following table:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Net earnings (loss) -- as reported.................... $13,709 $(83,413)
Net earnings (loss) -- pro forma...................... $10,709 $(84,932)
Net earnings (loss) per share -- as reported.......... $ .72 $ (5.15)
Net earnings (loss) per share -- pro forma............ $ .56 $ (5.24)
Weighted average and pro forma weighted average common
shares.............................................. 19,107 16,185
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for options granted in 1997 and 1996; risk-free interest rates
of 6.4%; expected dividend yields of 0.0%; expected lives of 4 years; and
expected volatility of 43%.
The impact of outstanding non-vested stock options granted prior to fiscal
1996 has been excluded from the pro forma calculation; accordingly, the 1997 and
1996 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation will apply to all applicable stock options.
13. EMPLOYEE STOCK PURCHASE PLAN
The Company has established a qualified Employee Stock Purchase Plan, the
terms of which allow for qualified employees (as defined) to participate in the
purchase of designated shares of the Company's common stock at a price equal to
the lower of 85% of the closing price at the beginning or end of each semi-
annual stock purchase period. The Company issued 58,490 and 73,544 shares of
stock during fiscal 1997 and 1996 pursuant to this plan at an average price per
share of $9.70 and $5.50, respectively.
14. EXPORT SALES AND MAJOR CUSTOMERS
Export sales from the United States to customers in foreign countries
amounted to approximately $153,423 $61,717, and $61,645 in fiscal 1997, 1996,
and 1995, respectively. Total sales to all customers in foreign countries
amounted to approximately $203,388, $124,469 and $114,511 in fiscal 1997, 1996
and 1995,
F-22
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
respectively. Total sales to Europe amounted to 29%, 18% and 22% in fiscal 1997,
1996 and 1995, respectively. Total sales to Asia amounted to 16%, 20% and 19% in
fiscal 1997, 1996 and 1995, respectively. Major customers (i.e., customers
representing more than 10% of total sales) change from year to year depending on
the level of refurbishment activity and/or the level of new aircraft purchases
by such customers. There were no major customers in fiscal 1997, 1996 or 1995.
15. OTHER EXPENSES
Other expenses for the year ended February 24, 1996 relate to costs
associated with the integration and consolidation of the Company's European
seating business. Other expenses for the year ended February 25, 1995 consisted
of a charge related primarily to intangible assets ($10,835) and inventories
($11,216) associated with the Company's passenger entertainment systems. The
introduction of the Company's MDDS interactive video system, which the Company
expects to become the industry's standard for in-flight passenger and service
entertainment, has captured the dominant market share with contract awards from
the major airlines totaling more than $150,000 during the year ended February
24, 1996. The MDDS system also has recently caused major carriers to convert
programs for earlier products to the Company's MDDS system and has caused two of
the Company's principal competitors to offer to develop systems for the airlines
similar to the Company's MDDS system. These events have caused the in-flight
entertainment industry to re-evaluate its product offerings and, in the process,
have impaired the value of certain of its assets. As a result, the Company has
written down certain of its assets, including certain customer-specific
inventories and other assets.
16. FOREIGN OPERATIONS
Geographic Area -- The Company operated principally in two geographic
areas, the United States and Europe during the years ended February 22, 1997,
February 24, 1996 and February 25, 1995. There were no significant transfers
between geographic areas during the period. Identifiable assets are those assets
of the Company that are identified with the operations in each geographic area.
The following table presents net sales and operating income for the years
ended February 22, 1997, February 24, 1996, and February 25, 1995 and
identifiable assets as of February 22, 1997, February 24, 1996 and February 25,
1995 by geographic area.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET SALES:
United States............................ $312,497 $169,830 $170,542
Europe................................... 99,882 62,752 58,805
-------- -------- --------
Total:................................ $412,379 $232,582 $229,347
======== ======== ========
OPERATING INCOME:
United States............................ $ 33,834 $(35,822) $ (9,457)
Europe................................... 8,564 (5,623) 5,604
-------- -------- --------
Total:................................ $ 42,398 $(41,445) $ (3,853)
======== ======== ========
IDENTIFIABLE ASSETS:
United States............................ $380,273 $332,832 $279,402
Europe................................... 110,816 100,754 100,552
-------- -------- --------
Total:................................ $491,089 $433,586 $379,954
======== ======== ========
</TABLE>
F-23
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
17. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments at February 22, 1997 and February 24, 1996 is made in accordance
with the requirements of SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments." The estimated fair value amounts have been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
The carrying amounts of cash and cash equivalents, accounts
receivable -- trade, and accounts payable are a reasonable estimate of their
fair values. At February 22, 1997, the Company's Senior Notes have a carrying
value of $124,411 and fair value of 131,250, while the Company's Senior
Subordinated Notes have a carrying value of $100,000 and fair value of $104,500.
The carrying amounts of other long-term debts approximates fair value because
the obligations either bear interest at floating rates or compare favorably with
fixed rate obligations that would be available to the Company.
The fair value information presented herein is based on pertinent
information available to management as of February 22, 1997. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively re-valued for purposes
of these consolidated financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
18. SELECTED QUARTERLY DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1997 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 22, 1997
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales............................................ $97,302 $103,026 $107,823 $104,228
Gross profit..................................... 32,547 34,439 36,510 38,326
Net earnings..................................... 1,433 1,863 4,131 6,282
Net earnings per share........................... 0.08 0.11 0.23 0.29
</TABLE>
Summarized quarterly financial data for fiscal 1996 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 24, 1996
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales........................................... $ 55,594 $ 57,451 $ 55,188 $ 63,349
Gross profit.................................... 18,442 18,719 17,726 17,664
Net (loss) before cumulative effect of
accounting change............................. (9,682) (7,514) (14,021) (28,864)
Cumulative effect of accounting change.......... (23,332) -- -- --
Net loss........................................ (33,014) (7,514) (14,021) (28,864)
Net loss per share:
Before cumulative effect of accounting change... $ (0.60) $ (0.45) $ (0.74) $ (1.92)
Cumulative effect of accounting change.......... (1.44) -- -- --
-------- -------- -------- --------
Net loss per share.............................. $ (2.04) $ (0.45) $ (0.74) $ (1.92)
======== ======== ======== ========
</TABLE>
F-24
<PAGE> 108
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
OFFERING MEMORANDUM IN CONNECTION WITH THE OFFERING COVERED BY THIS OFFERING
MEMORANDUM. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS.
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS OFFERING MEMORANDUM OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 4
Incorporation of Certain Documents By
Reference............................ 4
Summary................................ 6
Risk Factors........................... 18
The Company............................ 22
Use of Proceeds........................ 22
The Exchange Offer..................... 22
Capitalization......................... 29
Selected Financial Data................ 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 32
Business............................... 38
Management............................. 51
Security Ownership of Certain
Beneficial Owners and Management..... 54
Description of Certain Indebtedness.... 56
Description of the New Notes........... 57
Plan of Distribution................... 82
Experts................................ 82
Independent Auditors................... 82
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
======================================================
======================================================
$250,000,000
EXCHANGE OFFER
BE AEROSPACE, INC.
[LOGO]
8% SENIOR SUBORDINATED
NOTES DUE 2008
------------------------
PROSPECTUS
-----------------------
, 1998
======================================================
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any action or proceeding, had no reasonable
cause to believe his conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any such person serving in any such capacity
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor, against expenses actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Registrant's Restated Certificate of Incorporation (the "Certificate")
provides that the Company's Directors shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent that exculpation from liabilities is not permitted under
the DGCL as in effect at the time such liability is determined. The Registrant's
Certificate further provides that the Registrant shall indemnify its directors
and officers to the fullest extent permitted by the DGCL.
The directors and officers of the Company are covered under directors' and
officers' liability insurance policies maintained by the Company.
II-1
<PAGE> 110
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or to be filed by amendment:
<TABLE>
<CAPTION>
PAGE NUMBER IS SEQUENTIAL
NUMBERING SYSTEM WHERE
EXHIBITS MAY BE LOCATED
-------------------------
<C> <S> <C>
1.1 Purchase Agreement dated January 6, 1998 by and among the
Registrant, Merrill Lynch & Co., BT Alex. Brown, Chase
Securities Inc., Credit Suisse First Boston and Morgan
Stanley Dean Witter
4.1 Indenture dated February 13, 1998 for Registrant's issue of
8% Senior Subordinated Notes due 2008 between the Registrant
and United States Trust Company of New York, as trustee
4.2 Second Supplemental Indenture to Indenture dated March 3,
1993 for the Registrant's issue of 9 3/4% Senior Notes due
2003 as supplemented on January 6, 1996, between the
Registrant and United States Trust Company of New York, as
trustee
4.3 Form of Note for the Registrant's 8% Senior Subordinated
Notes (included in Exhibit 4.1)
5.1 Opinion of Shearman & Sterling (to be filed by amendment)
8.1 Opinion re: tax matters (to be filed by amendment)
10.1 Third Amended and Restated Credit Agreement (the "Third
Amended and Restated Credit Agreement") dated as of October
29, 1993, as amended and restated as of May 29, 1997, among
the Registrant, the banks named therein and The Chase
Manhattan Bank, N.A. as agent
10.2 Amendment No. 1 dated November 19, 1997 to the Third Amended
and Restated Credit Agreement
10.3 Amendment No. 2 dated January 28, 1998 to the Third Amended
and Restated Credit Agreement
23.1 Consent of Deloitte & Touche
23.2 Consent of Shearman & Sterling (included in Exhibit 5.1) (to
be filed by amendment)
24 Power of Attorney (included on signature page)
25 Statement of Eligibility of United States Trust Company of
New York, Trustee (to be filed by amendment)
</TABLE>
The following exhibits previously have been filed with the Commission under
the Securities Act of 1933 and/or the Securities Exchange Act of 1934 and are
incorporated by reference herein, (i) the Registrant's Registration Statement on
Form S-1, as amended (No. 33-33689), filed with the Commission on March 7, 1990
(referred to below as "33-33689"); (ii) the Registrant's Registration Statement
on Form S-1, as amended (No. 33-43147), filed with the Commission on October 3,
1991 (referred to below as "33-43147"); (iii) the Registrant's Registration
Statement on Form S-1, as amended (No. 33-54146), filed with the Commission on
November 3, 1992 (referred to below as "33-54146"); (iv) the Registrant's
Registration Statement on Form S-3, as amended (No. 33-57798) filed with the
Commission on February 2, 1993 (referred to below as "33-57798"); (v) the
Registrant's Registration Statement on Form S-2 (No. 33-66490) filed with the
Commission on July 23, 1993 (referred to below as "33-66490"); (vi) the
Registrant's Registration Statement on Form S-8 (No. 33-48119), filed with the
Commission on May 26, 1992 (referred to below as "33-48119"); (vii) the
Registrant's Registration Statement on Form S-8 (No. 33-72194), filed with the
Commission on November 29, 1993 (referred to below as "33-72194"); (viii) the
Registrant's Registration Statement on Form S-8 (No. 33-82894), filed with the
Commission on August 16, 1994 (referred to below as "33-82894"); (ix) the
Registrant's Registration Statement on Form S-4 (No. 333-00433, filed with the
Commission on January 26, 1996 (referred to below as "33-00433"); (x) the
II-2
<PAGE> 111
Registrant's Current Report on Form 8-K dated March 5, 1992, filed with the
Commission on March 6, 1992 (referred to below as "March 8-K"); (xi) the
Registrant's Current Report on Form 8-K dated April 16, 1992, filed with the
Commission on April 17, 1992 (referred to below as "April 8-K"); (xii) the
Registrant's Current Report on Form 8-K dated August 23, 1993, filed with the
Commission on September 7, 1994 (referred to below as "August 8-K"); (xiii) the
Registrant's Current Report on Form 8-K dated December 14, 1995 filed with the
Commission on December 28, 1995 (referred to below as "December 8-K"); (xiv) the
Registrant's Current Report on Form 8-K dated March 26, 1996, filed with the
Commission on April 5, 1996 (referred to below as "March 1996 8-K"); (xv) the
Registrant's Report on Form 10-K for the seven-month transition period ended
February 29, 1992, filed with the Commission on May 27, 1992 (referred to below
as "1992 10-K"); (xvi) the Registrant's Report on Form 10-K, as amended, for the
fiscal year ended February 27, 1993, filed with the Commission on May 13, 1993
(referred to below as "1993 10-K"); (xvii) the Registrant's Report on Form 10-K,
as amended, for the fiscal year ended February 26, 1994, filed with the
Commission on May 23, 1994 (referred to below as "1994 10-K"); and (xviii) the
Registrant's Report on Form 10-K for the fiscal year ended February 25, 1995
filed with the Commission on May 16, 1995 (referred to below as the "1995
10-K").
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
Exhibit 2. Plan of acquisition, reorganization, arrangement,
liquidation or succession
2.1 Agreement of Purchase and Sale dated January 15, 2 March 8-K
1992 among The Pullman Company, PTC Aerospace,
Inc., Aircraft Products Company and the Registrant
2.2 Flight Equipment and Engineering Limited ("FEEL") 2.1 April 8-K
Stock Purchase Agreement among FEEL Holdings
Limited, Dr. Ling Kal K'ung, Mr. John Frederick
Branham ("Mr. Branham"), Mr. John Tcheng and the
Registrant dated April 2, 1992
2.3 Asset Purchase Agreement among JFB Engineering 2.2 April 8-K
Company Limited, Mr. Branham, FEEL and the
Registrant dated April 3, 1992
2.4 Agreement among Boustead Industries Limited, FEEL, 10.26 1993 10-K
Boustead PLC and the Registrant relating to the
sale and purchase of the entire issued share
capital of Fort Hill Aircraft Holdings Limited
dated February 8, 1993
2.5 Acquisition Agreement among the Registrant, 10.28 1993 10-K
Inventum and B.V. Industrieele Maatschappij dated
as of April 29, 1993
2.6 Acquisition Agreement dated as of July 26, 1993 2.1 August 8-K
among the Registrant, Nordskog Industries, Inc.,
and Elinor T. Nordskog, individually and as Trustee
Exhibit 3. Articles of Incorporation and By-laws
3.1 Amended and Restated Certificate of Incorporation 3.1 33-33689
3.2 Certificate of Amendment of the Restated 3 33-54146
Certificate of Incorporation
3.3 Amended and Restated By-Laws 3.2 March 8-K
</TABLE>
II-3
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
Exhibit 4. Instruments defining the rights of security
holders, including debentures
4.4 Specimen Common Stock Certificate 4 33-33689
4.5 Form of Note for the Registrant's issue of 9 3/4% 4.1 33-57798
Senior notes
4.6 Indenture dated March 3, 1993 between U.S. Trust 4.2 33-57798
Company of New York, as trustee, and the Registrant
relating to the Registrant's 9 3/4% Senior Notes
4.7 First Supplemental Indenture to Indenture dated 4.2 333-00433
March 3, 1993 for the Registrant's 9 3/4% Senior
Notes
4.8 Form of Note for the Registrant's 9 7/8% Senior 4.3 333-00433
Subordinated Notes
4.9 Form of Note for the Registrant's Series B 9 7/8% 4.3 333-00433
Senior Subordinated Notes
4.10 Indenture dated January 24, 1996 between Fleet 4.1 333-00433
National Bank, as trustee, and the Registrant
relating to the Registrant's 9 7/8% Senior
Subordinated Notes and Series B 9 7/8% Senior
Subordinated Notes
4.11 Form of Stockholders' Agreement by and among the 4.4 33-66490
Registrant, Summit Ventures II, L.P., Summit
Investors II, L.P. and Wedbush Capital Partners
Exhibit 10(i) Material Contracts
10.4 Supply Agreement dated as of April 17, 1990 between 10.7 33-33689
the Registrant and Applied Extrusion Technologies,
Inc.
10.5 Receivables Sales Agreement dated January 24, 1996 10.1 333-00433
among the Registrant, First Trust of Illinois, N.A.
and Centrally Held Eagle Receivables Program, Inc.
10.6 Escrow Agreement dated January 24, 1996 among the 10.2 333-00433
Registrant, Eagle Industrial Products Corporation
and First Trust of Illinois, NA, as Escrow Agent
10.7 Acquisition Agreement dated as of December 14, 1995 1 December 8-K
by and among the Registrant, Eagle Industrial
Products Corporation, Eagle Industries, Inc., and
Great America Management and Investment, Inc.
10.8 Flight Equipment and Engineering Limited ("FEEL") 2.1 April 8-K
Stock Purchase Agreement among FEEL Holdings
Limited, Dr. Ling Kai K'ung, Mr. John Frederick
Branham ("Mr. Branham"), Mr. John Tcheng and the
Registrant dated April 2, 1992
10.9 Agreement among Boustead Industries Limited, FEEL, 10.26 1993 10-K
Boustead PLC and the Registrant relating to the
sale and purchase of the entire issued share
capital of Fort Hill Aircraft Holdings Limited
dated February 8, 1993
</TABLE>
II-4
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
10.10 Acquisition Agreement among the Registrant, 10.28 1993-K
Inventum and B.V. Industrieelle Maatschappij dated
as of April 29, 1993
Exhibit 10(ii) Leases
10.11 Lease dated May 15, 1992 between McDonnell Douglas 10.1 33-54146
Realty Company, as lessor, and the Registrant, as
lessee, relating to the Irvine, California property
10.12 Lease dated September 1, 1992 relating to the 10.2 33-54146
Wellington, Florida property
10.13 Chesham, England Lease dated October 1, 1973 10.13(a) 1992 10-K
between Drawheath Limited and The Peninsular and
Oriental Steam Navigation Company (assigned in
February 1985)
10.14 Kilkeel, Northern Ireland Lease dated April, 1984 10.27 1993 10-K
between The Department of Economic Development and
Aircraft Furnishing International Limited.
10.15 Utrecht, The Netherlands Lease dated December 15, 10.29 1993 10-K
1988 between the Pension Fund Foundation for Good
Supply Commodity Boards and Inventum
10.16 Utrecht, The Netherlands Lease dated January 31, 10.30 1993 10-K
1992 between G.W. van de Grift Onroerend Goed B.V.
and Inventum
10.17 Lease dated October 25, 1993 relating to the 10.32 1994 10-K
property in Longwood, Florida.
Exhibit 10(iii) Executive Compensation Plans and Arrangements
10.18 Amended and Restated 1989 Stock Option Plan 28.1 33-48119
10.19 Directors' 1991 Stock Option Plan 28.2 33-48119
10.20 1990 Stock Option Agreement with Richard G. 28.3 33-48119
Hamermesh
10.21 1990 Stock Option Agreement with B. Martha Cassidy 28.4 33-48119
10.22 1990 Stock Option Agreement with Jim C. Cowart 28.5 33-48119
10.23 1990 Stock Option Agreement with Petros A. 28.7 33-48119
Palanjian
10.24 1990 Stock Option Agreement with Hansjorg Wyss 28.8 33-48119
10.25 1991 Stock Option Agreement with Amin J. Khoury 28.9 33-48119
10.26 1991 Stock Option Agreement with Jim C. Cowart 28.10 33-48119
10.27 1992 Stock Option Agreement with Amin J. Khoury 28.11 33-48119
10.28 1992 Stock Option Agreement with Jim C. Cowart 28.12 33-48119
10.29 1992 Stock Option Agreement with Paul W. Marshall 28.13 33-48119
10.30 1992 Stock Option Agreement with David Lahar 28.14 33-48119
10.31 United Kingdom 1992 Employee Share Option Scheme 10.4 33-54146
10.32 1994 Employee Stock Purchase Plan 99 33-82894
10.33 Employment Agreement dated as of January 1, 1992 10.12(a) 1992 10-K
between the Registrant and Amin J. Khoury
</TABLE>
II-5
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
10.34 Amendment No. 2 dated as of April 1, 1996 to the A. 10.2 March 1996 8-K
Khoury Agreement
10.35 Employment Agreement dated as of March 1, 1992 10.12(b) 1992 10-K
between the Registrant and Robert J. Khoury
10.36 Amendment No. 2 dated as of January 1, 1996 to the 10.3 March 1996 8-K
R. Khoury Agreement
10.37 Employment Agreement dated as of March 1, 1992 10.12(c) 1992 10-K
between the Registrant and Marco Lanza (the "Lanza
Agreement")
10.38 Amendment No. 1 dated as of January 1, 1996 to the 10.4 March 1996 8-K
Lanza Agreement
10.39 Employment Agreement dated as of April 1, 1992 10.12(e) 1992 10-K
between the Registrant and G. Bernard Jewell
10.40 Employment Agreement dated as of May 1, 1994 10.34 1994 10-K
between the Registrant and Thomas P. McCaffrey (the
"McCaffrey Agreement")
10.41 Amendment No. 1 dated as of January 1, 1996 to the 10.4 March 1996 8-K
McCaffrey Agreement
10.42 Employment Agreement dated as of April 1, 1996 10.1 March 1996 8-K
between the Registrant and Paul E. Fulchino
10.43 Acquisition Agreement dated December 14, 1995 among 1 December 8-K
the Registrant, Eagle Industries, Inc., Eagle
Industrial Products Corporation and Great American
Management and Investment, Inc.
Exhibit 21. Subsidiaries of the Registrant 21 1993 10-K
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel 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.
II-6
<PAGE> 115
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 116
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 9th day of March, 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 9th day of March, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/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 Executive Officer (principal executive
ROBERT J. KHOURY officer)
/s/ PAUL E. FULCHINO President, Chief Operating Officer and
- --------------------------------------------------- Director
PAUL E. FULCHINO
/s/ THOMAS P. MCCAFFREY Corporate Vice President of Administration,
- --------------------------------------------------- Chief Financial Officer and Assistant
THOMAS P. MCCAFFREY Secretary, (principal financial and
accounting officer)
/s/ JIM C. COWART Director
- ---------------------------------------------------
JIM C. COWART
/s/ RICHARD G. HAMERMESH Director
- ---------------------------------------------------
RICHARD G. HAMERMESH
/s/ BRIAN H. ROWE Director
- ---------------------------------------------------
BRIAN H. ROWE
/s/ HANSJOERG WYSS Director
- ---------------------------------------------------
HANSJOERG WYSS
</TABLE>
II-8
<PAGE> 1
Exhibit 1.1
BE AEROSPACE, INC.
(a Delaware corporation)
$250,000,000
8% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
February 6, 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
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 and Morgan Stanley & Co. Incorporated (each an
"Initial Purchaser" and together the "Initial Purchasers") $250,000,000
aggregate principal amount of its 8% Senior Subordinated Notes due 2008 (the
"Securities"). The Securities are to be issued pursuant to an indenture to be
dated as of February 13, 1998 (the "Indenture") between the Company and United
States Trust Company 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.
The Securities will be offered and sold to you without being
registered under the
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<PAGE> 2
Securities Act of 1933, as amended (the "1933 Act"), in reliance on an exemption
therefrom. The Company has prepared a preliminary offering memorandum, dated
January 29, 1998 (such preliminary offering memorandum being hereinafter
referred to as the "Preliminary Offering Memorandum"), and is preparing a final
offering memorandum, dated February 6, 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 understands that you propose to make an offering of the
Securities on the terms set forth in the Offering Memorandum, as soon as you
deem advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom you reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
under the 1933 Act, as such rule may be amended from time to time ("Rule 144A"),
in transactions under Rule 144A and/or (ii) to non-U.S. persons outside the
United States to whom you reasonably believe offers and sales of the Securities
may be made in reliance upon Regulation S ("Regulation S") under the 1933 Act.
The holders of Securities will be entitled to the benefits of a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit A with such changes as shall be agreed to by the parties hereto (the
"Registration Rights Agreement"), pursuant to which the Company will file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Securities or the
Exchange Securities referred to in the Registration Rights Agreement under the
1933 Act.
On January 28, 1998, the Company commenced a tender offer (the
"Tender Offer") for all outstanding 9 3/4% Senior Notes due 2003 (the "Senior
Notes") and a related consent solicitation (the "Consent Solicitation") pursuant
to which the Company is soliciting consents to certain amendments (the
"Amendments") to the Indenture, dated as of March 3, 1993, as supplemented on
January 5, 1996, between the Company and the United States Trust Company of New
York, under which the Senior Notes were issued, all as more fully described in
the Offer to Purchase and Consent Solicitation Statement, dated January 28,
1998, and related documentation (the "Offer to Purchase"). Upon consummation of
the Tender Offer and Consent Solicitation, the Company will execute a
supplemental indenture (the "Supplemental Indenture") to the Indenture, which
will give effect to the Amendments.
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
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<PAGE> 3
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 Senior Notes and 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);
(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; or (C)
engaged in any directed selling efforts (as defined in Rule 902 of the
1933 Act) in the United States in connection with the Securities being
offered and sold pursuant to Regulation S.
(v) Deloitte & Touche L.L.P., which is reporting upon the audited
financial statements and related notes 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 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
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<PAGE> 4
materially adverse to the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise. Such financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. The
financial statement schedules, if any, included in the 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 and "as adjusted" financial information
included in the Offering Memorandum present fairly the information shown
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 in good standing would not have a
material adverse effect on the Company and its subsidiaries, considered as
one enterprise.
(viii) The Company's only subsidiaries (either direct or indirect)
are: BEA Aerospace International Ltd., a company incorporated under the
laws of Barbados ("BEA International"), Flight Equipment & Engineering
Limited, a company incorporated under the Companies Act (United Kingdom)
("FEEL"), BE Aerospace (U.K.) Limited, a company incorporated under the
Companies Act (United Kingdom) ("BEA UK"), Fort Hill Aircraft Holdings
Limited, a company incorporated under the Companies Act (United Kingdom)
("Fort Hill"), AFI Holdings Limited, a company incorporated under the
Companies Act (United Kingdom) ("AFI"), Aircraft Furnishing Limited, a
company incorporated under the Companies Act (United Kingdom) ("AFL"), BE
Aerospace (Services) Limited, a company incorporated under the Companies
Act (United Kingdom), BE Aerospace (U.S.A.), Inc., a Delaware corporation
("BEA USA"), BE Aerospace (Netherlands) B.V., a company incorporated under
the laws of the Netherlands ("BEA Netherlands"), Royal Inventum, B.V., a
company incorporated under the laws of the Netherlands ("Royal Inventum"),
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") and Burns Aerospace (France) S.A.R.L., a
company incorporated under the laws of France ("Burns France") (each
individually, a "Subsidiary" and collectively, the
-4-
<PAGE> 5
"Subsidiaries"). The Company has no significant subsidiaries (as defined
in Rule 1.02 of the Commission's Regulation S-X), other than Acurex, FEEL
and Royal Inventum. AFI, Fort Hill and Nordskog are inactive subsidiaries
with no significant assets and are not engaged in any active trade or
business. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with corporate power and authority under such laws to own,
lease and operate its properties and conduct its business; and each
Subsidiary is duly qualified to transact business as a foreign corporation
and is in good standing in each other jurisdiction in which it owns or
leases property of a nature, or transacts business of a type, that would
make such qualification necessary, except to the extent that the failure
to so qualify or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, considered as one enterprise.
All of the outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued or created and are fully paid and
non-assessable and, other than in the case of BEA France, 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 Chief Executive Officer of the Company, are owned by the Company,
directly or through one or more Subsidiaries, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, except that (1) 65% of the issued and outstanding Ordinary
Shares of FEEL are pledged to the Agent under the Amended Bank Credit
Agreement, (2) 65% of the issued and outstanding capital stock of BEA
Netherlands is pledged to the Agent under the Amended Bank Credit
Agreement, (3) the outstanding capital stock of each of BEA USA and Acurex
is pledged to the Agent under the Amended Bank Credit Agreement and (4)
the outstanding capital stock of each of CNC and BEA UK is charged to
Barclays Bank PLC pursuant to a debenture over the assets of FEEL dated
November 19, 1992. The Company does not, directly or indirectly, own any
equity or long term debt securities of any corporation, firm, partnership,
joint venture or other entity, other than the stock of its Subsidiaries, a
note from FEEL in the principal amount of (Dutch Gilder)69,541, a second
note from FEEL in the principal amount of (Dutch Gilder)3,200,000 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,
-5-
<PAGE> 6
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 the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law);
and the Indenture conforms to the description thereof in the Offering
Memorandum.
(xiv) The Securities have been duly authorized by the Company. When
executed, authenticated, issued and delivered in the manner provided for
in the Indenture and sold and paid for as provided in this Agreement, the
Securities will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except as enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law); and the Securities conform to the description thereof in the
Offering Memorandum.
(xv) The Supplemental Indenture has been duly authorized by the
Company and, when executed and delivered by the Company and the Trustee
named therein in accordance with the terms thereof, will constitute a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without
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<PAGE> 7
limitation, all laws relating to fraudulent transfers), reorganization or
other similar laws affecting enforcement of creditors' rights generally or
by general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xvi) Since the respective dates as of which information is given in
the Offering Memorandum, except as otherwise stated therein or
contemplated thereby, there has not been (A) any material adverse change
in the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business, (B)
any transaction entered into by the Company or any subsidiary, other than
in the ordinary course of business, that is material to the Company and
its subsidiaries, considered as one enterprise, or (C) any dividend or
distribution of any kind declared, paid or made by the Company on its
capital stock.
(xvii) Neither the Company nor any Subsidiary is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as one
enterprise. The execution and delivery by the Company of this Agreement,
the Registration Rights Agreement, the Indenture and the Supplemental
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 (including any redemption of
the Senior Notes) and the Offer to Purchase (including the Tender Offer
and the Consent Solicitation) and compliance by the Company with the terms
of this Agreement, the Registration Rights Agreement, the Indenture and
the Supplemental 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 lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary under, (A)
any contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any Subsidiary is a party
or by which they may be bound or to which any of their respective
properties may be subject or (B) any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any Subsidiary or any of their respective properties.
(xviii) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign
(other than under the 1933 Act and the rules and regulations thereunder
with respect to the Registration Rights
-7-
<PAGE> 8
Agreement and the transactions contemplated thereunder and the securities
or "blue sky" laws of the various states) is required for the valid
authorization, issuance, sale and delivery of the Securities, for the
execution, delivery or performance by the Company of this Agreement, the
Registration Rights Agreement, the Indenture and the Supplemental
Indenture or for the consummation by the Company of the transactions
contemplated in this Agreement, the Offering Memorandum and the Offer to
Purchase (including the Tender Offer and the Consent Solicitation), except
such of the foregoing as will be obtained prior to the Closing Time.
(xix) Except as disclosed in the Offering Memorandum, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any Subsidiary or any of their respective officers, in their capacity as
such, that could result in any material adverse change in the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and its subsidiaries, considered as one enterprise, or that
could materially and adversely affect the properties or assets of the
Company and its subsidiaries, considered as one enterprise, or that could
adversely affect the consummation of the transactions contemplated in this
Agreement, the Offering Memorandum or the Offer to Purchase (including the
Tender Offer and the Consent Solicitation); the aggregate of all pending
legal or governmental proceedings that are not described in the Offering
Memorandum to which the Company or any Subsidiary is a party or which
affect any of their respective properties, including ordinary routine
litigation incidental to the business of the Company or any Subsidiary,
would not have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise.
(xx) There are no contracts or documents of a character that would
be required to be described in the Offering Memorandum, if it were a
prospectus filed as part of a registration statement on Form S-1 under the
1933 Act, that are not described as would be so required (other than
contracts or documents described in the Company's most recent proxy
statement filed with the Commission).
(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
-8-
<PAGE> 9
any Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of such corporation to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(xxii) The Company and the Subsidiaries each owns, possesses or has
obtained all material governmental licenses, permits, certificates,
consents, orders, approvals and other authorizations, including, without
limitation, any licenses, permits, certificates, consents, orders,
approvals and other authorizations required to be obtained from the
Federal Aviation Administration, necessary to own or lease, as the case
may be, and to operate its properties and to carry on its business as
presently conducted, and neither the Company nor any Subsidiary has
received any notice of proceedings relating to revocation or modification
of any such licenses, permits, certificates, consents, orders, approvals
or authorizations.
(xxiii) The Company and the Subsidiaries each owns or possesses
adequate patents, patent licenses, trademarks, service marks and trade
names necessary to carry on its business as presently conducted, and
neither the Company nor any Subsidiary has received any notice of
infringement of or conflict with asserted rights of others with respect to
any patents, patent licenses, trademarks, service marks or trade names
that in the aggregate, if the subject of an unfavorable decision, ruling
or finding, could materially adversely affect the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise.
(xxiv) To the best knowledge of the Company, no labor problem exists
with its employees or with the employees of any Subsidiary or is imminent
that could adversely affect the Company and its subsidiaries, considered
as one enterprise, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
Subsidiary's principal suppliers, contractors or customers that could be
expected to materially adversely affect the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise.
(xxv) Neither the Company nor any Subsidiary has taken or will take,
directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation
of the price of the Securities.
(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").
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<PAGE> 10
(xxvii) None of the Company or any affiliate (as such term is
defined in Rule 501(b) of Regulation D) of the Company or any person
acting on behalf thereof has engaged in any directed selling efforts (as
such term is defined in Regulation S) with respect to any Securities
offered and sold in reliance on Rule 903 of Regulation S, and the Company
and such affiliates and such other persons acting on behalf thereof have
complied with the offering restrictions requirement of Regulation S with
respect to the Securities.
(xxviii) The Dealer Manager Agreement, dated as of January 28, 1998,
between the Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, has been authorized, executed and delivered by the Company,
constitutes a valid and binding obligation of the Company and is
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).
(xxix) No part of the proceeds of the sale of the Securities will be
used for any purpose that violates the provisions of any of Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System or any
other regulation of such Board of Governors.
(xxx) 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
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<PAGE> 11
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.
(xxxi) 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.
(xxxii) 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.
(xxxiii) No material event of default exists under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company or any Subsidiary is a party or to which
the Company or any Subsidiary is subject.
(xxxiv) The Company is not an "investment company," and will not be
as a result of the sale of the Notes pursuant to this Agreement, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act").
(xxxv) 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.
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<PAGE> 12
For purposes of this Agreement, the following terms shall have the
following meanings: "Environmental Law" means any United States (or other
applicable jurisdiction's) federal, state, local or municipal statute,
law, rule, regulation, ordinance, code, policy or rule of common law and
any judicial or administrative interpretation thereof including any
judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority. "Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law.
(xxxvi) The Second Amendment, dated January 28, 1998, to the
Company's Third Amended and Restated Credit Agreement, amended and
restated as of May 29, 1997, as further amended on November 19, 1997, has
been duly authorized by the Company and, when executed and delivered by
the Company and the other parties thereto in accordance with the terms
thereof, will constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization or other similar laws affecting enforcement of creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(b) Any certificate signed by any officer of the Company or any
Subsidiary and delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
Section 2. Purchase, Sale and Resale of the Securities; Closing;
Representations and Warranties of the Initial Purchasers. (a) On the basis of
the representations and warranties herein contained, and subject to the terms
and conditions herein set forth, the Company agrees to sell to each of you,
severally and not jointly, and each of you severally agrees to purchase from the
Company, at a purchase price of 97.125% 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
February 13, 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
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<PAGE> 13
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 $242,812,500 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 1993 Act, or, with respect to Securities sold in reliance on Regulation
S, by means of any directed selling efforts (as defined in Rule 902 of
Regulation S) in the United States and (ii) will solicit offers for the
Securities only from, and will offer, sell or deliver the Securities, as part of
its initial offering, only to (A) persons in the United States whom you
reasonably believe to be Qualified Institutional Buyers or, if any such person
is buying for one or more institutional accounts for which such person is acting
as fiduciary or agent, only when such person has represented to you that each
such account is a Qualified Institutional Buyer to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, and, in each
case, in a transaction under Rule 144A and (B) non-U.S. persons outside the
United States to whom you reasonably believe offers and sales of the Securities
may be made in reliance upon Regulation S, in transactions meeting the
requirements of Regulation S under the Securities Act.
Section 3. Certain Covenants of the Company. The Company covenants
with you 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
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<PAGE> 14
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.
(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
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<PAGE> 15
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 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
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<PAGE> 16
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) 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), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
(l) The Company will apply the net proceeds that it receives from
the offer and sale of the Securities issued by it in the manner set forth
with respect to it in the Offering Memorandum under the heading "Use of
Proceeds."
(m) Except following the effectiveness of the Registration
Statement, none of the Company, any affiliates (as such term is defined in
Rule 501(b) of Regulation D) or any person acting on behalf thereof (other
than you) will engage in any directed selling efforts (as such term is
defined under Regulation S) in the United States with respect to the
Securities, and each of the Company, such affiliate and such other person
acting on behalf thereof will comply with the offering restrictions
requirement of Regulation S.
(n) Prior to the Closing Time, the Company will not issue any press
release or other communications directly or indirectly or hold any press
conference with respect to the Company, the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company, without your prior 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.
(o) For a period of 120 days from the date of the Offering
Memorandum, the Company will not, without your prior written consent,
directly or indirectly, offer, sell, grant any option to purchase or
otherwise dispose of any debt securities of the Company (or securities
convertible or exchangeable into or exercisable for debt securities of the
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<PAGE> 17
Company), other than the Exchange Securities referred to in the
Registration Rights Agreement.
Section 4. Payment of Expenses. Whether or not any sale of the
Securities is consummated, the Company will pay and bear all costs and expenses
incident to the performance of its obligations under this Agreement, including
(a) the preparation and printing of the Preliminary Offering Memorandum, the
Offering Memorandum and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Initial 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
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<PAGE> 18
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.
(b) At the Closing Time, each of you shall have received a signed
opinion of Lovell White Durrant, counsel to BEA(UK) and FEEL, dated as of
Closing Time, in substantially the form attached hereto as Exhibit B-2.
Such opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the sale of the Securities pursuant
to this Agreement as counsel for the Initial Purchasers may reasonably
request.
(c) At the Closing Time, each of you shall have received a signed
opinion of Trenite Van Doorne, counsel to Royal Inventum, dated as of
Closing Time, in substantially the form attached hereto as Exhibit B-3.
Such opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the sale of the Securities pursuant
to this Agreement as counsel for the Initial Purchasers may reasonably
request.
(d) At the Closing Time, each of you shall have received the
favorable opinion of 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), 5(b) and 5(c) appear on
their face to be appropriately responsive to the requirements of this
Agreement except, specifying the same, to the extent waived by you, and
with respect to the incorporation and legal existence of the Company, the
Securities, this Agreement, the Indenture, the Registration Rights
Agreement, the Offering Memorandum and such other related matters as you
may require. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to you. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and the
Subsidiaries and certificates of public officials; provided that such
certificates have been delivered to the Initial Purchasers.
(e) At the Closing Time, (i) the Offering Memorandum, as it may then
be amended or supplemented, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum, any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise, whether or not arising in the ordinary
course of business, (iii) no action, suit or proceeding at law or in
equity shall be
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<PAGE> 19
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 and (vi) the other representations and warranties of
the Company set forth herein shall be accurate in all material respects as
though expressly made at and as of the Closing Time. At the Closing Time,
each of you shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company, dated as of the
Closing Time, to such effect.
(f) At the time that this Agreement is executed by the Company, each
of you shall have received from Deloitte & Touche L.L.P., independent
auditors for the Company, a letter, dated such date, in form and substance
satisfactory to you, confirming that they are independent public
accountants with respect to the Company within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder, and stating
in effect that:
(i) in their opinion, the audited financial statements related
to the Company and its consolidated subsidiaries and the related
financial statement schedules included in the Offering Memorandum
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the related published
rules and regulations thereunder;
(ii) on the basis of procedures (but not an audit in
accordance with generally accepted auditing standards) consisting of
a reading of the latest available unaudited interim consolidated
financial statements of the Company included in the Offering
Memorandum, a reading of the minutes of all meetings of the
stockholders and directors of the Company and the Audit, Stock
Option and Compensation, and Pricing Committees of the Company's
Board of Directors since February 22, 1997 (except for those
meetings for which minutes have not yet been provided, in which case
minutes for such meetings in draft form have been read) inquiries of
certain officials of the Company and its subsidiaries responsible
for financial and accounting matters, a review in accordance with
procedures established by the American Institute of Certified Public
Accountants (the "AICPA") with respect to the nine-month periods
ended November 29, 1997 and
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<PAGE> 20
November 30, 1996 performed at the request of the Company, and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements for the Company
and its consolidated subsidiaries for the nine-month periods
ended November 29, 1997 and November 30, 1996 included in the
Offering Memorandum do not comply as to form in all material
respects with the applicable accounting requirements of the
1933 Act and the related published rules and regulations or
are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements included in the
Offering Memorandum;
(B) at December 27, 1997 and at a specified date not
more than five days prior to the date of this Agreement, there
was any change in the capital stock of the Company or any
increase in the consolidated long-term debt of the Company and
its subsidiaries, in each case as compared with amounts shown
in the latest balance sheet included in the Offering
Memorandum, except in each case for changes, decreases or
increases that the Offering Memorandum discloses have occurred
or may occur; or
(C) for the period from the date of the latest financial
statement included in the Offering Memorandum to a specified
date prior to the date of this Agreement, there was any
decrease in consolidated net sales, operating earnings, net
earnings or net earnings per share of the Company and its
subsidiaries, in each case as compared with the comparable
period in the preceding year, except in each case for any
decreases that the Offering Memorandum discloses have occurred
or may occur;
(iii) based on a comparison of the information included under
the heading "Selected Financial Information" with the requirements
of Item 301 of Regulation S-K and inquiries of certain officials of
the Company who have responsibility for financial and accounting
matters whether this information conforms in all material respects
with the disclosure requirements of Item 301 of Regulation S-K,
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does
not conform in all material respects with the disclosure
requirements of item 301 of Regulation S-K; and
(iv) in addition to the procedures referred to in clause (ii)
above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Offering
Memorandum appearing in the Offering Memorandum,
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<PAGE> 21
including the Selected Financial Information, which have previously
been specified by you and which shall be specified in such letter,
and have compared certain of such items with, and have found such
items to be in agreement with, the accounting and financial records
of the Company and its subsidiaries.
(g) At the Closing Time, each of you shall have received from
Deloitte & Touche L.L.P. a letter, in form and substance satisfactory to
you and dated as of the Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to Section 5(f), except
that the specified date referred to shall be a date not more than five
days prior to the Closing Time.
(h) 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.
(i) At the Closing Time, counsel for the Initial Purchasers shall
have been furnished with all such documents, certificates and opinions as
they may reasonably request for the purpose of enabling them to pass upon
the issuance and sale of the Securities as contemplated in this Agreement
and the matters referred to in Section 5(d) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Company, the performance of any of the covenants of the
Company, or the fulfillment of any of the conditions herein contained; and
all proceedings taken by the Company at or prior to the Closing Time in
connection with the authorization, issuance and sale of the Securities as
contemplated in this Agreement shall be reasonably satisfactory in form
and substance to the Initial Purchasers and to counsel for the Initial
Purchasers.
(j) At the Closing Time, the Registration Rights Agreement shall
have been fully executed and be in full force and effect.
(k) At or prior to the Closing Time, the Company shall have entered
into an amendment of the Company's Third Amended and Restated Credit
Agreement, amended and restated as of May 29, 1997, as further amended on
November 19, 1997, in the form previously delivered to counsel for Merrill
Lynch on behalf of the Initial Purchasers, to permit the consummation of
the Tender Offer and Consent Solicitation on the terms described in the
Offer to Purchase and the consummation of the transactions contemplated
hereby.
If any of the conditions specified in this Section 5 shall not have
been fulfilled
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<PAGE> 22
when and as required by this Agreement, this Agreement may be terminated by you
on notice to the Company at any time at or prior to the Closing Time, and such
termination shall be without liability of any party to any other party, except
as provided in Section 4. Notwithstanding any such termination, the provisions
of Sections 6, 7 and 8 shall remain in effect.
Section 6. Indemnification. (a) The Company agrees to indemnify and
hold harmless the Initial Purchasers and each person, if any, who controls the
Initial Purchasers within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact included in any preliminary offering
memorandum or the Offering Memorandum (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel chosen by you), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or
(ii) above;
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue 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
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<PAGE> 23
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 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.
(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.
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<PAGE> 24
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 alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Initial Purchaser
shall not 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
-24-
<PAGE> 25
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 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 or any outbreak of
hostilities or escalation thereof or other calamity or crisis the effect of
which is such as to make it, in the Initial Purchasers' judgment, impracticable
to market the Securities or enforce contracts for the sale of the Securities or
(iii) if trading in any securities of the Company has been suspended by the
Commission or the NASD, or if trading generally on either the American Stock
Exchange or the New York Stock Exchange or in the over-the-counter market has
been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by such exchange or
by order of the Commission, the NASD or any other governmental authority or (iv)
if a banking moratorium has been declared by either federal, New York or Florida
authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Sections 6, 7 and 8 shall remain in effect.
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<PAGE> 26
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 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.
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<PAGE> 27
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.
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<PAGE> 28
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> 29
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
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
----------------------------------
Name:
Title:
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<PAGE> 30
================================================================================
BE AEROSPACE, INC.
(a Delaware corporation)
$250,000,000
8% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
Dated: February 6, 1998
================================================================================
<PAGE> 31
SCHEDULE I
Principal Amount
of Securities
Initial Purchasers to be Purchased
------------------ ---------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................ $118,750,000
BT Alex. Brown Incorporated......................... 25,000,000
Chase Securities Inc................................ 12,500,000
Credit Suisse First Boston Corporation.............. 56,250,000
Morgan Stanley & Co. Incorporated................... 37,500,000
------------
Total.......................................... $250,000,000
<PAGE> 32
EXHIBIT A
FORM OF
REGISTRATION RIGHTS AGREEMENT
<PAGE> 33
EXHIBIT B-1
FORM OF OPINION OF SHEARMAN & STERLING
[Shearman & Sterling Letterhead]
February 13, 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
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
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 and Morgan Stanley
& Co. Incorporated (collectively, the "Initial Purchasers"), subject to the
terms and conditions set forth in the Purchase Agreement, dated February 6, 1998
(the "Purchase Agreement"), among the Company and the Initial Purchasers, of
$250,000,000 aggregate principal amount of the Company's 8% Senior Subordinated
Notes due 2008 (the "Notes") issued pursuant to an Indenture, dated as of
February 13, 1998 (the "Indenture"), between the Company and United States Trust
Company of New York, as trustee (the "Trustee"), and further subject to the
terms and conditions set forth in the Registration Rights Agreement, dated
February 13, 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 January 29, 1998, and the final Offering Memorandum,
dated February 6, 1998 relating to the offering of the Notes (such final
Offering Memorandum being hereinafter referred to as the
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<PAGE> 34
"Offering Memorandum"). We have also examined the Purchase Agreement, the
Indenture, the Registration Rights Agreement, a specimen of the Note and the
originals, or copies identified to our satisfaction, of such corporate records
of the Company, certificates of public officials, officers of the Company 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 contained in or made
pursuant to the Purchase Agreement, the Registration Rights Agreement,
certificates of officers of the Company 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:
1. The Securities 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."
2. 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.
3. The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
4. 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).
5. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the Indenture and issued and
delivered to and paid for by you pursuant to the Purchase Agreement, will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as
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<PAGE> 35
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).
6. 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 indemnity or
contribution may be limited by applicable federal or state securities laws and
public policy underlying such laws.
7. The execution and delivery by the Company of the Purchase
Agreement, the Registration Rights Agreement, the Supplemental Indenture and the
Indenture by the Company, the consummation by the Company of the transactions
contemplated in the Purchase Agreement and the Offer to Purchase, including
without limitation the execution and delivery of the Securities, and compliance
by the Company with the terms of the Purchase Agreement, the Registration Rights
Agreement, the Supplemental Indenture and the Indenture do not, and will not,
result in any violation of, and do not, and will not conflict with, or
constitute a default under, or result in the creation of or imposition of any a
lien under, (i) the certificate of incorporation or by-laws of the Company or
Acurex, (ii) 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 most recent Form 10-K
or which is listed on Schedule I hereto, in each case, on their face, or (iii)
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
8. 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 Securities in
accordance with the provisions of the Indenture, (ii) sale of the Securities to
you as contemplated by the Purchase Agreement, (iii) execution, delivery or
performance by the Company of the Purchase Agreement, the Registration Rights
Agreement, the Indenture or the Supplemental Indenture or (iv) consummation of
the transactions contemplated by the Offer to Purchase, 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.
-3-
<PAGE> 36
9. 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.
10. Assuming (i) the accuracy of the representations and warranties
of the Initial Purchasers in Section 2 of the Purchase Agreement and (ii) the
due performance by the Initial Purchasers of the covenants and agreements set
forth in Section 2 of the Purchase Agreement, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchasers
under, or in connection with the initial resale of such Securities by the
Initial Purchasers in accordance with, the Purchase Agreement to register the
Securities under the 1933 Act or to qualify any indenture in respect of the
Securities under the Trust Indenture Act, it being understood that no opinion is
expressed as to any subsequent resale of 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> 37
Schedule I
1. Third Amended and Restated Credit Agreement dated as of October 29,
1993, amended and restated as of May 29, 1997, as further amended on November
11, 1997 and January 28, 1998, among BE Aerospace, Inc., the Chase Manhattan
Bank, as Administrative Agent and Nationsbank, N.A. (South), as Co-Agent.
2. FEEL Credit Agreement
3. Inventum Credit Agreement
4. Letter of understanding related to the joint venture between the
Company and Harris Corporation
5. Consent Order regarding the settlement of the U.S. Government's
investigation of export sales to Iran between 1992-5
6. Indenture, dated as of March 3, 1993, as amended, between the Company
and United States Trust Company of New York
-5-
<PAGE> 38
February 13, 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
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
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 and Morgan Stanley
& Co. Incorporated (collectively, the "Initial Purchasers"), subject to the
terms and conditions set forth in the Purchase Agreement, dated February 6, 1998
(the "Purchase Agreement"), among the Company and the Initial Purchasers, of
$250,000,000 aggregate principal amount of the Company's 8% Senior Subordinated
Notes due 2008 (the "Notes") issued pursuant to an Indenture, dated as of
February 13, 1998 (the "Indenture"), between the Company and United States Trust
Company of New York, as trustee (the "Trustee"), and further subject to the
terms and conditions set forth in the Registration Rights Agreement, dated
February 13, 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 January 29, 1998, and the final Offering Memorandum,
dated February 6, 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
-6-
<PAGE> 39
any of the statements made in the Offering Memorandum, except as set forth in
paragraph 1 of our opinion addressed to you dated the date hereof. In addition,
with your approval, matters governed by the laws of the United Kingdom have been
passed upon by Lovell White Durrant, British counsel to the Company and matters
governed by the laws of the Netherlands have been passed upon by Trenite Van
Doorne, Dutch counsel to the Company, and we have assumed, without independent
verification, the accuracy of their legal opinions 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,
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<PAGE> 40
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
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
Ladies and Gentlemen:
I am General Counsel of BE Aerospace, Inc., a Delaware corporation
(the "Company"), and have advised the Company in connection with the issuance
and sale by the Company of $200,000,000 aggregate principal amount of its 8%
Senior Subordinated Notes due 2008 (the "Securities"). This opinion is being
rendered pursuant to Section 5(a) of the Purchase Agreement dated February 6,
1998 (the "Purchase Agreement") among the Company, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit
Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated
(collectively, the "Initial Purchasers") relating to the issuance and sale of
the Securities. Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Purchase Agreement.
In such capacity I have examined a copy of the Offering Memorandum,
dated as of February 6, 1998, related to the sale of the Securities (the
"Offering Memorandum"). I have also examined the Purchase Agreement, the
Indenture, dated as of February 13, 1998, between the Company and United States
Trust Company of New York, the Registration Rights Agreement, dated as of
February 13, 1998, between the Company and the Initial Purchasers, and the
originals, or copies identified to my satisfaction, of such corporate records of
the Company, certificates of public officials, officers of the Company 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 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
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<PAGE> 41
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:
1. Each of the Company and Acurex is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
corporate power to own or lease all assets owned or leased by it and conduct its
business as described in the Offering Memorandum. The Company has authority to
issue, sell and deliver the Securities, to execute and deliver the Purchase
Agreement, the Registration Rights Agreement and the Indenture, and to perform
its obligations thereunder. The Company is qualified to transact business, and
is in good standing as a foreign corporation, in California, Connecticut,
Florida, Massachusetts, New Jersey and Washington; the states of California,
Connecticut, Florida, Minnesota, New Jersey and Washington being the only
jurisdictions in the United States in which the Company owns or leases real
property. Acurex is qualified to transact business, and is in good standing as a
foreign corporation, in California and Florida; the states of California and
Florida being the only jurisdictions in which Acurex owns or leases real
property.
2. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Capitalization table in the 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.
3. To the best of my knowledge, (i) neither the Company, Acurex nor Burns
is in violation of its certificate of incorporation or by-laws or in default in
the performance of any obligation, agreement or condition in any agreement or
instrument known to us to which the Company, Acurex or Burns is a party or by
which either of them is bound and which default could have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries taken as a whole and (ii) neither the Company, Acurex, nor Burns is
in violation of any applicable law, rule or regulation, or, to our knowledge
after having made inquiry of the Company, any order, writ, injunction or decree,
of any jurisdiction, court or governmental instrumentality, where such violation
or default could have a material adverse effect on the business or financial
condition of the Company and its subsidiaries taken as a whole.
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<PAGE> 42
4. 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.
5. 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 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 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,
Edmund J. Moriarty
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<PAGE> 43
EXHIBIT B-2
FORM OF OPINION OF LOVELL WHITE DURRANT
[Lovell White Durrant Letterhead]
[Date]
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
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
USA
Dear Sirs
BE Aerospace (UK) Limited and Flight Equipment and Engineering Limited
1. We have acted as English legal advisers to BE Aerospace (UK) Limited
(formerly Flight Equipment and Engineering Limited), a company registered
in England and Wales under registered number 516846, the registered office
of which is located at Nissen House, Grovebury Road, Leighton Buzzard,
Bedfordshire ("BEA(UK)"), since its acquisition by BE Aerospace, Inc.
(formerly BE Avionics, Inc.) (the "Issuer") on 2 April, 1992. We have also
acted as English legal advisers to Flight Equipment and Engineering
Limited, a company registered in England and Wales under registered number
1417308, the registered office of which is located at Nissen House,
Grovebury Road, Leighton Buzzard, Bedfordshire ("FEEL"), since 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 8% Senior Subordinated Notes due 2008
(the "Securities"). We have been provided with copies of:
(a) an Offering Memorandum dated February 13, 1998, related to the
Securities (the "Offering Memorandum";
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<PAGE> 44
(b) a draft dated __________, 1998, of an indenture to be dated as of
February 13, 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 February 6, 1998, between the
Issuer and you relating to the issue and sale of the Securities (the
"Purchase Agreement"); and
(d) the registration rights agreement to be dated as of February 13,
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 each of BEA(UK) and FEEL:-
(a) Statutory Books, including the Register of Members and the Minutes
of board meetings and general meetings of the shareholders contained
therein;
(b) copies of the Memorandum and Articles of Association and Certificate
of Incorporation; and
(c) Certificates of good standing issued by the Registrar of Companies
on _________, 1998, copies of which are annexed hereto marked "A".
4. We have carried out a search of microfiches relating to each of BEA(UK)
and FEEL supplied to us by the Companies Registration Office on _________,
1998, which revealed no order or resolution to wind up either BEA(UK) or
FEEL and no notice of the appointment of an administrator or receiver of
either BEA(UK) or FEEL. We have also carried out a search at the Central
Registry of Winding Up Petitions, London on _________, 1998, which shows
no pending petition to wind up either BEA(UK) or FEEL. We have not
conducted any further search, or any search in any District Registry of
the High Court where winding-up and administration petitions may also be
presented in certain cases, and accordingly this opinion is given on the
assumption that such searches (if made) would not reveal any circumstances
which would require amendment of this opinion.
5. Except for the documents listed in paragraph 3 above, we have not examined
for the purposes of this opinion any contracts or other documents entered
into by or affecting either BEA(UK) or FEEL or any corporate records of
either BEA(UK) or FEEL. We
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<PAGE> 45
have not made any other enquiries or searches concerning either BEA(UK) or
FEEL (whether within this firm or otherwise), except as mentioned in
paragraph 4 above. For the purposes of this opinion, we have relied as to
factual matters upon certificates of officers and directors of the Issuer
and of BEA(UK) and FEEL and have relied on representations made by the
Issuer in the Purchase Agreement.
6. This opinion is given only with respect to English law in force at the
date of this letter as applied by English Courts and is given on the basis
that it will be governed by and construed in accordance with English law.
No opinion is expressed or implied as to the laws of any other territory.
7. This opinion is based on the assumptions set out in the appendix to this
letter, which we have taken no steps to verify independently.
8. Based upon and subject to the foregoing, and subject as stated herein and
to any matters not disclosed to us, we are of the opinion that:
(a) each of BEA(UK) and FEEL is duly incorporated under the Companies
Act 1948 as a private company with limited liability under English
law, is validly existing under English law and has the necessary
corporate power under the Companies Act 1985 and 1989 and its
Memorandum and Articles of Association to conduct its business and
to own, lease and operate its properties as described in the
Offering Memorandum at pages ____ (copies of which are annexed
hereto marked "B");
(b) as reflected in the register of members of BEA(UK), the Issuer is
the registered holder of the 500,000 issued ordinary shares of
(Dutch Gilder)1 each of BEA(UK) and the 380,000 issued cumulative
redeemable preference shares of (Dutch Gilder)1 each of BEA(UK).
Pursuant to Section 361 Companies Act 1985, the register of members
of a company (as defined in that Act) is prima facie evidence of any
matters which are by that Act directed or authorised to be inserted
in it, and of legal ownership of shares;
(c) as reflected in the register of members of FEEL, BEA(UK) is the
registered holder of the 100 issued ordinary shares of (Dutch
Gilder)1 each of FEEL. Pursuant to Section 361 Companies Act 1985,
the register of members of a company (as defined in that Act) is
prima facie evidence of any matters which are by that Act directed
or authorised to be inserted in it, and of legal ownership of
shares;
(d) in the absence of any circumstance by which a member of a company
limited by shares (as defined in the Companies Act 1985) may become
liable for the company's debts, the liability of the member
(including, with respect to BEA(UK), the Issuer or with respect to
FEEL, BEA(UK)) for such debts will be limited to the
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<PAGE> 46
par value of the shares held and any premium agreed to be paid, to
the extent that such amounts have not been paid by any previous
holder of those shares. According to the register of members of each
of BEA(UK) and FEEL, the search of microfiches relating to each of
BEA(UK) and FEEL referred to in paragraph 4 above and the
certificates of the officers and directors of the Issuer, BEA(UK)
and FEEL, but having made no other enquiry, investigation or
verification, we are of the opinion that the issued ordinary shares
of (Dutch Gilder)1 each in BEA(UK) and FEEL are fully paid;
(e) the issued cumulative redeemable preference shares of (Dutch
Gilder)1 each of BEA(UK) have been duly authorised, validly issued
and fully paid;
(f) the issued cumulative redeemable preference shares of (Dutch
Gilder)1 each of BEA(UK) were not issued in violation of any
pre-emptive rights under statute or under the Memorandum and
Articles of Association of BEA(UK);
(g) none of the following will result in any breach of the Memorandum
and Articles of Association of either of BEA(UK) or FEEL:-
(i) the execution and delivery by the Issuer of the Purchase
Agreement, the consummation by the Issuer of the transactions
therein contemplated and the compliance by the Issuer with its
terms;
(ii) the execution and delivery by the Issuer of the Registration
Rights Agreement and the compliance by the Issuer with its
terms;
(iii) the execution and delivery by the Issuer of the Indenture and
the compliance by the Issuer with its terms;
(iv) the issue and delivery by the Issuer of the Securities as
contemplated by the Offering Memorandum;
(v) the consummation by the Issuer of the transactions
contemplated in the Offering Memorandum; and
(h) the matters referred to in paragraph 8(g)(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 either BEA(UK) or FEEL under:-
(i) any existing English law, rule or regulation; or
(ii) to our knowledge (based solely upon written notification by
BEA(UK) and
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<PAGE> 47
FEEL) and on the basis of the certificates of the officers and
directors of BEA(UK), FEEL and the Issuer, any judgment, order
or decree of any government, governmental instrumentality or
court having jurisdiction over BEA(UK) or FEEL or any of their
properties.
9. This opinion is addressed to you in connection with the 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
Lovell White Durrant
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<PAGE> 48
Appendix to Opinion
In this opinion letter, we have assumed that:-
(a) All documents submitted to us as originals are authentic and complete and
all signatures and seals are genuine.
(b) All documents supplied to us as photocopies or facsimile transmitted
copies or other copies conform to the originals and such originals are
authentic and complete.
(c) All documents, forms, notices and information which should have been
delivered to the Companies Registration Office and the Central Registry of
Winding Up Petitions on behalf of or relating to BEA(UK) and FEEL have
been so delivered and the file of records maintained at the Companies
Registration Office and the Central Registry of Winding Up Petitions
concerning BEA(UK) and FEEL, and reproduced on microfiche for public
inspection or disclosed to us orally, was complete, accurate and
up-to-date at the time of the respective searches referred to in paragraph
4 of this opinion letter and there has been no change in the information
filed or the oral disclosure made since the date on which those searches
were made.
(d) All documents dated earlier than the date of this opinion letter on which
we have expressed reliance remain accurate, complete and in full force and
effect at the date of the opinion letter.
(e) Neither BEA(UK) nor FEEL has passed a resolution for its winding-up and no
proceedings have been instituted or steps taken for the winding-up of
BEA(UK) or FEEL or the appointment of an administrator or receiver in
respect of all or any assets of BEA(UK) or FEEL.
(f) No law (other than English law) affects any of the conclusions stated in
this opinion letter.
(g) The resolutions contained in the minutes referred to in paragraph 3(a) of
this opinion letter were duly passed at a properly convened, constituted
and conducted meeting of duly appointed directors and shareholders,
respectively, of BEA(UK) and FEEL at which all constitutional, statutory
and other formalities were duly observed (including, if applicable, those
relating to the declaration of directors' interests or the power of
interested directors to vote); such resolutions have not been amended or
rescinded and are in full force and effect; and the minutes of such
meetings referred to in paragraph 3(a) of this opinion letter are a true
record of the proceedings at such meetings.
(h) The certificates of the officers and directors of the Issuer and BEA(UK)
and FEEL provided for the purposes of this opinion letter are true and
accurate in all respects.
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<PAGE> 49
EXHIBIT B-3
FORM OF OPINION OF TRENITE VAN DOORNE
[Trenite van Doorne Letterhead]
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
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
USA
Rotterdam, 6 February 1998
Dear Sirs,
We have acted as legal advisers in The Netherlands to BE Aerospace
(Netherlands) B.V. ("BEAN"), Koninklijke Fabriek Inventum B.V. ("KFI") and BE
Aerospace (Sales and Services) B.V. ("BEASS"), which companies have their
registered office at Galvanibaan 5, 3439 MG Nieuwegein, The Netherlands, for the
purpose of rendering an opinion on certain matters of Netherlands law in
connection with the issue and sale by BE Aerospace Inc. of US$ 200,000,000
principal amount of [ ]% Senior Subordinated Notes due 2008.
For the purposes of this opinion we have examined and relied only on
the documents listed in Schedule 1 and Schedule 2, which shall form part of this
opinion. The documents listed in Schedule 1 are referred to as the "Documents"
and the documents listed in Schedule 2 as the "Certificates". BEAN, KFI and
BEASS are hereinafter referred to as the "Dutch Companies" and each company
individually as the "Dutch Company".
In connection with our examination and in giving this opinion, we
have assumed:
(a) the genuineness of the signatures to the Documents and the
Certificates, the authenticity and completeness of the
Documents and the Certificates submitted to us as originals,
the conformity to the original documents of the Documents and
the Certificates submitted to
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<PAGE> 50
us as copies and the authenticity and completeness of those
original documents;
(b) the legal capacity (handelingsbekwaambeid) of the natural
persons acting on behalf of the parties, the due incorporation
and valid existence of, the power, authority and legal rights
of, and the due authorization and execution of the Documents
by the parties thereto under any applicable law;
(c) the due compliance with all matters of, and the validity,
binding effect and enforceability of the Documents under any
applicable law (other than Dutch law) and in any jurisdiction
(other than The Netherlands) in which an obligation under the
Documents falls to be performed; and
(d) the accuracy, validity and binding effect of the Certificates
and the matters certified or evidenced thereby at the date
hereof and any other relevant date; and
(e) the due execution by the parties thereto of the Documents
submitted to and examined by us in draft in the form of those
drafts.
This opinion is given only with respect to Dutch law as generally
interpreted and applied by the Dutch courts as at the date of this opinion. As
to matters of fact we have relied on the representations and warranties
expressed in the Documents and the Certificates. We do not express an opinion on
the representations or warranties made by the parties to the Documents, matters
of fact, matters of foreign law, international law, including, without
limitation, the law of the European Union, and tax and anti-trust law, except to
the extent that those representations and warranties and matters of fact and law
are explicitly covered by the opinions below and except to the extent the law of
the European Union (other than anti-trust and tax law) has direct force and
effect in The Netherlands. No opinion is given on commercial, accounting or
non-legal matters or on the ability of the parties to meet their financial or
other obligations under the Documents. We have assumed that foreign law which
may apply with respect to the Documents or the transactions contemplated thereby
and any document not examined by us would not be such as to affect this opinion.
Based on and subject to the foregoing, and subject to the
qualifications set out below and the matters of fact, documents or events not
disclosed to us, we express the following opinions:
1. Each of the Dutch Companies is duly incorporated and validly
existing under the law of The Netherlands as a private company
with limited liability (besloten vennootschap met beperkte
aansprakelijkheid) and possesses the capacity to sue and to be
sued in its own name.
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<PAGE> 51
2. It does not appear from the Extracts that any Dutch Company
has been wound up (ontbinding) or has been declared bankrupt
(faillissement) or that any Dutch Company has been granted a
(provisional) suspension of payment ((voorlopige) surseance).
3. According to the deed of incorporation and the shareholders
register of BEAN, BE Aerospace Inc. ("BEAI" or the "Issuer"),
with registered office at 1400 Corporate Center Way,
Wellington, Florida 33414, U.S.A., is the registered holder of
36 (thirty six) issued ordinary registered shares, with a par
value of NLG 1,000 each, and BE Aerospace (USA) Inc. ("BEAU"),
with registered office at 1400 Corporate Center Way,
Wellington, Florida 33414, U.S.A., is the registered holder of
4 (four) issued ordinary registered shares, with a par value
of NLG 1,000 each, in the issued share capital of BEAN
consisting of 40 shares.
4. According to the shareholders register of KFI and the Deed of
Transfer KFI, BEAN is the registered holder of 5,584 (five
thousand five hundred and eighty-four) issued ordinary
registered shares, with a par value of NLG 500 each, in the
issued share capital of KFI consisting of 5,604 shares.
5. According to the shareholders register of BEASS and the Deeds
of Transfer, BEAN is the registered holder of 40 (forty)
shares, with a par value of NLG 1,000 each, in the issued
share capital of BEASS consisting of 40 shares.
6. In the absence of any circumstance by which a shareholder of a
private company with limited liability (een besloten
vennootschap mel beperkle aansprakelijkheid) may become liable
for the company's debts, the liability of BEAN, as shareholder
of KFI and BEASS, will be limited to the obligation to fully
pay the par value of the shares held and any share premium
agreed to be paid, to the extent that such amounts have not
been paid.
7. Pursuant to the Articles of Association, BEAI and BEAU, as
shareholders of BEAN, are each personally liable for
everything performed in the name of BEAN.
8. According to the Shareholders Registers and the Extracts, but
having made no other enquiry, investigations or verification,
the par value of the issued ordinary shares in BEAN, KFI and
BEASS is fully paid.
9. The execution and delivery by the Issuer of the Documents and
where appropriate the consummation by the Issuer of the
transaction therein contemplated and the compliance by the
Issuer with its terms will not
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<PAGE> 52
result in any conflict with rules of Netherlands law or in any
breach of the articles of association of either BEAN or KFI.
The opinions expressed above are subject to the following
qualifications:
(A) Our opinions expressed herein are subject to and limited by
applicable bankruptcy, insolvency, reorganization, suspension
of payment and other laws relating to or affecting the
protection or enforcement of priorities and creditors' rights
generally. including, without limitation, those governing the
avoidance or the validity of transactions entered into and
security created at a time when a company is, or may in
consequence thereof become, unable to pay its debts.
(B) We have assumed that the relevant Extracts fully and
accurately reflect the corporate status and position of each
of the Dutch Companies. It is noted, however, that the
Extracts may not completely and accurately reflect that status
and position insofar as there may be a delay between the
taking of a corporate action (such as the issuance of shares,
the appointment or removal of a director, a winding-up or
(provisional) suspension of payment resolution or the making
of a court order, like a winding-up, (provisional) suspension
of payment or bankruptcy order) and the filing of the
necessary documentation at the Commercial Register and a
further delay between that filing and an entry appearing on
the file of the relevant party at the Commercial Register.
(C) There is no public register of shares in The Netherlands. In
respect of the title to shares in the share capital of BEAN,
KFI and BEASS respectively per the date of this opinion, we
have compared the deed of incorporation of BEAN with the
shareholders register of BEAN, the Deed of Transfer KFI with
the shareholders register of KFI and the Deeds of Transfer
with the shareholders register of BEASS and established the
consistency of each of these Certificates. The absence of any
registration in the Shareholders Registers of any subsequent
transfer of title to the shares of BEAN, KFI or BEASS (as the
case may be) is, however, no conclusive evidence that any such
subsequent transfer of title has not occurred
(D) We have assumed that the difference between the total number
of shares issued in the share capital of KFI and the number of
shares held by BEAN, as reflected in the shareholders register
of KFI, is explained by the fact that at conversion of the
company of KFI from a company limited by shares (naamloze
vennootschap) into a closed company with limited liability
(besloten vennootschap mel beperkte aansprakelijkheid) on 2
March 1992, not each holder of shares has offered its shares
in order to be registered as a shareholder of the company, as
converted. Pursuant to section 2:183, subsection 4, of the
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<PAGE> 53
Dutch Civil Code, after conversion a shareholder is not able
to exercise the rights pertaining to the shares as long as the
shareholder has not been registered in the shareholders
register of the company.
(E) We have assumed that there are no contractual or other
restrictions binding on the Dutch Companies, which would
affect this opinion.
(F) We note that under Dutch securities law it is prohibited
(subject to certain exemptions and exceptions) in or from The
Netherlands to offer securities, such as the Securities, on
issue or to propose such an offer by means of advertisements
or documents.
This opinion, which is strictly limited to the matters stated herein
and which is not to be read as extending by implication to other matters in
connection with the Documents or otherwise, is given subject to the
conditions(1), including the limitation of liability, set out at the bottom of
the front page of this opinion letter, and on the basis that it is governed by
and to be construed in accordance with Dutch law and that any action, arising
out of it, is to be determined by the competent court in Rotterdam which shall
have exclusive jurisdiction in relation thereto. We do not assume any obligation
to advise you (or any other person entitled to rely on this opinion) of
subsequent changes in, or in the interpretation of, Dutch law.
This opinion is given solely for your benefit in this particular
matter and the context specified herein. It may not, without our prior written
consent, be transmitted or otherwise disclosed to, or relied upon by, others,
referred to in other matters or context whatsoever, or be quoted or made public
in any way, save that the opinion may be disclosed to your legal advisors.
Yours faithfully,
Trenite Van Doorne
- ----------
(1) The partnership Trenite Van Doorne is the exclusive contractual party with
respect to all work and services undertaken. Netherlands law shall apply. The
aggregate liability of the partnership, its partners and each of its servants
shall be limited to the proceeds available under the partnership's professional
liability insurance.
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<PAGE> 54
SCHEDULE 1
Documents
(a) a draft dated February 2, 1998 of an indenture between the Issuer and the
trustee named therein (the "Indenture") which we have been advised is the
final form thereof;
(b) a draft dated February 2, 1998 of a purchase agreement between the Issuer
and yourselves relating to the issue and sale of the Securities (the
"Purchase Agreement");
(c) a draft dated February 2, 1998 of a registration rights agreement between
the Issuer and yourselves relating to the filing of a registration
statement with respect to the Securities (the "Registration Rights
Agreement").
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<PAGE> 55
SHEDULE 2
Certificates
(a) copies of the notarial deed of incorporation of BEAN, KFI and BEASS, dated
28 April 1993, 20 May 1915 and 20 August 1990 respectively (the "Deeds of
Incorporation");
(b) copies of the articles of association (as amended) of BEAN and KFI dated
20 May 1994 and of BEASS, dated 11 January 1995 (the "Articles of
Association");
(c) copies of the register of shareholders of BEAN, KFI and BEASS respectively
(the "Shareholders Registers");
(d) extracts dated 6 February 1998 (updated by computer generated extracts
dated [__] February 1998) from the Commercial Register (Handelsregister)
in Utrecht, The Netherlands, in respect of BEAN, KFI and BEASS
respectively (the "Extracts");
(e) two notarial deeds of transfer of shares in the share capital of BEASS,
dated 22 September 1994 (the "Deeds of Transfer");
(f) a notarial deed of transfer of shares in the share capital of KFI, dated
29 April 1993 (the "Deed of Transfer KFI").
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<PAGE> 1
Exhibit 4.1
BE AEROSPACE, INC.
TO
UNITED STATES TRUST COMPANY
OF NEW YORK
Trustee
-----------------
Indenture
Dated as of February 13, 1998
----------------
$250,000,000
8% Senior Subordinated Notes due 2008
and
8% Series B Senior Subordinated Notes due 2008
<PAGE> 2
BE AEROSPACE, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of February 13, 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> 3
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
Acurex.....................................................2
AET........................................................2
Affiliate..................................................2
Agent Bank.................................................2
Asset Acquisition..........................................2
Asset Sale.................................................3
Average Life...............................................3
Bank Credit Agreement......................................3
Banks......................................................3
Board of Directors.........................................3
Board Resolution...........................................3
Business Day...............................................3
Capital Stock..............................................3
Capitalized Lease Obligation...............................4
Cash Equivalents...........................................4
Change of Control..........................................4
Closing Date...............................................4
Commission.................................................5
Common Stock...............................................5
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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<PAGE> 4
corporation................................................6
Default....................................................6
Defaulted Interest.........................................7
Depositary.................................................7
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........................................8
Fair Market Value..........................................8
Federal Bankruptcy Code....................................8
FEEL.......................................................8
Fully Traded Common Stock..................................8
GAAP.......................................................8
guarantee..................................................8
Guarantee..................................................8
Guarantor..................................................8
Holder.....................................................9
Indebtedness...............................................9
Indenture..................................................9
Initial Securities.........................................9
Interest Payment Date......................................9
Interest Rate Protection Obligations......................10
Investment................................................10
Lien......................................................10
Maturity..................................................10
Moody's...................................................10
Net Cash Proceeds.........................................10
Non-payment Event of Default..............................11
Non-U.S. Person...........................................11
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
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<PAGE> 5
Permitted Subsidiary Indebtedness.........................14
Person....................................................15
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
Regulation S..............................................16
Responsible Officer.......................................16
Restricted Subsidiary.....................................16
Royal Inventum............................................16
Rule 144A.................................................16
S&P.......................................................16
Securities................................................16
Securities Act............................................16
Security Register" and "Security Registrar................16
Senior Indebtedness.......................................16
Senior Notes..............................................17
Senior Notes Indenture....................................17
Shelf Registration Statement..............................17
Significant Subsidiary....................................17
Special Record Date.......................................17
Stated Maturity...........................................17
Subordinated Indebtedness.................................17
Subsidiary................................................17
Trust Indenture Act" or "TIA..............................18
Trustee...................................................18
Unrestricted Subsidiary...................................18
Vice President............................................18
Voting Stock..............................................18
wholly-owned..............................................18
SECTION 102. Incorporation by Reference of Trust
Indenture Act.............................................19
SECTION 103. Compliance Certificates and Opinions......................19
SECTION 104. Form of Documents Delivered to Trustee....................20
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..................22
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SECTION 109. Successors and Assigns....................................22
SECTION 110. Separability Clause.......................................22
SECTION 111. Benefits of Indenture.....................................22
SECTION 112. Governing Law.............................................23
SECTION 113. Legal Holidays............................................23
ARTICLE TWO SECURITY FORMS 24
SECTION 201. Forms Generally...........................................24
SECTION 202. Restrictive Legends.......................................25
ARTICLE THREE THE SECURITIES 27
SECTION 301. Title and Terms...........................................27
SECTION 302. Denominations.............................................27
SECTION 303. Execution, Authentication, Delivery and
Dating....................................................27
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................................................34
SECTION 309. Payment of Interest; Interest Rights
Preserved.................................................35
SECTION 310. Persons Deemed Owners.....................................36
SECTION 311. Cancellation..............................................36
SECTION 312. Computation of Interest...................................37
ARTICLE FOUR SATISFACTION AND DISCHARGE 38
SECTION 401. Satisfaction and Discharge of Indenture...................38
SECTION 402. Application of Trust Money................................39
ARTICLE FIVE REMEDIES 40
SECTION 501. Events of Default.........................................40
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.................................................41
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee....................................43
SECTION 504. Trustee May File Proofs of Claim..........................43
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities..................................44
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<PAGE> 7
SECTION 506. Application of Money Collected............................44
SECTION 507. Limitation on Suits.......................................45
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest...........................45
SECTION 509. Restoration of Rights and Remedies........................45
SECTION 510. Rights and Remedies Cumulative............................46
SECTION 511. Delay or Omission Not Waiver..............................46
SECTION 512. Control by Holders........................................46
SECTION 513. Waiver of Past Defaults...................................46
SECTION 514. Waiver of Stay or Extension Laws..........................47
ARTICLE SIX THE TRUSTEE 48
SECTION 601. Notice of Defaults........................................48
SECTION 602. Certain Rights of Trustee.................................48
SECTION 603. Trustee Not Responsible for Recitals or
Issuance of Securities....................................49
SECTION 604. May Hold Securities.......................................49
SECTION 605. Money Held in Trust.......................................50
SECTION 606. Compensation and Reimbursement............................50
SECTION 607. Corporate Trustee Required; Eligibility...................51
SECTION 608. Resignation and Removal; Appointment of
Successor.................................................51
SECTION 609. Acceptance of Appointment by Successor....................52
SECTION 610. Merger, Conversion, Consolidation or
Succession to Business....................................53
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE 54
SECTION 701. Disclosure of Names and Addresses of Holders..............54
SECTION 702. Reports by Trustee........................................54
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE 55
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms.............................................55
SECTION 802. Successor Substituted.....................................56
SECTION 803. Securities to Be Secured in Certain Events................56
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<PAGE> 8
ARTICLE NINE SUPPLEMENTAL INDENTURES 57
SECTION 901. Supplemental Indentures Without Consent of
Holders...................................................57
SECTION 902. Supplemental Indentures with Consent of
Holders...................................................57
SECTION 903. Execution of Supplemental Indentures......................58
SECTION 904. Effect of Supplemental Indentures.........................58
SECTION 905. Conformity with Trust Indenture Act.......................59
SECTION 906. Reference in Securities to Supplemental
Indentures................................................59
SECTION 907. Notice of Supplemental Indentures.........................59
SECTION 908. Effect on Senior Indebtedness.............................59
ARTICLE TEN COVENANTS 60
SECTION 1001. Payment of Principal, Premium, If Any, and
Interest..................................................60
SECTION 1002. Maintenance of Office or Agency...........................60
SECTION 1003. Money for Security Payments to Be Held in
Trust.....................................................60
SECTION 1004. Corporate Existence.......................................62
SECTION 1005. Payment of Taxes and Other Claims.........................62
SECTION 1006. Maintenance of Properties.................................62
SECTION 1007. Insurance.................................................62
SECTION 1008. Statement by Officers as to Default.......................62
SECTION 1009. Provision of Financial Statements.........................63
SECTION 1010. Limitation on Indebtedness................................63
SECTION 1011. Limitation on Restricted Payments.........................64
SECTION 1012. Limitation on Issuances and Sales of
Restricted Subsidiary Stock...............................67
SECTION 1013. Limitation on Transactions with Affiliates................67
SECTION 1014. Limitation on Liens Securing Pari Passu
Indebtedness or Subordinated Indebtedness.................67
SECTION 1015. Change of Control.........................................68
SECTION 1016. Limitation on Disposition of Proceeds of
Asset Sales...............................................69
SECTION 1017. Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries...................................70
SECTION 1018. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted
Subsidiaries..............................................71
SECTION 1019. Limitation on Other Senior Subordinated
Indebtedness..............................................71
SECTION 1020. Waiver of Certain Covenants...............................72
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<PAGE> 9
ARTICLE ELEVEN REDEMPTION OF SECURITIES 73
SECTION 1101. Right of Redemption.......................................73
SECTION 1102. Applicability of Article..................................73
SECTION 1103. Election to Redeem; Notice to Trustee.....................73
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed..................................................73
SECTION 1105. Notice of Redemption......................................74
SECTION 1106. Deposit of Redemption Price...............................74
SECTION 1107. Securities Payable on Redemption Date.....................74
SECTION 1108. Securities Redeemed in Part...............................75
ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE 76
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance.......................................76
SECTION 1202. Defeasance and Discharge..................................76
SECTION 1203. Covenant Defeasance.......................................76
SECTION 1204. Conditions to Defeasance or Covenant
Defeasance................................................77
SECTION 1205. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions..................................78
SECTION 1206. Reinstatement.............................................79
ARTICLE THIRTEEN SUBORDINATION OF SECURITIES 80
SECTION 1301. Securities Subordinate to Senior Indebtedness.............80
SECTION 1302. Payment Over of Proceeds upon Dissolution,
Etc.......................................................80
SECTION 1303. Suspension of Payment When Senior
Indebtedness in Default...................................81
SECTION 1304. Payment Permitted If No Default...........................82
SECTION 1305. Subrogation to Rights of Holders of Senior
Indebtedness..............................................82
SECTION 1306. Provisions Solely to Define Relative Rights...............83
SECTION 1307. Trustee to Effectuate Subordination.......................83
SECTION 1308. No Waiver of Subordination Provisions.....................83
SECTION 1309. Notice to Trustee.........................................84
SECTION 1310. Reliance on Judicial Order or Certificate of
Liquidating Agent.........................................85
SECTION 1311. Rights of Trustee As a Holder of Senior
Indebtedness; Preservation of Trustee's
Rights....................................................85
SECTION 1312. Article Applicable to Paying Agents.......................85
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SECTION 1313. No Suspension of Remedies.................................85
SECTION 1314. Trust Moneys Not Subordinated.............................85
TESTIMONIUM.................................................................87
SIGNATURES AND SEALS........................................................87
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<PAGE> 11
EXHIBITS
Exhibit A Form of Security
Exhibit B Form of Certificate to Be Delivered upon Termination of
Restricted Period
Exhibit C Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S
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<PAGE> 12
INDENTURE, dated as of February 13, 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 UNITED STATES TRUST COMPANY
OF NEW YORK, corporation formed under the laws of the State of New York, Trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 8%
Senior Subordinated Notes due 2008 (herein called the "Initial Securities"), and
8% 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 meanings
assigned to them therein, and the terms
<PAGE> 13
"cash transaction" and "self-liquidating paper", as used in TIA Section
311, shall have the meanings assigned to them in the rules of the
Commission adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Articles Two, Ten and Twelve, are
defined in those Articles.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed
in connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a subsidiary).
"Act", when used with respect to any Holder, has the meaning
specified in Section 105.
"Acurex" means Acurex Corporation, a Delaware corporation.
"AET" means Applied Extrusion Technologies, Inc., a Delaware
corporation.
"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
-2-
<PAGE> 14
of the Company; or (c) any other properties or assets of the Company or any
Restricted Subsidiary other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets (i) that is governed by the provisions of Article Eight of this
Indenture, (ii) to an Unrestricted Subsidiary, if permitted under Section 1011
of this Indenture or (iii) having a Fair Market Value of less than $250,000.
"Average Life" means, with respect to any Indebtedness, as at any
date of determination, the quotient obtained by dividing (a) the sum of the
products of (i) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as of
October 29, 1993, amended and restated as of May 29, 1997, as further amended on
November 19, 1997 and on January 28, 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.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or the city in which the principal trust office of the Trustee is located are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any
-3-
<PAGE> 15
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 February 13, 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)
-4-
<PAGE> 16
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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<PAGE> 17
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 114 West 47th Street, New York, New York 10036, except that with
respect to presentation of Securities for payment or for registration of
transfer or exchange, such term shall mean the office or agency of the Trustee
at which, at any particular time, its corporate agency business shall be
conducted.
"corporation" includes corporations, associations, companies and
business trusts.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
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"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Bank Credit Agreement and the Senior Notes and (ii) following the full
repayment of Indebtedness under the Bank Credit Agreement and the termination of
the commitments thereunder, any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding of at least
$17,000,000 and is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Eligible Inventories" as of any date means the consolidated
inventories of the Company and its Restricted Subsidiaries (net of any reserve)
on the basis of the method of accounting (either last in/first out or first
in/first out) used by the Company in the preparation of its financial statements
included in the latest Form 10-K filed by the Company under the Securities Act,
as shown on a consolidated balance sheet of the Company and its Restricted
Subsidiaries, all in accordance with GAAP.
"Eligible Receivables" as of any date means the consolidated
accounts receivables (net of any reserve) of the Company and its Restricted
Subsidiaries that are not more than 60 days past their due date and that were
entered into on normal payment terms as shown on a consolidated balance sheet of
the Company and its Restricted Subsidiaries, all in accordance with GAAP.
"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.
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<PAGE> 19
"Exchange Securities" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to transfer restrictions) that
are issued and exchanged for the Initial Securities pursuant to the Registration
Right Agreement and this Indenture.
"Fair Market Value" means, with respect to any asset, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"FEEL" means Flight Equipment and Engineering Limited, an English
corporation.
"Fully Traded Common Stock" means Common Stock issued by any
corporation if (A) such Common Stock is listed on The New York Stock Exchange,
The American Stock Exchange or The London Stock Exchange or is included for
trading privileges in the National Market System of the National Association of
Securities Dealers Automated Quotation System; provided that such Common Stock
is freely tradeable under the Securities Act (or, in the case of The London
Stock Exchange, any applicable law, rule or regulation) upon issuance; and (B)
such Common Stock does not constitute more than 15% of the issued and
outstanding Common Stock of such corporation held by Persons other than 10%
holders of such Common Stock and Affiliates and insiders of such corporation.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the Closing Date.
"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.
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"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit, bankers'
acceptance or other similar credit transaction and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock, now or hereafter outstanding, if, and to the extent, any of
the foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (b) all obligations of such Person evidenced
by bonds, notes, debentures or other similar instruments, if, and to the extent,
any of the foregoing would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, (c) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even if the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such Person, (e) all Indebtedness referred to in the
preceding clauses of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser 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.
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<PAGE> 21
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the net assets of any Restricted Subsidiary of the Company at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind. A Person shall be deemed to own subject to a Lien any property
which such Person has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement.
"Maturity", 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.
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<PAGE> 22
"Non-payment Event of Default" means any event (other than a Payment
Event of Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a Person that is not a "U.S. person" as
defined in Regulation S.
"Officers' Certificate" means a certificate signed by the Chairman,
the Chief Executive Officer, the President, 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
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<PAGE> 23
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.
"Pari Passu Indebtedness" means Indebtedness of the Company which is
pari passu with the Securities.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any, on) or interest on any Securities on behalf of the Company.
"Payment Event of Default" means any default in the payment of
Designated Senior Indebtedness.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company under the Bank Credit Agreement in
an aggregate principal amount at any one time outstanding not to exceed
the greater of (i) $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
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<PAGE> 24
successive refinancings by the Company, so long as (A) any such new
Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for
an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration thereof, such lesser amount as of the
date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) in the case of any refinancing of
Pari Passu Indebtedness or Subordinated Indebtedness, such new
Indebtedness is made pari passu with or subordinate to the Securities at
least to the same extent as the Indebtedness being refinanced and (C) such
new Indebtedness has an Average Life longer than the Average Life of the
Securities and a final Stated Maturity later than the final Stated
Maturity of the Securities; and
(viii) Indebtedness in an aggregate principal amount not in excess
of $30 million at any one time outstanding, less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the
definition thereof.
"Permitted Investments" means any of the following: (i) Investments
in Cash Equivalents; (ii) Investments in the Company or wholly-owned Restricted
Subsidiaries; (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
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<PAGE> 25
the Company or any Restricted Subsidiary other than the assets acquired in
connection with the incurrence of such Acquired Indebtedness; and
(v) any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (iv); provided
that any such extension, renewal or replacement shall be no more
restrictive in any material respect that the Lien so extended, renewed or
replaced and shall not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(i) Indebtedness of any Restricted Subsidiary outstanding on the
date of this Indenture;
(ii) obligations of any Restricted Subsidiary pursuant to Interest
Rate Protection Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations;
(iii) Indebtedness of any Restricted Subsidiary to any wholly-owned
Restricted Subsidiary of the Company or to the Company;
(iv) Indebtedness of any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock of Restricted
Subsidiaries;
(v) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary
incurred pursuant to clause (i) of this definition, including any
successive refinancings by such Restricted Subsidiary, so long as any such
new Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for
an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration thereof, such lesser amount as of the
date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by such Restricted Subsidiary as necessary to
accomplish such refinancing, plus the amount of expenses of such
Restricted Subsidiary incurred in connection with such refinancing and
such new Indebtedness has an Average Life longer than the Average Life of
the Securities and a final Stated Maturity later than the final Stated
Maturity of the Securities;
(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
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<PAGE> 26
(viii) Guarantees of Indebtedness of the Company permitted under
Section 1017.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 308 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding, or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"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 February 13, 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 February 15 or August 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
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<PAGE> 27
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means
the president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, any trust officer or assistant trust officer
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above-designated officers, and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Royal Inventum" means Royal Inventum, B.V., a company incorporated
under the laws of the Netherlands.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., 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 and the Senior
Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not
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include (A) Indebtedness evidenced by the Securities and the 9 7/8% Securities,
(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.
"Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company
issued under the Senior Notes Indenture.
"Senior Notes Indenture" means the Indenture dated as of March 3,
1993 between the Company and United States Trust Company of New York, as
trustee, as amended by the First Supplemental Indenture thereto dated as of
January 5, 1996.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" of the Company means any Restricted
Subsidiary of the Company that is a "significant subsidiary" as defined in Rule
1.02(v) of Regulation S-X under the Securities Act, and in any event shall
include any Guarantor.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Security or
any installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which
is expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including without limitation a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). Unless specifically provided to the contrary herein,
Unrestricted Subsidiaries shall not be included in the
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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 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.
"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.
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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
"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
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(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 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
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such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by
any Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to Board Resolution, fix in
advance a record date, of which it shall notify the Trustee and Paying Agent,
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Notwithstanding TIA Section 316(c), such
record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not earlier than the date 30 days prior to the
first solicitation of Holders generally in connection therewith and not later
than the date such solicitation is completed. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 106. Notices, Etc., to Trustee, Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(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 114 West 47th Street, New York, New York 10036,
telefax: 212-852-1626, Attention: Corporate Trust Division, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at 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.
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SECTION 107. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
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.
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SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the law of the State of New York, without regard to the
principles of conflicts of law. Upon the issuance of the Exchange Securities or
the effectiveness of the Shelf Registration Statement, this Indenture shall be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date or at the
Stated Maturity or Maturity; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
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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 "8% Senior Subordinated
Notes due 2008" and the Exchange Securities shall be known as the "8% 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 in reliance on Regulation S
shall be issued initially in the form of temporary certificated Securities in
registered form substantially in the form set forth in Exhibit A (the "Temporary
Offshore Physical Securities"). The Temporary Offshore Physical Securities will
be registered in the name of, and held by, a temporary certificate holder
designated by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated until the later of the completion of the distribution of the
Initial Securities and the termination of the "restricted period" (as defined in
Regulation S) with respect to the offer and sale of the Initial Securities (the
"Offshore Securities Exchange Date"). At any time following the Offshore
Securities Exchange Date, upon receipt by the Trustee and the Company of a
certificate substantially in the form of Exhibit B hereto, the Company shall
execute, and the Trustee shall authenticate and deliver, one or more permanent
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certificated Securities in registered form substantially in the form set forth
in Exhibit A (the "Permanent Offshore Physical Securities"), in exchange for the
surrender of Temporary Offshore Physical Securities of like tenor and amount.
Initial Securities offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities").
The Temporary Offshore Physical Securities, Permanent Offshore
Physical Securities and U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, each such U.S. Global Security,
Temporary Offshore Physical Security, Permanent Offshore Physical Security and
each U.S. Physical Security shall bear the following legend (the "Private
Placement Legend") on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS 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 OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 (IF AVAILABLE), OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION
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FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
Each U.S. Global Security, whether or not an Initial Security, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN 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 $250,000,000,
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 "8%
Senior Subordinated Notes due 2008" of the Company. The Exchange Securities
shall be known and designated as the "8% Series B Senior Subordinated Notes due
2008" of the Company. The Stated Maturity of the Initial Securities and the
Exchange Securities shall be March 1, 2008, and, except as otherwise set forth
herein, they shall bear interest at the rate of 8% per annum from February 13,
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 March 1 and
September 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, under its corporate seal reproduced
thereon and attested by its Secretary or an Assistant Secretary. The signature
of any of these officers on the Securities may be manual or facsimile signatures
of the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals
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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 $250,000,000; 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 an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
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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, Temporary Offshore Physical Securities or Permanent Offshore
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked
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the box provided for on the form of Initial Security stating, or has
otherwise advised the Company and the Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Initial Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Initial Security for its
own account or an account with respect to which it exercises sole
investment discretion and that it, or the person on whose behalf it is
acting with respect to any such account, is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor
is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, Temporary
Offshore Physical Securities or Permanent Offshore Physical Securities,
upon receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the U.S. Global Security in an amount equal to the principal
amount of the U.S. Physical Securities, Temporary Offshore Physical
Securities or Permanent Offshore Physical Securities, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Security so
transferred.
(b) Transfers by Non-U.S. Persons on or Prior to March 25, 1998. The
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Security by a Non-U.S. Person on or prior to March 25,
1998:
(i) The Registrar shall register the transfer of any Initial
Security (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Initial Security for its own account or
an account with respect to which it exercises sole investment discretion
and that it, or the person on whose behalf it is acting with respect to
any such account, is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company
as it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A. Unless clause (ii) below is
applicable, the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Temporary Offshore Physical Securities of like
tenor and amount.
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(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Physical Security to be transferred, and the Trustee
shall cancel the Temporary Offshore Physical Security so transferred.
(c) Transfers by Non-U.S. Persons on or After March 26, 1998. The
following provisions shall apply with respect to any transfer of an Initial
Security by a Non-U.S. Person on or after March 26, 1998:
(i) (x) If the Initial Security to be transferred is a Permanent
Offshore Physical Security, the Registrar shall register such transfer,
(y) if the Initial Security to be transferred is a Temporary Offshore
Physical Security, upon receipt of a certificate substantially in the form
of Exhibit C from the proposed transferor, the Registrar shall register
such transfer and (z) in the case of either clause (x) or (y), unless
clause (ii) below is applicable, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Permanent Offshore
Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Physical Security or Permanent Offshore Physical
Security to be transferred, and the Trustee shall cancel the Physical
Security so transferred.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) Prior to March 25, 1998, the Registrar shall register any
proposed transfer of an Initial Security to a Non-U.S. Person upon receipt
of a certificate substantially in the form of Exhibit C hereto from the
proposed transferor and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Physical
Securities of like tenor and amount.
(ii) On and after March 26, 1998, the Registrar shall register any
proposed transfer to any Non-U.S. Person (w) if the Initial Security to be
transferred is a Permanent Offshore Physical Security, (x) if the Initial
Security to be transferred is a Temporary Offshore Physical Security, upon
receipt of a certificate substantially in the form of Exhibit C from the
proposed transferor, (y) if the Initial Security to be transferred is a
U.S. Physical Security or an interest in the U.S. Global Security, upon
receipt of a certificate substantially in the form of Exhibit C from the
proposed transferor and (z) in the case of either clause (w), (x) or (y),
the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Permanent Offshore Physical Securities of like tenor and
amount.
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(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Permanent Offshore Physical Securities of like tenor and amount.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless either (i) the circumstances contemplated by
the fifth paragraph of Section 201 or paragraphs (c)(i) or (d)(ii) of this
Section 307 exist or (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 306 or this Section 307. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver, in exchange for any such mutilated Security or
in lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in
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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 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
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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 operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation along with an Officer's Certificate and Company Order
requesting the cancellation. No Securities shall be authenticated in lieu of or
in exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Securities be returned
to it.
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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.
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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 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; and
(9) notwithstanding anything else to the contrary contained herein,
the Trustee need perform only those duties as are specifically set forth
in this Indenture and no others and no implied covenants or obligations
shall be read into this Indenture as against the Trustee.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and, upon the effectiveness of
the Registration Statement, that the statements made by it in a Statement of
Eligibility on Form T-1 supplied to the Company are true and accurate, subject
to the qualifications set forth therein. The Trustee shall not be accountable
for the use or application by the Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee
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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.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any, on) or interest
on particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(9) or Section 501(10), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any bankruptcy law.
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SECTION 607. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, except when the Trustee's duty to resign is stayed in accordance
with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 107. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder subject to the retiring Trustee's rights
as provided under the last sentence of Section 606. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
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.
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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.
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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).
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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 114 West 47th Street, New
York, New York 10036 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.
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 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
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any operating expense or other cost increase) in connection with such
acquisition, as determined in good faith by the chief financial officer of the
Company in accordance with GAAP and the rules, regulations and guidelines of the
Commission, as if such elimination of operating expense or the realization of
such cost reductions were achieved at the beginning of such four-quarter
period), would have been at least equal to 2.0 to 1, and (y) if such
Indebtedness is Subordinated Indebtedness, such Indebtedness shall have an
Average Life longer than the Average Life of the Securities and a final Stated
Maturity of principal later than the final Stated Maturity of principal of the
Securities.
(b) The Company will not permit any Restricted Subsidiary to incur
any Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro forma
effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of this Section 1010), would have been at least
equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any
Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the
Securities in compliance with 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 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
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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;
(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;
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(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.
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
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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 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.
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(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 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.
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(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 clause (ii), so long as (x) such excess consideration is in the form of
Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully
Traded Common Stock received by the Company and its Restricted Subsidiaries
(measured as of the date of receipt) from all Asset Sales in reliance on this
proviso since the date of this Indenture that has not been converted into cash
or Cash Equivalents does not exceed $10,000,000 and (z) any Fully Traded Common
Stock that is converted into cash or Cash Equivalents shall be applied as
provided in paragraphs (b) and (c) of this Section 1016.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after
such Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness
of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing
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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 at least to the same
extent as 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
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and (y) was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary of the Company.
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Guarantee by a Restricted Subsidiary of the Securities shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary of the
Company, (c) make loans or advances to the Company or any other Restricted
Subsidiary of the Company, (d) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary of the Company or (e) guarantee any
Indebtedness of the Company or any other Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary non-assignment provisions of any lease governing
a leasehold interest of the Company or any Restricted Subsidiary of the Company,
(iii) any agreement or other instrument of a Person acquired by the Company or
any Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, (iv) any agreement in existence on the Closing Date (to the extent of
any encumbrances or restrictions in existence thereunder on the Closing Date)
and (v) any agreement providing for the incurrence of Indebtedness of Restricted
Subsidiaries pursuant to either clause (x) of paragraph (b) of Section 1010 or
clause (vii) of the definition of Permitted Subsidiary Indebtedness; provided
that any Restricted Subsidiary (including, without limitation, FEEL, Acurex and
Royal Inventum) that becomes subject to any such encumbrances or restrictions
pursuant to this clause (v) shall Guarantee the Securities in 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.
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The Company will not, and will not permit any Restricted Subsidiary
to, incur, create, assume, guarantee or in any other manner become directly or
indirectly liable with respect to or responsible for, or permit to remain
outstanding, any Indebtedness, other than the Securities, that is expressly
subordinate or junior in right of payment to any Senior Indebtedness unless such
Indebtedness is also pari passu with, or subordinate in right of payment to, the
Securities pursuant to provisions substantially similar to those contained in
Article Thirteen.
SECTION 1020. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 803 or Sections 1007 through
1019, inclusive, if before or after the time for such compliance the Holders of
at least a majority in principal amount of the Outstanding Securities, by Act of
such Holders, waive such compliance in such instance with such term, provision
or condition, but no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
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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 March 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 March
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 108% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Redemption Date, with the
net cash proceeds of one or more Equity Offerings; provided that at least 65% of
the aggregate principal amount of 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.
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.
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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.
SECTION 1107. Securities Payable on Redemption Date.
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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 February 13, 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 to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as provided in
this Article (such equity securities or subordinated securities
hereinafter being "Permitted Junior Securities")) on account of principal
of (or premium, if any, on) or interest on the Securities; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than a
payment or distribution in the form of Permitted Junior Securities), by
set-off or otherwise, to which the Holders or the Trustee would be
entitled but for the provisions of this Article shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior Indebtedness or
their representative or representatives or to the trustee or trustees
under any indenture under
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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
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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.
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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
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Title:
UNITED STATES TRUST COMPANY OF
NEW YORK
By
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Title:
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STATE OF )
) ss.:
COUNTY OF )
On the ________ day of February, 1998, before me personally came
_______________________ to me known who, being by me duly sworn, did depose and
say that he is __________________________ of BE Aerospace, Inc., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
_____________________________________
-88-
<PAGE> 100
STATE OF )
) ss.:
COUNTY OF )
On the ________ day of February, 1998, before me personally came
_______________________ to me known who, being by me duly sworn, did depose and
say that he is __________________________ of United States Trust Company of New
York, one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
_____________________________________
-89-
<PAGE> 101
Exhibit A
[FACE OF SECURITY]
BE AEROSPACE, INC.
8% [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 March 1, 2008.
[Initial Interest Rate: 8% per annum.]*
[Interest Rate: 8% per annum.]**
Interest Payment Dates: March 1 and September 1 of each year
commencing September 1, 1998.
Regular Record Dates: February 15 and August 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. B-1
<PAGE> 102
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. B-2
<PAGE> 103
(Form of Trustee's Certificate of Authentication)
This is one of the 8% [Series B]** Senior Subordinated Notes due 2008
described in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By:
-----------------------------------------
Authorized Signatory
- ----------
** Include only for Exchange Securities.
Exh. B-3
<PAGE> 104
[REVERSE SIDE OF SECURITY]
BE AEROSPACE, INC.
8% [Series B]** Senior Subordinated Note due 2008
1. Principal and Interest; Subordination.
The Company will pay the principal of this Security on March 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 [8%
per annum (subject to adjustment as provided below)]* [8% per annum, except that
interest accrued on this Security pursuant to the penultimate paragraph of this
Section 1 for periods prior to the applicable Exchange Date (as such term is
defined in the Registration Rights Agreement referred to below) will accrue at
the rate or rates borne by the Securities from time to time during such
periods.]**
Interest will be payable semiannually (to the holders of record of
the Securities (or any predecessor Securities) at the close of business on the
February 15 or August 15 immediately preceding the Interest Payment Date) on
each Interest Payment Date, commencing September 1, 1998.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated February 13, 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 90th calendar day
following the date of original issue of the Securities or (c) the Exchange Offer
(as such term is defined in the Registration Rights Agreement) is not
consummated or a Shelf Registration Statement (as such term is defined in the
Registration Rights Agreement) is not declared effective on or prior to the
120th calendar day following the date of original issue of the Securities, the
interest rate borne by this Security shall be increased by one-half of one
percent per annum following such 30-day period in the case of (a) above,
following such 90-day period in the case of (b) above or following such 120-day
period in the case of (c) above. The aggregate amount of such increase from the
original interest rate pursuant to these provisions shall in no event exceed
one-half of one percent per annum. Upon (x) the filing of the Exchange Offer
Registration Statement after the 30-day period described in clause (a) above,
(y) the effectiveness of the Exchange Offer Registration Statement after the
90-day period described in clause (b) above or (z) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 120-day period described
- ----------
* Include only for Initial Securities.
** Include only for Exchange Securities.
Exh. B-4
<PAGE> 105
in clause (c) above, the interest rate borne by this Security from the date of
such filing, effectiveness or consummation, as the case may be, will be reduced
to the interest rate set forth above.]*
Interest on this Security will accrue from the most recent date to
which interest has been paid [on this Security or the Security surrendered in
exchange herefor]** or, if no interest has been paid, from February 13, 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 March 1 and September 1 to the
persons who are Holders (as reflected in the Security Register at the close of
business on the February 15 and August 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 March 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 Initial Securities.
** Include only for Exchange Securities.
Exh. B-5
<PAGE> 106
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
February 13, 1998 (the "Indenture"), between the Company and United States Trust
Company 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
$250,000,000.
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
March 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 March 1
of each of the years set forth below:
Redemption
Year Price
---- -----
2003 104.00%
2004 102.00%
2005 and thereafter 100.00%
Redemption with Proceeds of Offering. In addition, at any time or
from time to time, on or prior to March 1, 2001, the Company may, at its option,
redeem up to 35% of the aggregate principal amount of the Securities originally
issued under this Indenture at a Redemption Price equal to 108% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Redemption Date, with the net cash proceeds of one or more Equity Offerings;
provided that at least 65% of the aggregate principal amount of 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. B-6
<PAGE> 107
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. B-7
<PAGE> 108
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. B-8
<PAGE> 109
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. B-9
<PAGE> 110
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or February 13, 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:______________________________
Exh. B-10
<PAGE> 111
-----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
------------------------------------ -----------------------------------
NOTICE: To be executed by an
executive officer.
Exh. B-11
<PAGE> 112
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:____________________________
Exh. B-12
<PAGE> 113
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
On or after March 26, 1998
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Division
Re: BE Aerospace, Inc. (the "Company") 8% Senior
Subordinated Notes due 2008 (the "Securities")
Ladies and Gentlemen:
This letter relates to U.S. $________ principal amount of Securities
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of February 13,
1998 relating to the Securities (the "Indenture"), we hereby certify that (1) we
are the beneficial owner of such principal amount of Securities represented by
the Temporary Certificate and (2) we are a person outside the United States to
whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to issue a Certificated Security
representing the undersigned's interest in the principal amount of Securities
represented by the Temporary Certificate, all in the manner provided by the
Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-----------------------------------
Authorized Signature
Exh. B-1
<PAGE> 114
Exhibit C
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Division
Re: BE Aerospace, Inc. (the "Company") 8% Senior
Subordinated Notes due 2008 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States or (b) the
transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
Exh. C-1
<PAGE> 115
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------------
Authorized Signature
Exh. C-2
<PAGE> 1
Exhibit 4.2
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated
as of February 6, 1998, between BE AEROSPACE, INC., a Delaware corporation (the
"Company"), and United States Trust Company of New York, a New York corporation
(the "Trustee").
WITNESSETH:
WHEREAS, in accordance with Section 902 of the Indenture relating to
the 9 3/4% Senior Notes due 2003 (the "Notes") of the Company dated as of March
3, 1993, as supplemented on January 5, 1996 (as supplemented, the "Indenture"),
between the Company and the Trustee, the Trustee and the Company, when
authorized by a Board Resolution, with the written consent of the Holders of a
majority in principal amount of the Outstanding Securities (the "Requisite
Consents") may amend certain terms and covenants contained in the Indenture;
WHEREAS, the Company has obtained the Requisite Consents to amend
the Indenture as set forth below;
WHEREAS, the Board has, as evidenced by a Board Resolution,
authorized the amendment of the Indenture pursuant to this Supplemental
Indenture;
WHEREAS all things necessary to make this Supplemental Indenture a
valid supplement to the Indenture according to its terms have been done;
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 1.1. Certain Terms Defined in the Indenture. All capitalized
terms used herein without definition herein shall have the meanings ascribed
thereto in the Indenture.
SECTION 1.2. Amendments of Section 101. (a) Section 101 of the
Indenture is amended by deleting each of the following definitions in their
entirety:
"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).
"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
<PAGE> 2
2
Company shall be merged with or into the Company or any Restricted Subsidiary of
the Company or (b) the acquisition by the Company or any Restricted Subsidiary
of the Company of the assets of any Person which constitute all or substantially
all of the assets of such Person or any division or line of business of such
Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease
or other disposition to any Person other than the Company or a wholly-owned
Restricted Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary of the
Company held by the Company or any Restricted Subsidiary; (b) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary of the Company; or (c) any
other properties or assets of the Company or any Restricted Subsidiary other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" shall not include any sale, issuance, conveyance,
transfer, lease or other disposition of properties or assets (i) that is
governed by the provisions of Article Eight of this Indenture, (ii) to an
Unrestricted Subsidiary, if permitted under Section 1011 of this Indenture or
(iii) having a Fair Market Value of less than $10,000.
"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.
"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 become 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 mergers 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 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
<PAGE> 3
3
"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.
"Consolidated Adjusted Net Income" means, for any period, the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted by excluding (a)
net after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions, (c) the net income (or net loss) of
any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any of its Restricted
Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or its Restricted
Subsidiaries in cash by such other Person during such period, (d) net income (or
net loss) of any Person combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (e) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that net income is not at the date of
determination permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders and (f) income resulting from transfers of assets received by the
Company or any Restricted Subsidiary from an Unrestricted Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for
any period, the ratio of (a) the sum of Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Tax Expense and Consolidated
Non-cash Charges, in each case, for such period, of such Person and its
subsidiaries on a consolidated basis, all determined in accordance with GAAP, to
(b) the sum of such Consolidated Interest Expense for such period; provided that
(i) in making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect on
the date of
<PAGE> 4
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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 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.
<PAGE> 5
5
"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 that 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.
"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.
"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.
"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)
<PAGE> 6
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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.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company under the Bank Credit Agreement in
an aggregate principal amount at any one time outstanding not to exceed
the sum of 80% of the aggregate amount of Eligible Receivables and 50% of
the aggregate amount of Eligible Inventory, measured as of the end of the
most recent fiscal quarter preceding the time such Indebtedness is
incurred;
(ii) Indebtedness of the Company under the Securities;
(iii) Indebtedness of the Company outstanding on the date of this
Indenture (other than Indebtedness incurred pursuant to clause (i) of this
definition);
(iv) obligations of the Company pursuant to interest Rate Protection
Obligations, which obligations do not exceed the aggregate principal
amount of the Indebtedness covered by such Interest Rate Protection
Obligations;
(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees,
indemnities or obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets, including,
without limitation, shares of Capital Stock of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Indebtedness of the Company incurred pursuant to clauses
(ii) and (iii) of this definition, including any successive refinancings
by the Company, so long as (A) any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if such
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
<PAGE> 7
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plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus the amount of expenses of the Company
incurred in connection with such refinancing, (B) in the case of any
refinancing of Pari Passu Indebtedness or Subordinated Indebtedness, such
new Indebtedness is made pari passu with or subordinate to the Securities
at least to the same extent as the Indebtedness being refinanced and (C)
such new Indebtedness has an Average Life longer than the Average Life of
the Securities and a final Stated Maturity later than the final Stated
Maturity of the Securities; and
(viii) Indebtedness in an aggregate principal amount not in excess
of $30 million at any one time outstanding, less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the
definition thereof.
"Permitted Investments" means any of the following (i) Investments
in Cash Equivalents; (ii) Investments in the Company or wholly-owned Restricted
Subsidiaries; provided that if the Company shall make any Investment in FEEL in
excess of $1 million, FEEL shall Guarantee the Securities in compliance with
paragraph (b) and clauses (i)(A) and (ii) of paragraph (a) of Section 1017;
(iii) Investments in an amount not to exceed $15 million at any one time
outstanding; or (iv) Investments by the Company or any Restricted Subsidiary of
the Company in another Person, if as a result of such Investment (A) such other
Person becomes a Restricted Subsidiary or (B) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a Restricted Subsidiary.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety
<PAGE> 8
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and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired;
(e) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Restricted
Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens; provided, however, that (i) the related
purchase money Indebtedness shall not be secured by any property or assets
of the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired and (ii) the Lien securing such
Indebtedness shall be created (A) in the case of any Asset Acquisition,
within 270 days of the closing of such Asset Acquisition and (B) in all
other cases, in the ordinary course of business within 90 days of such
acquisition;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods;
(i) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory or other
goods;
(j) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(k) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets;
<PAGE> 9
9
(l) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(m) Liens securing Interest Rate Protection Obligations which
Interest Rate Protection Obligations relate to Indebtedness that is
secured by Liens otherwise permitted under this Indenture; and
(n) Liens securing an aggregate of $30 million of Indebtedness
permitted to be incurred under this Indenture by the Company and its
Restricted Subsidiaries.
"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 or 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
other than Indebtedness incurred pursuant to clause (vii) 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 and such
new Indebtedness has an Average Life longer than the Average Life of the
Securities and final Stated Maturity later than the final Stated Maturity
of the Securities; and
(vi) Indebtedness (as defined in clauses (e) and (f) of the
definition of Indebtedness) to the Holders incurred pursuant to provisions
of this Indenture;
<PAGE> 10
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(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 (vii) of the definition thereof; and
(viii) Guarantees of Indebtedness of the Company permitted under
Section 1017.
(b) The definition of "Unrestricted Subsidiary" located in Section
101 of the Indenture is amended in full to read as follows:
""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 which is not a Subsidiary of the Subsidiary to be so
designated. The Board of Directors may designate any Unrestricted Subsidiary to
be a Subsidiary."
SECTION 1.3. Amendment of Section 501. Section 501 of the Indenture
is amended and restated in full to read as follows:
"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 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; 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
<PAGE> 11
11
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) 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
(6) 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
(7) the institution by the Company or any Significant Subsidiary or
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 1.4. Amendment of Section 801. Section 801 of the Indenture
is amended and restated in full to read as follows:
"SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
<PAGE> 12
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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) 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 transactions
have been complied with."
SECTION 1.5. Amendments to Article Ten. Article Ten of the Indenture
is amended by deleting the following sections in their entirety and inserting
"Intentionally Omitted" under each Section heading:
SECTION 1009. Provision of Financial Statements.
The Company shall file with the Commission the annual, quarterly and
other reports required by Section 13(a), 13(c) or 15(d) of the Exchange Act,
regardless of whether such Sections of the Exchange Act are applicable to the
Company, and shall provide copies of such reports to Holders and the Trustee
within 15 days of the date it is or would have been required to file such
reports with the Commission had it been subject to such Sections. The Company
shall also comply with the other provisions of TIA Section 314(a).
<PAGE> 13
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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 (collectively to "incur")
the payment of any Indebtedness (including any Acquired Indebtedness), other
than Permitted Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro forma
effect to: (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred and the application of such
proceeds occurred at the beginning of such four-quarter period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company or
its Restricted Subsidiaries since the first day of such four-quarter period as
if such Indebtedness was incurred, repaid or retired at the beginning of such
four-quarter period; and (iii) notwithstanding clause (d) of the definition of
Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger
or otherwise) or disposition (whether by sale, merger or otherwise) of any
company, entity or business acquired or disposed of by the Company or its
Restricted Subsidiaries, as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition occurred at the
beginning of such four-quarter period), would have been at least equal to 2.0 to
1, and (y) if such Indebtedness is Subordinated Indebtedness, such Indebtedness
shall have an Average Life longer than the Average Life of the Securities and a
final Stated Maturity of principal later than the final Stated Maturity of
principal of the Securities.
(b) The Company will not permit any Restricted Subsidiary to incur
any Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro forma
effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of this Section 1010), would have been at least
equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any
Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the
Securities in compliance with paragraph (b) and clauses (i)(A) and (ii) of
paragraph (a) of Section 1017.
(c) The Company shall not incur any Indebtedness that is expressly
subordinated to any other Indebtedness of the Company unless such Indebtedness,
by its terms or the terms of any agreement or instrument pursuant to which such
Indebtedness is issued or outstanding, is also expressly made subordinate to the
Securities at least to the extent it is subordinated to such other Indebtedness,
except that the securities shall not be required to become designated senior
indebtedness or its equivalent due solely to the incurrence of such other
Indebtedness in accordance with this sentence.
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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 Restricted Subsidiary by the Company or
(b) guarantees of Indebtedness of the Company by any Restricted
Subsidiary),
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010, and
(3) the aggregate amount of all Restricted Payments declared or made after the
date of this Indenture shall not exceed the sum of (A) 50% of the aggregate
cumulative Consolidated Adjusted Net Income of the Company accrued on a
cumulative basis during the period beginning on the first day after the date of
this Indenture and ending on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus
100% of such loss), plus (B) the aggregate net cash proceeds received after the
date of this
<PAGE> 15
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Indenture by the Company from the issuance or sale (other than to any Restricted
Subsidiary) of shares of Capital Stock of the Company (other than Redeemable
Capital Stock) or warrants, options or rights to purchase such shares of Capital
Stock of the Company, plus (C) the aggregate net cash proceeds received after
the date of this Indenture by the Company from the issuance or sale (other than
to any Restricted Subsidiary) of debt securities that have been converted into
or exchanged for Capital Stock of the Company (other than Redeemable Capital
Stock) to this extent such debt securities were originally sold for cash,
together with the aggregate cash received by the Company at the time of such
conversion or exchange, plus (D) to the extent not otherwise included in the
Company's Consolidated Adjusted Net Income, the net reduction in Investments in
Unrestricted Subsidiaries resulting from the payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or a Restricted Subsidiary after the date of
this Indenture from any Unrestricted Subsidiary or from the redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as
provided in the definition of Investment), not to exceed in the case of any
Unrestricted Subsidiary the total amount of Investments (other than Permitted
Investments) in such Unrestricted Subsidiary by the Company and its Restricted
Subsidiaries, plus (E) $10 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) and (v) 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 purchase, redemption or other acquisition or retirement for
value of Subordinated Indebtedness (other than Redeemable Capital Stock or
Permitted Indebtedness incurred pursuant to clause (vii) of the definition
thereof) in exchange for, or out of the net cash proceeds of a
substantially concurrent incurrence (other
<PAGE> 16
16
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, (B) such new Indebtedness is subordinated to the
Securities to the same extent as such Subordinated Indebtedness so
purchased, redeemed, acquired or retired and (C) such new Indebtedness has
an Average Life longer than the Average Life of the Securities and a final
Stated Maturity of principal later than the final Stated Maturity of
principal of the Securities; and
(v) 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) and (v) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph (b) but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a) (provided
that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce
the amount that would otherwise be available under clause (3) of paragraph (a)
when declared, but not also when subsequently paid pursuant to such clause (i))
and the actions described in clause (iv) of this paragraph (b) shall be
Restricted Payments that shall be permitted to be taken in accordance with this
paragraph (b) and shall not reduce the amount that would otherwise be available
for Restricted Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the Company
under clause (3)(A) of paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
this Indenture, such Restricted Payment shall be deemed
<PAGE> 17
17
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, or (2) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
SECTION 1013. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into or suffer to exist any transaction with,
or for the benefit of, any Affiliate of the Company or any beneficial owner of
5% or more of any class of the Company's Capital Stock at any time outstanding
("Interested Persons"), unless (i) such transaction is among the Company and
wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms
that are no less favorable to the Company, or such Restricted Subsidiary, as the
case may be, than those which could have been obtained in an arm's length
transaction with third parties who are not Interested Persons and (B) such
transaction has been approved by the Board of Directors (including a majority of
the Disinterested Directors); provided, however, that this covenant will not
restrict (1) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted Subsidiary
who are not employees of the Company or any Restricted Subsidiary and (2) the
performance of the Company's obligations under the AET Contract.
SECTION 1014. Limitation on Liens.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind on or with respect to any of its property or assets, whether owned at
the date of this 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 Subordinated Indebtedness,
the Securities are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Lien and (y) in the case of any other Lien, the
<PAGE> 18
18
Securities are equally and ratably secured, except for (a) Liens existing as of
the Closing Date; (b) Liens securing the Securities; (c) Liens in favor of the
Company; (d) Liens securing Indebtedness of the Company or any Restricted
Subsidiary having a principal amount not in excess of (A) the sum of 80% of
Eligible Receivables and 50% of Eligible Inventory, measured as of the end of
the most recent fiscal quarter preceding the incurrence of such Lien less (B)
the amount of Indebtedness secured by Liens incurred pursuant to clause (n) of
the definition of Permitted Liens; provided that, to the extent such Liens
secure Indebtedness of any Restricted Subsidiary (i) such Restricted Subsidiary
shall Guarantee the Securities in compliance with the provisions of paragraph
(b) and clauses (i)(A) and (ii) of paragraph (a) of Section 1017 and (ii) such
Restricted Subsidiary's Guarantee of the Securities shall be equally and ratably
secured with the Indebtedness secured by such Lien; and (e) Permitted Liens.
SECTION 1015. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase all of the outstanding Securities (a
"Change of Control Offer"), and shall purchase, on a business day (the "Change
of Control Purchase Date") not more than 70 nor less than 60 days following the
Change of Control Date, all of the then outstanding Securities validly tendered
pursuant to such Change 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.
(b) 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
Holder notice of the Change of Control Offer in the manner provided in Section
106, 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.
<PAGE> 19
19
(c) Holders electing to have Securities purchased will be required
to surrender such Securities to the Company at the address specified in the
notice at least five Business Days prior to the Change of Control Purchase Date.
Holders will be entitled to withdraw their election if the Company receives, not
later than three Business Days prior to the Change of Control Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities delivered for purchase by the
Holder as to which his election is to be withdrawn and a statement that such
Holder is withdrawing his election to have such Securities purchased. Holders
whose Securities are purchased only in part will be issued new Securities equal
in principal amount of the unpurchased portion of the Securities surrendered.
(d) The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Securities as described above.
SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company and
its Restricted Subsidiaries may engage in Asset Sales for consideration not in
the form of cash or Cash Equivalents in amounts in excess of that permitted in
this clause (ii), so long as (x) such excess consideration is in the form of
Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully
Traded Common Stock received by the Company and its Restricted Subsidiaries
(measured as of the date of receipt) from all Asset Sales in reliance on this
proviso since the date of this Indenture that has not been converted into cash
or Cash Equivalents does not exceed $10 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 Section 1016.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after
such Asset Sale, to (i) repay or prepay any then outstanding senior Indebtedness
of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date or in
businesses reasonably related thereto. If any such legally binding agreement to
invest such
<PAGE> 20
20
Net Cash Proceeds is terminated, then the Company may, within 90 days of such
termination or within 12 months of such Asset Sale, whichever is later, invest
such Net Cash Proceeds as provided in clauses (i) or (ii) (without regard to the
parenthetical contained in such clause (ii)) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10
million, the Company shall, within 15 Business Days, make an offer to purchase
(an "Excess Proceeds Offer") from all holders of 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) (A) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for an unsubordinated Guarantee of payment of the Securities by such
Restricted Subsidiary and (B) with respect to any such Guarantee of Subordinated
Indebtedness, any such Guarantee of such Restricted Subsidiary with respect to
such Subordinated Indebtedness shall be subordinated to such Restricted
Subsidiary's Guarantee with respect to the Securities at least to the same
extent as such Subordinated Indebtedness is subordinated to the Securities; (ii)
such Restricted Subsidiary waives and will not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Guarantee; (iii) such Restricted Subsidiary shall appoint CT Corporation in New
York City as its agent for the service of process; and (iv) such Restricted
Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that
(A) such appointment of CT Corporation is valid, (B) such Guarantee of the
Securities has been duly executed and authorized and (C) such 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
<PAGE> 21
21
laws relating to fraudulent transfers) and except insofar as enforcement thereof
is subject to general principles of equity; provided that this paragraph (a)
shall not be applicable to any Guarantee of any Restricted Subsidiary that (x)
existed at the time such Person became a Restricted Subsidiary of the Company
and (y) was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary of the Company.
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Guarantee by a Restricted Subsidiary of the Securities shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such Guarantee.
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary of the
Company, (c) make loans or advances to the Company or any other Restricted
Subsidiary of the Company, (d) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary of the Company or (e) guarantee any
Indebtedness of the Company or any other Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary non-assignment provisions of any lease governing
a leasehold interest of the Company or any Restricted Subsidiary of the Company,
(iii) any agreement or other instrument of a Person acquired by the Company or
any Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, (iv) any agreement in existence on the Closing Date (to the extent of
any encumbrances or restrictions in existence thereunder on the Closing Date)
and (v) any agreement providing for the incurrence of Indebtedness of Restricted
Subsidiaries pursuant to either clause (x) of paragraph (b) of Section 1010 or
clause (vii) of the definition of Permitted Subsidiary Indebtedness; provided
that any Restricted Subsidiary (including, without limitation, FEEL) that
becomes subject to any such encumbrances or restrictions pursuant to this clause
(v) shall Guarantee the Securities in compliance with the provisions of
paragraph (b) and clauses (i) and (ii) of paragraph (a) of Section 1017.
<PAGE> 22
22
SECTION 1.6 Section 1020. A new Section 1020 entitled "Waivers" will
be added to the Indenture reading in its entirety as follows:
"SECTION 1020. Waivers. The application of the provisions of the
Indenture are hereby waived to the extent that such provisions might otherwise
interfere with the ability of the Company to enter into agreements contemplated
by, and to consummate the offer and sale of one or more new issues of senior
subordinated debt securities in a public or private offering."
SECTION 2. Effectiveness. This Supplemental Indenture shall become
effective in accordance herewith upon its execution but shall become operative
and shall supersede the Indenture to the extent provided herein only if, and on
the date (the "Operative Date") that, the Company consummates the purchase of
Securities pursuant to and in accordance with the terms of the Offer to Purchase
and Consent Solicitation Statement of the Company, dated January 28, 1998. From
and after such date, the Indenture shall apply only to the extent not amended
and superseded hereby. The Company shall notify the trustee of the Operative
Date promptly after such date. Any failure of the Company to give such notice,
or any defect therein, shall not, however, in any way impair or affect (a) the
validity of this Supplemental Indenture or (b) this Supplemental Indenture
becoming operative pursuant to this Section 2.
SECTION 3. Governing Law. This Supplemental Indenture shall be
governed by the laws of the State of New York.
SECTION 4. Counterparts. This Supplemental Indenture may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 5. Severability. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 6. Ratification. Except as expressly amended hereby, each
provision of the Indenture shall remain in full force and effect and, as amended
hereby, the Indenture is in all respects agreed to, ratified and confirmed by
each of the Company and the Trustee.
-----------------------------------
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
BE AEROSPACE, INC.
By:______________________________________
Title:
Attest:___________________
Title:
UNITED STATES TRUST COMPANY OF NEW YORK
By:______________________________________
Title:
Attest:___________________
Title:
<PAGE> 1
Exhibit 10.1
[CONFORMED COPY]
***************************************************************
BE AEROSPACE, INC.
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 29, 1993
Amended and Restated as of May 29, 1997
THE CHASE MANHATTAN BANK,
as Administrative Agent
NATIONSBANK, N.A. (SOUTH),
as Co-Agent
***************************************************************
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters ............................ 1
1.01 Certain Defined Terms ........................................... 1
1.02 Accounting Terms and Determinations ............................. 23
1.03 Classes and Types of Loans ...................................... 24
Section 2. Commitments, Loans, Notes and Prepayments ..................... 25
2.01 Loans ........................................................... 25
2.02 Borrowings ...................................................... 26
2.03 Letters of Credit ............................................... 26
2.04 Changes of Commitments .......................................... 31
2.05 Commitment Fee .................................................. 32
2.06 Lending Offices ................................................. 32
2.07 Several Obligations; Remedies Independent ....................... 32
2.08 Evidence of Debt ................................................ 33
2.09 Optional Prepayments and Conversions or Continuations of Loans .. 33
2.10 Mandatory Prepayments and Reductions of Commitments ............. 34
Section 3. Payments of Principal and Interest ............................ 37
3.01 Repayment of Loans .............................................. 37
3.02 Interest ........................................................ 37
Section 4. Payments; Pro Rata Treatment; Computations; Etc ............... 38
4.01 Payments ........................................................ 38
4.02 Pro Rata Treatment .............................................. 39
4.03 Computations .................................................... 39
4.04 Minimum Amounts ................................................. 40
4.05 Certain Notices ................................................. 40
4.06 Non-Receipt of Funds by the Administrative Agent ................ 41
4.07 Sharing of Payments, Etc. ....................................... 42
Section 5. Yield Protection, Etc. ........................................ 43
5.01 Additional Costs ................................................ 43
5.02 Limitation on Types of Loans .................................... 46
5.03 Illegality ...................................................... 47
5.04 Treatment of Affected Loans ..................................... 47
5.05 Compensation .................................................... 48
5.06 Additional Costs in Respect of Letters of Credit ................ 48
5.07 U.S. Taxes ...................................................... 49
Section 6. Conditions Precedent .......................................... 51
6.01 Conditions to Effectiveness ..................................... 51
6.02 Initial and Subsequent Extensions of Credit ..................... 53
(i)
<PAGE> 3
Page
----
Section 7. Representations and Warranties ................................ 54
7.01 Corporate Existence ............................................. 54
7.02 Financial Condition ............................................. 54
7.03 Litigation ...................................................... 55
7.04 No Breach ....................................................... 55
7.05 Action .......................................................... 55
7.06 Approvals ....................................................... 56
7.07 Use of Credit ................................................... 56
7.08 ERISA ........................................................... 56
7.09 Taxes ........................................................... 56
7.10 Investment Company Act .......................................... 57
7.11 Public Utility Holding Company Act .............................. 57
7.12 Material Agreements and Liens ................................... 57
7.13 Environmental Matters ........................................... 57
7.14 Capitalization .................................................. 59
7.15 Subsidiaries, Etc ............................................... 60
7.16 Title to Assets ................................................. 61
7.17 Compliance with Law ............................................. 61
7.18 True and Complete Disclosure .................................... 61
Section 8. Covenants of the Company ...................................... 62
8.01 Financial Statements, Etc ....................................... 62
8.02 Litigation ...................................................... 66
8.03 Existence, Etc. ................................................. 66
8.04 Insurance ....................................................... 67
8.05 Prohibition of Fundamental Changes .............................. 67
8.06 Limitation on Liens ............................................. 68
8.07 Indebtedness .................................................... 70
8.08 Investments ..................................................... 71
8.09 Restricted Payments ............................................. 71
8.10 Leverage Ratio .................................................. 73
8.11 Adjusted Net Worth .............................................. 73
8.12 Interest Coverage Ratio ......................................... 74
8.13 Net Worth of Acurex ............................................. 74
8.14 Lines of Business ............................................... 74
8.15 Transactions with Affiliates .................................... 74
8.16 Use of Proceeds ................................................. 75
8.17 Certain Obligations Respecting Subsidiaries ..................... 75
8.18 Modifications of Certain Documents .............................. 76
8.19 Environmental Matters ........................................... 76
8.20 Security for Series A Loans ..................................... 77
8.21 Redemption of Senior Subordinated Notes ......................... 77
Section 9. Events of Default ............................................. 77
Section 10. The Administrative Agent ..................................... 82
10.01 Appointment, Powers and Immunities ............................. 82
10.02 Reliance by Administrative Agent ............................... 82
10.03 Defaults ....................................................... 83
10.04 Rights as a Lender ............................................. 83
10.05 Indemnification ................................................ 84
(ii)
<PAGE> 4
Page
----
10.06 Non-Reliance on Administrative Agent and Other Lenders ......... 84
10.07 Failure to Act ................................................. 85
10.08 Resignation or Removal of Administrative Agent ................. 85
10.09 Consents under Basic Documents ................................. 86
10.10 Collateral Sub-Agents .......................................... 86
10.11 Co-Agent ....................................................... 87
Section 11. Miscellaneous ................................................ 87
11.01 Waiver ......................................................... 87
11.02 Notices ........................................................ 87
11.03 Expenses, Etc. ................................................. 87
11.04 Amendments, Etc. ............................................... 89
11.05 Successors and Assigns ......................................... 90
11.06 Assignments and Participations ................................. 90
11.07 Survival ....................................................... 92
11.08 Captions ....................................................... 93
11.09 Counterparts ................................................... 93
11.10 Governing Law; Submission to Jurisdiction ...................... 93
11.11 Waiver of Jury Trial ........................................... 93
11.12 Treatment of Certain Information; Confidentiality .............. 93
11.13 Amendments to Security Documents ............................... 94
Annex 1 - Commitments
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Hazardous Materials
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Approvals and Compliance
SCHEDULE V - Existing Letters of Credit
SCHEDULE VI - Taxes
SCHEDULE VII - Transactions with Affiliates
EXHIBIT A-1 - Form of Revolving Credit Security Agreement
EXHIBIT A-2 - Form of Term Loan Security Agreement
EXHIBIT B - Form of Confidentiality Agreement
(iii)
<PAGE> 5
THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 29,
1993, amended and restated as of May 29, 1997, among: BE AEROSPACE, INC., a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Company"); each of the lenders that is a signatory hereto
identified under the caption "LENDERS" on the signature pages hereto or which,
pursuant to Section 11.06(b) hereof, shall become a "Lender" hereunder
(individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE
MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
The Company, certain Lenders and the Administrative Agent are party
to a Second Amended and Restated Credit Agreement dated as of October 29, 1993,
amended and restated as of January 19, 1996 (as modified and supplemented and in
effect immediately prior to the Amendment Effective Date referred to below, the
"Existing Credit Agreement"). The Company has requested that the Lender and the
Administrative Agent agree to amend and restate the Existing Credit Agreement,
and the Lenders and the Administrative Agent are willing to amend and restate
the Existing Credit Agreement, all on the terms and conditions herein set forth.
Accordingly, the parties hereto agree to amend and restate the
Existing Credit Agreement so that, as amended and restated, it reads in its
entirety as provided herein.
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Acquisition" shall mean any transaction, or any series of related
transactions, by which the Company and/or any of its Subsidiaries (a) acquires
any ongoing business or all or substantially all of the assets of any Person,
whether through purchase of assets, merger or otherwise, (b) directly or
indirectly acquires control of at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors or (c) directly or indirectly acquires control of a majority ownership
interest in any partnership, joint venture or similar arrangement. The terms
"Acquire" and "Acquired" used as a verb shall have a correlative meaning.
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"Acurex" shall mean Acurex Corporation, a Delaware corporation.
"Adjusted Net Worth" shall mean, as at any date, the sum of (a)
total stockholders' equity of the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) plus (b) the
fair market value of any shares of capital stock of the Company (determined as
of the date such shares are issued) which are utilized in any business
combination accounted for using pooling of interest accounting plus (c) an
amount not to exceed $20,000,000 in the aggregate of the after-tax amount
(calculated using the then effective corporate Federal tax rate, regardless of
the after-tax amount determined in accordance with GAAP) of any nonrecurring
noncash write-offs of intangible assets since February 22, 1997 plus (d) the
amount of any purchased research and development and related acquisition costs
of a target company to the extent such costs are or have been expensed.
"Administrative Questionaire" shall mean an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any event,
any Person that owns directly or indirectly securities having 5% or more of the
voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person, Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or any of its
Subsidiaries and (b) none of the Subsidiaries of the Company shall be
Affiliates.
"Amendment Effective Date" shall mean the date on which all of the
conditions set forth in Section 6.01 hereof
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shall have been satisfied or waived by the Lenders and the Administrative Agent.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan in the Administrative Questionnaire
submitted by such Lender or such other office of such Lender (or of an affiliate
of such Lender) as such Lender may from time to time specify to the
Administrative Agent and the Company as the office by which its Loans of such
Type are to be made and maintained.
"Applicable Margin" shall mean with respect to Base Rate Loans and
Eurodollar Loans, the rate for such Type of Loan for each rating level period
set forth in the schedule below:
Applicable Margin
Rating Level Period Base Rate Loans Eurodollar Loans
- ------------------- --------------- ----------------
Level I Period 0.00% 0.500%
Level II Period 0.00% 0.625%
Level III Period 0.00% 0.750%
Level IV Period 0.00% 0.875%
Level V Period 0.00% 1.000%
Level VI Period 0.00% 1.250%
Level VII Period 0.25% 1.500%
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the
Notes, the Letter of Credit Documents and the Security Documents.
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"Borrowing Base" shall mean, as at any date, the sum of (a) 80% of
the aggregate amount of Eligible Receivables at said date plus (b) 50% of the
aggregate value of Eligible Inventory at said date plus (c) the lesser of (i)
40% of the net book value of personal Property (excluding real estate owned or
leased, and excluding Eligible Inventory and Eligible Receivables) of the
Company in which the Administrative Agent has a valid and perfected
first-priority security interest and (ii) $20,000,000 through and including the
third anniversary of the Restatement Date, $15,000,000 from the third
anniversary of the Restatement Date through and including the fourth anniversary
of the Restatement Date, and $10,000,000 thereafter; provided that in no event
shall the amount of the Borrowing Base exceed the amount of Indebtedness
permitted to be secured by Liens under clause (d) of Section 1014 of the Senior
Indenture.
"Business Day" shall mean any day (a) on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13)
"Casualty Event" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Chase" shall mean The Chase Manhattan Bank.
"Class" shall have the meaning assigned to such term in Section 1.03
hereof.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Account" shall have the meaning assigned to such term in
Section 4.01 of the Revolving Credit Security Agreement.
"Commitment Fee Rate" shall mean (a) .1875% for any Level I Period,
(b) .2000% for any Level II Period, (c) .2250% for any Level III Period, (d)
.2500% for any Level IV Period, (e) .2750% for any Level V Period, (f) .3250%
for any Level VI Period and (e) .3750% for any Level VII Period.
"Commitments" shall mean the Series A Commitments and the Series B
Commitments.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any Person excluding any sale, assignment,
transfer or other disposition of inventory in the ordinary course of business
and on ordinary business terms; provided that the term "Disposition" shall not
include (i) any Equity Issuance (as such term is defined in this Section 1.01
without giving effect to the proviso therein), (ii) any sale, assignment,
transfer or other disposition of Property by any Subsidiary of the Company to
the Company or to any other Subsidiary of the Company, in each case for
consideration that is not in excess of the fair market value of such Property as
determined in good faith by the chief financial officer of the Company or (iii)
any sale, assignment, transfer or other disposition of Property by the Company
or any Subsidiary of the Company to a joint venture, subject to the proviso in
Section 8.08(h) hereof. The creation of any Lien on any Property permitted under
Section 8.06 hereof shall not
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constitute a "Disposition" of such Property. The term "Dispose" shall have a
correlative meaning.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company that
is incorporated under the law of any State of the United States of America.
"EBITDA" shall mean, for any period, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), net operating earnings (calculated before depreciation
and amortization expense, non-recurring non-cash write-offs of assets (to the
extent deducted in computing net operating earnings), Interest Expense, taxes
and extraordinary and unusual items) for such period.
"Eligible Inventory" shall mean, as at any date, the inventories
(net of any reserve and excluding capitalized engineering expenditures) of the
Company on the basis of the method of accounting (either last in/first out or
first in/first out) used by the Company in the preparation of its financial
statements included in the latest Form 10-K filed by the Company under the
Securities Exchange Act, as included in the most recent consolidated balance
sheet of the Company and its Subsidiaries delivered pursuant to Section 8.01
hereof (or, prior to the delivery of the first consolidated balance sheet under
Section 8.01 hereof, the consolidated balance sheet as at February 22, 1997
referred to in Section 7.02 hereof) and in which the Administrative Agent has a
valid and perfected first-priority security interest.
"Eligible Receivables" shall mean, as at any date, the trade
accounts receivable (net of any reserve) of the Company that are not more than
60 days past their due date and that were entered into on normal payment terms
as included in the most recent consolidated balance sheet of the Company and its
Subsidiaries delivered pursuant to Section 8.01 hereof (or, prior to the
delivery of the first consolidated balance sheet under Section 8.01 hereof, the
consolidated balance sheet as at February 22, 1997 referred to in Section 7.02
hereof) and in which the Administrative Agent has a valid and perfected
first-priority security interest.
"Environmental Claim" shall mean, with respect to any Person, (a)
any written notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
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natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any written claim by any governmental
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law, and any written claim
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Issuance" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries after February 22, 1997 of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors, officers, employees, agents,
consultants or advisors of the Company or any of its Subsidiaries and any
capital stock of the Company issued upon the exercise of such warrants or
options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the issuing or selling
Person or (b) the receipt by the Company or any of its Subsidiaries after the
Closing Date of any capital contribution received (whether or not evidenced by
any equity security issued by the recipient of such contribution); provided that
Equity Issuance shall not include (x) any such issuance or sale by any
Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the
Company or (y) any capital contribution by the Company or any Wholly Owned
Subsidiary of the Company to any Subsidiary of the Company.
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"Equity Rights" shall mean, with respect to any Person, any
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of, or
outstanding securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Company is a member and (ii) solely for purposes
of potential liability under Section 302 (c) (11) of ERISA and Section 412 (c)
(11) of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which the
Company is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/100 of 1%) of the respective rates per annum quoted
by each Reference Lender at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) on the date two Business Days prior to the first day
of such Interest Period for the offering by such Reference Lender to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to be made by such Reference Lender for such Interest
Period. If any Reference Lender is not participating in any Eurodollar Loan
during any Interest Period therefor, the Eurodollar Base Rate for such Loan for
such Interest Period shall be determined by reference to the amount of the
Eurodollar Loan to be made by Chase for such Interest Period.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Base Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement for such Loan for such Interest Period.
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"Event of Default" shall have the meaning assigned to such term in
Section 9 hereof.
"Existing Credit Agreement" shall have the meaning assigned to such
term in the recitals hereto.
"Existing Lenders" shall mean the lenders party to the Existing
Credit Agreement.
"Existing Letters of Credit" shall have the meaning assigned to such
term in Section 2.03(1) hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"Fiscal Date" shall mean the last day of each fiscal quarterly
period of the Company.
"Funded Debt" shall mean, for any Person: (a) all Indebtedness of
such Person that should be reflected on a balance sheet of such Person in
accordance with GAAP; and (b) all Indebtedness of any other Person that should
be reflected on a balance sheet of such other Person in accordance with GAAP and
that is secured by a Lien on the Property of, is supported by a letter of credit
issued for account of, or is Guaranteed by, such Person.
"GAAP" shall mean generally accepted accounting principles applied
on a basis consistent with those which, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness,
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other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) Property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a
correlative meaning.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Increased Acquisition Amount" shall have the meaning assigned to
such term in Section 8.05(b) hereof.
"Increased Senior Note Prepayment Amount" shall have the meaning
assigned to such term in Section 8.09 hereof.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so
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secured has been assumed by such Person; (d) obligations of such Person in
respect of letters of credit or similar instruments issued or accepted by banks
and other financial institutions for account of such Person; (e) Capital Lease
Obligations of such Person; and (f) Indebtedness of others Guaranteed by such
Person.
"Information Memorandum" shall mean the Confidential Information
Memorandum dated May, 1997 distributed to the Lenders.
"Interest Coverage Ratio" shall mean, as at any date the ratio of
(i) EBITDA for the period of four consecutive complete fiscal quarters of the
Company ending on or most recently ended prior to such date to (ii) Interest
Expense for such period.
"Interest Expense" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) plus (b) the net amounts payable (or minus
the net amounts receivable) under Interest Rate Protection Agreements accrued
during such period (whether or not actually paid or received during such period)
minus (c) interest income during such period.
"Interest Period" shall mean, with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Company may select as provided
in Section 4.05 hereof, except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period for any Series A Loan may
end after the Series A Commitment Termination Date; (ii) no Interest Period for
any Series B Loan may commence before and end after any Series B Commitment
Reduction Date unless, after giving effect thereto, the aggregate principal
amount of the Series B Loans having Interest Periods that end after such Series
B Commitment Reduction Date shall be equal to or less than the aggregate
principal amount of the Series B Loans scheduled to be outstanding after giving
effect to the payments of principal required to be made on such Series B
Commitment Reduction Date; (iii) each Interest Period that would otherwise end
on a day
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which is not a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); (iv) notwithstanding clauses (i) and
(ii) above, no Interest Period shall have a duration of less than one month and,
if the Interest Period for any Eurodollar Loan would otherwise be a shorter
period, such Eurodollar Loan shall not be available hereunder for such period;
and (v) until the earlier of (a) the date that Chase shall have notified the
Company that its syndication of the Commitments and Loans is completed and (b)
the ninetieth day after the Amendment Effective Date, Interest Periods in excess
of one month shall not be available.
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes hereof V the "credit exposure" at any time of any Person under an
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person, but excluding
any such advance, loan or extension of credit having a term not exceeding 90
days representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business); (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person; or (d) the entering
into of any Interest Rate Protection Agreement.
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"Issuing Lender" shall mean Chase, as the issuer of Letters of
Credit under Section 2.03 hereof, together with its successors and assigns in
such capacity.
"Letter of Credit" shall have the meaning assigned to such term in
Section 2.03 hereof.
"Letter of Credit Documents" shall mean, with respect to any Letter
of Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"Letter of Credit Interest" shall mean, for each Series A Lender,
such Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn amount
of such Letter of Credit plus (b) the aggregate unpaid principal amount of all
Reimbursement Obligations of the Company at such time due and payable in respect
of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Series A Lender (other than the Issuing Lender) shall be deemed to
hold a Letter of Credit Liability in an amount equal to its participation
interest in the related Letter of Credit under Section 2.03 hereof, and the
Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount
equal to its retained interest in the related Letter of Credit after giving
effect to the acquisition by the Series A Lenders other than the Issuing Lender
of their participation interests under said Section 2.03.
"Level I Period" shall mean any period during which (a) no Event of
Default shall have occurred and be continuing, and (b) Rating Level 1 is in
effect or the Leverage Ratio is less than 1.75 to 1; "Level II Period" shall
mean any period, other than a Level I Period, during which (a) no Event of
Default shall have occurred and be continuing, (b) neither Rating Level 1 nor
Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal
to 1.75 to 1 but less than 2.25 to 1; "Level III Period" shall mean any period,
other than a Level I Period or a
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Level II Period, during which (a) no Event of Default shall have occurred and be
continuing, (b) neither Rating Level 1 nor Rating Level 2 is in effect and (c)
the Leverage Ratio is greater than or equal to 2.25 to 1 but less than 2.75 to
1; "Level IV Period" shall mean any period, other than a Level I Period, a Level
II Period or a Level III Period, during which (a) no Event of Default shall have
occurred and be continuing, (b) neither Rating Level 1 nor Rating Level 2 is in
effect and (c) the Leverage Ratio is greater than or equal to 2.75 to 1 but less
than 3.25 to 1; "Level V Period" shall mean any period, other than a Level I
Period, a Level II Period, a Level III Period or a Level IV Period during which
(a) no Event of Default shall have occurred and be continuing, (b) neither
Rating Level 1 nor Rating Level 2 is in effect and (c) the Leverage Ratio is
greater than or equal to 3.25 to 1 but less than 3.75 to 1; "Level VI Period"
shall mean any period, other than a Level I Period, a Level II Period, a Level
III Period, Level IV Period or a Level V Period during which (a) no Event of
Default shall have occurred and be continuing, (b) neither Rating Level 1 nor
Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal
to 3.75 to 1 but less than 4.25 to 1; and "Level VII Period" shall mean any
period that is not a Level I Period, a Level II Period, a Level III Period, a
Level IV Period, a Level V Period or a Level VI Period. Any change in the
Applicable Margin for any Type of Loan or any change in the Commitment Fee by
reason of (x) a change in the Standard & Poor's Rating or the Moody's Rating
shall become effective on the date of announcement or publication by the
respective rating agencies of a change in such rating or, in the absence of such
announcement or publication, the effective date of such rating and (y) a change
in the Leverage Ratio shall become effective on the first day of the next
succeeding fiscal quarterly period of the Company following receipt by the
Administrative Agent of the financial statements of the Company and its
Subsidiaries for such most recent Fiscal Date delivered as required by Section
8.01(a) or (b) hereof; provided that failure to deliver such financial
statements as required by Section 8.01(a) or (b) hereof shall result in the
Applicable Margin and Commitment Fee Rate being at the rates set forth opposite
Level VII Period.
"Leverage Ratio" shall mean, at any time, the ratio of Total Funded
Debt at such time to EBITDA for the four most recent fiscal quarters for which
financial statements have been delivered pursuant to Section 6.01(i), 8.01(a) or
8.01(b) hereof.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Basic Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
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holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loans" shall mean the Series A Loans and the Series B Loans.
"Majority Lenders" shall mean Majority Series A Lenders and Majority
Series B Lenders.
"Majority Series A Lenders" shall mean Series A Lenders having at
least 60% of the aggregate amount of the Series A Commitments or, if the Series
A Commitments shall have terminated, Lenders holding at least 60% of the sum of
(a) the aggregate unpaid principal amount of the Series A Loans plus (b) the
aggregate amount of all Letter of Credit Liabilities.
"Majority Series B Lenders" shall mean Series B Lenders having at
least 60% of the aggregate amount of the Series B Commitments or, if the Series
B Commitments shall have terminated, Lenders holding at least 60% of the
aggregate unpaid principal amount of the Series B Loans.
"Margin Stock" shall mean "margin stock" within the meaning of
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of the Company to perform its obligations under any of
the Basic Documents to which it is a party, (c) the validity or enforceability
of any of the Basic Documents, (d) the rights and remedies of the Lenders and
the Administrative Agent under any of the Basic Documents or (e) the timely
payment of the principal of or interest on the Loans or the Reimbursement
Obligations or other amounts payable in connection therewith.
"Moody's" shall mean Moody's Investors Services, Inc. or any
successor corporation thereto.
"Moody's Rating" shall mean, at any time, the then current rating
(including the failure to rate) by Moody's of the Company's long-term senior
unsecured Indebtedness.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3 (37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and which is covered by Title IV of ERISA.
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"Net Available Proceeds" shall mean:
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Company and its Subsidiaries in respect of such Casualty Event net
of (A) reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith and (B) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Company or any of its
Subsidiaries in respect of such Casualty Event;
(iii) in the case of any Equity Issuance, the aggregate amount of
all cash received by the Company and its Subsidiaries in respect of such
Equity Issuance net of reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith; and
(iv) in the case of any Reversion, the aggregate amount of all cash
received by the Company or any of its Subsidiaries in respect of such
Reversion net of (A) reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith and (B) any income and excise taxes
payable by the Company or any of its Subsidiaries in respect of such
Reversion.
"Net Cash Payments" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Company and its Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
Payments shall be net of (i) the amount of any legal, accounting and other
professional fees, title and recording tax expenses, commissions and other fees
and expenses paid by the Company and its Subsidiaries in connection with such
Disposition and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Company and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority within three
months of date of such Disposition or the Company or any of its Subsidiaries
uses any applicable tax benefit available to it as set forth on its balance
sheet to reduce such estimated taxes payable within such three month period),
(b) Net Cash Payments shall not include any cash payments of less than $100,000
from any one Disposition or a series of related Dispositions, and (c) Net Cash
Payments shall
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be net of any repayments by the Company or any of its Subsidiaries of
Indebtedness to the extent that (i) such Indebtedness is secured by a Lien on
the Property that is the subject of such Disposition and (ii) the transferee of
(or holder of a Lien on) such Property requires that such Indebtedness be repaid
as a condition to the purchase of such Property.
"Notes" shall mean the promissory notes (if any) executed and
delivered by the Company pursuant to Section 2.08 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean any Investment in (i) direct
obligations of the United States of America or any agency thereof, or
obligations guaranteed by the United States of America, or of any agency
thereof; (ii) commercial paper rated at least A-1 by S&P or P-1 by Moody's;
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of America of any bank or trust company
which is organized under the laws of the United States of America or any state
thereof and has capital, surplus and undivided profits aggregating at least
$1,000,000,000; (iv) shares of any money market or mutual fund not less than 80%
of the assets of which are invested solely in securities or obligations of the
type described in clauses (i) through (iii) above and (v) repurchase agreements
with respect to securities described in clause (i) above entered into with an
office of a bank or trust company meeting the criteria specified in clause (iii)
above, provided in each case that such Investment matures within one year from
the date of acquisition thereof by the Company or a Subsidiary of the Company.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit plan established or maintained
by the Company or any ERISA Affiliate and that is covered by Title IV of ERISA,
other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan, any Reimbursement Obligation or any other amount under this Agreement, any
Note or any other Basic Document that is not paid when due (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due
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date to but excluding the date on which such amount is paid in full equal to 2%
plus the Base Rate as in effect from time to time plus the Applicable Margin for
Base Rate Loans (provided that, if the amount so in default is principal of a
Eurodollar Loan and the due date thereof is a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" for such principal shall be,
for the period for and including such due date to but excluding the last day of
the Interest Period, 2% plus the interest rate for such Loan as provided in
Section 3.02 hereof and, thereafter, the rate provided for above in this
definition)
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
"Principal Office" shall mean the principal office of Chase, located
on the date hereof at 270 Park Avenue, New York, New York 10017.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the quarterly anniversaries of the
Restatement Date; provided that, if any such date is not a Business Day, the
Quarterly Date shall be the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, the next
preceding Business Day).
"Rating Level 1" shall mean (a) the Standard & Poor's Rating is at
or above BBB- (or any successor rating) and (b) the Moody's Rating is at or
above Baa3 (or any successor rating).
"Rating Level 2" shall mean (a) the Standard & Poor's Rating is
below BB- (or any successor rating) or (b) the Moody's Rating is below Ba3 (or
any successor rating).
"Recapture Date" shall mean the last day of the Recapture Period.
"Recapture Period" shall mean each period (a) commencing on the
later of (i) October 29, 1993 and (ii) the day immediately following the last
day of the immediately preceding Recapture Period, and (b) ending on the date on
which the Company and/or its Subsidiaries receives Net Available Proceeds which,
together with all Net Available Proceeds received since the first day of such
Recapture Period, equal or exceeds in the aggregate $1,000,000.
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"Reference Lenders" shall mean Chase and NationsBank, N.A.
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
B, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any
change after the date of this Agreement in Federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including such Lender of or under any Federal, state or foreign
law or regulations (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations
of the Company then outstanding, or which may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, groundwater,
wetlands, land or subsurface strata. The terms "Release" and "Released" used as
a verb shall have a correlative meaning.
"Reserve Requirement" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
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"Restatement Date" shall mean May 29, 1997.
"Restricted Payment" shall mean, with respect to any Person, (a)
dividends (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of such Person or of any
warrants (other than of shares of common stock, warrants or options of such
Person as payment for the exercise price of options or warrants to purchase
common stock of such Person having a fair market value equal to such exercise
price), options or other rights to acquire the same (or to make any payments to
any other Person, such as "phantom stock" payments, where the amount thereof is
calculated with reference to the fair market or equity value of such Person or
any of its Subsidiaries), but excluding dividends payable solely in shares of
common stock or in options, warrants or other rights to purchase such common
stock of such Person or (b) any payment (whether made by such Person or any of
its Subsidiaries) on account of the purchase, redemption, prepayment, defeasance
or other acquisition or retirement of value of any Indebtedness (i) which is
subordinated in right of payment to the prior payment of the Loans or (ii) which
is evidenced by the Senior Notes.
"Reversion" shall mean the termination by the Company or any of its
Subsidiaries of a Plan which results in a payment to the Company or any of its
Subsidiaries of any part of the over-funded portion of such Plan.
"Revolving Credit Security Agreement" shall mean the Revolving
Credit Security Agreement dated as of October 29, 1993 between the Company and
the Agent, a copy of which is attached as Exhibit A-l hereto, as amended by
Section 11.13 (a) hereof and as the same shall be further modified, supplemented
and in effect from time to time.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Security Documents" shall mean, collectively, the Revolving Credit
Security Agreement and the Term Loan Security Agreement.
"Senior Indenture" shall mean the Indenture dated as of March 3,
1993 between the Company and United States Trust Company of New York, as
Trustee, as the same shall be modified and supplemented and in effect from time
to time.
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"Senior Notes" shall mean the Company's 9-3/4% Senior Notes due 2003
issued pursuant to the Senior Indenture, as the same shall be modified and
supplemented and in effect from time to time.
"Senior Subordinated Indenture" shall mean the Indenture dated as of
February 1, 1996 between the Company and Fleet National Bank Connecticut, N.A.,
as Trustee, as the same shall be modified and supplemented and in effect from
time to time.
"Senior Subordinated Notes" shall mean the Company's Senior
Subordinated Notes due 2006 issued pursuant to the Senior Subordinated
Indenture, as the same shall be modified and supplemented and in effect from
time to time.
"Series A Commitment" shall mean, for each Series A Lender, the
obligation of such Lender to make Series A Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Series A Commitment" (as the
same may be reduced from time to time pursuant to Section 2.04 hereof or
increased or reduced from time to time pursuant to Section 11.06 hereof). The
original aggregate principal amount of the Series A Commitments is $100,000,000.
"Series A Commitment Percentage" shall mean, with respect to any
Series A Lender, the ratio of (a) the amount of the Series A Commitment of such
Lender to (b) the aggregate amount of the Series A Commitments of all of the
Lenders.
"Series A Commitment Termination Date" shall mean the fifth
anniversary of the Restatement Date; provided that if such day is not a Business
Day, the Series A Commitment Termination Date shall be the immediately preceding
Business Day.
"Series A Lenders" shall mean (a) on the Amendment Effective Date,
the Lenders having Series A Commitments as indicated on Annex 1 hereto and (b)
thereafter, the Lenders from time to time holding Series A Loans and Series A
Commitments after giving effect to any assignments thereof permitted by Section
11.06 hereof.
"Series A Loans" shall mean the loans provided for by Section
2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Series A Notes" shall mean the promissory notes provided for by
Section 2.08 (a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as
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the same shall be modified and supplemented and in effect from time to time.
"Series B Commitment" shall mean, for each Series B Lender, the
obligation of such Lender to make Series B Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Series B Commitment" (as the
same may be reduced from time to time pursuant to Section 2.04 hereof or
increased or reduced from time to time pursuant to Section 11.06 hereof). The
original aggregate principal amount of the Series B Commitments is $25,000,000.
"Series B Commitment Reduction Dates" shall mean the eight Quarterly
Dates commencing with the Quarterly Date falling on or nearest to the date three
years and three months after the Restatement Date and ending on the Series B
Commitment Termination Date.
"Series B Commitment Termination Date" shall mean the fifth
anniversary of the Restatement Date; provided that if such day is not a Business
Day, the Series B Commitment Termination Date shall be the immediately preceding
Business Day.
"Series B Lenders" shall mean (a) on the Amendment Effective Date,
the Lenders having Series B Commitments as indicated on Annex 1 hereto and (b)
thereafter, the Lenders from time to time holding Series B Loans and Series B
Commitments after giving effect to any assignments thereof permitted by Section
11.06 hereof.
"Series B Loans" shall mean the loans provided for by Section
2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Series B Notes" shall mean the promissory notes provided for by
Section 2.08(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"S&P" shall mean Standard & Poor's Rating Group or any successor
thereto.
"Specified Subsidiary" shall mean each of BE Aerospace
International, Inc., BE Aerospace (France) S.A.R.L. and Nordskog Industries,
Inc., but only until all (or, in the case of a Subsidiary that is not a Domestic
Subsidiary, 65%) of its shares that are owned by the Company become subject to
the Lien of the Revolving Credit Security Agreement or are otherwise pledged to
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the Administrative Agent for the benefit of the Series A Lenders pursuant to
documentation in form and substance reasonably satisfactory to the Majority
Series A Lenders.
"Standard & Poor's Rating" shall mean, at any time, the then current
rating (including the failure to rate) by S&P of the Company's long-term senior
unsecured Indebtedness.
"Subsidiary" shall mean, for any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. "Wholly Owned Subsidiary" shall mean any such corporation,
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are so owned or controlled.
"Term Loan Security Agreement" shall mean the Term Loan Security
Agreement dated as of October 29, 1993, a copy of which is attached as Exhibit
A-2 hereto, as amended by Section 11.13(b) hereof and as the same shall be
further modified, supplemented and in effect from time to time.
"Total Funded Debt" shall mean, as at any date, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of all Funded Debt.
"Type" shall have the meaning assigned to such term in Section 1.03
hereof.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those
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used in the preparation of the latest financial statements furnished to the
Lenders hereunder (which, prior to the delivery of the first financial
statements under Section 8.01 hereof, shall mean the audited financial
statements as at February 22, 1997 referred to in Section 7.02 hereof). All
calculations made for the purposes of determining compliance with this Agreement
shall (except as otherwise expressly provided herein) be made by application of
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the latest annual or quarterly financial
statements furnished to the Lenders pursuant to Section 8.01 hereof (or, prior
to the delivery of the first financial statements under Section 8.01 hereof,
used in the preparation of the audited financial statements as at February 22,
1997 referred to in Section 7.02 hereof) unless (i) the Company shall have
objected to determining such compliance on such basis at the time of delivery of
such financial statements or (ii) the Majority Lenders shall so object in
writing within 30 days after delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 8.01 hereof, shall mean
the audited financial statements as at February 22, 1997 referred to in Section
7.02 hereof)
(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the fiscal year of the Company
shall end on the last Saturday in February of each year, and the last days of
the first three fiscal quarters shall fall on the last Saturday in each of May,
August and November of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
Loan) refers to whether such Loan is a Series A Loan or a Series B Loan, each of
which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a
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Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may
be identified by both Class and Type.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
(a) Series A Loans. Each Series A Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series A Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Series A Commitment of such Lender as in effect from time to time (such
Loans, together with the "Series A Loans" made under the Existing Credit
Agreement, being herein called "Series A Loans"), provided that in no event
shall the aggregate principal amount of all Series A Loans, together with the
aggregate amount of all Letter of Credit Liabilities, exceed the aggregate
amount of the Series A Commitments or the Borrowing Base as in effect from time
to time. Subject to the terms and conditions of this Agreement, the Company may
borrow, repay and reborrow the amount of the Series A Commitments by means of
Base Rate Loans and Eurodollar Loans and may Convert Series A Loans of one Type
into Series A Loans of another Type (as provided in Section 2.09 hereof) or
Continue Series A Loans of one Type as Series A Loans of the same Type (as
provided in Section 2.09 hereof); provided that prior to the earlier of (i) the
date that the Administrative Agent shall have notified the Company that it has
completed its syndication of the Commitments or (ii) the date 90 days after the
Restatement Date, all Eurodollar Loans must have Interest Periods of one month.
(b) Series B Loans. Each Series B Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series B Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Series B Commitment of such Lender as in effect from time to time (such
Loans, together with the "Series B Loans" made under the Existing Credit
Agreement, being herein called "Series B Loans"), provided that in no event
shall the aggregate principal amount of all Series B Loans exceed the aggregate
amount of the Series B Commitments as in effect from time to time. Subject to
the terms and conditions of this Agreement, the Company may borrow, repay and
reborrow the amount of the Series B Commitments by means of Base Rate Loans and
Eurodollar Loans and may Convert Series B Loans of one Type into Series B Loans
of another Type (as provided in Section 2.09 hereof) or Continue Series B Loans
of one Type as Series B Loans of the same Type (as provided in Section 2.09
hereof); provided that prior to the earlier of (i)
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the date that the Administrative Agent shall have notified the Company that it
has completed its syndication of the Commitments or (ii) the date 90 days after
the Restatement Date, all Eurodollar Loans must have Interest Periods of one
month.
(c) Limit on Eurodollar Loans. No more than six separate Interest
Periods in respect of Eurodollar Loans of either Class from each Lender may be
outstanding at any one time.
2.02 Borrowings. The Company shall give the Administrative Agent
(which shall promptly notify the Lenders) notice of each borrowing hereunder as
provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on the
date specified for each borrowing hereunder, each Lender shall make available
the amount of the Loan or Loans to be made by it on such date to the
Administrative Agent, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Chase
at the Principal Office designated by the Company.
2.03 Letters of Credit. Subject to the terms and conditions of this
Agreement, the Series A Commitments may be utilized, upon the request of the
Company, in addition to the Series A Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "Letters of Credit") for account of the Company or any of its
Subsidiaries (as specified by the Company), provided that in no event shall (i)
the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Series A Loans, exceed the aggregate amount of
the Series A Commitments as in effect from time to time, (ii) the outstanding
aggregate amount of all Letter of Credit Liabilities exceed $15,000,000 and
(iii) the expiration date of any Letter of Credit extend beyond the earlier of
the Series A Commitment Termination Date and the date twelve months following
the issuance of such Letter of Credit. The following additional provisions shall
apply to Letters of Credit:
(a) The Company shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than thirty days
preceding the Series A Commitment Termination Date) each Letter of Credit
is to be issued and the account party or parties therefor and describing
in reasonable detail the proposed terms of such
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Letter of Credit (including the beneficiary thereof) and the nature of the
transactions or obligations proposed to be supported thereby (including
whether such Letter of Credit is to be a commercial letter of credit or a
standby letter of credit). Upon receipt of any such notice, the
Administrative Agent shall advise the Issuing Lender of the contents
thereof.
(b) On each day during the period commencing with the issuance by
the Issuing Lender of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Series A Commitment of each
Series A Lender shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to such Lender's Series A Commitment
Percentage of the then undrawn face amount of such Letter of Credit. Each
Series A Lender (other than the Issuing Lender) agrees that, upon the
issuance of any Letter of Credit hereunder, it shall automatically acquire
a participation in the Issuing Lender's liability under such Letter of
Credit in an amount equal to such Lender's Series A Commitment Percentage
of such liability, and each Series A Lender (other than the Issuing
Lender) thereby shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and shall be unconditionally
obligated to the Issuing Lender to pay and discharge when due, its Series
A Commitment Percentage of the Issuing Lender's liability under such
Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Company (through the Administrative Agent) of the
amount to be paid by the Issuing Lender as a result of such demand and the
date on which payment is to be made by the Issuing Lender to such
beneficiary in respect of such demand. Notwithstanding the identity of the
account party of any Letter of Credit, the Company hereby unconditionally
agrees to pay and reimburse the Administrative Agent for account of the
Issuing Lender for the amount of each demand for payment under such Letter
of Credit at or prior to the date on which payment is to be made by the
Issuing Lender to the beneficiary thereunder, without presentment, demand,
protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.03, the Company shall advise the Administrative Agent
whether or not the Company intends to borrow hereunder to finance its
obligation to reimburse the Issuing Lender for the amount of the related
demand for payment and, if it does, submit a notice of such borrowing
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as provided in Section 4.05 hereof. In the event that the Company fails to
so advise the Administrative Agent, or if the Company fails to reimburse
the Issuing Lender for a demand for payment under a Letter of Credit by
the date of such payment, the Administrative Agent shall give each Series
A Lender prompt notice of the amount of the demand for payment, specifying
such Lender's Series A Commitment Percentage of the amount of the related
demand for payment.
(e) Each Series A Lender (other than the Issuing Lender) shall pay
to the Administrative Agent for account of the Issuing Lender at the
Principal Office in Dollars and in immediately available funds, the amount
of such Lender's Series A Commitment Percentage of any payment under a
Letter of Credit upon notice by the Issuing Lender (through the
Administrative Agent) to such Series A Lender requesting such payment and
specifying such amount; provided that such Series A Lender shall not be
obligated to reimburse the Issuing Bank if such payment is the result of
the willful misconduct or gross negligence of the Issuing Bank in
determining that the request or demand for such payment complied with the
terms of such Letter of Credit. Each such Series A Lender's obligation to
make such payments to the Administrative Agent for account of the Issuing
Lender under this clause (e), and the Issuing Lender's right to receive
the same, shall be absolute and unconditional and shall not be affected by
any circumstance whatsoever, including, without limitation, (i) the
failure of any other Series A Lender to make its payment under this clause
(e), the financial condition of the Company (or any other account party),
the existence of any Default or (ii) the termination of the Commitments.
Each such payment to the Issuing Lender shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Series A Lender
shall default in its obligation to make any such payment to the
Administrative Agent for account of the Issuing Lender, for so long as
such default shall continue the Administrative Agent shall at the request
of the Issuing Bank withhold from any payments received by the
Administrative Agent under this Agreement or any Note for account of such
Series A Lender the amount so in default and the Administrative Agent
shall pay the same to the Issuing Lender in satisfaction of such defaulted
obligation.
(f) Upon the making of each payment by a Series A Lender to the
Issuing Lender pursuant to clause (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of the Administrative Agent, the Issuing Lender or such Lender,
acquire (i) a participation in an amount equal to such
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payment in the Reimbursement Obligation owing to the Issuing Lender by the
Company hereunder and under the Letter of Credit Documents relating to
such Letter of Credit and (ii) a participation in a percentage equal to
such Lender's Series A Commitment Percentage in any interest or other
amounts payable by the Company hereunder and under such Letter of Credit
Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Lender
pursuant to clause (g) of this Section 2.03). Upon receipt by the Issuing
Lender from or for account of the Company of any payment in respect of any
Reimbursement Obligation or any such interest or other amount (including
by way of setoff or application of proceeds of any collateral security)
the Issuing Lender shall promptly pay to the Administrative Agent for
account of each Series A Lender entitled thereto, such Series A Lender's
Series A Commitment Percentage of such payment, each such payment by the
Issuing Lender to be made in the same money and funds in which received by
the Issuing Lender. In the event any payment received by the Issuing
Lender and so paid to the Series A Lenders hereunder is rescinded or must
otherwise be returned by the Issuing Lender, each Series A Lender shall,
upon the request of the Issuing Lender (through the Administrative Agent),
repay to the Issuing Lender (through the Administrative Agent) the amount
of such payment paid to such Lender, with interest as specified in clause
(j) of this Section 2.03.
(g) The Company shall pay to the Administrative Agent for account of
the Series A Lenders in respect of each Letter of Credit a letter of
credit fee in an amount equal to the product of the Applicable Margin for
Eurodollar Loans times the daily average undrawn amount of such Letter of
Credit for the period from and including the date of issuance of such
Letter of Credit to and including the date such Letter of Credit is drawn
in full, expires or is terminated (such fee to be non-refundable, to be
paid in arrears on each Quarterly Date and on the Series A Commitment
Termination Date and to be calculated, for any day, after giving effect to
any payments made under such Letter of Credit on such day). In addition,
the Company shall pay to the Administrative Agent for account of the
Issuing Lender all commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Lender from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative
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Agent) to each Series A Lender and the Company a notice describing the
aggregate amount of all Letters of Credit outstanding at the end of such
month. Upon the request of any Series A Lender from time to time, the
Issuing Lender shall deliver any other information reasonably requested by
such Lender with respect to each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 6
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Issuing Lender consistent
with its then current practices and procedures with respect to letters of
credit of the same type and (ii) the Company shall have executed and
delivered such applications, agreements and other instruments relating to
such Letter of Credit as the Issuing Lender shall have reasonably
requested consistent with its then current practices and procedures with
respect to letters of credit of the same type, provided that in the event
of any conflict between any such application, agreement or other
instrument and the provisions of this Agreement or any Security Document,
the provisions of this Agreement and the Security Documents shall control.
(j) To the extent that any Series A Lender fails to pay any amount
required to be paid pursuant to clause (e) or (f) of this Section 2.03 on
the due date therefor, such Lender shall pay interest to the Issuing
Lender (through the Administrative Agent) on such amount from and
including such due date to but excluding the date such payment is made (i)
during the period from and including such due date to but excluding the
date three Business Days thereafter, at a rate per annum equal to the
Federal Funds Rate (as in effect from time to time) and (ii) thereafter,
at a rate per annum equal to the Base Rate (as in effect from time to
time) plus 2%.
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (x) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (y) each Series
A Lender shall have consented thereto.
Credit Agreement
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(l) Pursuant to Section 2.03 of the Existing Credit Agreement, Chase
has issued the Letters of Credit identified on Schedule V hereto (the
"Existing Letters of Credit"). Each Series A Lender hereby agrees that
each Existing Letter of Credit shall constitute, on and after the
Amendment Effective Date, a Letter of Credit for all purposes of this
Agreement.
The Company hereby indemnifies and holds harmless each Series A Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses which such Lender or the Administrative Agent may
incur (or which may be claimed against such Lender or the Administrative Agent
by any Person whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by the Issuing Lender under
any Letter of Credit; provided that the Company shall not be required to
indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) in the case of the Issuing
Lender, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the
other obligations of the Company, any Lender or the Administrative Agent under
this Agreement.
2.04 Changes of Commitments.
(a) Series A Commitments.
(i) The Series A Commitments shall terminate on the Series A
Commitment Termination Date.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series A Loans or Letter of Credit Liabilities are
outstanding, to terminate the Series A Commitments and (y) to reduce the
aggregate unused amount of the Series A Commitments (for which purpose use
of the Series A Commitments shall be deemed to include the aggregate
amount of Letter of Credit Liabilities); provided that (A) the Company
shall give notice of each such termination or reduction as provided in
Section 4.05 hereof, (B) each partial reduction shall be in an aggregate
amount at least equal to $5,000,000 or in multiples of $1,000,000 in
excess thereof and (C) the aggregate amount of the Series A Commitments
may not be (I) terminated so long as
Credit Agreement
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the Series B Commitments are outstanding or (II) reduced below the
aggregate amount of the Series B Commitments then outstanding.
(b) Series B Commitments.
(i) The Series B Commitments shall terminate on the Series B
Commitment Termination Date. In addition, the aggregate amount of the
Series B Commitments shall be automatically reduced on each Series B
Commitment Reduction Date by an amount equal to the product of (x) the
aggregate amount of the Series B Commitments as originally in effect times
(y) 12.5%.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series B Loans are outstanding, to terminate the
Series B Commitments and (y) to reduce the aggregate amount of the Series
B Commitments; provided that (A) the Company shall give notice of each
such termination or reduction as provided in Section 4.05 hereof; (B) each
partial reduction shall be in an aggregate amount at least equal to
$5,000,000 or in multiples of $1,000,000 in excess thereof; and (C) to the
extent that, after giving effect to any such reduction, the aggregate
principal amount of the Series B Loans would exceed the Series B
Commitments, the Company shall prepay the Series B Loans.
(c) All Commitments. The Commitments once terminated or reduced may
not be reinstated.
2.05 Commitment Fee. The Company shall pay to the Administrative
Agent for account of (i) each Series A Lender a commitment fee on the daily
average unused amount of such Lender's Series A Commitment (for which purpose
Letter of Credit Liabilities shall be deemed to be a use of any Lender's Series
A Commitment) and (ii) each Series B Lender a commitment fee on the daily
average unused amount of such Lender's Series B Commitment, for the period from
and including the Amendment Effective Date to but not including the date such
Commitment is terminated, at a rate per annum equal to the Commitment Fee Rate.
Accrued commitment fee shall be payable on each Quarterly Date and on the date
the relevant Commitments are terminated.
2.06 Lending Offices. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
Lender to make any Loan to be made by it on the
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date specified therefor shall not relieve any other Lender of its obligation to
make its Loan on such date, but neither any Lender nor the Administrative Agent
shall be responsible for the failure of any other Lender to make a Loan to be
made by such other Lender, and no Lender shall have any obligation to the
Administrative Agent (except as provided in Section 4.06 hereof) or any other
Lender for the failure by such Lender to make any Loan required to be made by
such Lender.
2.08 Evidence of Debt.
(a) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Company to such Lender
resulting from each Loan made or continued hereunder by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made or continued hereunder, the Class
and Type thereof and the Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender's
share thereof.
(c) The entries made in the accounts maintained pursuant to
paragraph (a) or (b) of this Section 2.08 shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Company
to repay the Loans in accordance with the terms of this Agreement.
(d) Any Lender may request that Loans made or continued by it
hereunder be evidenced by a promissory note(s). In such event, the Company, at
its own expense, shall prepare, execute and deliver to such Lender a promissory
note(s) payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and in a form approved by the
Administrative Agent and such note(s) shall be evidence of such Loans (and all
amounts payable in respect thereof).
2.09 Optional Prepayments and Conversions or Continuations of Loans.
Subject to Sections 4.04 and 5.05 hereof, the Company shall have the right to
prepay Loans, or to Convert Loans of one Type into Loans of another Type or
Continue Loans of one Type as Loans of the same Type, at any time or from
Credit Agreement
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time to time, provided that the Company shall give the Administrative Agent
notice of each such prepayment, Conversion or Continuation as provided in
Section 4.05 hereof (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder).
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Company to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
(a) Borrowing Base. Until the Series A Commitment Termination Date,
the Company shall from time to time prepay the Series A Loans (and/or provide
cover for Letter of Credit Liabilities as specified in clause (f) below) in such
amounts as shall be necessary so that at all times the aggregate outstanding
amount of the Series A Loans together with the outstanding Letter of Credit
Liabilities shall not exceed the Borrowing Base, such amount to be applied,
first, to Series A Loans outstanding and, second, as cover for Letter of Credit
Liabilities outstanding.
(b) Casualty Events. Unless the Company or any of its Subsidiaries,
as the case may be, shall have irrevocably committed to repair or replace any
Property of the Company or such Subsidiary affected by a Casualty Event, on the
date 30 days following the receipt by the Company of the proceeds of insurance,
condemnation award or other compensation in respect of such Casualty Event
affecting such Property (or upon such earlier date as the Company or such
Subsidiary, as the case may be, shall have determined not to repair or replace
the Property affected by such Casualty Event), the Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (f) below), and the Commitments shall be subject to automatic reduction,
in an aggregate amount, if any, equal to 75% of the Net Available Proceeds of
such Casualty Event not theretofore applied to the repair or replacement of such
Property (or reserved by the Company for application to such purposes), such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10. Nothing in this clause (b)
shall be deemed to limit any obligation of the Company or any of its
Subsidiaries pursuant to any of the Security Documents to remit to a collateral
or similar account (including, without limitation, the
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Collateral Account) maintained by the Administrative Agent pursuant to any of
the Security Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event.
(c) Recapture of Proceeds from Asset Sales. In the event of a
Disposition, the Company shall deposit 75% of the Net Available Proceeds
therefrom into the Collateral Account no later than five Business Days after
receipt thereof; provided that prior to such deposit the Company may invest such
Net Available Proceeds, or after such deposit the Company may withdraw such Net
Available Proceeds from the Collateral Account within 270 days after such
Disposition so long as immediately thereafter such Net Available Proceeds are
invested, in Property to be used by the Company or any of its Subsidiaries in
the lines of business in which the Company or any of its Subsidiaries is engaged
as of the Restatement Date or in any business related thereto. No later than 270
days following the occurrence of any such Disposition, the Company will deliver
to the Lenders a statement, certified by the chief financial officer of the
Company, in form and detail satisfactory to the Administrative Agent, of the
amount of the Net Available Proceeds of such Disposition not applied as
contemplated by the immediately preceding sentence and, on the first Recapture
Date thereafter, the Company shall withdraw the remaining Net Available Proceeds
from the Collateral Account and prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in clause (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 75% of the Net Available Proceeds received or which become available
for prepayment or reduction during such Recapture Period ending on such
Recapture Date, such prepayment and reduction to be effected in each case in the
manner and to the extent specified in clause (e) of this Section 2.10. In
addition to the foregoing, to the extent the remaining 25% of the Net Available
Proceeds from such Disposition would become "Excess Proceeds" (as defined in the
Senior Subordinated Indenture) under clause (b) of Section 1016 of the Senior
Subordinated Indenture (the "Remainder Amount"), the Company shall, immediately
prior to such Remainder Amount becoming "Excess Proceeds" as aforesaid, prepay
the Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (f) below), and the Commitments shall be subject to automatic reduction,
in an aggregate amount equal to such Remainder Amount, such prepayment and
reduction to be effected in each case in the manner and to the extent specified
in clause (e) of this Section 2.10. Nothing in this Section 2.10(c) shall be
deemed to excuse or otherwise limit the obligation of the Company to obtain the
consent of the Majority Lenders pursuant to Section 8.05 hereof to any
Disposition not otherwise permitted hereunder.
Credit Agreement
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(d) Reversions. Without limiting the obligation of the Company under
Section 8.01(c) hereof, upon any Reversion the Company shall prepay the Loans
(and/or provide cover for Letter of Credit Liabilities as specified in clause
(f) below), and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 75% of the Net Available Proceeds thereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10.
(e) Application. Prepayments and reductions of Commitments described
in the above clauses of this Section 2.10 (other than clause (a) above) shall be
effected as follows:
(i) first, the Series B Commitments shall be reduced in an amount
equal to the prepayment or reduction specified in such clauses (and to the
extent that, after giving effect to such reduction, the aggregate
principal amount of Series B Loans would exceed the Series B Commitments,
the Company shall prepay Series B Loans (such prepayments shall be applied
first to Base Rate Loans and then to Eurodollar Loans) in an aggregate
amount equal to such excess); and
(ii) second, any excess over the amount referred to in the foregoing
clause (i) shall automatically reduce the Series A Commitments (and to the
extent that, after giving effect to such reduction, the aggregate
principal amount of Series A Loans, together with the aggregate amount of
all Letter of Credit Liabilities, would exceed the Series A Commitments,
the Company shall, first, prepay Series A Loans (such prepayments shall be
applied first to Base Rate Loans and then to Eurodollar Loans) and,
second, provide cover for Letter of Credit Liabilities as specified in
clause (f) below, in an aggregate amount equal to such excess).
(f) Cover for Letter of Credit Liabilities. In the event that the
Company shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided therein as collateral security in the first
instance for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of the Letter of Credit Liabilities
paid in full.
Credit Agreement
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Section 3. Payments of Principal and Interest.
3.02. Repayment of Loans.
(a) The Company hereby promises to pay to the Administrative Agent
for account of each Series A Lender the entire outstanding principal amount of
such Lender's Series A Loans, and each Series A Loan shall mature, on the Series
A Commitment Termination Date.
(b) The Company hereby promises to pay to the Administrative Agent
for account of each Series B Lender the entire outstanding principal amount of
such Lender's Series B Loans, and each Series B Loan shall mature, on the Series
B Commitment Termination Date. In addition, if following any Series B Commitment
Reduction Date the aggregate principal amount of the Series B Loans shall exceed
the Series B Commitments, the Company shall pay Series B Loans in an aggregate
amount equal to such excess.
3.02 Interest. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin (if any)
and
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period p1us the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Company hereunder or under the Notes held by such Lender to or for account
of such Lender, which shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three
Credit Agreement
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months, at three-month intervals following the first day of such Interest
Period, and (iii) in the case of any Loan, upon the payment or prepayment
thereof or the Conversion of such Loan to a Loan of another Type (but only on
the principal amount so paid, prepaid or Converted), except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Administrative Agent shall give notice thereof to the
Lenders to which such interest is payable and to the Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Company under any
other Basic Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Company, not later than 1:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day)
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Company with such
Lender (with notice to the Company and the Administrative Agent).
(c) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Company hereunder to
which such payment is to be applied (and in the event that the Company fails to
so specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of
Section 2.03 (e) hereof, each payment received by
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the Administrative Agent under this Agreement or any Note for account of any
Lender shall be paid by the Administrative Agent promptly to such Lender, in
immediately available funds, for account of such Lender's Applicable Lending
Office for the Loan or other obligation in respect of which such payment is
made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 hereof shall be made from the relevant Lenders, each payment of
commitment fee under Section 2.05 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular Class
under Section 2.04 hereof and under Section 2.10(e) hereof shall be applied to
the respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class; (b) the
making, Conversion and Continuation of Series A Loans and Series B Loans of a
particular Type (other than Conversions provided for by Section 5.04 hereof)
shall be made pro rata among the relevant Lenders according to the amounts of
their respective Series A and Series B Commitments (in the case of making of
Loans) or their respective Series A and Series B Loans (in the case of
Conversions and Continuations of Loans) and the then current Interest Period for
each Eurodollar Loan shall be coterminous; (c) each payment or prepayment of
principal of Series A Loans or Series B Loans by the Company shall be made for
account of the relevant Lenders pro rata in accordance with the respective
unpaid principal amounts of the Loans of such Class held by them; and (d) each
payment of interest on Series A Loans and Series B Loans by the Company shall be
made for account of the relevant Lenders pro rata in accordance with the amounts
of interest on such Loans then due and payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans and Reimbursement
Obligations and commitment fee and letter of credit fee shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for
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each date that the Base Rate is calculated by reference to the Federal Funds
Rate, interest on Base Rate Loans shall be computed on the basis of a year of
360 days and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
to Section 2.10 hereof and Conversions or prepayments made pursuant to Section
5.04 hereof, (i) each borrowing, Conversion and partial prepayment of principal
of Series A Loans shall be in multiples of $1,000,000 and (ii) each borrowing,
Conversion or partial prepayment of principal of Series B Loans shall be in
multiples of $1,000,000 (borrowings, Conversions or prepayments of or into Loans
of different Types, or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period). Anything in this Agreement to the contrary notwithstanding,
the aggregate principal amount of Eurodollar Loans having the same Interest
Period shall be in an amount at least equal to $5,000,000 or in multiples of
$1,000,000 in excess thereof and, if any Eurodollar Loans would otherwise be in
a lesser principal amount for any period, such Loans shall be Base Rate Loans
during such period.
4.05 Certain Notices. Notices by the Company to the Administrative
Agent of terminations or reductions of the Commitments, of borrowings,
Conversions, Continuations and optional prepayments of Loans and of Classes of
Loans and of Types of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 10:00 a.m. New York time on the number of Business Days prior to
the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of, or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
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Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Company fails to select the Type of Loan, or the duration of any Interest Period
for any Eurodollar Loan, within the time period and otherwise as provided in
this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender, or a participation in a Letter of Credit drawing to be
acquired by such Lender, hereunder or (in the case of the Company) a payment to
the Administrative Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the
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Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Administrative
Agent, without limiting the obligation of the Company under Section 3.02
hereof to pay interest to such recipient(s) at the Post-Default Rate in
respect of the Required Payment) and
(ii) if the Required Payment shall represent proceeds of a loan to
be made by the Lenders to the Company, the Payor and the Company shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the rate of interest provided for such
Required Payment pursuant to Section 3.02 hereof (and, in case the Company
shall return the Required Payment to the Administrative Agent, without
limiting any claim the Company may have against the Payor in respect of
the Required Payment).
4.07 Sharing of Payments. Etc.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option, to offset balances held by
it for account of the Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
the Company), in which case it shall promptly notify the Company and the
Administrative Agent thereof, provided that such Lender's failure to give such
notice shall not affect the validity thereof.
(b) If any Lender shall obtain from the Company payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Basic Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater
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percentage of the principal of or interest on the Loans of such Class or Letter
of Credit Liabilities or such other amounts then due hereunder or thereunder by
the Company to such Lender than the percentage received by any other Lender, it
shall promptly purchase from such other Lenders participations in (or, if and to
the extent specified by such Lender, direct interests in) the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or Letter of
Credit Liabilities or such other amounts, respectively, owing to each of the
Lender. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by
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such Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(other than taxes imposed on or measured by the overall net income of such
Lender or of its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender
(including, without limitation, the Commitments of such Lender hereunder);
or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.04 hereof shall be applicable), provided that
such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a)
of this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender that includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if such
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Lender so elects by notice to the Company (with a copy to the Administrative
Agent), the obligation of such Lender to make or Continue, or to Convert Base
Rate Loans into, Eurodollar Loans hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.04 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the bank
holding company of which such Lender is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law and whether or not failure to complete therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory Change
or (ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord (including, without limitation, the Final Risk-Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based
Capital Guidelines of the Office of the Comptroller of the Currency (12 C.F.R.
Part 3, Appendix A)), of capital in respect of its Commitments or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such Lender (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(c) and Section 5.06 hereof, "Basle Accord" shall
mean the proposals for risk-based capital framework described by the Basle
Committee on Banking Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
(d) Each Lender shall notify the Company of any event occurring
after the Amendment Effective Date entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within
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45 days, after such Lender obtains actual knowledge thereof; provided that (i)
if any Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Company a certificate setting forth the basis and amount of
each request by such Lender for compensation under paragraph (a) or (c) of this
Section 5.01. Determinations and allocations by any Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or
(b) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (c) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent reasonably determines, which
determination shall be conclusive, that quotations of interest rates for
the relevant deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof are not being provided in the relevant
amounts or for the relevant maturities for purposes of determining rates
of interest for Eurodollar Loans as provided herein; or
(b) if the related Loans are Series A Loans, the Majority Series A
Lenders or, if the related Loans are Series B Loans, the Majority Series B
Lenders reasonably determine, which determination shall be conclusive, and
notify the Administrative Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rate of interest for Eurodollar Loans
for such Interest Period is to be determined are not likely adequately to
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cover the cost to such Lenders of making or maintaining Eurodollar Loans
for such Interest Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Company shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Administrative Agent) and such Lender's obligation to make
or Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall
be suspended until such time as such Lender may again make and maintain
Eurodollar Loans (in which case the provisions of Section 5.04 hereof shall be
applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof,
such Lender's Eurodollar Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion required by Section 5.01(b) or 5.03
hereof, on such earlier date as such Lender may specify to the Company with a
copy to the Administrative Agent) and, unless and until such Lender gives notice
as provided below that the circumstances specified in Section 5.01 or 5.03
hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
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If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, Types and Interest
Periods) in accordance with their respective Commitments.
5.05 Compensation. The Company shall pay to the Administrative Agent
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 9 hereof) on
a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with
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maturities comparable to such period (as reasonably determined by such Lender).
5.06 Additional Costs in Respect of Letters of Credit. Without
limiting the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing or maintaining participations in) or
maintaining its obligation hereunder to issue (or purchase participations in)
any Letter of Credit hereunder or reduce any amount receivable by any Lender
hereunder in respect of any Letter of Credit (which increases in cost, or
reductions in amount receivable, shall be the result of such Lender's or
Lenders' reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Lender or Lenders (through
the Administrative Agent), the Company shall pay immediately to the
Administrative Agent for account of such Lender or Lenders, from time to time as
specified by such Lender or Lenders (through the Administrative Agent), such
additional amounts as shall be sufficient to compensate such Lender or Lenders
(through the Administrative Agent) for such increased costs or reductions in
amount. A statement as to such increased costs or reductions in amount incurred
by any such Lender or Lenders, submitted by such Lender or Lenders to the
Company shall be conclusive in the absence of manifest error as to the amount
thereof, provided that the determination of such increased costs or reductions
are made on a reasonable basis.
5.07 U.S. Taxes.
(a) The Company agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Lender hereunder unless such Lender is, on
the Amendment Effective Date (or on the date
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it becomes a Lender as provided in Section 11.06 (b) hereof) and on the
date of any change in the Applicable Lending Office of such Lender, either
entitled to submit a Form 1001 (relating to such Lender and entitling it
to a complete exemption from withholding on all interest to be received by
it hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the Loans),
or
(ii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.O7(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Company
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
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Section 6. Conditions Precedent.
6.01 Conditions to Effectiveness. The effectiveness of the amendment
and restatement of the Existing Credit Agreement provided for hereby is subject
to the receipt by the Administrative Agent of the following documents, each of
which shall be satisfactory to the Administrative Agent (and to the extent
specified below, to each Lender) in form and substance:
(a) Corporate Documents. The following documents, each certified as
indicated below:
(i) a copy of the charter, as amended and in effect, of the
Company certified as of a recent date by the Secretary of State of
the State of Delaware (or, if there have been no modifications to
such charter from the copy thereof delivered by the Company pursuant
to the Existing Credit Agreement, a certificate of the Secretary or
an Assistant Secretary of the Company to that effect), and a
certificate from such Secretary of State dated as of a recent date
as to the good standing of and charter documents filed by the
Company;
(ii) a certificate of the Secretary or an Assistant Secretary
of the Company, dated the Amendment Effective Date and certifying
(A) that attached thereto is a true and complete copy of the by-laws
of the Company as amended and in effect at all times from the date
on which the resolutions referred to in clause (B) below were
adopted to and including the date of such certificate (or if there
have been no modifications to such by-laws from the copy thereof
delivered by the Company pursuant to the Existing Credit Agreement,
a certificate of the Secretary or an Assistant Secretary of the
Company to that effect), (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the board of directors
of the Company authorizing the execution, delivery and performance
of the amendment and restatement of the Existing Credit Agreement
and such other of the Basic Documents to which the Company is or is
intended to be a party and the extensions of credit hereunder, and
that such resolutions have not been modified, rescinded or amended
and are in full force and effect, (C) that the charter of the
Company has not been amended since the date of the certification
thereto furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer of the Company
executing the amendment and restatement of the Existing Credit
Agreement and such other of the Basic Documents
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to which the Company is intended to be a party and each other
document to be delivered by the Company from time to time in
connection therewith (and the Administrative Agent and each Lender
may conclusively rely on such certificate until it receives notice
in writing from the Company to the contrary); and
(iii) a certificate of another officer of the Company as to
the incumbency and specimen signature of the Secretary or Assistant
Secretary, as the case may be, of the Company.
(b) Officer's Certificate. A certificate of a senior officer of the
Company, dated the Amendment Effective Date, to the effect that (i) no
Default shall have occurred and be continuing and (ii) the representations
and warranties made by the Company in Section 7 hereof, and in each of the
other Basic Documents, are true and correct on and as of the Amendment
Effective Date with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date)
(c) Opinion of Counsel to the Company. An opinion, dated the
Amendment Effective Date, of Ropes & Gray, counsel to the Company, in form
and substance satisfactory to the Administrative Agent (and the Company
hereby instructs such counsel to deliver such opinions to the Lenders and
the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated
the Amendment Effective Date, of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, in form and substance satisfactory to the
Administrative Agent.
(e) Financial Information. True, correct and complete copies of the
financial statements, projections and other information referred to in
Section 7.02 hereof.
(f) Approvals and Consents. Evidence that all necessary governmental
and third party filings, licenses, permits, consents and approvals have
been obtained by the Company and are in full force and effect on the
Amendment Effective Date.
(g) Payment of Fees and Expenses. Evidence that (i) all principal of
and interest on, and all other amount owing in respect of, the loans made
by the Existing Lenders under the Existing Credit Agreement shall have
been paid in full
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and (ii) all fees and expenses payable to the Existing Lenders and the
Administrative Agent under the Existing Credit Agreement accrued to the
Amendment Effective Date and unpaid and such fees as the Company shall
have agreed to pay or deliver to the Administrative Agent in connection
herewith, including, without limitation, the reasonable fees and expenses
of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase in
connection with the negotiation, preparation, execution and delivery of
the amendment and restatement of the Existing Credit Agreement and the
Notes and the other Basic Documents and the extensions of credit hereunder
(to the extent that statements for such fees and expenses have been
delivered to the Company) shall have been paid in full.
(h) Governmental Proceedings: Etc. Evidence that no litigation or
similar proceeding is threatened by any governmental agency or authority
or any other person with respect to the execution and delivery of the
amendment and restatement of the Existing Credit Agreement, the Notes and
the other Basic Documents, and the consummation of the transactions herein
or therein contemplated which, in each case, the Lenders shall reasonably
determine is likely to have a material adverse effect on (i) the assets,
business, operations, or condition (financial or otherwise) or prospects
of the Company and its Subsidiaries taken as a whole or (ii) the timely
payment of the Loans and interest thereon or the enforceability of the
Basic Documents or the rights and remedies thereunder.
(i) Leverage Ratio. A certificate of a senior officer of the
Company, dated the Amendment Effective Date, setting forth the Leverage
Ratio as at the Amendment Effective Date.
(i) Other Documents. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Chase may reasonably
request.
6.02 Initial and Subsequent Extensions of Credit. The obligation of
the Lenders to make any Loan or otherwise extend any credit to the Company upon
the occasion of each borrowing or other extension of credit hereunder (including
the initial borrowing) is subject to the further conditions precedent that:
(a) Both immediately prior to the making of such Loan or other
extension of credit and also after giving effect thereto and to the
intended use thereof: (i) no Default shall have occurred and be
continuing; (ii) the representations and warranties made by the Company in
Section 7 hereof, and in each of the other Basic Documents,
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shall be true and correct on and as of the date of the making of such Loan
or other extension of credit with the same force and effect as if made on
and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date). Each notice of borrowing or request for the issuance of a
Letter of Credit by the Company hereunder shall constitute a certification
by the Company to the effect set forth in the preceding sentence (both as
of the date of such notice or request and, unless the Company otherwise
notifies the Administrative Agent prior to the date of such borrowing or
issuance, as of the date of such borrowing or issuance); and
(b) The Administrative Agent shall have received a certificate of a
senior financial officer of the Company setting forth in reasonable detail
the computations necessary to demonstrate that both immediately prior to
the making of such Loan or other extension of credit and immediately after
giving effect thereto, the Company is or will be in compliance with (i)
Section 1010 of the Senior Indenture, (ii) Section 1010 of the Senior
Subordinated Indenture, (iii) if the Loan to be made is a Series A Loan or
the extension of credit is to be a Letter of Credit, Section 1014 of the
Senior Indenture and (iv) the Borrowing Base as at the end of the
quarterly fiscal period of the Company ending on or most recently ended
prior to the date of such extension of credit.
Section 7. Representations and Warranties. The Company represents
and warrants to the Lenders that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could have a Material
Adverse Effect.
7.02 Financial Condition. (a) The Company has heretofore furnished
to each of the Lenders the consolidated balance sheet of the Company and its
Subsidiaries as at February 22, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows of the Company
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and its Subsidiaries for the fiscal year ended on said date, with the opinion
thereon of Deloitte & Touche. All such financial statements are complete and
correct and fairly present the financial condition of the Company and its
Subsidiaries as at, and the results of operations for the fiscal year ended on
said date, all in accordance with generally accepted accounting principles and
practices applied on a consistent basis. Neither the Company nor any of its
Subsidiaries has on the Restatement Date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in said balance sheets as at said dates.
(b) Since February 22, 1997, there has been no material adverse
change in the financial condition, operations, business or prospects of the
Company and its Subsidiaries from that set forth in said financial statements as
at said date.
7.03 Litigation. Except as disclosed to the Lenders in writing prior
to the Amendment Effective Date, there are no legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or agency,
now pending or (to the knowledge of the Company) threatened against the Company
or any of its Subsidiaries which, if adversely determined, could have a Material
Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of the Company, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which the Company or any of its Subsidiaries is a party (including, without
limitation, the Senior Indenture and the Senior Subordinated Indenture) or by
which any of them or any of their Property is bound or to which any of them is
subject, or constitute a default under any such agreement or instrument, or
(except for Liens created pursuant to the Security Documents) result in the
creation or imposition of any Lien upon any Property of the Company or any of
its Subsidiaries pursuant to the terms of any such agreement or instrument.
7.05 Action. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents; the execution, delivery and performance by the
Company of each of the Basic
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Documents have been duly authorized by all necessary corporate action on its
part (including, without limitation, any required shareholder approvals); and
this Agreement has been duly and validly executed and delivered by the Company
and constitutes, and each of the Notes and the other Basic Documents to which it
is a party when executed and delivered (in the case of the Notes, for value)
will constitute, its legal, valid and binding obligation, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors' rights and the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Company of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.
7.07 Use of Credit. Neither the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of any extension
of credit hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 8.01(f)
hereof.
7.09 Taxes. The Company and its Domestic Subsidiaries are members of
an affiliated group of corporations filing consolidated returns for Federal
income tax purposes, of which the Company is the "common parent" (within the
meaning of Section 1504 of the Code) of such group. Except as set forth in
Schedule VI hereto, the Company and its Domestic Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any
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assessment received by the Company or any of its Domestic Subsidiaries. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of taxes and other governmental charges are, in the opinion of the
Company, adequate. The Company has not given or been requested to give a waiver
of the statute of limitations relating to the payment of Federal, state, local
and foreign taxes or other impositions.
7.10 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the Company nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct list, as
of the Restatement Date, of each credit agreement, loan agreement, indenture,
purchase agreement, guarantee, letter of credit or other arrangement providing
for or otherwise relating to any Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, the Company or any
of its Subsidiaries the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) $1,000,000, and the aggregate principal or face
amount outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as
of the Restatement Date, of each Lien securing Indebtedness the aggregate
principal or face amount of which equals or exceeds $1,000,000 of any Person and
covering any Property of the Company or any of its Subsidiaries, and the
aggregate amount of such Indebtedness secured (or which may be secured) by each
such Lien and the Property covered by each such Lien is correctly described in
Part B of said Schedule I.
7.13 Environmental Matters. Except as set forth in Schedule II
hereto, each of the Company and its Subsidiaries has obtained all environmental,
health and safety permits, licenses and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license or
authorization would not have a Material Adverse Effect. All of the permits,
licenses and authorizations that
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have been obtained are in full force and effect and each of the Company and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not have a Material Adverse Effect.
In addition, except as set forth in Schedule II hereto:
(a) To the Company's knowledge after due inquiry, no written notice,
notification, demand, request for information, citation, summons or order
has been issued, no complaint has been filed, no penalty has been assessed
and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the
Company or any of its Subsidiaries to have any environmental, health or
safety permit, license or other authorization required under any
Environmental Law in connection with the conduct of the business of the
Company or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, discharge or disposal, or
any Release of any Hazardous Materials generated by the Company or any of
its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns, operates
or leases a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act of 1976, as amended, or
under any comparable state or local statute; and
(i) to the Company's knowledge after due inquiry, no PCB
Transformers (as defined in the Toxic Substances Control Act, 15
U.S.C. ss.1601, et seq., as amended, and the regulations relating
thereto) are present at any site or facility owned, operated or
leased by the Company or any of its Subsidiaries;
(ii) to the Company's knowledge after due inquiry, no asbestos
or asbestos-containing materials is present at any site or facility
owned, operated or leased by the Company or any of its Subsidiaries;
(iii) to the Company's knowledge after due inquiry, there are
no underground storage tanks or surface impoundments for Hazardous
Materials, active or
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abandoned, at any site or facility owned, operated or leased by the
Company or any of its Subsidiaries; and
(iv) to the Company's knowledge after due inquiry, no Hazardous
Materials have been Released by the Company or any of its
Subsidiaries at, on or under any site or facility now owned,
operated or leased by the Company or any of its Subsidiaries in a
reportable quantity established by any Environmental Law.
(c) To the Company's knowledge after due inquiry, neither the
Company nor any of its Subsidiaries has transported or arranged for the
transportation of any Hazardous Material to any location that is listed on
the National Priorities List ("NPL") under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
listed for possible inclusion on the NPL by the Environmental Protection
Agency, or listed in the Comprehensive Environmental Response and
Liability Information System, as provided for by 40 C.F.R. ss. 300.5
("CERCLIS"), or on any similar state or local list or that is the subject
of Federal, state or local enforcement actions or other investigations
that may lead to Environmental Claims against the Company or any of its
Subsidiaries.
(d) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Laws on any site or
facility owned, operated or leased by the Company or any of its
Subsidiaries, and to the Company's knowledge no government action has been
taken or is in process that could subject any such site or facility to
such Liens. Neither the Company nor any of its Subsidiaries would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any site or facility owned by it in any deed to the
real property on which such site or facility is located.
(e) There have been no environmental investigations, written
studies, audits, tests, reviews or other analyses conducted by or that are
in the possession of the Company or any of its Subsidiaries in relation to
any site or facility now or previously owned, operated or leased by the
Company or any of its Subsidiaries which have not been made available to
the Lenders.
7.14 Capitalization. The authorized capital stock of the Company
consists, on the Amendment Effective Date, of an aggregate of 31,000,000 shares
consisting of (i) 30,000,000 shares of common stock, par value $0.01 per share,
of which
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21,893,392 shares were, as at February 22, 1997 duly and validly issued and
outstanding, each of which shares is fully paid and nonassessable and (ii)
1,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares were outstanding as at February 22, 1997. As of the Amendment Effective
Date the Company is registered with the Securities and Exchange Commission under
the Securities Exchange Act, and its shares of common stock are publicly owned
and traded on the NASDAQ National Market System. As of the Amendment Effective
Date, (x) except for options to purchase 2,447,425 shares of the common stock of
the Company, there are no outstanding Equity Rights with respect to the Company
and (y) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital
stock of the Company nor are there any outstanding obligations of the Company or
any of its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of the Company or any of its Subsidiaries.
7.15 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary and (iii) the nature of the ownership interests held by each
such Person and the percentage of ownership of such Subsidiary represented by
such ownership interests. Except as disclosed in Part A of Schedule III hereto,
(x) each of the Company and its Subsidiaries owns, free and clear of Liens
(other than Liens created pursuant to the Security Documents), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule III hereto, (y) all of the issued
and outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all Investments (other than
Investments disclosed in Part A of said Schedule III hereto) of $100,000 or more
held by the Company or any of its Subsidiaries in any Person and, for each such
Investment, (x) the identity of the Person or Persons in which such Investment
has been made, (y) the nature of such Investment and (z) the amount of such
Investment. Except as disclosed in Part B of Schedule III hereto, each of the
Company and its Subsidiaries owns, free and clear of all Liens (other than Liens
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created pursuant to the Security Documents), all such Investments.
(c) Except as set forth in Schedule III hereto, none of the
Subsidiaries of the Company is, on the Restatement Date, subject to any
indenture, agreement, instrument or other arrangement of the type described in
the last sentence of Section 8.17 hereof.
7.16 Title to Assets. The Company owns and has on the Restatement
Date, and will own and have on the Amendment Effective Date, good and marketable
title (subject only to Liens permitted by Section 8.06 hereof) to the Properties
shown to be owned in the most recent financial statements referred to in Section
7.02 hereof (other than Properties disposed of in the ordinary course of
business or otherwise permitted to be disposed of pursuant to Section 8.05
hereof). The Company owns and has on the Restatement Date, and will own and
have on the Amendment Effective Date, good and marketable title to, and enjoys
on the Restatement Date, and will enjoy on the Amendment Effective Date,
peaceful and undisturbed possession of, all Properties (subject only to Liens
permitted by Section 8.06 hereof) that are necessary for the operation and
conduct of its businesses.
7.17 Compliance with Law. Except as set forth in Schedule IV hereto,
each of the Company and its Subsidiaries is in compliance with all applicable
laws, rules, regulations and orders of, and all applicable restrictions imposed
by, all governmental authorities or bodies, domestic or foreign, in respect of
the conduct of its business and the ownership of its Property (including
Environmental Laws), except such noncompliance as would not, in the aggregate,
have a Material Adverse Effect on the business, properties, assets, operations,
condition (financial or otherwise), or prospects of the Company and its
Subsidiaries, taken as a whole.
7.18 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Lender prior to the
Amendment Effective Date in connection with the negotiation, preparation or
delivery of this Agreement and the other Basic Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole (together
with the Information Memorandum which the Lenders acknowledge contains
projections based on certain assumptions therein stated) do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished on or
after the Amendment Effective Date by the Company
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and its Subsidiaries to the Administrative Agent and the Lenders in connection
with this Agreement and the other Basic Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to the Company that could have a Material Adverse Effect that has not
been disclosed herein, in the other Basic Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for use in connection with the transactions contemplated hereby or
thereby.
Section 8. Covenants of the Company. The Company covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by the Company hereunder:
8.01 Financial Statements, Etc. The Company shall deliver to each of
the Lenders:
(a) as soon as available and in any event within 45 days after the
end of each of the first three quarterly fiscal periods of each fiscal
year of the Company, consolidated statements of earnings, stockholders'
equity and cash flows of the Company and its Subsidiaries, and of Acurex,
for such period and for the period from the beginning of the respective
fiscal year to the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding period in the preceding fiscal year, and the related
consolidated balance sheet of the Company and its Subsidiaries, and of
Acurex, as at the end of such period, setting forth in comparative form
the corresponding consolidated figures for the last day of the preceding
fiscal year, accompanied by a certificate of a senior financial officer of
the Company, which certificate shall state that said consolidated
financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations of the Company
and its Subsidiaries, and of Acurex, in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of operations and stockholders' equity of the Company and its
Subsidiaries,
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and consolidated statements of cash flows of the Company and its
Subsidiaries, for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form
the corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied, (i) in the case of said consolidated
statements and balance sheet of the Company, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
present fairly, in all material respects, the consolidated financial
condition and results of operations of the Company and its Subsidiaries as
at the end of, and for, such fiscal year in accordance with generally
accepted accounting principles, and a report of such accountants stating
that, in making the examination necessary for their opinion, nothing came
to their attention, except as specifically stated, that caused them to
believe that the Company had failed to comply with Sections 8.10, 8.11,
8.12 or 8.13 hereof, or any other provisions hereof, insofar as they
relate to accounting matters, and (ii) in the case of said consolidating
statements and balance sheets, by a certificate of a senior financial
officer of the Company which certificate shall state that said
consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of operations of
the Company and of each of its Subsidiaries, in each case in accordance
with generally accepted accounting principles, consistently applied, as at
the end of, and for, such fiscal year;
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, statements of information
concerning net sales, operating earnings, depreciation and amortization of
each division of the Company and its Subsidiaries (including, without
limitation, the Seating Products Division, Galley Products Division,
In-Flight Entertainment Division and Service Division) for such period
setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Company shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
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(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan
has occurred or exists, a statement signed by a senior financial officer
of the Company setting forth details respecting such event or condition
and the action, if any, that the Company or its ERISA Affiliate proposes
to take with respect thereto (and a copy of any report or notice required
to be filed with or given to PBGC by the Company or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302
of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of
the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code); and any request for a waiver under Section
412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the Company
or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer
Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Company or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy
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secondary liability as a result of a purchaser default) or the
receipt by the Company or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a) (29) of the Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such
Plan is a part if the Company or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of
said Sections;
(g) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;
(h) within 45 days after the end of each quarterly fiscal period of
each fiscal year of the Company, a certificate of a senior financial
officer of the Company setting forth in reasonable detail a true and
accurate calculation of the Borrowing Base as at the end of such quarterly
fiscal period;
(i) within 45 days after the end of each quarterly fiscal period of
each fiscal year of the Company, a statement of a senior officer of the
Company (A) listing each Disposition by the Company and its Subsidiaries
that occurred during such quarterly fiscal period if the Net Available
Proceeds thereof exceeded $50,000 and (B) setting forth in reasonable
detail the Net Available Proceeds of each such Disposition and the
aggregate Net Available Proceeds since the first day of the then current
Recapture Period; and
(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be filed under
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ERISA) as any Lender or the Administrative Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Company has taken or proposes to take with respect thereto) and (ii) setting
forth in reasonable detail the computations necessary to determine whether the
Company is in compliance with Sections 8.07(e), 8.07(g), 8.08(f), 8.08(h), 8.09,
8.10, 8.11, 8.12 and 8.13 hereof as of the end of the respective quarterly
fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Subsidiaries, except proceedings which, if adversely determined, would not
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company will give to each Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities of,
the Company or any of its Subsidiaries and notice of any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation which,
if adversely determined, would not have a Material Adverse Effect.
8.03 Existence. Etc. The Company will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 8.03 shall prohibit any transaction expressly
permitted under Section 8.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements could have a Material Adverse
Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its Property prior to the date on which penalties attach thereto, except
for any such
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tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves
are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Administrative Agent (as the
case may be).
8.04 Insurance. The Company will, and will cause each of its
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations.
8.05 Prohibition of Fundamental Changes. The Company will not, nor
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution) or Dispose of all or substantially all of
its Property. The Company will not, nor will it permit any of its Subsidiaries
to, to make any Acquisition except for Investments permitted under Section 8.08
hereof. Notwithstanding the foregoing provisions of this Section 8.05:
(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) any other such Subsidiary; provided that (x)
if any such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation;
(b) subject to Section 8.14 hereof, the Company or any Subsidiary of
the Company may make any Acquisition; provided that immediately prior to
and after giving effect to any
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such Acquisition, (i) no Default shall have occurred and be continuing and
(ii) not more than $50,000,000 of the proceeds of Loans then outstanding
shall have been applied, directly by the Company or indirectly through a
Subsidiary, to the purchase price of one or more Acquisitions (provided,
that, an amount in excess of $25,000,000 (the "Increased Acquisition
Amount") of the proceeds of the Loans may be applied directly by the
Company or indirectly through a Subsidiary, to the purchase price of one
or more Acquisitions so long as the amount of such excess plus the
Increased Senior Note Prepayment Amount shall not at any time exceed
$25,000,000); and
(c) the Company or any Subsidiary of the Company may make any
Acquisition from any Subsidiary of the Company in each case for
consideration that is not in excess of the fair market value of the
Property acquired in such Acquisition as determined in good faith by the
chief financial officer of the Company.
8.06 Limitation on Liens. The Company will not, nor will it permit
any of its Domestic Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its Property, whether now owned or hereafter acquired,
except:
(a) Liens created pursuant to the Security Documents;
(b) Liens outstanding on the Restatement Date and listed in Part B
of Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good
faith and by appropriate proceedings if, unless the amount thereof is not
material with respect to it or its financial condition, adequate reserves
with respect thereto are maintained on the books of the Company or the
affected Domestic Subsidiaries, as the case may be, in accordance with
GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings and Liens securing
judgments but only to the extent for an amount and for a period not
resulting in an Event of Default under Section 9(h) hereof;
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(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on
the use of Property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Domestic Subsidiaries;
(h) Liens on Property of any corporation which becomes a Domestic
Subsidiary of the Company after Restatement Date, provided that such Liens
are in existence at the time such corporation becomes a Domestic
Subsidiary of the Company and were not created in anticipation thereof;
(i) subject to the restrictions contained in the Security Documents,
Liens upon real and/or tangible personal Property acquired after the
Restatement Date (by purchase, construction or otherwise) by the Company
or any of its Domestic Subsidiaries (other than Acurex) other than in
connection with any Acquisition by the Company or any of its Domestic
Subsidiaries, each of which Liens either (A) existed on such Property
before the time of its acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund,
the cost (including the cost of construction) of such Property; provided
that no such Lien shall extend to or cover any Property of the Company or
such Domestic Subsidiary other than the Property so acquired and
improvements thereon; and provided, further, that the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of the
fair market value (as determined in good faith by a senior financial
officer of the Company) of such Property at the time it was acquired (by
purchase, construction or otherwise);
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(j) additional Liens upon real and/or tangible personal Property of
the Company or any of its Domestic Subsidiaries (other than Acurex)
created after the Restatement Date, provided that the aggregate
Indebtedness secured thereby and incurred on and after the Restatement
Date shall not exceed $20,000,000 in the aggregate at any one time
outstanding; and
(k) any extension, renewal or replacement of the foregoing, provided
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or Property (other than a substitution of like
Property).
8.07 Indebtedness. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding or committed on the Restatement Date
and listed in Part A of Schedule I hereto and any extension, renewal or
replacement thereof;
(c) Indebtedness of Subsidiaries of the Company to the Company in
the aggregate amounts permitted by Section 8.08(d) hereof;
(d) Indebtedness of the Company to its Subsidiaries and Indebtedness
of Subsidiaries of the Company to other Subsidiaries of the Company;
(e) Indebtedness of the Company and its Subsidiaries secured by
Liens permitted under Sections 8.06(i) and 8.06(j) hereof;
(f) Guarantees by any Subsidiary of the Company (other than Acurex,
at all times prior to the Series B Commitment Termination Date) of
Indebtedness of the Company or any Subsidiary of the Company; provided
that at all times prior to the Series B Commitment Termination Date,
Acurex may Guarantee Indebtedness of the Company or any Subsidiary of the
Company from time to time so long as the Company shall reduce the Series B
Commitments pursuant to Section 2.04(b) (ii) hereof simultaneously with
the execution of any such Guarantee by Acurex in an amount equal to the
value of such Guarantee; and
(g) additional unsecured Indebtedness of the Company and its
Subsidiaries (other than Acurex) up to but not
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exceeding in the aggregate $40,000,000 at any one time outstanding;
provided that (i) any such Indebtedness of any such individual Subsidiary
may not exceed $10,000,000 in the aggregate at any one time outstanding
and (ii) any such Indebtedness shall not be used to refinance the Senior
Notes;
provided that the Company may incur additional unsecured Indebtedness that has
no regularly scheduled maturity or mandatory prepayments on or before the Series
A Commitment Termination Date.
8.08 Investments. The Company will not, nor will it permit any of
its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the Restatement Date and identified
in Schedule III Part B hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company in capital stock of Subsidiaries of
the Company and advances by the Company to Subsidiaries of the Company in
the ordinary course of business; provided that the aggregate amount of the
Investments by the Company or any of its Subsidiaries in the Specified
Subsidiaries shall not exceed $5,000,000 at any one time outstanding;
(e) Investments by Subsidiaries of the Company in capital stock of
other Subsidiaries of the Company and advances by Subsidiaries of the
Company to the Company and to other Subsidiaries of the Company in the
ordinary course of business;
(f) Interest Rate Protection Agreements so long as the aggregate
credit exposure under all Interest Rate Protection Agreements calculated
at the time any Interest Rate Protection Agreement is entered into does
not exceed $10,000,000;
(g) Investments permitted by clause (b) of the last sentence of
Section 8.05 hereof; and
(h) Investments of the Company and its Subsidiaries in joint
ventures or representing obligations of customers owing to the Company and
its Subsidiaries in respect of the deferred purchase price of products or
services sold or the
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leasing of products to customers, [in each case in the ordinary course of
business of the Company] and its Subsidiaries as provided for in Section
8.14 hereof and on such terms as the management of the Company may
determine in its reasonable business judgment, provided that the aggregate
amount of such obligations that are not fully secured (whether by a
perfected Lien on, or an indefeasible title retention to, the products so
sold or leased, or otherwise) plus the aggregate fair market value of all
Property (whether now owned or hereafter acquired) of the Company or any
of its Subsidiaries (as determined in good faith by the chief financial
officer of the Company) sold, assigned, transferred or otherwise disposed
of on or after the Restatement Date to all such joint ventures shall not
exceed at any one time outstanding the greater of (i) $15,000,000 and (ii)
5% of Adjusted Net Worth.
8.09 Restricted Payments. The Company will not, nor will it permit
any of its Subsidiaries to, declare or make any Restricted Payment at any time;
provided that (i) the Company may pay dividends ("Dividend Payments") and/or
prepay, redeem or otherwise retire the Senior Notes ("Senior Note Payments" and,
together with Dividend Payments, "Permitted Payments") during any fiscal year
(the "Current Fiscal Year") in an aggregate amount up to but not exceeding 25%
of the net earnings of the Company for the immediately preceding fiscal year
("Available Net Earnings"), provided that (x) any portion of Available Net
Earnings not used for Permitted Payments in the Current Fiscal Year (the
"Carry-Over Amount") may be used for Senior Note Payments only (for which
purpose Senior Note Payments shall first be deemed to have been made from the
Carry-over Amount and only thereafter from Available Net Earnings) in any
succeeding fiscal year and (y) no more than $25,000,000 in the aggregate of
principal of the Senior Notes may be prepaid, redeemed or retired (provided,
that, an amount in excess of $25,000,000 (the "Increased Senior Note Prepayment
Amount") of principal of the Senior Notes may be prepaid, redeemed or retired so
long as the amount of such excess of the Increased Acquisition Amount shall not
at any time exceed $25,000,000) and (ii) any Subsidiary of the Company (other
than Acurex, at all times prior to the Series B Commitment Termination Date) may
make Restricted Payments to the Company from time to time; and provided,
further, that at all times prior to the Series B Commitment Termination Date,
Acurex may make Restricted Payments to the Company from time to time so long as
the Company shall reduce the Series B Commitments pursuant to Section 2.04(b)
(ii) hereof simultaneously with the receipt of each such Restricted Payment in
an amount equal to the proceeds thereof (less the amount of any such proceeds,
if any, applied to the payment of interest on the Series B Loans).
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8.10 Leverage Ratio. The Company will not permit the Leverage Ratio
to exceed the following respective ratios at any time during the following
respective periods:
Period Ratio
------ -----
From the Fiscal Date in
February 1997 through the
Fiscal Date in August 1997 5.5 to 1
From (but not including) the
Fiscal Date in August 1997
through the Fiscal Date in
February 1998 5.0 to 1
From (but not including) the
Fiscal Date in February 1998
through the Fiscal Date in
February 1999 4.5 to 1
From (but not including) the
Fiscal Date in February 1999
through the Fiscal Date in
February 2000 4.0 to 1
Thereafter 3.50 to 1
8.11 Adjusted Net Worth. The Company will not at any date permit
Adjusted Net Worth to be less than the sum of (a) $125,761,000 plus (b) 75% of
the aggregate amount of Net Available Proceeds of Equity Issuances received
after the Restatement Date plus (c) 75% of the sum of consolidated net earnings
of the Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) for each fiscal quarter of the Company
ending after February 22, 1997; provided that consolidated net earnings for any
fiscal quarter in which there is a consolidated net loss shall be deemed to be
zero.
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8.12 Interest Coverage Ratio. The Company will not permit the
Interest Coverage Ratio to be less than the following respective ratios during
the following respective periods:
Period Ratio
------ -----
From the Fiscal Date in
February 1997 through the
Fiscal Date in August 1997 2.00 to 1
From (but not including) the
Fiscal Date in August 1997
through the Fiscal Date in
February 1998 2.25 to 1
From (but not including) the
Fiscal Date in February 1998
through the Fiscal Date in
February 1999 2.50 to 1
From (but not including) the
Fiscal Date in February 1999
through the Fiscal Date in
February 2000 2.75 to 1
Thereafter 3.00 to 1
8.13 Net Worth of Acurex. The Company shall cause Acurex to
maintain, at all times, a minimum net worth of not less than two times the
aggregate outstanding amount of the Series B Loans.
8.14 Lines of Business. Neither the Company nor any of its
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than the business of designing, manufacturing,
distributing, selling, leasing and servicing products used in the interior of
airplanes, buses and trains and servicing and acting as a broker in the sales
and leases of such products together with any other business directly related to
the foregoing.
8.15 Transactions with Affiliates. Except as set forth in Schedule
VII hereto or as expressly permitted by this Agreement, the Company will not,
nor will it permit any of its Subsidiaries to, directly or indirectly: (a) make
any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any Property to an Affiliate; (c) merge into or consolidate with or
purchase or acquire Property from an Affiliate; or (d) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including,
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without limitation, guarantees and assumptions of obligations of an Affiliate);
provided that (x) any Affiliate who is an individual may serve as a director,
officer or employee of the Company or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity and (y) the
Company and its Subsidiaries may enter into transactions (other than extensions
of credit by the Company or any of its Subsidiaries to an Affiliate) providing
for the leasing of Property, the rendering or receipt of services or the
purchase or sale of inventory and other Property in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Company and its Subsidiaries as the
monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
8.16 Use of Proceeds. The Company will use the proceeds of the Loans
hereunder solely to finance ongoing working capital and other capital
requirements of the Company and to finance Acquisitions (subject to clause (b)
of the last sentence of Section 8.05) (in compliance with all applicable legal
and regulatory requirements); provided that neither the Administrative Agent nor
any Lender shall have any responsibility as to the use of any of such proceeds.
8.17 Certain Obligations Respecting Subsidiaries.
(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that the
Company and each of its Subsidiaries at all times owns (subject only to the Lien
of the Security Documents) at least the same percentage of the issued and
outstanding shares of each class of stock of each of its Subsidiaries as is
owned on the Restatement Date. Without limiting the generality of the foregoing,
none of the Company nor any of its Subsidiaries shall sell, transfer or
otherwise dispose of any shares of stock in any Subsidiary owned by them, nor
permit any Subsidiary to issue any shares of stock of any class whatsoever to
any Person (other than to the Company or the immediate parent of such Subsidiary
which is a Wholly Owned Subsidiary of the Company). In the event that (a) any
such additional shares of stock shall be issued by any such Subsidiary or (b)
the Company shall create any new Subsidiary or Acquire any additional Subsidiary
and shall thereby become the owner, directly or indirectly, of the shares of
capital stock of such new or additional Subsidiary, as the case may be, the
Company agrees forthwith to deliver to the Administrative Agent pursuant to
terms of the Revolving Credit Security Agreement the certificates representing
such shares of stock, accompanied by undated stock powers executed in blank and
shall take such other
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action as the Administrative Agent shall request to perfect the security
interest created therein pursuant to the Revolving Credit Security Agreement;
provided that if any such Subsidiary is organized under the laws of a
jurisdiction other than the United States of America or a State thereof, the
Company need not pledge to the Administrative Agent more than 65% of the capital
stock or other ownership interest in such Subsidiary and such pledge shall, at
the request of the Majority Series A Lenders, be made either under the Revolving
Credit Security Agreement or under a pledge or other agreement governed by the
law of such Subsidiary's jurisdiction of organization.
(b) The Company will not permit any of its Subsidiaries to enter
into, after the Restatement Date, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.
8.18 Modifications of Certain Documents. The Company will not
consent to any modification, supplement or waiver of any of the provisions of
the Senior Indenture, the Senior Subordinated Indenture, the Senior Notes, the
Senior Subordinated Notes or the corporate documents referred to in Section
6.01(a) hereof (other than the by-laws of the Company) without the prior consent
of the Administrative Agent (with the approval of the Majority Lenders).
8.19 Environmental Matters.
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Laws applicable to the Company and each of its
Subsidiaries, except to the extent that failure to comply with such laws would
not have a Material Adverse Effect, and shall obtain, at or prior to the time
required by applicable Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for its operations and
maintain such authorizations in full force and effect.
(b) If the Company discovers evidence of the presence of any
Hazardous Materials in any amount that is required to be reported under
Environmental Law, the Company will promptly clean-up such Hazardous Materials
or take such other remedial action as is (a) required by law or (b) deemed
necessary by the Company in its reasonable determination, such determination to
be based in part on the advice of independent environmental
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consultants acceptable to the Company and the Administrative Agent.
(c) The Company shall promptly furnish to the Administrative Agent
all written notices of any Environmental Claims received by the Company or any
of its Subsidiaries with respect to any alleged violation of or non-compliance
with any Environmental Laws or any permits, licenses or authorizations issued
thereunder in connection with the ownership, operation or use of any site or
facility or the operation of their businesses or the presence or Release of
Hazardous Substances, which Environmental Claim if determined adversely to the
Company would have a Material Adverse Effect.
8.20 Security for Series A Loans. The Company shall, no later than
90 days following the request by the Majority Series A Lenders, file in each
governmental office or agency in each appropriate jurisdiction as owner of
record of each of the Foreign Trademarks identified on Annex 4 to the Revolving
Credit Security Agreement.
8.21 Redemption of Senior Subordinated Notes. The Company will not
prepay, redeem, effect a defeasance or covenant defeasance or otherwise retire
any of the Senior Subordinated Notes.
Section 9. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) The Company shall (i) default in the payment of any principal of
any Loan or any Reimbursement Obligation when due (whether at stated
maturity or upon mandatory or optional prepayment) or (ii) default in the
payment of any interest on any Loan, any fee or any other amount payable
by it hereunder or under any other Basic Document when due (whether at
stated maturity or upon mandatory or optional prepayment or otherwise)
and such default shall have continued unremedied for three or more
Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $5,000,000 or more, or in the payment when due of
any amount aggregating $5,000,000 or more under any Interest Rate
Protection Agreement; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such
Indebtedness or any event specified in any Interest Rate Protection
Agreement shall occur if the effect of such event is to cause, or (with
the giving of any
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notice or the lapse of time or both) to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in
full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity or to have the interest rate thereon reset to
a level so that securities evidencing such Indebtedness trade at a level
specified in relation to the par value thereof or, in the case of an
Interest Rate Protection Agreement, to permit the payments owing under
such Interest Rate Protection Agreement to be liquidated in an amount
aggregating $5,000,000 or more; or
(c) Any representation, warranty or certification made or deemed
made herein or in any other Basic Document (or in any modification or
supplement hereto or thereto) by the Company, or any certificate furnished
to any Lender or the Administrative Agent pursuant to the provisions
hereof or thereof shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12 or 8.13 hereof or the Company shall default in the
performance of any of its obligations under Section 5.02 of the Revolving
Credit Security Agreement or Section 4.02 of the Term Loan Security
Agreement; or the Company shall default in the performance of any of its
other obligations in this Agreement or any other Basic Document and such
default shall continue unremedied for a period of thirty days after notice
thereof to the Company by the Administrative Agent or any Lender (through
the Administrative Agent); or
(e) The Company or any of its Subsidiaries shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts
become due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed
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against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of a receiver, custodian, trustee,
examiner, liquidator or the like of the Company or such Subsidiary or of
all or any substantial part of its Property, or (iii) similar relief in
respect of the Company or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against the Company or
such Subsidiary shall be entered in an involuntary case under the
Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect
of such judgment) or in excess of $20,000,000 in the aggregate (regardless
of insurance coverage) shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Company or any of its Subsidiaries and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within 30 days from the date of
entry thereof and the Company or the relevant Subsidiary shall not, within
said period of 30 days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 8.01(f) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the
opinion of the Majority Lenders shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which would constitute, in the determination of the
Majority Lenders, a Material Adverse Effect; or
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(j) A reasonable basis shall exist for the assertion against the Company
or any of its Subsidiaries of (or there shall have been asserted against the
Company or any of its Subsidiaries) claims or liabilities, whether accrued,
absolute or contingent, based on or arising from the generation, storage,
transport, handling or disposal of Hazardous Materials by the Company or any of
its Subsidiaries or Affiliates, or any predecessor in interest of the Company or
any of its Subsidiaries or Affiliates, or relating to any site or facility
owned, operated or leased by the Company or any of its Subsidiaries or
Affiliates, which claims or liabilities (insofar as they are payable by the
Company or any of its Subsidiaries but after deducting any portion thereof which
is reasonably expected to be paid by other creditworthy Persons jointly and
severally liable therefor), in the judgment of the Majority Lenders are
reasonably likely to be determined adversely to the Company or any of its
Subsidiaries, and the amount thereof is, singly or in the aggregate, reasonably
likely to have a Material Adverse Effect; or
(k) Any "person" or "group" (as such terms are defined in Sections 13(d)
and 14(d) of the Securities Exchange Act (other than Amin or Robert Khoury,
their lineal descendants or trusts established by such Persons for their
respective lineal descendants)) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of 30% or more of the aggregate
voting rights of the outstanding capital stock of the Company (on a fully
diluted basis); or during any consecutive 25-month period, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by the stockholders of the
Company was approved by a vote of 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or
(1) Except for expiration in accordance with its terms, any of the
Security Documents shall be terminated or shall cease to be in full force and
effect, for whatever reason;
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THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Company, the
Administrative Agent may, by notice to the Company, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable (provided that (x) if so requested by the Majority
Series A Lenders, the Administrative Agent shall take such action with respect
to the Series A Commitments and/or the Series A Loans, Reimbursement Obligations
and such interest and other amounts to the extent owed to the Series A Lenders
and (y) if so requested by the Majority Series B Lenders, the Administrative
Agent shall take such action with respect to the Series B Commitments and the
Series B Loans and such interest and other amounts to the extent owed to the
Series B Lenders), whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Company; and (2) in the case of the
occurrence of an Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Company, the Commitments shall automatically be
terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the principal amount
then outstanding of, and accrued interest on, the Series A Loans and all other
amounts payable by the Company hereunder and under the Notes to be due and
payable), the Company agrees that it shall, if requested by the Administrative
Agent or the Majority Series A Lenders through the Administrative Agent (and, in
the case of any Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Company, forthwith, without any demand or the
taking of any other action by the Administrative Agent or such Lenders) provide
cover for the Letter of Credit Liabilities by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit
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Liabilities and be subject to withdrawal only as therein provided.
Section 10. The Administrative Agent.
10.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Basic Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and of the other Basic Documents, together with such other powers as
are reasonably incidental thereto. The Administrative Agent (which term as used
in this sentence and in Section 10.05 and the first sentence of Section 10.06
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Basic Documents, and shall not by reason of this Agreement or any other
Basic Document be a trustee for any Lender; (b) shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement or in any other Basic Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Basic Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
Note or any other Basic Document or any other document referred to or provided
for herein or therein or for any failure by the Company or any other Person to
perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document; and (d) shall not be responsible
for any action taken or omitted to be taken by it hereunder or under any other
Basic Document or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct. The Administrative Agent may deem and
treat the payee of any Note as the holder thereof for all purposes hereof unless
and until a notice of the assignment or transfer thereof shall have been filed
with the Administrative Agent, together with the consent of the Company to such
assignment or transfer (to the extent provided in Section 11.06(b) hereof).
10.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel,
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independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or any other
Basic Document, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder or thereunder in accordance
with instructions given by the Majority Lenders or, if provided herein, in
accordance with the instructions given by the Majority Series A Lenders, the
Majority Series B Lenders or all of the Lenders as is required in such
circumstance, and such instructions of such Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Company specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Series A Lenders or the Majority Series B Lenders,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Lenders except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders, the Majority Series A Lenders, the Majority Series B Lenders or all of
the Lenders.
10.04 Rights as a Lender. With respect to its Commitments and the
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase and its affiliates may accept fees and other consideration from
the
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Company for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
10.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Company under said Section 11.03,
and including in any event any payments under any indemnity that the
Administrative Agent is required to issue to any bank referred to in Section
4.02 of the Revolving Credit Security Agreement to which remittances in respect
of Accounts, as defined therein, are to be made) ratably in accordance with the
aggregate principal amount of the Loans and Reimbursement Obligations held by
the Lenders (or, if no Loans or Reimbursement Obligations are at the time
outstanding, ratably in accordance with their respective Commitments), for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Administrative Agent (including by any Lender) arising out of or by reason of
any investigation in or in any way relating to or arising out of this Agreement
or any other Basic Document or any other documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses that the Company is
obligated to pay under Section 11.03 hereof, and including also any payments
under any indemnity that the Administrative Agent is required to issue to any
bank referred to in Section 4.02 of the Revolving Credit Security Agreement to
which remittances in respect of Accounts, as defined therein, are to be made,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent shall
not be required to keep itself informed as to the
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performance or observance by the Company of this Agreement or any of the other
Basic Documents or any other document referred to or provided for herein or
therein or to inspect the Properties or books of the Company or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Company or any of its Subsidiaries (or
any of their affiliates) that may come into the possession of the Administrative
Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under the other Basic Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, after consultations with the Company, appoint a successor
Administrative Agent, that shall be a bank which has an office in New York, New
York with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 10 shall continue in effect
for its benefit in
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respect of any actions taken or omitted to be taken by it while it was acting as
the Administrative Agent.
10.09 Consents under Basic Documents. Except as otherwise provided
in Section 11.04 hereof with respect to this Agreement, the Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the Basic Documents,
provided that, (i) without the prior consent of the Majority Series B Lenders,
the Administrative Agent shall not consent to any modification, supplement or
waiver under the Term Loan Security Agreement, (ii) without the prior consent of
the Majority Series A Lenders, the Administrative Agent shall not consent to any
modification, supplement or waiver under the Revolving Credit Security
Agreement, (iii) without the consent of each Series B Lender, the Administrative
Agent shall not (except as provided herein or in the Term Loan Security
Agreement) release any collateral or otherwise terminate any Lien under the Term
Loan Security Agreement providing for collateral security, or agree to
additional obligations being secured by such collateral security (unless the
Lien for such additional obligations shall be junior to the Lien in favor of the
other obligations secured by such Term Loan Security Agreement) and (iv) without
the consent of each Series A Lender, the Administrative Agent shall not (except
as provided herein or in the Revolving Credit Security Agreement) release any
collateral or otherwise terminate any Lien under the Revolving Credit Security
Agreement providing for collateral security, or agree to additional obligations
being secured by such collateral security (unless the Lien for such additional
obligations shall be junior to the Lien in favor of the other obligations
secured by such Revolving Credit Security Agreement), except that no such
consent shall be required, and the Administrative Agent is hereby authorized, to
release any Lien covering Property which (a) is the subject of a Disposition of
Property permitted hereunder or to which the Majority Lenders have consented or
(b) is all or any part of the Company's United States Services' Division to the
extent that such Property is transferred to a Wholly Owned Subsidiary of the
Company so long as the shares of such Wholly Owned Subsidiary have been pledged
to the Administrative Agent pursuant to the Revolving Credit Security Agreement.
10.10 Collateral Sub-Agents. Each Series A Lender by its execution
and delivery of this Agreement agrees, as contemplated by Section 4.03 of the
Revolving Credit Security Agreement, that, in the event it shall hold any
Permitted Investments referred to therein, such Permitted Investments shall be
held in the name and under the control of such Series A Lender, and such Series
A Lender shall hold such Permitted Investments as a collateral sub-agent for the
Administrative
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Agent thereunder. The Company by its execution and delivery of this Agreement
hereby consents to the foregoing.
10.11 Co-Agent. The Co-Agent identified on the front cover page of
this Agreement shall have no duties or responsibilities hereunder other than as
a Bank hereunder.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
11.02 Notices. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at (i) in the case of the Company and the
Administrative Agent, the "Address for Notices" specified below its name on the
signature pages hereof) and (ii) in the case of each of the Lenders, the address
(or telecopy number) set forth in its Administrative Questionnaire; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement, all
such communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Company agrees to pay or reimburse each of
the Lenders and the Administrative Agent for paying: (a) all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase), in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement and the other Basic
Documents and the extension of credit hereunder and (ii) any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Basic Documents; (b) all reasonable costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, reasonable counsels' fees)
in connection with (i) any Default and
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any enforcement or collection proceedings resulting therefrom or in connection
with the negotiation of any restructuring or "work-out" (whether or not
consummated), or the obligations of the Company hereunder and (ii) the
enforcement of this Section 11.03; and (c) all transfer, stamp, documentary,
intangibles or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any of the
other Basic Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by any Basic Document or any other document referred to therein.
The Company hereby agrees (i) to indemnify the Administrative Agent
and each Lender and their respective directors, officers, employees, attorneys
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or expenses
incurred by the Administrative Agent to any Lender, whether or not the
Administrative Agent or any Lender is a party thereto) arising out of or by
reason of any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified) and (ii) not to assert any claim against the
Administrative Agent, any Lender, any of their affiliates, or any of their
respective directors, officers, employees, attorneys and agents, on any theory
of liability, for special, indirect, consequential or punitive damages arising
out of or otherwise relating to any of the transactions contemplated herein or
in any other Basic Document. Without limiting the generality of the foregoing,
the Company will (x) indemnify the Administrative Agent for any payments that
the Administrative Agent is required to make under any indemnity issued to any
bank referred to in Section 4.02 of the Revolving Credit Security Agreement to
which remittances in respect to Accounts, as defined therein, are to be made and
(y) indemnify the Administrative Agent and each Lender from, and hold the
Administrative Agent and each Lender harmless against, any losses, liabilities,
claims, damages or expenses described in the preceding sentence (but excluding,
as provided in the preceding sentence, any loss, liability, claim, damage or
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expense incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified) arising under any Environmental Law as a result of the
past, present or future operations of the Company or any of its Subsidiaries (or
any predecessor in interest to the Company or any of its Subsidiaries), or the
past, present or future condition of any site or facility owned, operated or
leased by the Company or any of its Subsidiaries (or any such predecessor in
interest), or any Release or threatened Release of any Hazardous Materials from
any such site or facility, including any such Release or threatened Release
which shall occur during any period when the Administrative Agent or any Lender
shall be in possession of any such site or facility following the exercise by
the Administrative Agent or any Lender of any of its rights and remedies
hereunder or under any of the Security Documents but only to the extent that
such Release or threatened Release is directly or indirectly attributable to
facts, circumstances or Releases of Hazardous Materials existing prior to the
date of such possession.
11.04 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Administrative Agent
and the Majority Lenders, or by the Company and the Administrative Agent acting
with the consent of the Majority Lenders, and any provision of this Agreement
may be waived by the Majority Lenders or by the Administrative Agent acting with
the consent of the Majority Lenders; provided that: (a) no modification,
supplement or waiver shall, unless by an instrument signed by all of the Lenders
or by the Administrative Agent acting with the consent of all of the Lenders:
(i) increase, or extend the term of any of the Commitments, or extend the time
or waive any requirement for the reduction or termination of any of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan, the Reimbursement Obligations or any fee hereunder, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon or any fee is payable hereunder, (v) alter the
rights or obligations of the Company to prepay Loans, (vi) alter the terms of
this Section 11.04, (vii) modify the definition of the term "Majority Lenders",
"Majority Series A Lenders" or "Majority Series B Lenders", or modify in any
other manner the number or percentage of the Lender required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
or (viii) waive any of the conditions precedent set forth in Section 6 hereof;
(b) any modification or supplement of Section 10 hereof shall require the
consent of the Administrative Agent; and (c) notwithstanding the above, (i)
Sections 2.01(a), 2.03, 2.04(a), 2.05(i) and 5.06, may be modified or
supplemented
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only by an instrument in writing signed by the Company, the Administrative Agent
and the Series A Lenders, or by the Company and the Administrative Agent acting
with the consent of the Series A Lenders, and any such provision may be waived
by the Series A Lenders or by the Administrative Agent acting with the consent
of the Series A Lenders, and (ii) Sections 2.01(b), 2.04(b) and 2.05(ii) may be
modified or supplemented only by an instrument in writing signed by the Company,
the Administrative Agent and the Series B Lenders, or by the Company and the
Administrative Agent acting with the consent of the Series B Lenders, and any
such provision may be waived by the Series B Lenders or by the Administrative
Agent acting with the consent of the Series B Lenders.
11.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Series A Lender, its Letter of Credit
Interest (but only with the consent of the Company and the Administrative Agent
and, in the case of a Series A Commitment or a Letter of Credit Interest, the
Issuing Lender, which consents in the case of the Company and the Administrative
Agent shall not be unreasonably withheld or delayed); provided that (i) any such
consent by the Company shall not be unreasonably withheld, (ii) no such consent
by the Company or the Administrative Agent shall be required in the case of any
assignment to another Lender; (iii) any such partial assignment shall be in an
amount at least equal to $5,000,000; (iv) unless the Company and the
Administrative Agent shall otherwise consent (which consents shall not be
unreasonably withheld or delayed), each such assignment by a Lender of its
Series A Loans, Series A Note, Series A Commitment or Letter of Credit Interest
shall be made in such manner so that the same percentage of its Series A Loans,
Series A Note, Series A Commitment and Letter of Credit Interest, Series B
Loans, Series B Note and Series B Commitment is assigned to the respective
assignee; and (v) unless the Company and the Administrative Agent shall
otherwise consent (which consents shall not be unreasonably withheld or
delayed), each such assignment by a Lender of its Series B Loans, Series B Note
or Series B Commitment shall be made in such manner so that the same percentage
of its Series B Loans, Series B Note and Series B Commitment, Series A Loans,
Series A Note, Series A
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Commitment and Letter of Credit Interest is assigned to the respective assignee.
Upon execution and delivery by the assignee to the Company, the Administrative
Agent and the Issuing Lender of an instrument in writing pursuant to which such
assignee agrees to become a "Lender" hereunder (if not already a Lender) having
the Commitment(s), Loans, and, if applicable, Letter of Credit Interest
specified in such instrument, and upon consent thereto by the Company, the
Administrative Agent and the Issuing Lender, to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise provided
in such assignment with the consent of the Company, the Administrative Agent and
the Issuing Lender), the obligations, rights and benefits of a Lender hereunder
holding the Commitment(s), Loans and, if applicable, Letter of Credit Interest
(or portions thereof) assigned to it (in addition to the Commitment(s), Loans
and Letter of Credit Interest, if any, theretofore held by such assignee) and
the assigning Lender shall, to the extent of such assignment, be released from
the Commitment(s) (or portion(s) thereof) so assigned. Upon each such assignment
the assigning Lender shall pay the Administrative Agent an assignment fee of
$3,000.
(c) A Lender may sell or agree to sell to one or more other Persons
a participation in all or any part of any Loans or Letter of Credit Interest
held by it, or in its Commitments, in which event each purchaser of a
participation (a "Participant") shall be entitled to the rights and benefits of
the provisions of Section 8.01(j) hereof with respect to its participation in
such Loans, Letter of Credit Interest and Commitments as if (and the Company
shall be directly obligated to such Participant under such provisions as if)
such Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights or
benefits under this Agreement or any Note or any other Basic Document (the
Participant's rights against such Lender in respect of such participation to be
those set forth in the agreements executed by such Lender in favor of the
Participant). All amounts payable by the Company to any Lender under Section 5
hereof in respect of Loans, Letter of Credit Interest held by it, and its
Commitments, shall be determined as if such Lender had not sold or agreed to
sell any participations in such Loans, Letter of Credit Interest and
Commitments, and as if such Lender were funding each of such Loan, Letter of
Credit Interest and Commitments in the same way that it is funding the portion
of such Loan, Letter of Credit Interest and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Basic Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree
Credit Agreement
<PAGE> 96
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to (i) increase or extend the term, or extend the time or waive any requirement
for the reduction or termination, of such Lender's related Commitment, (ii)
extend the date fixed for the payment of principal of or interest on the related
Loan or Loans, Reimbursement Obligations or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee, (v) alter the rights or
obligations of the Company to prepay the related Loans or (vi) consent to any
modification, supplement or waiver hereof or of any of the other Basic Documents
to the extent that the same, under Section 10.10 or 11.04 hereof, requires the
consent of each Lender.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 11.06, any Lender may assign and
pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release the
assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Company or any of its Affiliates or
Subsidiaries without the prior written consent of each Lender.
11.07 Survival. The obligations of the Company under Sections 5.01,
5.05, 5.06, 5.07 and 11.03 hereof and the obligations of the Lenders under
Sections 10.05 and 11.12 hereof shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments. In addition,
each representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of a Loan or a Letter of Credit), herein
or pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any extension
of credit hereunder (whether by means of a Loan or a Letter of Credit), any
Default which may arise by reason of such representation or warranty proving to
have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason
Credit Agreement
<PAGE> 97
- 93 -
to believe that such representation or warranty was false or misleading at the
time such extension of credit was made.
11.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Company hereby authorizes each Lender to share
any information delivered to such Lender by the Company and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Lender to
enter into this Agreement, to any such subsidiary or affiliate, it being
understood that any such
Credit Agreement
<PAGE> 98
- 94 -
subsidiary or affiliate receiving such information shall be bound by the
provisions of clause (b) below as if it were a Lender hereunder.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same is
delivered to the Lenders or the Administrative Agent, provided that nothing
herein shall limit the disclosure of any such information (i) to the extent
required by statute, rule, regulation or judicial process, (ii) to counsel for
any of the Lenders or the Administrative Agent, (iii) to bank examiners,
auditors or accountants, (iv) to the Administrative Agent or any other Lender
(or to Chase Securities Inc.), (v) in connection with any litigation to which
any one or more of the Lenders or the Administrative Agent is a party, (vi) to a
subsidiary or affiliate of such Lender as provided in clause (a) above or (vii)
to any assignee or participant (or prospective assignee or participant) so long
as such assignee or participant (or prospective assignee or participant) first
executes and delivers to the respective Lender a Confidentiality Agreement
substantially in the form of Exhibit B hereto; provided, further, that (x)
unless specifically prohibited by applicable law or court order, each Lender and
the Administrative Agent shall, prior to disclosure thereof, notify the Company
of any request for disclosure of any such non-public information (A) by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) or (B) pursuant to legal process and (y) in no event shall
any Lender or the Administrative Agent be obligated or required to return any
materials furnished by the Company.
11.13 Amendments to Security Documents.
(a) The Revolving Credit Security Agreement is hereby amended so
that from and after the Amendment Effective Date, all references therein to the
Credit Agreement shall be deemed to be a reference to the Credit Agreement as
amended and restated hereby.
(b) The Term Loan Security Agreement is hereby amended so that from
and after the Amendment Effective Date, (x) all references therein to the Credit
Agreement shall be deemed to be
Credit Agreement
<PAGE> 99
- 95 -
a reference to the Credit Agreement as amended and restated hereby.
Credit Agreement
<PAGE> 100
- 96 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
-----------------------------------
Title: Vice President & CFO
Address for Notices:
BE Aerospace, Inc.
1300 Corporate Center Way
Wellington, Florida 33414
Attention: Amin J. Khoury
Telecopier No. (561) 791-5000
Telephone No. : (561) 791-3966
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
Telecopier No. : (617) 951-7050
Telephone No. : (617) 951-7000
Credit Agreement
<PAGE> 101
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LENDERS
THE CHASE MANHATTAN BANK
By /s/ Mathew H. Massie
-----------------------------------
Title: Vice President
NATIONSBANK, N.A. (SOUTH)
By /s/ Andrew M. Airheart
-----------------------------------
Title: Senior Vice President
LASALLE BUSINESS CREDIT, INC.
By /s/ Patrick E. Killpatrick
-----------------------------------
Title: Vice President
LTCB TRUST COMPANY
By /s/ John J. Sullivan
-----------------------------------
Title: Executive Vice President
CREDITANSTALT- BANKVEREIN
By /s/ Greg Roux
-----------------------------------
Title: Vice President
By /s/ John P. Macukas
-----------------------------------
Title: Senior Vice President
Credit Agreement
<PAGE> 102
- 98 -
FUJI BANK & TRUST COMPANY
By /s/ Toshiaki Yakura
-----------------------------------
Title: Executive Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By /s/ Robert Ivosevich
-----------------------------------
Title: Authorized Signature
THE SUMITOMO BANK, LIMITED
By /s/ Ana C. Bolduc
-----------------------------------
Title: Vice President & Manager
By /s/ Brian M. Smith
-----------------------------------
Title: Senior Vice President &
Regional Manager (East)
Credit Agreement
<PAGE> 103
- 99 -
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Mathew H. Massie
-----------------------------------
Title: Vice President
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Loan and Agency Services Group
New York, New York 10081
Credit Agreement
<PAGE> 104
Annex 1
Series A Series B Total
Bank Commitment Commitment Commitments
- ---- ---------- ---------- -----------
The Chase Manhattan Bank $ 16,000,000 $ 4,000,000 $ 20,000,000
NationsBank, N.A. (South) $ 16,000,000 $ 4,000,000 $ 20,000,000
LTCB Trust Company $ 15,200,000 $ 3,800,000 $ 19,000,000
LaSalle Business
Credit, Inc. $ 15,200,000 $ 3,800,000 $ 19,000,000
Credit Lyonnais, New
York Branch $ 11,200,000 $ 2,800,000 $ 14,000,000
Creditanstalt-Bankverein $ 10,400,000 $ 2,600,000 $ 13,000,000
Fuji Bank Ltd $ 8,000,000 $ 2,000,000 $ 10,000,000
The Sumitomo Bank
Limited $ 8,000,000 $ 2,000,000 $ 10,000,000
------------ ----------- ------------
Total $100,000,000 $25,000,000 $125,000,000
Annex 1 to Credit Agreement
<PAGE> 105
SCHEDULE I
Material Agreements and Liens
[See Sections 7.12 and 8.07(b)]
Part A - Material Agreements
1. Indenture dated as of March 3, 1993 between the Company, as issuer, and
the United States Trust Company of New York, as trustee, in connection
with $125,000,000 of 9-3/4. Senior Notes of the Company.
2. Loan agreements dated February 24, 1993 between the Company's subsidiary
Flight Equipment and Engineering Limited, an English corporation ("FEEL"),
and Barclays Bank PLC ("Barclays"), as amended, providing for an overdraft
facility in the aggregate principal amount of (pound)3,000,000.
3. Guarantee dated February 24, 1993 by the Company to Barclays limited to
(pound)2,750,000 of the Indebtedness of FEEL described in Item 2 above.
4. Guarantee as of March 1, 1993 of Aircraft Furnishing Limited ("AFL") in an
unlimited amount of the Indebtedness of FEEL described in described in
Item 2 above.
5. Loan agreement between Royal Inventum B.V. and ING Bank dated July 14,
1993 in the aggregate principal amount of Dfl. 2,000,000.
6. Demand Promissory Note dated August 27, 1993 from Aero Holdings
Acquisition Corp. (now known as Acurex Corporation) to the Company in the
aggregate principal amount of approximately $2,000,000.
7. Acquisition Agreement among the Company, Elinor T. Nordskog and Nordskog
Industries, Inc. dated July 27, 1993. (Acquisition purchase price
adjustments unknown)
8. Purchase Agreement dated October 26, 1993 between the Company and Thomas
P. McCaffrey and Kerry J. McCaffrey, Trustees of the Thomas P. and Kerry
J. McCaffrey Living Trust, Dated August 3, 1990 pursuant to which the
trust sold certain residential property located in San Clemente,
California to the Company, and the Company, among other things, assumed
Indebtedness which, as of the date hereof, is outstanding to Countrywide
Funding Corporation in the aggregate principal amount of $457,484.
9. Capitalized lease obligations of FEEL and AFL for machinery and equipment
in the aggregate amount of $945,000.
Schedule I to Credit Agreement
<PAGE> 106
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10. Indebtedness of FEEL to the Company in an aggregate principal amount not
in excess of (pound)3,369,541.
11. Indebtedness of BE Aerospace (Netherlands) B.V. to the Company in an
aggregate principal amount not in excess of Dfls. 49,385,000.
12. Indenture dated as of January 24, 1996 between the Company and First
National Bank of Connecticut, as trustee, in connection with $100,000,000
of 9-7/8% Senior Subordinated Notes due 2006.
13. Acquisition Agreement dated as of December 14, 1995, among the Company,
Burns Aerospace Corporation, Eagle Industrial Products Corporation, Eagle
Industries, Inc. and Great American Management and Investment, Inc.
(Acquisition purchase price adjustment unknown.)
Schedule I to Credit Agreement
<PAGE> 107
SCHEDULE I
Part B - Liens
BE Aerospace, Inc.
1. California
a. UCC - Secretary of State
(i) 1st Source Bank, filed September 3, 1993, file number
93180963. Certain leased machining equipment.
(ii) Allied American Insurance Company, filed May 24, 1993, file
number 93099606. Certain leased machining equipment.
(iii) United Jersey Bank, filed May 3, 1993, file number
93086057. Certain leased computer equipment and related
tangible and intangible property,
(iv) 1st Source Bank, filed March 18, 1993, file number
93054020. Certain leased computer equipment.
(v) 1st Source Bank, filed March 18, 1993, file number
93054019. Certain leased machining equipment.
(vi) Yale Financial Services, Inc., filed March 15, 1993, file
number 93052839. Fork lift.
(vii) Tilden Financial Corp., filed March 4, 1993, file number
93044645. Certain leased equipment.
(viii) United Jersey Bank, filed March 5, 1993, file number 93043802.
Certain leased computer equipment and related tangible and
intangible property.
(ix) Bankers Leasing Association, Inc., filed December 29, 1992,
file number 92275389. Certain leased computer equipment.
(x) First Bank and Trust Company of Illinois, filed May 7, 1993,
file number 92275389. Certain leased computer equipment.
(Assignment of No. 92275389)
<PAGE> 108
(xi) United Jersey Bank, filed December 14, 1992, file number
92263097. Certain leased machining equipment.
(xii) United Jersey Bank, filed March 30, 1993, file number
92263097. Certain leased computer equipment.
(xiii) Guaranty Lease Funding Corporation, filed September 24, 1992,
file number 92207704. Certain leased equipment.
(xiv) GE Capital Corporation, filed August 7, 1992, file number
92170592. Certain leased office furniture and fixtures.
(xv) Copelco Capital, Inc., filed October 12, 1993, file number
93208050. Certain leased office equipment.
(xvi) The Chase Manhattan Bank, filed November 3, 1993, file number
93221435. Blanket filing.
(xvii) UJB Leasing Corporation, filed December 1, 1994, file number
9435361073. Miscellaneous equipment.
(xviii) Hewlett-Packard Company Finance and Remark, filed December 6,
1994, file number 9435560656. Miscellaneous equipment.
(xix) NEC America, Inc., filed March 17, 1995, file number
9508060313. Miscellaneous telephone equipment.
(xx) British Airways PLC, filed May 20, 1996, file number
9614460354. Miscellaneous equipment.
(xxi) Hewlett-Packard Company Finance and Remark, filed May 9, 1997,
file number 9712861105. Certain leased equipment and related
tangible and intangible property.
(xxii) Hewlett-Packard Company Finance and Remark, filed May 7, 1997,
file number 9712960794. Certain leased equipment and related
tangible and intangible property.
b. Other
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<PAGE> 109
(i) An outstanding mortgage on a residential property in San
Clemente, California in favor of Countrywide Funding
Corporation secures, as of the date hereof, $457,484 of
Indebtedness.
2. Connecticut
a. UCC - Secretary of State
(i) Yale Financial Services, Inc., filed March 11, 1993, file
number 1001222. Forklift.
(ii) The Chase Manhattan Bank, filed November 3, 1993, file number
1034166; Blanket; Amendment filed February 1, 1996, file
number 1678686 (Debtor address change); Partial Release filed
December 16, 1996, file number 1741071 (miscellaneous
equipment).
(iii) IBM Credit Corporation, filed July 6, 1992, file number
972855. Certain leased computer equipment.
(iv) IBM Credit Corporation, filed November 24, 1992, file number
0988857. Certain leased computer equipment.
(v) Colonial Pacific Leasing, filed September 28, 1992, file
number 982477. Certain leased equipment.
(vi) Tilden Financial Corp., filed March 4, 1993, file number
1000393. Certain leased equipment.
(vii) European American Bank, filed November 26, 1993, file number
1036973. Miscellaneous leased computer equipment.
(viii) UJB Leasing Corporation, filed August 23, 1994, file number
1070220. Miscellaneous leased computer equipment.
(ix) UJB Leasing Corporation, filed September 8, 1994, file number
1574243. Miscellaneous leased equipment.
(x) Nationsbank of Florida, N.A. filed December 22, 1994, file
number 1593984. Blanket.
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<PAGE> 110
(xi) UJB Leasing Corporation, filed January 23, 1995, file number
1600177. Miscellaneous Leased Equipment.
(xii) United Jersey Bank, filed January 25, 1995, file number
1600740. Leased equipment and related tangible and intangible
property.
(xiii) United Jersey Bank, filed January 25, 1995, file number
1600746. Leased equipment and related tangible and
intangible property.
(xiv) United Jersey Bank, filed January 25, 1995, file number
1600748. Leased equipment and related tangible and intangible
property.
(xv) UJB Leasing Corporation, filed March 7, 1995, file number
1608175. Miscellaneous equipment.
(xvi) AT&T Systems Leasing Corp., Inc., filed July 20, 1995, file
number 1633709. Miscellaneous leased computer and office
equipment.
(xvii) GE Capital filed August 17, 1995, file number 1639218. Leased
computer equipment.
(xviii) Hyster Credit Company, filed September 27, 1995, file number
1647676. Ford truck and miscellaneous equipment.
(xix) AT&T Systems Leasing Corp., Inc., filed January 19, 1996, file
number 1668254. Miscellaneous equipment.
(xx) AT&T Systems Leasing Corp., Inc., filed March 29, 1996, file
number 1683373. Miscellaneous equipment.
(xxi) AT&T Systems Leasing Corp., Inc., filed March 29, 1996, file
number 1683381. Miscellaneous equipment.
(xxii) USL Capital Corporation, filed September 5, 1996, file number
1717760. Miscellaneous machinery.
(xxiii) Bankers Leasing Association, Inc., filed December 20, 1996,
file number 1739286. Miscellaneous office equipment.
(xxiv) General Electric Capital Corporation, filed March 5, 1997,
file number 1754332. Leased aircraft.
-4-
<PAGE> 111
3. Florida
a. UCC - Secretary of State
(i) GE Capital Corporation, filed October 9, 1992, file number
92204637. Certain equipment.
(ii) United Jersey Bank, filed December 14, 1992, file number
92255761. Certain leased machining equipment.
(iii) United Jersey Bank, filed March 1, 1993, file number 93044459.
Certain leased computer equipment.
(iv) Bankers Leasing Association, Inc., filed January 15, 1993,
file number 93010622. Certain computer hardware and software.
(v) First Bank and Trust Company of Illinois, filed May 6, 1993,
file number 93095513. Certain computer hardware and software.
(Assignment of No. 93010622)
(vi) United Jersey Bank, filed March 4, 1993, file number 93047191.
Certain leased computer equipment and certain other tangible
and intangible property related thereto.
(vii) NationsBank Leasing Corporation, filed March 22, 1993, file
number 93060950. Certain leased machining equipment.
(viii) Equilease Systems Corp., filed March 25, 1993, file number
93063496. Certain leased computer equipment.
(ix) St. James Leasing, filed May 3, 1993, file number 93091970.
Certain leased computer equipment and certain other tangible
and intangible property relaxed thereto,
(x) The Chase Manhattan Bank, filed November 4, 1993, file number
930227345, Blanket; Amendment filed January 31, 1996, file
number 960000020922 (Debtor address change); Partial Release
filed December 16, 1996, file number 960000262425
(miscellaneous equipment).
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<PAGE> 112
(xi) EQ Financial Services Corporation, filed November 30, 1993,
file number 930244109. Miscellaneous leased equipment.
(xii) European American Bank, filed November 30, 1993, file number
930244111. Miscellaneous leased equipment.
(xiii) EQ Financial Services Corporation, filed March 15, 1994, file
number 94051606. Miscellaneous leased equipment.
(xiv) St. James Leasing Ltd., filed August 23, 1994, file number
940171957. Miscellaneous leased equipment.
(xv) St. James Leasing Ltd., filed September 6, 1994, file number
940180451. Miscellaneous leased equipment.
(xvi) St. James Leasing Ltd., filed September 7, 1994, file number
940182527. Miscellaneous leased equipment.
(xvii) St. James Leasing Ltd., filed December 2, 1994, file number
940242154. Miscellaneous leased equipment.
(xviii) St. James Leasing Ltd., filed January 29, 1995, file number
95017299. Miscellaneous equipment and related tangible and
intangible property.
(xix) St. James Leasing Ltd., filed January 26, 1995, file number
95017303, Miscellaneous equipment and related tangible and
intangible property.
(xx) NEC America, Inc., filed March 20, 1995, file number 95053838.
Miscellaneous telephone equipment.
(xxi) AT&T Systems Leasing Corporation Division, Inc., filed July
19, 1995, file number 950143452. Miscellaneous computer
equipment.
(xxii) Lewis/Botle, Inc., filed October 3, 1995, file number
950219964. Ford truck.
(xxiii) NationsBank, N.A., filed January 26, 1996, file number
96018099. Blanket.
(xxiv) Chemical Leasing, filed September 26, 1996, file number
960201890. Miscellaneous office equipment.
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<PAGE> 113
(xxv) Yale Financial Services, Inc., filed December 23, 1996, file
number 960266376. Miscellaneous equipment.
(xxvi) Yale Financial Services, Inc. filed February 24, 1997, file
number 97038608. Forklift and related equipment.
(xxvii) General Electric Capital Corporation filed March 5, 1997, file
number 97047206. Leased aircraft.
4. North Carolina
a. Other
(i) An outstanding mortgage on a residential property in
Pfafftown, North Carolina in favor of The Pfefferkorn Company
secures, as of the date hereof, $136,568 of
Indebtedness.
(ii) The Chase Manhattan Bank N.A. filed January 30, 1996, file
number 1304283, blanket.
(iii) CLG. Inc., filed May 1, 1996, file number 1335435,
miscellaneous computer equipment.
(iv) USL Capital Corporation, filed May 23, 1996, file number
1342441, miscellaneous leased equipment.
(v) NationsBank Leasing, filed December 20, 1996, file number
1409484, miscellaneous equipment.
(vi) Yale Financial Services Inc., filed December 23, 1996, file
number 1409894, miscellaneous equipment.
(vii) Yale Financial Services Inc., filed February 19, 1997, file
number 1429174, fork lift and rented equipment.
(viii) Pullman Bank and Trust Company, filed April 15, 1997, file
number 1450646, miscellaneous leased office equipment.
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<PAGE> 114
5. Forsyth County, NC
(i) The Chase Manhattan Bank, filed January 29, 1996, file number
215975, miscellaneous leased equipment.
(ii) CLG, Inc., filed May 1, 1996, file number 217178,
miscellaneous leased equipment.
(iii) USL Capital Corporation, filed May 28, 1996, file number
217462, [ ]
(iv) USL Capital Corporation, filed September 10, 1996, file number
218787, miscellaneous leased equipment.
(v) Yale Financial Services, Inc., filed December 20, 1996, file
number 220219, miscellaneous equipment.
(vi) NationsBank Leasing Corporation, filed December 24, 1996, file
number 220297, miscellaneous leased equipment.
(vii) Yale Financial Services, Inc., filed February 19, 1997, file
number 220980, Forklift and related accessories.
(ix) US Technology Leasing Corporation, filed April 14, 1997, file
number 221618, miscellaneous leased equipment.
BE Avionics, Inc.
1. California
a. UCC - Secretary of State
(i) California City Bank, filed February 20, 1990, file number
90045391. Certain computer equipment.
(ii) AT&T Credit Corporation, filed September 17, 1990, file number
90231153. Certain leased equipment.
(iii) Pitney Bowes Credit Corporation, filed February 22, 1991, file
number 91037908. Certain leased copier equipment.
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<PAGE> 115
(iv) Pitney Bowes Credit Corporation, filed June 21, 1991, file
number 91135535. Certain leased equipment.
(v) Leasametric Inc., filed May 18, 1992, file number 92111404.
Certain leased equipment.
(vi) Colonial Pacific Leasing, filed September 24, 1992, file
number 92208231. Certain leased equipment.
2. Massachusetts
a. UCC - Secretary of State
(i) The Chase Manhattan Bank, N.A. as Agent, filed March 3, 1992,
file number 077540. All personal property, whether tangible or
intangible.
Aircraft Products Company
1. Florida
a. UCC- Secretary of State
(i) Chrysler Capital Corporation, filed November 9, 1989, file
number 89297767. Certain leased computer equipment.
(ii) General Electric Capital Corporation, filed September 29,
1992, file number 92197513. Certain leased computer hardware
and software. (Assignment of No. 89297767)
(iii) Chrysler Capital Corporation, filed November 9, 1989, file
number 89297768. Certain leased computer hardware and
software.
(iv) General Electric Capital Corporation, filed September 25,
1992, file number 92194967. Certain leased equipment.
(Assignment of No. 89297768)
(v) Chrysler Capital Corporation, filed September 27, 1990, file
number 90245856. Certain leased equipment.
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<PAGE> 116
(vi) Chrysler Capital Corporation, filed December 24, 1990, file
number 90315841. Certain leased equipment.
(vii) Oliver-Allen Corporation, filed July 22, 1991, file number
91157029. Certain leased equipment.
(viii) Datamatic Leasing Inc., filed August 12, 1991, file number
91173649. Certain leased equipment.
(ix) GE Capital Corporation, filed October 8, 1992, file number
92204637. Certain leased machining equipment.
(x) Minolta Leasing Services, filed June 14, 1993, file number
93123779. Certain leased equipment.
PTC Aerospace Inc.
1. California
a. UCC - Secretary of State
(i) Chrysler Credit Corporation, filed January 9, 1990, file
number 90004136, certain leased computer equipment.
(ii) Pactel Finance, filed April 2, 1990, file number 90085088,
certain equipment.
(iii) Oliver-Allen Corporation, filed March 20, 1991, file number
91057403, certain leased equipment.
(iv) LB Credit Corporation, filed September 11, 1992, file number
91057403, certain leased equipment. (Assignment of File No.
91057403)
(v) Yale Financial Services, Inc., filed November 3, 1992, file
number 92237178, certain leased transportation equipment.
(vi) Yale Financial Services, Inc., filed November 17, 1992, file
number 92247474, certain leased transportation equipment.
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<PAGE> 117
(vii) 1st Source Bank, filed March 18, 1993, file number 93054019,
certain leased machining equipment.
(viii) 1st Source Bank, filed March 18, 1993, file number 93054020.
certain leased computer equipment.
(ix) Allied American Insurance Company, filed May 24, 1993, file
number 93099606, certain leased equipment.
(x) The CIT Group/Equipment Financing Inc., filed June 2, 1993,
file number 93105767, certain leased equipment.
(xi) 1st Source Bank, filed September 3, 1993, file number
93180960, certain leased equipment
2. Connecticut
a. UCC - Secretary of State
(i) Oliver-Allen Corporation, filed June 30, 1992, file number
971989. Certain leased printer.
(ii) LB Credit Corporation, filed September 14, 1992, file number
980699. Certain leased printer. (Assignment of No. 971989)
(iii) United Financial Corporation, filed July 17, 1992, file number
974379. Certain equipment.
(iv) SNET Credit, Inc., filed May 18, 1992, file number 966514.
Certain equipment.
(v) SNET Credit, Inc., filed November 12, 1991, file number
945438. Certain leased equipment.
(vi) Colonial Pacific Leasing, filed March 18, 1991, file number
916823. Certain leased equipment.
(vii) Tenant Company, filed January 22, 1991, file number 909896.
Certain sweeper/scrubber.
(viii) Citicorp Dealer Finance, filed May 18, 1990, file number
877886. Forklift.
(ix) Bank One Leasing Corp., filed November 20, 1989, file number
853254. Certain leased copier equipment.
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<PAGE> 118
(x) Chrysler Capital Corporation, filed December 27, 1990, file
number 905889. Certain leased machining and computer
equipment.
(xi) Chrysler Capital Corporation, filed January 25, 1991, file
number 908754. Certain leased equipment.
(xii) Chrysler Capital Corporation, filed March 28, 1991, file
number 916898. Certain manufacturing equipment.
(xiii) General Electric Capital Corporation, filed November 17, 1992,
file number 0988131. Certain leased equipment.
(xiv) XL/Datacomp, Inc., filed March 16, 1992, file number 959099.
Certain leased computer hardware and software.
(xv) Citicorp Leasing, Inc., filed April 22, 1993, file number
1006782. Certain leased computer hardware and software.
(xvi) R.A.S. Financial, Inc. filed November 20, 1992, file number
0988534. Certain leased computer equipment.
(xvii) First Source Bank, filed January 8, 1993, file number 0993996.
Certain leased computer equipment.
(xviii) 1st Source Bank, filed March 12, 1993, file number 1001480.
Certain leased machining equipment.
(xix) R.A.S. Financial, Inc., filed December 28, 1992, file number
0992519. Certain leased computer equipment.
(xx) First Source Bank, filed January 27, 1993, file number
0996132. Certain leased computer equipment.
(xxi) 1st Source Bank, filed March 12, 1993, file number 1001481.
Certain leased computer equipment.
(xxii) XL/Datacomp, Inc., filed March 17, 1993, file number 1002012.
Certain leased computer hardware and software.
(xxiii) Allied American Insurance Company, filed May 24, 1993, file
number 1013743. Certain leased manufacturing equipment.
(xxiv) The CIT Group/Equipment Financing, Inc., filed June 2, 1993,
file number 1015241. Certain leased machining equipment.
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<PAGE> 119
(xxv) 1st Source Bank, filed August 19, 1993, file number 1025133.
Certain leased manufacturing equipment.
(xxvi) XL/Datacomp, Inc., filed October 18, 1991, file number 942433.
Certain leased computer hardware and software.
(xxvii) Citicorp Leasing, Inc., filed January 17, 1992, file number
952759. Certain leased computer hardware and software.
(xxviii) Chrysler Capital Corporation, filed January 10, 1990, file
number 859351. Certain leased computer hardware and software.
3. New Jersey
a. UCC - Secretary of State
(i) Chrysler Corporation, filed January 9, 1990, file number
1314179. Certain computer hardware and software.
(ii) General Electric Capital Corporation, filed December 2, 1992,
file number 1314179. Certain computer hardware and software.
(Assignment of No. 1314179)
Acurex Corporation
1. California
a. UCC - Secretary of State
(i) Foothill Bank, filed March 30, 1992, file number 92063114.
Certain leased equipment.
Nordskog Industries. The
1. California
a. UCC - Secretary of State
(i) Hewlett Packard Company, Finance and Remarketing Division,
filed February 14, 1989, file number 89032824. Certain leased
computer equipment.
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<PAGE> 120
(ii) Hewlett Packard Company, filed September 11, 1989, file number
89240841. Certain leased computer equipment
(iii) Hewlett Packard Company, filed February 9, 1990, file number
89240841 (Amendment).
(iv) Leasefirst, filed June 19, 1993, file number 90153748. Certain
leased computer equipment.
(v) Hewlett Packard Company/Finance & Remarketing Division,
filed on March 11, 1991, file number 91053748. Certain
leased computer equipment.
(vi) Lease America Corporation, filed November 22, 1991, file
number 91250205. Certain leased copier equipment.
(vii) NEC America, Inc., filed January 31, 1992, file number
92020999. Certain leased telephone equipment
(viii) NEC America, Inc., filed April 27, 1992, file number 92083995.
Certain leased telephone equipment.
(ix) The Bank of California, N.A., filed August 30, 1992, file
number 93177146. Security interest in general intangibles to
secure a Letter of Credit to Self-Insurance Plans, State of
California, in the aggregate principal amount of $962,809.
(x) Hewlett Packard Company/Finance & Remarketing Division, filed
November 12, 1992, file number 92243227. Certain leased
computer equipment.
Flight Equipment and Engineering Limited
The Indebtedness of FEEL identified in Section 2 of Part A of this
Schedule I is cross-collateralized in the U.K. by the following:
1. A Debenture over the assets of FEEL on Barclays' standard form dated 19th
November 1982.
2. A charge over the leasehold, Nashleigh Works, Nashleigh Hill, Chesham, on
Barclays' standard form dated 11th May 1985.
3. A charge over the freehold Asheridge Road, Chesham, on Barclays' standard
form dated 7th July 1975.
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<PAGE> 121
4. A charge over the freehold property on the Northwest side of Grovebury
Road, Leighton Buzzard, on Barclays' standard form dated 2nd March 1993.
5. A charge over the leasehold property, Nissen House, Grovebury Road,
Leighton Buzzard, on Barclays' standard form dated 2nd March 1993.
6. A charge over the leasehold property lying on the East of the Grand Union
Canal, Leighton Buzzard on Barclays' standard form dated 3rd March 1993.
7. A charge over the Guardian Assurance Life Policy on the life of John
Branham on Barclays' standard form dated 24th September 1991.
8. A charge over the life policy on the life of John Tcheng to be charged on
Barclays' standard form.
9. A charge over the life policy on the life of David Boulter to be charged
on Barclays' standard form.
10. The AFL guarantee referred to in Section 5 of Part A of this Schedule I.
11. A debenture over the assets of AFL on Barclays' standard form granted as
of March 1, 1993.
12. The Company's guarantee referred to in Section 4 of Part A of this
Schedule I.
13. A Letter of Set Off allowing Barclays' to combine any account, Sterling or
Currency dated 24th September 1991.
In addition, FEEL and AFL have capitalized lease obligations outstanding
for machinery and equipment in the aggregate amount of $945,000.
Royal Inventum B.V.
The Indebtedness of Royal Inventum B.V. identified in Section 6 of Part A
of this Schedule I is secured by a charge over the assets of Royal Inventum B.V.
by ING Bank.
BE Aerospace (UK) Limited
1. Guarantee (Unlimited) on Barclays' standard form given by Aircraft
Furnishing Limited (now known as Fort Hill Aircraft Limited) for the
benefit of Flight Equipment and Engineering Limited (now BE Aerospace (UK)
Limited). [No date, but believed to be dated 24 February 1993. We believe
that it was given to guarantee a medium term loan agreement dated 28
February 1993.]
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<PAGE> 122
2. Guarantee (Foreign) on Barclays' standard form given by BE Aerospace, Inc.
for (pound)2.75 million for the benefit of BE Aerospace (UK) Limited,
dated 24 February 1993. It appears to cover a medium term loan agreement
dated 28 February 1993.
3. Legal charge over Nashleigh Works, Nashleigh Hill, Chesham,
Buckinghamshire, dated 11 May 1995.
In addition, there may be other liens securing indebtedness of amounts
less than $1,000,000.
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<PAGE> 123
SCHEDULE II
Hazardous Materials
1. Litchfield, CT, facility historically did not have state or federal clean
Water Act permits authorizing discharge of wastewater to the Bantam River.
The discharge has been substantially eliminated as of this date.
2. Litchfield, CT, facility may not have required air permits for air
emissions associated with paint booths and adhesive operations. A request
for determination of the need for permits has been made to the state
officials.
3. In 1992, the Garden Grove, CA, facility paid a $45,000 penalty for
violation of air pollution regulations.
4. The Route 209 facility of Pullman in Bantam, CT, is an interim status
facility under RCRA. There appears to be documentary evidence that waste
from the Route 209 facility may have been transshipped through the
Litchfield, CT, facility, raising potential issues of RCRA compliance
relating to the Litchfield, CT facility.
5. Asbestos-containing materials may be present in the Litchfield, CT,
facility. A preliminary investigation has been completed and does not
indicate any large-scale concerns.
6. Hazardous Materials have been detected in the soils and groundwater at the
Litchfield, CT facility. A groundwater assessment is ongoing under the
supervision of the CTDEP. The latest groundwater monitoring reports show
that contaminant levels in groundwater meet applicable standards.
7. Certain sites to which the Company and its Subsidiaries may have sent
waste which are listed on CERCLIS, or any similar state or local list or
are under investigation by governmental agencies are set forth in Exhibits
3-2, 3-3, 3-4 and 3-5 of the ICF Kaiser, Engineers report entitled
"Environmental Assessment of PTC Aerospace and Aircraft Products Companies
Final Report" dated February 14, 1992 and, with respect to the Burns
Aerospace facility, in a report entitled "Phase I Environmental Due
Diligence Examination of the Burns Aerospace Corporation, Winston-Salem,
North Carolina, dated January 1994, prepared by ENSR Consulting and
Engineering".
8. The Litchfield, CT, facility has two utility-owned transformers, one
contains less than 50 ppm PCBs. The other contains 63 ppm PCBs.
<PAGE> 124
9. Hazardous waste from the Altamonte Springs, Florida facility was sent to
the Chemical Conservation Corporation landfill in Valdosta, Georgia which
is on the CERCLIS list.
10. Hazardous waste from the Altamonte Springs, Florida site may have been
disposed of at the Seaboard Chemical site in North Carolina, which is
being remediated under consent order with the State of North Carolina.
11. Certain wells upgradient of the Anaheim, California site have been
impacted by dichlorodifluoromethane (refrigerant) and trichloroethane
(degreaser), both of which are believed to have been used by the
predecessor of Acurex.
12. At a facility in Santa Ana, California which EECO Incorporated, a former
owner of part of the BE Avionics business, owned and later leased, there
may have been some seepage into the soil of toxic materials involved in
metal plating, including arsenic. The Company purchased the BE Avionics
business from EECO in a 1989 asset acquisition, and EECO has subsequently
filed for bankruptcy protection and is no longer in operation. The BE
Avionics business was never conducted in the affected facility.
13. Certain of the ovens manufactured by Nordskog prior to 1981 contain
asbestos.
14. Hazardous waste originating from the Burns Aerospace, Winston-Salem, North
Carolina facility may have been shipped to the Seaboard Chemical site in
North Carolina which is listed on CERCLIS. In 1991, a letter was received
from the North Carolina Department of Environmental Health and National
Resources indicating that Fairchild Burns Company was a de minimis
contributor of waste to that site. By letter dated February 26, 1992 Burns
Aerospace Corporation notified Fairchild Industries, from whom it had
acquired the Winston-Salem facility, that Fairchild Industries was
responsible for that liability.
15. In May, 1994, the Company received notice that is was considered a de
minimis PRP with respect to the Frontier Chemical Site in Niagara Fails,
NY relating to a shipment of waste from the Litchfield, CT facility in
1992. The Company joined a group of de minimis PRPs that performed certain
actions under an Administrative Consent Order with EPA. The Company
believes that it has fully settled Its liability with respect to the site
through payment to the group.
16. The roof at the Chesham, UK facility may contain asbestos cement-root
sheeting.
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<PAGE> 125
Compliance Issues
PTC Aerospace, Litchfield, CT
(1) Facility is listed on the CERCLIS Data Base.
(2) Pursuant to a Notice of Violation issued by the Connecticut DEP in March,
1992, the Facility has implemented a RCRA closure plan and has upgraded
record keeping and training functions.
PTC Aerospace Garden Grove, CA
(1) Oily compressor blowdown is discharged directly to the ground.
(2) Facility does not comply with state RCRA regulations governing generators
of less than 1,000 kilograms of hazardous waste per month.
(3) Facility does not comply with state OSHA requirements governing a written
respiratory protection program, personnel training and recordkeeping,
personnel medical monitoring, and other worker safety and health
requirements.
(4) Facility may require NPDES stormwater discharge permit.
Aircraft Products Company, Delray Beach, FL
(1) Facility has not applied for an air emissions permit or conditional
exemption from the State for its air emission sources.
(2) Paint booth filters, empty drums, and solvent-contaminated rags are
disposed of as nonhazardous solid wastes.
(3) Not all hazardous waste drums were properly labeled.
(4) Unused chemicals are stored onsite that are no longer used in the
production process and should be disposed of as hazardous waste.
(5) Plant does not have a written respiratory protection program or a hearing
conservation program, although such protection is provided to employees.
(6) Plant may require an NPDES stormwater discharge permit.
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<PAGE> 126
Aircraft Products Company, Jacksonville, FL
(1) Facility has no data to indicate that its nonhazardous solid wastes, which
include solvent-contaminated rags, are properly disposed of as
nonhazardous waste.
(2) The facility qualifies currently as a large quantity generator of
regulated hazardous wastes but does not comply with the RCRA requirements
applicable to these generators or to the storage of wastes onsite for less
than 90 days.
(3) Unused chemicals are stored onsite that are no longer used in the
production process and should be disposed of as nonhazardous waste.
(4) Areas designed for hazardous waste drum storage are not posted as such or
signs are obscured.
(5) Plant personnel with responsibility to handle hazardous wastes have not
received the requisite health and safety training.
(6) Containers of hazardous materials are not consistently labeled as to the
hazards they may present to worker health and safety.
(7) Plant does not have a written respiratory protection program nor are
employees fit tested to wear respirators as required by OSHA.
(8) Plant may require an NPDES stormwater discharge permit.
Nordskog Industries, Inc., Van Nuys, CA
(1) Several facilities to which hazardous waste may have been shipped for
disposal are on the CERCLIS data base, as noted in Table 1 of the June
4, 1993 Draft Phase I Environmental Site Assessment.
(2) There may be a compliance issue concerning the mixing of hazardous and
non-hazardous wastes prior to 1984.
(3) The facility has had historical problems meeting effluent standards for
metal finishing. Wastewater is treated in an on-site clarifier prior to
discharge to the municipal sewer.
(4) Nordskog received a Notice to Comply dated July 21, 1993 from the South
Coast Air Quality Management District requiring Nordskog to (i) keep more
detailed usage records as required by Rule 109, including all "VOC" and
vapor pressure information,
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<PAGE> 127
(ii) use only HLVP or 65% efficient spray equipment, (iii) use only
closed containers for all solvents, and (iv) use only Rule 1171 and 1124
compliance cleaning solvents.
Status of Mountain View, CA Property
The Prudential Insurance Company of America ("Prudential") is the owner of
property known as 485 Clyde Avenue (Building 1), Mountain View, California (the
"Property"). Acurex Corporation (Acurex) owned the Property in the early 1970s
and then entered into a sale-leaseback arrangement with Prudential in connection
with the Property. The Property itself sits on part of a very large
contamination plume said to result from discharges into the soil and groundwater
from a nearby Hewlett Packard manufacturing facility. As of the date hereof, the
Company believes that the municipal authorities in Mountain View do not intend
to commence an environmental clean-up in connection with the plume and do not
intend to permit any owner of property on or contiguous with the plume to
commence a clean-up of such owner's property.
In 1992, pursuant to an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") among Acurex, Xeruca, Inc. and others, the lease was
assigned front Acurex to Xeruca. The Merger Agreement included an indemnity from
Xeruca to Acurex for, among other things, those liabilities associated with the
Property. In connection with the expiration of the lease for the Property on
July 13, 1993, Prudential requested that Acurex execute an indemnification
agreement whereby Xeruca would agree to clean-up the Property (if and when
permitted by the municipal authorities) and provide a general indemnity for
matters related to the clean-up while Acurex would agree to guarantee Xeruca's
performance and indemnify Prudential for Xeruca's failure to perform its
obligations. Acurex refused to enter into this agreement, and Prudential
threatened to sue Acurex to compel it to acknowledge such alleged
indemnification obligations.
This dispute between Acurex and Prudential was resolved by an Agreement
made as of August 27, 1993 (the "Settlement Agreement") among Prudential, Xeruca
and Acurex. Pursuant to the Settlement Agreement, Xeruca agreed to indemnify
Prudential with respect to environmental claims related to the Property. In
addition, Acurex assigned to Prudential the benefit of the indemnification
provisions from Xeruca under the Merger Agreement with respect to environmental
claims related to the Property. As a result of the Settlement Agreement, Acurex
is now a co-beneficiary with Prudential of Xeruca's Indemnification obligations
and Prudential has released and forever discharged Acurex from any and all
claims that Acurex is obligated to sign an indemnification agreement with
Prudential.
No lawsuit is currently pending or threatened against Acurex in connection
with the Property.
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<PAGE> 128
Burns Aerospace - Winston-Salem, NC
Contaminants have been detected in the soil and groundwater at the former
Burns-Aerospace facility at levels that may require remediation under the
regulations of the North Carolina Department of Environmental Health and Natural
Resources. Initial conditions at the site at the time of purchase are described
in a report entitled "Site Characterization Report" dated January 19, 1996,
prepared by Groundwater Technology. Further site assessment work is being
conducted by the Company that includes groundwater and soils testing. The
Company has informed the Seller of the facility, Eagle Industries, that the
environmental remedial costs are subject to the indemnification claims of the
purchase contract. Certain other compliance issues at the facility are
identified in a report entitled "Environmental Survey and Compliance
Evaluation," prepared by Environmental Quality Management, dated February
21, 1996.
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<PAGE> 129
SCHEDULE III
Subsidiaries and Investments
[See Sections 7.17 and 8.08(a)]
Part A - Subsidiaries
Jurisdiction
of Percentage
Subsidiary Organization Owners of Ownership
- ---------- ------------ ------ ------------
BE Aerospace Barbados BEA 100%
International, Ltd.
BE Aerospace (UK) England BEA 100%
Limited ("BEA-UK")
Flight Equipment and England BEA-UK 100%
Engineering Limited
BE Aerospace England BEA-UK 100%
(Services), Limited
Aircraft Furnishing England BEA-UK 99.00%
Limited ("AFL") 1.00%
Fort Hill Aircraft Northern AFL 100%
Limited Ireland
AFI Holdings Northern AFL 100%
Limited Ireland
BE Aerospace France BEA 98.00%
(France) S.A.R.L. K.A.D. 1.00%
Companies, 1.00%
Inc.
Marc Leveille
(director)
BE Aerospace Delaware BEA 100%
(U.S.A.), Inc.
BE Aerospace Netherlands BEA 90%
(Netherlands) B.V. BEA (U.S.A.) 10%
("BEA-Neth")
Royal Inventum B.V. Netherlands BEA-Neth 96.60%*
Tepaco Properties B.V. Netherlands BEA-Neth 100%
Acurex Corporation Delaware BEA 100%
Schedule III to Credit Agreement
<PAGE> 130
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Nordskog Industries, California BEA 100%
Inc.
- ----------
* The balance of these shares were lost prior to the sale of the shares of
this entity to BEA.
Schedule III to Credit Agreement
<PAGE> 131
-3-
Part B - Investments
In addition to the Investments set forth in Part A above, as of the
date hereof the Company has the following outstanding Investments:
a. an Investment in a Middle East sales office in an amount not to
exceed $200,000;
b. an Investment in a residential property in San Clemente, California
in an amount of approximately $600,000; and
c. Money Market Funds in the amount, as of May 23, 1997, of
approximately $35M.
Finally, each of the matters described in Items 3, 5, 9 and 10 of
Part A of Schedule I constitutes an Investment in or by FEEL, AFL and the
Company, as the case may be.
Schedule III to Credit Agreement
<PAGE> 132
SCHEDULE IV
Approvals and Compliance
None, except compliance with certain Environmental Laws disclosed in
the materials set forth in Schedule II hereto.
Schedule IV to Credit Agreement
<PAGE> 133
SCHEDULE V
Existing Letters of Credit
Letter of Credit No. Amount Outstanding Expiry Date
- -------------------- ------------------ -----------
P-259468 636,380.00 5/29/97
P-361496 25,509.00 5/31/97
P-258984 534,000.00 12/11/97
P-754546 800,000.00 1/10/98
P-259114 1,400,000.00 1/31/98
P-751178 307,817.00 2/28/98
P-754750 505,000.00 3/16/98
P-753306 313,719.00 5/1/98
--------------
Total Letters of Credit
Outstanding $4,522,425.00
Schedule V to Credit Agreement
<PAGE> 134
SCHEDULE VI
Taxes
None.
Schedule VI to Credit Agreement
<PAGE> 135
SCHEDULE VII
Transactions with Affiliates
Under a Supply Agreement dated April 17, 1990 with Applied Extrusion
Technologies, Inc., a Delaware corporation ("AET"), the Company purchases from
AET its requirements of injection-molded plastic parts for use in the
manufacture of passenger control units and other products for installation in
commercial aircraft for the period ending March 31, 1998. Under that agreement,
AET has agreed to use its best efforts at all times to maintain available and in
good working order a sufficient number and variety of injection molding machines
to satisfy the Company's orders as received and to use its best efforts to
initiate production within three days of receipt of an order or, in emergency
situations, on the date on which the order is received. The price to be paid by
the Company to AET for products purchased under the Supply Agreement is an
amount which results in a 33-1/3% gross margin to AET, after including in AET's
standard cost for such products, all direct and indirect costs of labor,
materials, equipment and overhead. Purchases by the Company under this agreement
for the fiscal year ended on February 22, 1997 were approximately $1,642,000.
Mr. Amin J. Khoury is a director and significant stockholder of AET and serves
as its Chairman and Chief Executive Officer. Messrs. Richard G. Hamermesh and
Hansjoerg Wyss, directors of BE Aerospace, Inc. are also directors of AET.
Schedule VII to Credit Agreement
<PAGE> 136
CONFORMED COPY
EXHIBIT A-1
REVOLVING CREDIT SECURITY AGREEMENT
REVOLVING CREDIT SECURITY AGREEMENT dated as of October 29, 1993
between BE AEROSPACE, INC., a corporation duly organized and validly existing
under the laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as agent for certain lenders or other financial
institutions or entities party, as lenders, to the Credit Agreement referred to
below (in such capacity, together with its successors in such capacity, the
"Agent").
The Company, certain lenders and the Agent are parties to a Credit
Agreement dated as of October 29, 1993 (as modified and supplemented and in
effect from time to time, the "Credit Agreement"), providing, subject to the
terms and conditions thereof, for extensions of credit (by making of loans and
issuing letters of credit) to be made by said lenders to the Company in an
aggregate principal or face amount not exceeding $85,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to pledge and grant a security interest in the Revolving Credit Collateral (as
hereinafter defined) as security for the Revolving Credit Secured Obligations
(as so defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
used herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d)
hereof.
"Collateral Account" shall have the meaning ascribed thereto in
Section 4.01 hereof.
"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Company, including each Copyright identified
in Annex 2 hereto.
"Copyrights" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
Revolving Credit Security Agreement
<PAGE> 137
- 2 -
"Documents" shall have the meaning ascribed thereto in Section 3(j)
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h)
hereof.
"Instruments" shall have the meaning ascribed thereto in Section
3(e) hereof.
"Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements
granted to the Company with respect to any of the foregoing, in each case
whether now or hereafter owned or used including, without limitation, the
licenses or other agreements with respect to the Copyright Collateral, the
Patent Collateral or the Trademark Collateral, listed in Annex 5 hereto;
(c) all information, customer lists, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data,
sales data and other information relating to sales or service of products
now or hereafter manufactured; (e) all accounting information and all
media in which or on which any information or knowledge or data or records
may be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records or data;
(f) all licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by the Company;
and (g) all causes of action, claims and warranties now or hereafter owned
or acquired by the Company in respect of any of the items listed above.
"Inventory" shall have the meaning ascribed thereto in Section 3(f)
hereof.
"Issuers" shall mean, collectively, (a) the respective corporations
identified on Annex 1 hereto under the caption "Issuer" and (b) to the
extent not otherwise identified on Annex 1 hereto, each other Subsidiary
of the Company.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
Revolving Credit Security Agreement
<PAGE> 138
- 3 -
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Company, including each Patent identified in
Annex 3 hereto.
"Patents" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Pledged Stock" shall have the meaning ascribed thereto in Section
3(a) hereof.
"Revolving Credit Collateral" shall have the meaning ascribed
thereto in Section 3 hereof.
"Revolving Credit Secured Obligations" shall mean, collectively, (a)
the principal of and interest on the Revolving Credit Loans made by the
Revolving Credit Lenders to, and the Revolving Credit Note(s) held by each
Revolving Credit Lender of, the Company and all other amounts from time to
time owing to the Revolving Credit Lenders or the Agent by the Company
under the Basic Documents including, without limitation, all Reimbursement
Obligations and interest thereon and (b) all obligations of the Company to
the Revolving Credit Lenders and the Agent hereunder.
"Stock Collateral" shall mean, collectively, the Revolving Credit
Collateral described in clauses (a) through (c) of Section 3 hereof and
the proceeds of and to any such property and, to the extent related to any
such property or such proceeds, all books, correspondence, credit files,
records, invoices and other papers.
"Term Loan Collateral" shall have the meaning assigned to such term
in the Term Loan Security Agreement.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Company, including each Trademark identified
in Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral
does not and shall not include any Trademark which would be rendered
invalid, abandoned, void or unenforceable by reason of its being included
as part of the Trademark Collateral.
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"Trademarks" shall mean all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and applications
for trademark and service mark registrations, including, without
limitation, all renewals of trademark and service mark registrations, all
rights corresponding thereto throughout the world, the right to recover
for all past, present and future infringements thereof, all other rights
of any kind whatsoever accruing thereunder or pertaining thereto,
together, in each case, with the product lines and goodwill of the
business connected with the use of, and symbolized by, each such trade
name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company represents
and warrants to the Revolving Credit Lenders and the Agent that:
(a) The Company is the sole beneficial owner of the Revolving Credit
Collateral and no Lien exists or will exist upon the Revolving Credit
Collateral at any time (and no right or option to acquire the same exists
in favor of any other Person), except for Liens permitted under Section
8.06 of the Credit Agreement and except for the pledge and security
interest in favor of the Agent for the benefit of the Revolving Credit
Lenders created or provided for herein, which pledge and security interest
constitute a first priority perfected pledge and security interest in and
to all of the Revolving Credit Collateral (other than Intellectual
Property registered or otherwise located outside of the United States of
America).
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual
restriction, or any restriction under the charter or by-laws of the
respective Issuer, upon the transfer of such Pledged Stock (except for any
such restriction contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 hereto constitutes at least 65% of the issued and outstanding
shares of capital stock of any class
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of the Issuers beneficially owned by the Company on the date hereof
(whether or not registered in the name of the Company) and said Annex 1
correctly identifies, as at the date hereof, the respective Issuers of
such Pledged Stock, the respective class and par value of the shares
comprising such Pledged Stock and the respective number of shares (and
registered owners thereof) represented by each such certificate.
(d) Annex 2, 3 and 4 hereto set forth a complete and correct list of
all Copyrights, Patents and Trademarks owned by the Company on the date
hereof; except pursuant to licenses and other user agreements entered into
by the Company in the ordinary course of business, which are listed in
Annex 5 hereto, the Company owns and possesses the right to use, and has
done nothing to authorize or enable any other Person to use, any
Copyright, Patent or Trademark listed in said Annex 2, 3 and 4, and all
registrations listed in said Annex 2, 3 and 4 are valid and in full force
and effect; except as may be set forth in said Annex 5, the owns and
possesses the right to use all Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property
on the date hereof.
(f) To the Company's knowledge, (i) except as set forth in Annex 5
hereto, there is no violation by others of any right of the Company with
respect to any Copyright, Patent or Trademark listed in Annex 2, 3 and 4
hereto and (ii) the Company is not infringing in any respect upon any
Copyright, Patent or Trademark of any other Person; and no proceedings
have been instituted or are pending against the Company or, to the
Company's knowledge, threatened, and no claim against the Company has been
received by the Company, alleging any such violation, except as may be set
forth in said Annex 5.
(g) The Company does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of
Trademark Collateral applies.
(h) Any goods now or hereafter produced by the Company or any of its
Subsidiaries included in the Revolving Credit Collateral have been and
will be produced in compliance with the requirements of the Fair Labor
Standards Act, as amended.
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Section 3. Revolving Credit Collateral. As collateral security for
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the Revolving Credit Secured Obligations, the Company hereby
pledges and grants to the Agent, for the benefit of the Revolving Credit Lenders
as hereinafter provided, a security interest in all of the Company's right,
title and interest in the following property, whether now owned by the Company
or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "Revolving Credit
Collateral"):
(a) the shares of capital stock of the Issuers represented by the
certificates identified in Annex 1 hereto and, subject to the limitation
set forth in Section 5.04(a) (1) hereof, all other shares of capital stock
of whatever class of the Issuers, now or hereafter owned by the Company,
in each case together with the certificates evidencing the same
(collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which the Issuer is not the
surviving corporation, all shares of each class of the capital stock of
the successor corporation formed by or resulting from such consolidation
or merger (the Pledged Stock, together with all other certificates,
shares, securities, properties or moneys as may from time to time be
pledged hereunder pursuant to clause (a) or (b) above and this clause (c)
being herein collectively called the "Stock Collateral");
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Company
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under any guarantee (not including a letter of credit) of the purchase
price of Inventory or Equipment sold by the Company and all tax refunds
(such accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called "Instruments");
(f) all inventory (as defined in the Uniform Commercial Code) of the
Company, including Motor Vehicles held by the Company for lease (including
lease to Subsidiaries of the Company), fuel, tires and other spare parts,
all goods obtained by the Company in exchange for such inventory, and any
products made or processed from such inventory including all substances,
if any, commingled therewith or added thereto (herein collectively called
"Inventory");
(g) all Intellectual Property and all other accounts or general
intangibles of the Company not constituting Intellectual Property or
Accounts;
(h) all equipment (as defined in the Uniform Commercial Code) of the
Company, including all Motor Vehicles (herein collectively called
"Equipment");
(i) each contract and other agreement of the Company relating to the
sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Company covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
(k) all rights, claims and benefits of the Company against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by the Company, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
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(1) the balance from time to time in the Collateral Account;
(m) all other tangible and intangible property of the Company (other
than Term Loan Collateral), including, without limitation, all proceeds,
products, offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property of the
Company described in the preceding clauses of this Section 3 (including,
without limitation, any proceeds of insurance thereon) and, to the extent
related to any property described in said clauses or such proceeds,
products and accessions, all books, correspondence, credit files, records,
invoices and other papers, including without limitation all tapes, cards,
computer runs and other papers and documents in the possession or under
the control of the Company or any computer bureau or service company from
time to time acting for the Company.
Section 4. Cash Proceeds of Revolving Credit Collateral.
4.01 Collateral Account. The Agent may establish with Chase a cash
collateral account (the "Collateral Account") in the name and under the control
of the Agent into which there shall be deposited from time to time the cash
proceeds of any of the Revolving Credit Collateral (including proceeds of
insurance thereon) required to be delivered to the Agent pursuant hereto and
into which the Company may from time to time deposit any additional amounts
which it wishes to pledge to the Agent for the benefit of the Revolving Credit
Lenders as additional collateral security hereunder. The balance from time to
time in the Collateral Account shall constitute part of the Revolving Credit
Collateral hereunder and shall not constitute payment of the Revolving Credit
Secured Obligations until applied as hereinafter provided. Except as expressly
provided in the next sentence, the Agent shall remit the collected balance
outstanding to the credit of the Collateral Account to or upon the order of the
Company as the Company shall from time to time instruct; provided that the Net
Available Proceeds from Dispositions deposited in the Collateral Account (but
not the investment earnings thereof) shall remain in the Collateral Account
until withdrawn as permitted or required by Section 2.10(c) of the Credit
Agreement. However, at any time following the occurrence and during the
continuance of an Event of Default, the Agent may (and, if instructed by the
Revolving Credit Lenders as specified in Section 10.03 of the Credit Agreement,
shall) in its (or their) discretion apply or cause to be applied (subject to
collection) the balance from time to time outstanding to the credit of the
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Collateral Account to the payment of the Revolving Credit Secured Obligations in
the manner specified in Section 5.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein
and in Section 2.10(c) of the Credit Agreement.
4.02 Proceeds of Accounts. At any time after the occurrence and
during the continuance of an Event of Default, the Company shall, upon the
request of the Agent, instruct all account debtors and other Persons obligated
in respect of all Accounts to make all payments in respect of the Accounts
either (a) directly to the Agent (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Agent) or (b) to one or more other banks in the United States of America (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of the Agent) under arrangements, in form and
substance satisfactory to the Agent pursuant to which the Company shall have
irrevocably instructed such other bank (and such other bank shall have agreed)
to remit all proceeds of such payments directly to the Agent for deposit into
the Collateral Account. All payments made to the Agent, as provided in the
preceding sentence, shall be immediately deposited in the Collateral Account. In
addition to the foregoing, the Company agrees that, at any time after the
occurrence and during the continuance of an Event of Default, if the proceeds of
any Revolving Credit Collateral hereunder (including the payments made in
respect of Accounts) shall be received by it, the Company shall as promptly as
possible deposit such proceeds into the Collateral Account. Until so deposited,
all such proceeds shall be held in trust by the Company for and as the property
of the Agent and shall not be commingled with any other funds or property of the
Company.
4.03 Investment of Balance in Collateral Account. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Company (or, after the occurrence and during the continuance
of a Default, the Agent) shall determine, which Permitted Investments shall be
held in the name and be under the control of the Agent, provided that (i) at any
time after the occurrence and during the continuance of an Event of Default, the
Agent may (and, if instructed by the Revolving Credit Lenders as specified in
Section 10.03 of the Credit Agreement, shall) in its (or their) discretion at
any time and from time to time elect to liquidate any such Permitted Investments
and to apply or cause to be applied the proceeds thereof to the payment of the
Revolving Credit Secured Obligations in the manner specified in Section 5.09
hereof and (ii) if requested by the Company, such Permitted Investments may be
held in the name and under the
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control of one or more of the Revolving Credit Lenders (and in that connection
each Revolving Credit Lender, pursuant to Section 10.10 of the Credit Agreement,
has agreed that such Permitted Investments shall be held by such Revolving
Credit Lender as a collateral sub-agent for the Agent hereunder).
4.04 Cover for Letter of Credit Liabilities. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held
by the Agent in a separate sub-account (designated "Letter of Credit Liabilities
Sub-Account") and all amounts held in such sub-account shall constitute
collateral security first for the Letter of Credit Liabilities outstanding from
time to time and second as collateral security for the other Revolving Credit
Secured Obligations hereunder.
Section 5. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Revolving Credit Lender and the Agent as follows:
5.01 Delivery and Other Perfection. The Company shall:
(a) subject to Section 5.04(a)(1) hereof, if any of the
above-described shares, securities, moneys or property required to be
pledged by the Company under clauses (a), (b) and (c) of Section 3 hereof
are received by the Company, forthwith either (x) transfer and deliver to
the Agent such shares or securities so received by the Company (together
with the certificates for any such shares and securities duly endorsed in
blank or accompanied by undated stock powers duly executed in blank), all
of which thereafter shall be held by the Agent, pursuant to the terms of
this Agreement, as part of the Revolving Credit Collateral or (y) take
such other action as the Agent shall deem necessary or appropriate to duly
record the Lien created hereunder in such shares, securities, moneys or
property in said clauses (a), (b) and (c);
(b) deliver and pledge to the Agent any and all Instruments,
endorsed and/or accompanied by such instruments of assignment and transfer
in such form and substance as the Agent may request; provided, that so
long as no Default shall have occurred and be continuing, the Company may
retain for collection in the ordinary course any Instruments received by
the Company in the ordinary course of business and the Agent shall,
promptly upon request of the Company,
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make appropriate arrangements for making any other Instrument pledged by
the Company available to the Company for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Agent, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant
hereto or to enable the Agent to exercise and enforce its rights hereunder
with respect to such pledge and security interest, including, without
limitation, causing any or all of the Stock Collateral to be transferred
of record into the name of the Agent or its nominee (and the Agent agrees
that if any Stock Collateral is transferred into its name or the name of
its nominee, the Agent will thereafter promptly give to the Company copies
of any notices and communications received by it with respect to the Stock
Collateral), provided that notices to account debtors in respect of any
Accounts or Instruments shall be subject to the provisions of clause (i)
below;
(d) from time to time as requested by any Revolving Credit Lender,
cause the Agent to be listed as the lienholder of any Equipment covered by
a certificate of title or ownership and within 120 days of such request
deliver evidence of the same to the Agent;
(e) keep full and accurate books and records relating to the
Revolving Credit Collateral, and stamp or otherwise mark such books and
records in such manner as the Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(f) furnish to the Agent from time to time (but, unless a Default
shall have occurred and be continuing, no more frequently than quarterly)
statements and schedules further identifying and describing the Copyright
Collateral, the Patent Collateral and the Trademark Collateral and such
other reports in connection with the Copyright Collateral, the Patent
Collateral and the Trademark Collateral, as the Agent may reasonably
request, all in reasonable detail;
(g) promptly upon request of the Agent, following receipt by the
Agent of any statements, schedules or reports pursuant to clause (f)
above, modify this Agreement by amending Annex 2, 3 and/or 4 hereto to
include any
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Copyright, Patent or Trademark which becomes part of the Revolving Credit
Collateral under this Agreement;
(h) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Revolving Credit Collateral, and
permit representatives of the Agent to be present at the Company's place
of business to receive copies of all communications and remittances
relating-to the Revolving Credit Collateral, and forward copies of any
notices or communications received by the Company with respect to the
Revolving Credit Collateral, all in such manner as the Agent may require;
(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Agent, promptly notify (and the Company
hereby authorizes the Agent so to notify) each account debtor in respect
of any Accounts or Instruments that such Revolving Credit Collateral has
been assigned to the Agent hereunder, and that any payments due or to
become due in respect of such Revolving Credit Collateral are to be made
directly to the Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Agent (granted with the authorization of the Revolving Credit
Lenders as specified in Section 10.09 of the Credit Agreement), the Company
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Revolving Credit Collateral in which the Agent is not named as
the sole secured party for the benefit of the Revolving Credit Lenders.
5.03 Preservation of Rights. The Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Revolving Credit Collateral.
5.04 Special Provisions Relating to Certain Revolving Credit
Collateral.
(a) Stock Collateral.
(1) The Company will cause the Stock Collateral to constitute at all
times 100% of the total number of shares of each class of capital stock of each
Issuer then outstanding; provided that if any such Issuer is organized under the
laws of jurisdiction other than the United States of America or a State thereof,
the Company need only cause the Stock Collateral of such
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Issuer to constitute 65% of the total number of shares of each class of capital
stock of such Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Company agrees that it will not vote the Stock
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Credit Agreement, the Notes or any such other instrument or agreement; and
the Agent shall execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney, dividend and
other orders, and all such instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers which it is entitled to exercise pursuant to this Section
5.04(a)(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent or any
Revolving Credit Lender exercises any available right to declare any Revolving
Credit Secured Obligations due and payable or seeks or pursues any other relief
or remedy available to it under applicable law or under this Agreement, the
Credit Agreement, the Notes or any other agreement relating to such Revolving
Credit Secured Obligations, all dividends and other distributions on the Stock
Collateral shall be paid directly to the Agent and retained by it in the
Collateral Account as part of the Stock Collateral, subject to the terms of this
Agreement, and, if the Agent shall so request in writing, the Company agrees to
execute and deliver to the Agent appropriate additional dividend, distribution
and other orders and documents to that end, provided that if such Event of
Default is cured, any such dividend or distribution theretofore paid to the
Agent shall, upon request of the Company (except to the extent theretofore
applied to the Revolving Credit Secured Obligations), be returned by the Agent
to the Company.
(b) Intellectual Property.
(1) For the purpose of enabling the Agent to exercise rights and
remedies under Section 5.05 hereof at such time as the Agent shall be lawfully
entitled to exercise such rights and
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remedies, and for no other purpose, the Company hereby grants to the Agent, to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Company) to use, assign,
license or sublicense any of the Intellectual Property now owned or hereafter
acquired by the Company, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 8.05 of the Credit Agreement which limit
the right of the Company to dispose of its property, so long as no Event of
Default shall have occurred and be continuing, the Company will be permitted to
exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or
take other actions with respect to the Intellectual Property in the ordinary
course of the business of the Company. In furtherance of the foregoing, unless
an Event of Default shall have occurred and be continuing the Agent shall from
time to time, upon the request of the Company, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
the Company shall have certified are appropriate (in its judgment) to allow it
to take any action permitted above (including relinquishment of the license
provided pursuant to clause (i) immediately above as to any specific
Intellectual Property). Further, upon the payment in full of all of the
Revolving Credit Secured Obligations and cancellation or termination of the
Revolving Credit Commitments and Letter of Credit Liabilities or earlier
expiration of this Agreement or release of the Revolving Credit Collateral, the
Agent shall grant back to the Company the license granted pursuant to clause (1)
immediately above. The exercise of rights and remedies under Section 5.05 hereof
by the Agent shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Company in accordance with the first
sentence of this clause (2).
5.05 Events of Default, Etc. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Company shall, at the request of the Agent, assemble the
Revolving Credit Collateral owned by it at such place or places,
reasonably convenient to both the Agent and the Company, designated in the
Agent's request;
(b) the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Revolving Credit Collateral
and may extend the time of
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payment, arrange for payment in installments, or otherwise modify the
terms of, any of the Revolving Credit Collateral;
(c) the Agent shall have all of the rights and remedies with respect
to the Revolving Credit Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Revolving Credit Collateral as if the Agent were the
sole and absolute owner thereof (and the Company agrees to take all such
action as may be appropriate to give effect to such right);
(d) the Agent in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange
for any of the Revolving Credit Collateral, but shall be under no
obligation to do so; and
(e) the Agent may, upon ten Business Days' prior written notice to
the Company of the time and place, with respect to the Revolving Credit
Collateral or any part thereof which shall then be or shall thereafter
come into the possession, custody or control of the Agent, the Revolving
Credit Lenders or any of their respective agents, sell, lease, assign or
otherwise dispose of all or any part of such Revolving Credit Collateral,
at such place or places as the Agent deems best, and for cash or for
credit or for future delivery (without thereby assuming any credit risk),
at public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place thereof
(except such notice as is required above or by applicable statute and
cannot be waived), and the Agent or any Revolving Credit Lender or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of
the Revolving Credit Collateral so disposed of at any public sale (or, to
the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise), of
the Company, any such demand, notice and right or equity being hereby
expressly waived and released. In the event of any sale, assignment, or
other disposition of any of the Trademark Collateral, the goodwill
connected with and
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symbolized by the Trademark Collateral subject to such disposition shall
be included, and the Company shall supply to the Agent or its designee,
for inclusion in such sale, assignment or other disposition, all
Intellectual Property relating to such Trademark Collateral. The Agent
may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time
or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the Agent in
Section 5.04(b) hereof, shall be applied in accordance with Section 5.09 hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Revolving Credit Collateral, to limit purchasers to those who
will agree, among other things, to acquire the Revolving Credit Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. The Company acknowledges that any such private sales may be at
prices and on terms less favorable to the Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Revolving
Credit Collateral for the period of time necessary to permit the Agent or issuer
thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Revolving Credit Collateral pursuant to Section 5.05
hereof are insufficient to cover the costs and expenses of such realization and
the payment in full of the Revolving Credit Secured Obligations, the Company
shall remain liable for any deficiency.
5.07 Removals. Etc. Without at least 30 days' prior written notice
to the Agent, the Company shall not (i) maintain any of its books and records
with respect to the Revolving Credit Collateral at any office or maintain its
principal place of business at any place, or permit any Inventory or Equipment
to be located anywhere, other than at the address indicated beneath the
signature of the Company to the Credit Agreement or at one of the locations
identified in Part A of Annex 6 hereto or in transit from one of such locations
to another or (ii) change its name, or
Revolving Credit Security Agreement
<PAGE> 152
- 17 -
the name under which it does business, from the name shown on the signature
pages hereto; provided, however, that the Company may do business in the states
and under the names specified in Part B of Annex 6 hereto.
5.08 Private Sale. The Agent and the Revolving Credit Lenders shall
incur no liability as a result of the sale of the Revolving Credit Collateral,
or any part thereof, at any private sale pursuant to Section 5.05 hereof
conducted in a commercially reasonable manner. The Company hereby waives any
claims against the Agent or any Revolving Credit Lender arising by reason of the
fact that the price at which the Revolving Credit Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the Revolving Credit
Secured Obligations, even if the Agent accepts the first offer received and does
not offer the Revolving Credit Collateral to more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Revolving Credit
Collateral pursuant hereto, and any other cash at the time held by the Agent
under Section 4 hereof or this Section 5, shall be applied by the Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, and all reasonable expenses incurred and advances made by the
Agent in connection therewith;
Next, to the payment in full of the Revolving Credit Secured
Obligations, in each case equally and ratably in accordance with the
respective amounts thereof then due and owing or as the Revolving Credit
Lenders holding the same may otherwise agree; and
Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied first to the Letter of Credit
Liabilities outstanding from time to time and second to the other Revolving
Credit Secured Obligations in the manner provided above in this Section 5.09.
Revolving Credit Security Agreement
<PAGE> 153
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As used in this Section 5, "proceeds" of Revolving Credit Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Revolving Credit Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Company or any issuer
of or obligor on any of the Revolving Credit Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments which the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Agent shall be entitled under
this Section 5 to make collections in respect of the Revolving Credit
Collateral, the Agent shall have the right and power to receive, endorse and
collect all checks made payable to the order of the Company representing any
dividend, payment or other distribution in respect of the Revolving Credit
Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall (i) file such financing statements
and other documents in such offices as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement, (ii) cause the Agent
(to the extent requested by any Revolving Credit Lender) to be listed as the
lienholder on all certificates of title or ownership relating to Motor Vehicles
owned by the Company and (iii) deliver to the Agent all certificates identified
in Annex 1 hereto, accompanied by undated stock powers duly executed in blank.
5.12 Termination. When all Revolving Credit Secured Obligations
shall have been paid in full and the Revolving Credit Commitments of the
Revolving Credit Lenders under the Credit Agreement and all Letter of Credit
Liabilities shall have expired or been terminated, this Agreement shall
terminate, and the Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Revolving Credit Collateral and money received in
respect thereof, to or on the order of the Company and to be released and
canceled all licenses and rights referred to in Section 5.04(b) hereof. The
Agent shall also execute and deliver to the Company upon such
Revolving Credit Security Agreement
<PAGE> 154
- 19 -
termination such Uniform Commercial Code termination statements, certificates
for terminating the Liens on the Motor Vehicles and such other documentation as
shall be reasonably requested by the Company to effect the termination and
release of the Liens on the Revolving Credit Collateral.
5.13 Expenses. The Company agrees to pay to the Agent all reasonable
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 5, or performance by the Agent of any obligations of the Company in
respect of the Revolving Credit Collateral which the Company has failed or
refused to perform, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Revolving Credit Collateral, and for the care of the Revolving Credit Collateral
and defending or asserting rights and claims of the Agent in respect thereof, by
litigation or otherwise, including expenses of insurance, and all such expenses
shall be Revolving Credit Secured Obligations to the Agent secured under Section
3 hereof.
5.14 Further Assurances. The Company agrees that, from time to time
upon the written request of the Agent, the Company will execute and deliver such
further documents and do such other acts and things as the Agent may reasonably
request in order fully to effect the purposes of this Agreement.
5.15 Release of Motor Vehicles. So long as no Event of Default shall
have occurred and be continuing, upon the request of the Company, the Agent
shall execute and deliver to the Company such instruments as the Company shall
reasonably request to remove the notation of the Agent as lienholder on any
certificate of title for any Motor Vehicle; provided that any such instruments
shall be delivered, and the release effective only upon receipt by the Agent of
a certificate from the Company stating that the Motor Vehicle the lien on which
is to be released is to be sold or has suffered a casualty loss (with title
thereto passing to the casualty insurance company therefor in settlement of the
claim for such loss).
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Agent or any of its
agents to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right,
Revolving Credit Security Agreement
<PAGE> 155
- 20 -
power or remedy. The remedies herein are cumulative and are not exclusive of
any remedies provided by law.
6.02 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.03 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 11.02 of
the Credit Agreement and shall be deemed to have been given at the times
specified in said Section 11.02.
6.04 Waivers, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Company
and the Agent (with the consent of the Revolving Credit Lenders as specified in
Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon the Agent and each Revolving Credit Lender, each holder of any of
the Revolving Credit Secured Obligations and the Company.
6.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Company, the Agent, the Revolving Credit Lenders and each holder of any of the
Revolving Credit Secured Obligations (provided, however, that the Company shall
not assign or transfer its rights hereunder without the prior written consent of
the Agent).
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
6.07 Agents. The Agent may employ agents and attorneys-in-fact in
connection herewith and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
6.08 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the
Revolving Credit Lenders in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any provision hereof in any
Revolving Credit Security Agreement
<PAGE> 156
- 21 -
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Security Agreement to be duly executed and delivered as of the day and
year first above written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
--------------------------------------
Title: Secretary
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By /s/ Matthew H. Massie
--------------------------------------
Title: Vice President
Revolving Credit Security Agreement
<PAGE> 157
ANNEX 1
PLEDGED STOCK
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
Flight Equipment 26 BE Avionics, 325,000
and Engineering Inc. (now ordinary
Limited known as BE shares, (pound)1 par
Aerospace, value
Inc.)
BE Aerospace 1-23 BE 23 shares of
(Netherlands) (uncertificated Aerospace, capital stock,
B.V. shares) Inc. dfl. 1,000 par value
BE Aerospace 2 BE 65 shares of
(U.S.A.), Inc. Aerospace, common stock,
Inc. $0.01 par value
Annex 1 to Revolving Credit Security Agreement
<PAGE> 158
ANNEX 2
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
Title Date Filed Registration No. Effective Date
- ----- ---------- ---------------- --------------
None.
Annex 2 to Revolving Credit Security Agreement
<PAGE> 159
ANNEX 3
LIST OF PATENTS AND PATENT APPLICATIONS
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
Locking USA 37103076 01/23/73
Electrical Cable
Connector
Acoustic Yoke Great Brit. 1510243 02/27/76
Coupler Switch
Transducer USA 4028491 06/07/77
Switching System
Miniature USA 4029375 06/14/77
Electrical
Connector
Acoustic Yoke USA 4029169 06/14/77
Ear Coupler USA 4055233 10/25/77
Variable USA 4352084 09/28/82
Resistor Disk
Assembly
Controller Unit USA 4509097 04/02/85
Quick Release USA 4547016 10/15/85
Mounting
Matrix Control USA 4577191 03/18/86
Method &
Apparatus
574259-1 Coffee/Tea Maker APPLICATION BEING PREPARED
574259-11 Auto Retractable Step II APPLICATION BEING PREPARED
574259-12 Auto Retractable Step I APPLICATION BEING PREPARED
776650 Auto Monitor Tilt Mechanism APPLICATION FILED 10/03/91
Annex 3 to Revolving Credit Security Agreement
-1-
<PAGE> 160
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
574267-12 Apparatus for France 46414
Selectively
574267-13 Apparatus for Great Brit. 46414
Selectively
574267-14 Apparatus for Italy 46414
Selectively
574267- Brewing Inline USA 3898428 08/05/75
Apparatus
574267- Cart, Serving USA 3986582 10/19/76
Has Spaced
574267-30 Des. Dish Singl- USA 284156 06/10/86
Serv.
574267- Des. Dish Singl- USA 280960 10/15/85
Serv.
574267- Des. Dish Singl- USA 282335 01/28/86
Serv.
574267- Dinsh Singl- USA 4560859 12/24/85
Serv.
574267- Heater Assy USA 4294643 10/13/81
Method
574267- Heater Assy USA 4286143 08/25/81
Laminated
574267- Oven Freezer Canada 0891768 02/01/72
Has Fan
574267-5 Singl-Serv. Australia 515828 09/15/78
Heater Shelf
574267-17 Singl Serv. Canada 1218245 02/24/87
574267-18 Singl Serv. Canada 1231543 01/19/88
574267-11 Singl Serv. Europe 0046414 08/20/81
Annex 3 to Revolving Credit Security Agreement
-2-
<PAGE> 161
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
574267-15 Singl Serv. Japan 1214307 10/20/83
574267-10 Singl Serv. Germany 31728324 08/20/81
System
574267-20 Singl Serv. Great Brit. 2017293 09/14/78
Heater
574267-8 Singl Serv. Japan 1085804 06/18/81
Heater
574267-25 Singl Serv. USA 4180125 12/25/79
Heater
574267-33 Singl Serv. USA 30623 05/26/81
Heater
574267-34 Singl Serv. USA 4346756 08/31/82
System
574267-29 Singl Serv. USA 4776485 10/11/88
with Insulat.
Aircraft USA 4647980 03/03/87
Passenger
Television
System
Airline USA 281940 12/03/85
Passenger
Seatback
Combined LCD
Display and
Battery Pack
Unit For an
Entertainment
and Information
System
Television USA 295042 04/05/88
Nodule
Annex 3 to Revolving Credit Security Agreement
-3-
<PAGE> 162
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
Aircraft Taiwan 36006 11/10/87
Passenger
Television
System
Television Taiwan 17791 03/10/89
Module
Aircraft Australia 577768 02/13/89
Passenger
Television
System
Aircraft Canada 1227735 10/06/87
Passenger
Television
System
Aircraft Europe Application Filed 1/15/87;
Passenger (designated Ser. No. 87100474.3
Television countries
System are:
Austria,
Belg., Fr.,
Ger., U.K.,
Italy,
Swed.,
Switz. And
Neth.)
Airline Japan Application Filed 5/18/87;
Passenger Ser. No. 12160/87
Television
System
Television Japan Application Filed 5/23/86;
Module Ser. No. 61-19680
Annex 3 to Revolving Credit Security Agreement
-4-
<PAGE> 163
ANNEX 4
LIST OF TRADE NAMES, TRADEMARKS, SERVICE MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. Trademarks
Mark Registration Registration Goods
---- ------------ ------------ -----
No. Date
--- ----
1. Airvision
Logo 1,404,654 8/12/86 Audio visual
entertainment units for
installation in the rear
seats of transportation
vehicles, consisting of:
a viewing screen,
earphones, cassettes,
cassette players - sold
as a unit, in
international class 9.
2. Airvision 1,449,452 7/28/87 Audio visual
entertainment units for
installation in the rear
seats of transportation
vehicles, consisting of:
a viewing screen,
earphones, cassettes,
cassette players - sold
as a unit, in
international class 9.
Annex 4 to Revolving Credit Security Agreement
<PAGE> 164
Foreign Trademarks
<TABLE>
<CAPTION>
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes
Name No. Date No. Renewal
Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRVISION ALGERIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION AUSTRALIA Registered A490611 06/07/88 A19D511 06/07/88 06/07/95 41,
AIRVISION AUSTRALIA Registered A490612 06/07/88 A19D512 06/07/88 06/07/95 9,
AIRVISION AUSTRIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION BENELUX Registered 710868 07/01/88 438360 03/06/88 07/01/98 9,37,41,
AIRVISION BULGARIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION CROATIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION CZECHOSLOVAKIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION DENMARK Pending 4276/88 24/06/88 3671-1991 14/06/91 14/06/01 9,37,41,
AIRVISION EGYPT Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION FINLAND Registered 3756/88 24/06/88 106329 06/06/90 06/06/00 9,37,41,
AIRVISION FRANCE Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION GERMANY EAST Registered 22/06/88 525719 22/06/88 22/06/98 9,37,41,
AIRVISION GERMANY WEST Withdrawn 22/06/88 525719 22/06/88 22/06/98 9,37,41,
AIRVISION GREAT BRITAIN Registered 1360025 29/04/88 9,
AIRVISION GREAT BRITAIN _________ 1360026 29/04/88 41,
AIRVISION GREECE Pending 89642 06/07/88 89642 17/12/90 06/07/98 9,
AIRVISION HUNGARY Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION INDONESIA Registered 22/06/88 248940 24/04/89 24/04/98 9,
AIRVISION INTERNATIONAL Registered 22/06/88 525719 22/06/88 22/06/98 9,37,41,
AIRVISION INTERNATIONAL Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION IRELAND Registered 2593/88 23/06/88 129284 26/11/90 07/01/95 9,
AIRVISION ITALY Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION JAPAN Registered 78073/88 07/01/88 229993T 31/01/91 31/10/00 24,
AIRVISION JAPAN Pending 78072/88 07/01/88 11,
AIRVISION JAPAN Registered 78074/88 07/01/88 2325T84 30/05/91 30/05/01 26,
AIRVISION JAPAN Drop 78072/88 07/01/88 11,
AIRVISION KOREA PEP. DEM. R. Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION LIECHTENSTEIN Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION MALAYSIA Pending 88/03214 04/07/88 9,
AIRVISION MONACO Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION MOROCCO Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION NEW ZEALAND Registered 184982 24/06/88 184952 10/03/92 24/06/95 41,
AIRVISION NEW ZEALAND Registered 184951 24/06/88 184951 10/03/92 24/06/95 9,
AIRVISION NORWAY Registered 882834 27/06/88 140052 11/01/90 11/01/00 9,37,41,
AIRVISION PORTUGAL Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION ROMANIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION SAN MARINO Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION SINGAPORE Registered 3332/88 30/06/88 3332/88 30/06/88 07/01/95 9,
AIRVISION SLOVENIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION SOUTH KOREA Registered 1388/88 29/06/88 10336 20/09/89 20/09/99 111,
AIRVISION SOUTH KOREA Registered 14427/88 29/06/88 181022 11/10/89 11/10/99 38,
AIRVISION SOUTH KOREA Registered 14429/88 29/06/88 177402 23/06/89 23/06/99 52,
AIRVISION SOUTH KOREA Registered 14428/88 29/06/88 177778 29/08/89 29/06/99 31,
AIRVISION SOVIET UNION Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION SPAIN Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION SUDAN Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION SWEDEN Pending 88-5694 06/07/88 227109 18/10/91 18/10/01 9,37,41,
AIRVISION SWITZERLAND Registered 22/06/88 525719A 22/06/88 22/06/98 9,
AIRVISION TAIWAN Registered (71)29898 24/06/88 447777 01/06/89 01/06/99 73,
AIRVISION TAIWAN Registered 77-29896 24/06/88 457033 01/11/89 01/11/99 93,
AIRVISION TAIWAN Registered (77)29699 24/06/88 33324 15/01/89 15/01/99 1,
</TABLE>
Annex 4 to Revolving Credit Agreement Security Agreement
-2-
<PAGE> 165
<TABLE>
<CAPTION>
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes
Name No. Date No. Renewal
Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRVISION TAIWAN Registered (77)29897 24/06/88 424801 31/01/89 31/01/98 66,
AIRVISION UKRAINE Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION YUGOSLAVIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41,
AIRVISION (LOGO) ALGERIA Registered 06/01/89 533525A 06/01/89 06/01/98 9,16,41,
AIRVISION (LOGO) AUSTRALIA Registered 492951 08/08/88 A482981 09/06/88 08/06/95 41,
AIRVISION (LOGO) AUSTRALIA Registered 492979 08/08/88 A482979 09/06/88 08/06/95 9,
AIRVISION (LOGO) AUSTRALIA Registered 492980 08/08/88 A482969 09/06/88 08/06/95 16,
AIRVISION (LOGO) AUSTRIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) BENELUX Registered 717180 06/07/88 447996 10/02/89 06/07/98 9,16,41,
AIRVISION (LOGO) BULGARIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) CROATIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) CZECHOSLOVAKIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) DENMARK Registered 5390/88 04/06/88 689-990 08/02/90 09/02/90 9,16,41
AIRVISION (LOGO) EGYPT Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) FINLAND Registered 3412/88 05/08/88 108123 05/10/90 05/10/00 9,16,41
AIRVISION (LOGO) FRANCE Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) GERMANY EAST Registered 06/01/89 533525 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) GERMANY WEST Registered 06/01/89 533525 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) GREAT BRITAIN Registered 1353493 06/08/88 1353483 23/10/92 05/05/95 41,
AIRVISION (LOGO) GREAT BRITAIN Registered 1492841 21/02/82 1492041 21/02/93 26/02/99 9,
AIRVISION (LOGO) GREAT BRITAIN Rejected 1353992 05/08/88 16,
AIRVISION (LOGO) GREAT BRITAIN Pending 1353991 05/08/88 9,
AIRVISION (LOGO) GREECE Registered 90143 10/06/88 90143 10/08/88 10/08/98 9,16
AIRVISION (LOGO) HONG KONG Registered 5053/88 16/06/88 8700/83 16/02/93 16/06/95 16,
AIRVISION (LOGO) HONG KONG Withdrawn 5052/88 16/06/88 9,
AIRVISION (LOGO) HUNGARY Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) INDONESIA Registered 11/06/88 266038 01/04/91 01/04/01 9,16,
AIRVISION (LOGO) INTERNATIONAL Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) INTERNATIONAL Registered 06/01/89 533525 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) IRELAND Registered 3410/88 06/06/88 129285 26/11/90 08/08/95 9,
AIRVISION (LOGO) IRELAND Registered 3411/88 06/06/88 129286 26/11/90 08/08/95 16,
AIRVISION (LOGO) ITALY Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) JAPAN Registered 92602/88 10/06/88 2402644 30/04/92 30/04/02 26,
AIRVISION (LOGO) JAPAN Pending 92599/88 10/06/88 11,
AIRVISION (LOGO) JAPAN Registered 92601/88 10/06/88 2364916 25/12/91 29/12/01 25,
AIRVISION (LOGO) JAPAN Registered 92600/88 10/06/88 2340952 30/09/91 30/06/01 24,
AIRVISION (LOGO) KOREA PEP. DEM. R. Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) LIECHTENSTEIN Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
AIRVISION (LOGO) MALAYSIA Pending 88/05223 10/10/88 9,
AIRVISION (LOGO) MALAYSIA Pending 88/05222 10/10/88 16,
AIRVISION (LOGO) MONACO Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) MOROCCO Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) NEW ZEALAND Registered 186296 10/06/88 186296 12/03/92 10/08/95 16,
AIRVISION (LOGO) NEW ZEALAND Registered 186295 10/06/88 186295 12/03/92 10/08/95 9,
AIRVISION (LOGO) NEW ZEALAND Registered 186297 10/06/88 186297 12/03/92 10/08/95 41,
AIRVISION (LOGO) NORWAY Registered 88-3533 01/06/88 145136 23/05/91 23/05/01 9,16,41,
AIRVISION (LOGO) POLAND Pending Z-82457 22/06/90 9,
AIRVISION (LOGO) PORTUGAL Registered 06/01/89 533525A 06/01/99 06/01/99 9,16,41,
AIRVISION (LOGO) ROMANIA Registered 06/01/89 533525A 06/01/99 06/01/99 9,16,41,
AIRVISION (LOGO) SAN MARINO Registered 06/01/89 533525A 06/01/99 06/01/99 9,16,41
AIRVISION (LOGO) SINGAPORE Pending 5234/88 24/09/88 16,
AIRVISION (LOGO) SINGAPORE Registered 5232/88 24/09/88 5232/88 24/09/88 24/09/95 9,
AIRVISION (LOGO) SLOVENIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
</TABLE>
Annex 4 to Revolving Credit Agreement Security Agreement
-3-
<PAGE> 166
<TABLE>
<CAPTION>
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes
Name No. Date No. Renewal
Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRVISION (LOGO) SOUTH KOREA Registered 19260/88 27/06/88 177776 29/06/89 29/06/99 51,
AIRVISION (LOGO) SOUTH KOREA Registered 1797/88 27/06/88 10537 16/11/89 16/11/99 111,
AIRVISION (LOGO) SOUTH KOREA Pending 19259/88 27/06/88 39,
AIRVISION (LOGO) SOUTH KOREA Registered 19261/88 27/06/88 177396 23/06/89 23/06/99 52,
AIRVISION (LOGO) SOVIET UNION Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) SPAIN Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) SUDAN Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) SWEDEN Registered 88-6794 12/08/88 227113 18/10/91 18/10/01 9,16,41,
AIRVISION (LOGO) SWTZERLAND Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) TAIWAN Registered 77-44068 22/08/88 437928 01/04/89 01/04/99 95,
AIRVISION (LOGO) TAIWAN Registered 77-44066 22/08/88 435019 16/03/89 16/03/99 49,
AIRVISION (LOGO) TAIWAN Registered 77-44069 22/08/88 445192 01/07/89 31/01/99 96,
AIRVISION (LOGO) TAIWAN Registered 77-44066 22/08/88 35082 16/04/89 15/01/99 1,
AIRVISION (LOGO) TAIWAN Registered 77-44067 22/08/88 447783 01/08/89 01/08/99 73,
AIRVISION (LOGO) UKRAINE Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
AIRVISION (LOGO) YUGOSLAVIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
</TABLE>
Annex 4 to Revolving Credit Agreement Security Agreement
-4-
<PAGE> 167
ANNEX 5
LIST OF CONTRACTS. LICENSES AND OTHER AGREEMENT
1. Pursuant to an Amended and Restated Asset Purchase Agreement (the
"Asset Purchase Agreement") between the Company and Philips Electronics North
America Corporation ("PENA") dated August 27, 1993, on October 13, 1993 the
Company purchased certain assets and liabilities from the Philips Airvision
division ("Airvision") of PENA, including certain patents, patent applications,
trademarks and trademark applications of Airvision.
Based on copies of affidavits and other letters of the inventors'
attorney in PENA's files, a public disclosure by the inventors of a
representative airline seat with seatback mounted television was made on or
about October 1984 at a meeting of the World Airline Entertainment Association
in San Diego. This disclosure was not brought to the attention of the Patent and
Trademark Office examiner during the prosecution of this application.
Based on such affidavits and letters, it is believed that the
mock-up consisted of a small LCD color television screen supported by tape and
wood blocks in the seat headrest. The screen was removed from a hand-held
portable television and combined with electronic components externally of the
seat to provide a visual display with separate channels of a seatback mounted
television.
Such affidavits and letters disclose that the above mock-up was
displayed on a limited basis in a hotel room to others attending the conference
for the purpose of soliciting a research and development partner having access
to an aircraft upon which the system could be tested. At the time, no in-flight
demonstration testing had occurred.
Based on facts averred in a Declaration Under 37 C.F.R. 1.131 filed
by the inventors during prosecution of the application, there is also a possible
basis for the assertion that the television system was "on sale" more than one
year prior to the date of application. As PENA understands it, Airvision's
predecessor in interest (a) made a confidential offer to sell the system to The
Boeing Company on October 11, 1982 including a description of and offer to
include "Second Generation Devices" intended to permit a selection of movies;
(b) completed a first prototype (seat mounted LCD screen in 1983); (c) completed
a working second prototype (TV modular system for installation into passenger
seat) in September, 1984; (d) conducted market studies
Annex 5 to Revolving Credit Security Agreement
-1-
<PAGE> 168
for the remainder of 1984 and 1985; (e) completed a third prototype (production
model) on August 13, 1985; and (f) filed a patent application on January 21,
1986, more than one year after the working prototype was made.
2. Pursuant to a Letter Agreement dated February 5, 1992 between Hughes
Avicom International and Philips Airvision Ltd., Airvision agreed not to assert
against Hughes Avicom Airvision's U.S. Patent No. 4,647,980, and Hughes Avicom
agreed not to assert against Airvision Hughes Avicom's U.S. Patent Application
Serial No. 07/579,335. Pursuant to the Asset Purchase Agreement, the Company has
assumed this agreement.
3. Pursuant to the Asset Purchase Agreement, the Company agreed with PENA
that the assignment of patents and patent applications thereunder was subject to
existing cross-licenses of PENA to which the Company will not have the benefit
and that PENA will have the right to renew and extend such cross-licenses under
such patents and patent applications.
4. The foreign trademarks of the Company were agreed to be transferred to
the Company pursuant to the Asset Purchase Agreement by Philips Electronics
N.V., a Netherlands corporation and indirect parent of PENA. However, until
certain transfer documents have been filed in certain jurisdictions outside of
the United States, the Company cannot be said to hold all ownership, right,
title and interest in and to such trademarks.
Annex 5 to Revolving Credit Security Agreement
-2-
<PAGE> 169
ANNEX 6
LIST OF LOCATIONS AND TRADE NAMES
Part A - List of Locations
1. 1300 Corporate Center Way, Suite 202, Wellington, FL 33414
2. 975 Sunshine Lane, Altamonte Springs, FL 32714
3. 17481 Red Hill Avenue, P.O. Box 22008, Irvine, CA 92714-5630
4. 12807 Lake Drive, P.O. Drawer 130, Delray Beach, FL 33447
5. 11710 Central Parkway, Jacksonville, FL 32216
6. Parkerbaan 20, 3439 MC Nieuwegein, The Netherlands
7. 2 Moor Road, Kilkeel, Co. Down, BT34 4NG, Northern Ireland
8. Nashleigh Works, Preston Hill, Chesham, Buckinghamshire, HP5 3JR, England
9. Grovebury Road, Leighton Buzzard, Bedfordshire, LU7 854, England
10. 607 Bantam Road, Litchfield, CT 06759
11. 11752 Markon Drive, Garden Grove, CA 92641
Annex 6 to Revolving Credit Security Agreement
<PAGE> 170
Part B - Trade Names/State
Trade Name State
---------- -----
BE Avionics California
Florida
PTC Aerospace California
Connecticut
Aircraft Products Company California
Florida
Trans Video Systems Florida
New Jersey
BE Services California
Florida
Annex 6 to Revolving Credit Security Agreement
<PAGE> 171
CONFORMED COPY
EXHIBIT A-2
TERM LOAN SECURITY AGREEMENT
TERM LOAN SECURITY AGREEMENT dated as of October 29, 1993 between BE
AEROSPACE, INC., a corporation duly organized and validly existing under the
laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), as agent for certain lenders or other financial institutions or
entities party to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "Agent").
The Company, certain lenders and the Agent are parties to a Credit
Agreement dated as of October 29, 1993 (as modified and supplemented and in
effect from time to time, the "Credit Agreement"), providing, subject to the
terms and conditions thereof, for extensions of credit (by making of loans and
issuing letters of credit) to be made by said lenders to the Company in an
aggregate principal or face amount not exceeding $85,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to pledge and grant a security interest in the Term Loan Collateral (as
hereinafter defined) as security for the Term Loan Secured Obligations (as so
defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
used herein as defined therein. In addition, as used herein:
"Issuer" shall mean the corporation identified on Annex 1 hereto
under the caption "Issuer".
"Pledged Stock" shall have the meaning ascribed thereto in Section
3(a) hereof.
"Term Loan Collateral" shall have the meaning ascribed thereto in
Section 3 hereof.
"Term Loan Secured Obligations" shall mean, collectively, (a) the
principal of and interest on the Term Loans made by the Term Loan Lenders
to, and the Term Loan Note(s) held by each Term Loan Lender of, the
Company and all other amounts from time to time owing to the Term Loan
Lenders or the Agent by the Company under the Basic Documents and (b) all
obligations of the Company to the Term Loan Lenders and the Agent
hereunder.
Term Loan Security Agreement
<PAGE> 172
-2-
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company represents
and warrants to the Term Loan Lenders and the Agent that:
(a) The Company is the sole beneficial owner of the Term Loan
Collateral and no Lien exists or will exist upon the Term Loan Collateral
at any time (and no right or option to acquire the same exists in favor of
any other Person), except for Liens permitted under Section 8.06 of the
Credit Agreement and except for the pledge and security interest in favor
of the Agent for the benefit of the Term Loan Lenders created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of the Term Loan
Collateral.
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual
restriction, or any restriction under the charter or by-laws of the
Issuer, upon the transfer of such Pledged Stock (except for any such
restriction contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 hereto constitutes all of the issued and outstanding shares of
capital stock of any class of the Issuer beneficially owned by the Company
on the date hereof (whether or not registered in the name of the Company)
and said Annex 1 correctly identifies, as at the date hereof, the Issuer
of such Pledged Stock, the respective class and par value of the shares
comprising such Pledged Stock and the respective number of shares (and
registered owners thereof) represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Term Loan Secured Obligations, the Company hereby pledges and grants to the
Agent, for the benefit of the Term Loan Lenders as hereinafter provided, a
security interest in all of the Company's right, title and interest in the
following property, whether now owned by the
Term Loan Security Agreement
<PAGE> 173
-3-
Company or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "Term Loan Collateral"):
(a) the shares of capital stock of the Issuer represented by the
certificates identified in Annex 1 hereto and all other shares of capital
stock of whatever class of the Issuer, now or hereafter owned by the
Company, in each case together with the certificates evidencing the same
(collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which the Issuer is not the
surviving corporation, all shares of each class of the capital stock of
the successor corporation formed by or resulting from such consolidation
or merger; and
(d) all proceeds of and to any of the property of the Company
described in the preceding clauses of this Section 3 and, to the extent
related to any property described in said clauses or such proceeds, all
books, correspondence, credit files, records, invoices and other papers.
Section 4. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Term Loan Lender and the Agent as follows:
4.01 Delivery and Other Perfection. The Company shall:
(a) if any of the above-described shares, securities, moneys or
property required to be pledged by the Company under clauses (a), (b) and
(c) of Section 3 hereof are received by the Company, forthwith either (x)
transfer and deliver to the Agent such shares or securities so received by
the Company (together with the certificates for any such
Term Loan Security Agreement
<PAGE> 174
-4-
shares and securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank), all of which thereafter shall be
held by the Agent, pursuant to the terms of this Agreement, as part of the
Term Loan Collateral or (y) take such other action as the Agent shall deem
necessary or appropriate to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant
hereto or to enable the Agent to exercise and enforce its rights hereunder
with respect to such pledge and security interest, including, without
limitation, causing any or all of the Term Loan Collateral to be
transferred of record into the name of the Agent or its nominee (and the
Agent agrees that if any Term Loan Collateral is transferred into its name
or the name of its nominee, the Agent will thereafter promptly give to the
Company copies of any notices and communications received by it with
respect to the Term Loan Collateral);
(c) keep full and accurate books and records relating to the Term
Loan Collateral, and stamp or otherwise mark such books and records in
such manner as the Agent may reasonably require in order to reflect the
security interests granted by this Agreement; and
(d) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Term Loan Collateral, and permit
representatives of the Agent to be present at the Company's place of
business to receive copies of all communications and remittances relating
to the Term Loan Collateral, and forward copies of any notices or
communications received by the Company with respect to the Term Loan
Collateral, all in such manner as the Agent may require.
4.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Agent (granted with the authorization of the Term Loan Lenders as
specified in Section 10.09 of the Credit Agreement), the Company shall not file
or suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Term Loan Collateral in which
Term Loan Security Agreement
<PAGE> 175
-5-
the Agent is not named as the sole secured party for the benefit of the Term
Loan Lenders.
4.03 Preservation of Rights. The Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the Term
Loan Collateral.
4.04 Term Loan Collateral.
(1) The Company will cause the Term Loan Collateral to constitute at
all times 100% of the total number of shares of each class of capital stock of
the Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Term Loan Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Company agrees that it will not vote the Term Loan
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Credit Agreement, the Notes or any such other instrument or agreement; and
the Agent shall execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney, dividend and
other orders, and all such instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers which it is entitled to exercise pursuant to this Section
4.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Term Loan Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent or any Term
Loan Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Term Loan Collateral shall be paid directly to the Agent
and retained by it as part of the Term Loan Collateral, subject to the terms of
this Agreement, and, if the Agent shall so request in writing, the Company
agrees to execute and deliver to the Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
Event of Default is cured, any such dividend or distribution theretofore paid to
the Agent shall,
Term Loan Security Agreement
<PAGE> 176
-6-
upon request of the Company (except to the extent theretofore applied to the
Term Loan Secured Obligations), be returned by the Agent to the Company.
4.05 Events of Default, Etc. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Agent shall have all of the rights and remedies with respect
to the Term Loan Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Term Loan Collateral as if the Agent were the sole and
absolute owner thereof (and the Company agrees to take all such action as
may be appropriate to give effect to such right);
(b) the Agent in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange
for any of the Term Loan Collateral, but shall be under no obligation to
do so; and
(c) the Agent may, upon ten Business Days' prior written notice to
the Company of the time and place, with respect to the Term Loan
Collateral or any part thereof which shall then be or shall thereafter
come into the possession, custody or control of the Agent, the Term Loan
Lenders or any of their respective agents, sell, lease, assign or
otherwise dispose of all or any part of such Term Loan Collateral, at such
place or places as the Agent deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be
waived), and the Agent or any Term Loan Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Term Loan
Collateral so disposed of at any public sale (or, to the extent permitted
by law, at any private sale) and thereafter hold the same absolutely, free
from any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise), of the Company, any such demand,
Term Loan Security Agreement
<PAGE> 177
-7-
notice and right or equity being hereby expressly waived and released. The
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.05 shall be applied in accordance with Section 4.09 hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Term Loan Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Term Loan Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. The Company acknowledges that any such private sales may be at prices
and on terms less favorable to the Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Term Loan Collateral for
the period of time necessary to permit the or issuer thereof to register it for
public sale.
4.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Term Loan Collateral pursuant to Section 4.05 hereof
are insufficient to cover the costs and expenses of such realization and the
payment in full of the Term Loan Secured Obligations, the Company shall remain
liable for any deficiency.
4.07 Removals, Etc. Without at least 30 days' prior written notice
to the Agent, the Company shall not (i) maintain any of its books and records
with respect to the Term Loan Collateral at any office or maintain its principal
place of business at any place other than at the address indicated beneath the
signature of the Company to the Credit Agreement or (ii) change its name, or the
name under which it does business, from the name shown on the signature pages
hereto; provided that the Company may do business in the states and under the
names specified in Annex 2 hereto.
4.08 Private Sale. The Agent and the Term Loan Lenders shall incur
no liability as a result of the sale of the Term Loan Collateral, or any part
thereof, at any private sale
Term Loan Security Agreement
<PAGE> 178
-8-
pursuant to Section 4.05 hereof conducted in a commercially reasonable manner.
The Company hereby waives any claims against the Agent or any Term Loan Lender
arising by reason of the fact that the price at which the Term Loan Collateral
may have been sold at such a private sale was less than the price which might
have been obtained at a public sale or was less than the aggregate amount of the
Term Loan Secured Obligations, even if the Agent accepts the first offer
received and does not offer the Term Loan Collateral to more than one offeree.
4.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Term Loan Collateral pursuant hereto, and any other cash at the
time held by the Agent under this Section 4, shall be applied by the Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, and all reasonable expenses incurred and advances made by the
Agent in connection therewith;
Next, to the payment in full of the Term Loan Secured Obligations,
in each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Term Loan Lenders holding the same
may otherwise agree; and
Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this Section 4, "proceeds" of Term Loan Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Term Loan Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Company or any issuer
of or obligor on any of the Term Loan Collateral.
4.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 4 and taking any
action and executing any instruments which the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the
Term Loan Security Agreement
<PAGE> 179
-9-
foregoing, so long as the Agent shall be entitled under this Section 4 to make
collections in respect of the Term Loan Collateral, the Agent shall have the
right and power to receive, endorse and collect all checks made payable to the
order of the Company representing any dividend, payment or other distribution in
respect of the Term Loan Collateral or any part thereof and to give full
discharge for the same.
4.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall deliver to the Agent all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
4.12 Termination. When all Term Loan Secured Obligations shall have
been paid in full and the Term Loan Commitments of the Term Loan Lenders under
the Credit Agreement shall have expired or been terminated, this Agreement shall
terminate, and the Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Term Loan Collateral and money received in respect
thereof, to or on the order of the Company.
4.13 Expenses. The Company agrees to pay to the Agent all reasonable
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 4, or performance by the Agent of any obligations of the Company in
respect of the Term Loan Collateral which the Company has failed or refused to
perform, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Term Loan
Collateral, and for the care of the Term Loan Collateral and defending or
asserting rights and claims of the Agent in respect thereof, by litigation or
otherwise, and all such expenses shall be Term Loan Secured Obligations to the
Agent secured under Section 3 hereof.
4.14 Further Assurances. The Company agrees that, from time to time
upon the written request of the Agent, the Company will execute and deliver such
further documents and do such other acts and things as the Agent may reasonably
request in order fully to effect the purposes of this Agreement.
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the part of the Agent or any of its
agents to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or
Term Loan Security Agreement
<PAGE> 180
-10-
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent or any of its agents of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
5.03 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 11.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 11.02.
5.04 Waivers, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Company
and the Agent (with the consent of the Term Loan Lenders as specified in Section
10.09 of the Credit Agreement). Any such amendment or waiver shall be binding
upon the Agent and each Term Loan Lender, each holder of any of the Term Loan
Secured Obligations and the Company.
5.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Company, the Agent, the Term Loan Lenders and each holder of any of the Term
Loan Secured Obligations (provided, however, that the Company shall not assign
or transfer its rights hereunder without the prior written consent of the
Agent).
5.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
5.07 Agents. The Agent may employ agents and attorneys-in-fact in
connection herewith and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
5.08 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the Term
Loan
Term Loan Security Agreement
<PAGE> 181
-11-
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Term Loan
Security Agreement to be duly executed and delivered as of the day and year
first above written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
----------------------------------
Title: Secretary
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By /s/ Matthew H. Massie
----------------------------------
Title: Vice President
Term Loan Security Agreement
<PAGE> 182
ANNEX 1
PLEDGED STOCK
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
Acurex 2 BE 100 shares of
Corporation Aerospace, common stock,
Inc. $0.01 par
value
Annex 1 to Term Loan Security Agreement
<PAGE> 183
ANNEX 2
TRADE NAMES
Trade Name State
---------- -----
BE Avionics California
Florida
PTC Aerospace California
Connecticut
Aircraft Products Company California
Florida
Trans Video Systems Florida
New Jersey
BE Services California
Florida
Annex 2 to Term Loan Security Agreement
<PAGE> 184
EXHIBIT B
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date)
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Third Amended and Restated Credit Agreement dated as of
October 29, 1993 and amended and restated as of _______, 1997
(as so amended and restated, the "Credit Agreement"), between
BE Aerospace, Inc. (the "Company"), the lenders named therein
and The Chase Manhattan Bank, as Administrative Agent.
Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the
Company pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all
non-public information identified by the Company as being confidential at the
time the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you,
as a prospective [holder of a participation in the Loans (as defined in the
Credit Agreement)] [assignee Lender], with certain of such non-public
information subject to the execution and delivery by you, prior to receiving
such non-public information, of a Confidentiality Agreement in this form. Such
information will not be made available to you until your execution and return to
us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [participation] [assignment] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe and
sound banking practices, to keep such information confidential, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to your
counsel or to counsel for any of the Lenders or the
Confidentiality Agreement
<PAGE> 185
-2-
Administrative Agent, (iii) to bank examiners, auditors or accountants, (iv) to
the Administrative Agent or any other Lender (or to Chase Securities Inc.), (v)
in connection with any litigation to which you or any one or more of the Lenders
or the Administrative Agent are a party, (vi) to a subsidiary or affiliate of
yours as provided in Section 11.12(a) of the Credit Agreement or (vii) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first executes
and delivers to you a Confidentiality Agreement substantially in the form
hereof; provided, further, that (x) unless specifically prohibited by applicable
law or court order, you agree, prior to disclosure thereof, to notify the
Company of any request for disclosure of any such non-public information (A) by
any governmental agency or representative thereof (other than any such request
in connection with an examination of your financial condition by such
governmental agency) or (B) pursuant to legal process and (y) that in no event
shall you be obligated to return any materials furnished to you pursuant to this
Confidentiality Agreement.
Please indicate your agreement to the foregoing by signing as
provided below the enclosed copy of this Confidentiality Agreement and returning
the same to us.
Very truly yours,
[INSERT NAME OF LENDER]
By________________________________
The foregoing is agreed to as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By__________________________]
Confidentiality Agreement
<PAGE> 1
Exhibit 10.2
CONFORMED COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of November 19, 1997, between BE AEROSPACE,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "Company"); each of the lenders that is a signatory
hereto (individually, a "Lender" and, collectively, the "Lenders"); and THE
CHASE MANHATTAN BANK, a New York banking corporation, as agent for the Lenders
(in such capacity, together with its successors in such capacity, the
"Administrative Agent").
The Company, the Lenders and the Administrative Agent are parties to
a Third Amended and Restated Credit Agreement dated as of October 29, 1993, as
amended and restated as of May 29, 1997 (as heretofore modified and supplemented
and in effect on the date hereof, the "Credit Agreement"). The Company and the
Administrative Agent are parties to a Revolving Credit Security Agreement dated
as of October 29, 1993 (as heretofore modified and supplemented and in effect on
the date hereof, the "Revolving Credit Security Agreement"). The Company has
requested that the Credit Agreement and the Revolving Credit Security Agreement
be amended in certain respects, and accordingly, the parties hereto hereby agree
as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1. terms defined in the Credit Agreement (as amended hereby) are
used herein as defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof (the
"First Amendment Effective Date"), the Credit Agreement and the Revolving Credit
Security Agreement shall be amended as follows:
2.01. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby. References in the
Revolving Credit Security Agreement (including references to the Revolving
Credit Security Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Revolving Credit Security Agreement as amended hereby.
2.02. Section 1.01 of the Credit Agreement shall be amended by
adding the following new definitions (to the extent not already included in
said Section 1.01) and inserting the same in the appropriate alphabetical
locations and by amending the following definitions (to the extent already
included in said Section 1.01) to read in their entirety, as follows:
"Amendment No. 1" shall mean Amendment No. 1 dated as of November
13, 1997 to this Agreement.
"BE Services" shall mean B/E Services, Inc. a Delaware corporation
and Wholly Owned Subsidiary of the Company.
<PAGE> 2
-2-
"First Amendment Effective Date" shall have the meaning ascribed
thereto in Amendment No. 1.
"GE Lease Agreement" shall mean the Master Lease Agreement dated as
of October 20, 1997 between the Company and General Electric Capital
Corporation, for itself and as Agent for Certain Participants.
"Guarantee and Security Agreement" shall mean a Guarantee and
Security Agreement substantially in the form of Exhibit A to Amendment No.
1, dated the First Amendment Effective Date, between In-Flight
Entertainment, LLC and the Administrative Agent as the same shall be
modified and supplemented and in effect from time to time.
"In-Flight Entertainment LLC" shall mean In-Flight Entertainment,
LLC, a Delaware limited liability company and Wholly Owned Subsidiary of
the Company.
"Revolving Credit Security Agreement" shall mean the Revolving
Credit Security Agreement dated as of October 29, 1993 between the Company
and the Agent, a copy of which is attached as Exhibit A-1 hereto, as
amended by Sections 11.13(a) and 11.13(c) hereof and as the same shall be
further modified, supplemented and in effect from time to time.
"Security Documents" shall mean, collectively, the Revolving Credit
Security Agreement, the Term Loan Security Agreement and the Guarantee and
Security Agreement."
"Term Loan Security Agreement" shall mean the Term Loan Security
Agreement dated as of October 29, 1993, a copy of which is attached as
Exhibit A-2 hereto, as amended by Sections 11.13(b) and 11.13(d) hereof
and as the same shall be further modified, supplemented and in effect from
time to time.
2.03. The definition of "Borrowing Base" in Section 1.01 of the
Credit Agreement is hereby amended by (i) inserting, In-Flight Entertainment LLC
and BE Services" immediately following "Company" therein and (ii) inserting ",
other than in the case of BE Services," immediately after "the Administrative
Agent has" therein.
2.04. The definition of "Eligible inventory" in Section 1.01 of the
Credit Agreement is hereby amended by (i) inserting ", In-Flight Entertainment
LLC and BE Services" immediately following "Company" in the third line therein
and (ii) inserting ", other than in the case of BE Services," immediately after
"the Administrative Agent has" therein.
2.05. The definition of "Eligible Receivables" in Section 1.01 of
the Credit Agreement is hereby amended by (i) inserting ", In-Flight
Entertainment LLC and BE Services" immediately following "Company" in the second
line therein and (ii) inserting ", other than in the case of BE Services,"
immediately after "the Administrative Agent has" therein.
<PAGE> 3
-3-
2.06. Section 8.06(i) of the Credit Agreement is hereby amended by
inserting "and/or software and license rights with respect to software
(including, without limitation, software and license rights with respect to
software under the GE Lease Agreement)" immediately following "real and/or
tangible personal Property" therein.
2.07. Section 8.17(a) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that
the Company and each of its Subsidiaries at all times owns (subject only
to the Lien of the Security Documents) at least the same percentage of the
issued and outstanding shares of each class of stock or partnership or
other ownership interest of each of its Subsidiaries as is owned on the
Restatement Date (or, with respect to any Subsidiary acquired or organized
after the date hereof, as of the date of such acquisition or
organization). Without limiting the generality of the foregoing, none of
the Company nor any of its Subsidiaries shall sell, transfer or otherwise
dispose of any shares of stock or partnership or other ownership interest
in any Subsidiary owned by them, nor permit an Subsidiary to issue any
shares of stock of any class or partnership or other ownership interest
whatsoever to any Person (other than to the Company or the immediate
parent of such Subsidiary which is a Wholly Owned Subsidiary of the
Company). In the event that (a) an" such additional shares of stock or
partnership or other ownership interest shall be issued by any such
Subsidiary or (b) the Company shall directly or indirectly create any new
Subsidiary or Acquire any additional Subsidiary and shall thereby become
the owner, directly or indirectly, of the shares of capital stock or
partnership or other ownership interest of such new or additional
Subsidiary, the Company agrees forthwith to deliver to the Administrative
Agent pursuant to security documents satisfactory to the Banks, any
shares, certificates of ownership, membership interests or other evidence
of ownership, or other securities received as a result therefrom (together
with undated stock or other powers executed in blank) and shall give,
execute, deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be necessary or
desirable in the judgment of the Administrative Agent) to create, preserve
or validate the security interest created therein, including, without
limitation, causing any or all of the Revolving Credit Collateral and
Series A Collateral (as defined in the Revoking Credit Security Agreement
and Guarantee and Security Agreement, respectively) to be transferred of
record into the name of the Administrative Agent; provided that if any
such Subsidiary is organized under the laws of a jurisdiction other than
the United States of America or a State thereof, the Company need not
pledge to the Administrative Agent more than 65% of the capital stock,
partnership or other ownership interest in such Subsidiary and such pledge
shall, at the request of the Majority Series A Lenders, be made either
under the Revolving Credit Security Agreement or under a pledge or other
agreement governed by the law of such Subsidiary's jurisdiction of
organization."
2.08. Section 9(d) of the Credit Agreement is hereby amended by
adding the following at the end thereof:
<PAGE> 4
-4-
"In-Flight Entertainment LLC shall default in the performance of any
of its obligations under Section 6.02 of the Guarantee and Security
Agreement; or"
2.09. Section 10.05 of the Credit Agreement is hereby amended by
inserting "or Section 5.02 of the Guarantee and Security Agreement" immediately
following "Section 4.02 of the Revolving Credit Security Agreement" wherever the
same occurs therein.
2.10. Section 10.09 of the Credit Agreement is hereby amended by
inserting "or the Guarantee and Security Agreement" immediately following "the
Revolving Credit Security Agreement" in clauses (ii) and (iv) therein.
2.11. Section 10.10 of the Credit Agreement is hereby amended by
inserting "and Section 5.03 of the Guarantee and Security Agreement" immediately
following "Section 4.03 of the Revolving Credit Security Agreement" therein.
2.12. Section 11.03 of the Credit Agreement is hereby amended by
inserting "or Section 5.02 of the Guarantee and Security Agreement" immediately
following "Section 4.02 of the Revolving Credit Security Agreement" therein.
2.13. Section 11.13 of the Credit Agreement is hereby amended by
adding the following at the end thereof:
"(c) The Revolving Credit Security Agreement is hereby amended so
that (i) from and after the Amendment Effective Date, (x) all references
therein to the Credit Agreement shall be deemed to be a reference to the
Credit Agreement as amended and restated hereby and (y) all references
therein to '$85,000,000' shall be deemed to be a reference to
'$125,000,000', and (ii) from and after May 18, 1994, all references
therein to 'Revolving Credit Notes' and 'Revolving Credit Commitments'
shall be deemed to be references to 'Series A Lenders', 'Series A Loans',
'Series A Notes' and 'Series A Commitments', respectively.
(d) The Term Loan Security Agreement is hereby amended so that (i)
from and after the Amendment Effective Date, (x) all references therein to
the Credit Agreement shall be deemed to be a reference to the Credit
Agreement as amended and restated hereby and (y) all references therein to
'$85,000,000' shall be deemed to be a reference to '$125,000,000', and
(ii) from and after May 18, 1994, all references therein to 'Term Loan
Lenders', 'Term Loans', 'Term Loan Notes' and 'Term Loan Commitments'
shall be deemed to be references to 'Series B Lenders', 'Series B Loans',
'Series B Notes' and 'Series B Commitments', respectively."
2.14. Section 1 of the Revolving Credit Security Agreement shall be
amended by adding the following new definitions and inserting the same in the
appropriate alphabetical locations, as follows:
"LLC Agreements" shall have the meaning ascribed thereto in Section
3(m) hereof.
<PAGE> 5
-5-
"LLC Collateral" shall have the meaning ascribed thereto in Section
3(m) hereof.
"LLC Issuers" shall mean the respective limited liability companies
identified on Annex 7 hereto.
"Pledged Membership Interests" shall have the meaning ascribed
thereto in Section 3(m) hereof.
2.15. Section 2 of the Revolving Credit Security Agreement is hereby
amended by adding the following at the end thereof:
"(i) the Pledged Membership Interests, and all other Pledged
Membership Interests in which the Company shall hereafter grant a security
interest pursuant to Section 3 hereof, will be duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged
Membership Interests is or will be subject to any contractual restriction,
upon the transfer of such Pledged Membership Interests (except for any
such restriction contained herein).
(j) the Pledged Membership Interests constitute all of the ownership
interests in the LLC Issuers held by the Company on the date hereof
(whether or not registered in the name of the Company). and the Company is
the registered owner of all such ownership interests."
2.16. Section 3 of the Revolving Credit Security Agreement is hereby
amended by relettering clause (m) as clause (r) and by inserting the following
immediately following clause (l) therein:
"(m) the ownership interests of the Company in the LLC Issuers
identified in Annex 7 hereto, all certificates (if any) representing or
evidencing such ownership interests, and all right, title and interest in,
to and under the limited liability company agreements (the "LLC
Agreements") of such LLC Issuers (including without limitation all of the
right, title and interest (if any) as a member to participate in the
operation or management the LLC Issuers and all of its ownership interests
under the LLC Agreements), and all present and future rights of the
Company to receive payment of money or other distribution of payments
arising out of or in connection with its ownership interests and its
rights under the LLC Agreements, now or hereafter owned by the Company,
in each case together with any certificates evidencing the same
(collectively, the "Pledged Membership Interests" and, together with the
Revolving Credit Collateral pledged hereunder pursuant to clauses (n)
through (r) being herein collectively called the "LLC Collateral");
(n) any and all moneys, and any and all rights to receive such
moneys, due or to become due to the Company now or in the future by way
of a distribution made to the Company in its capacity as a member of any
of the LLC Issuers or otherwise pursuant to the LLC Agreements;
(o) any other property or assets, and any and all rights to receive
such property or assets, of any of the LLC Issuers to which the Company
now or in the future may be entitled in its capacity as a member of such
LLC Issuers;
<PAGE> 6
-6-
(p) any other claim which the Company now has or may in the future
acquire in its capacity as a member of any of the LLC Issuers against any
such LLC Issuer and its property or arising out of or for breach of or
default under the LLC Agreements or otherwise relating to the property of
any of the LLC Issuers;
(q) all rights to terminate, amend, supplement, modify or waive
performance under the LLC Agreements, to perform thereunder and to compel
performance and to otherwise exercise all remedies thereunder;"
2.17. Section 5.01(a) of the Revolving Credit Security Agreement is
hereby amended by inserting the following immediately before "subject to Section
5.04(a)(1) hereof" therein:
"(i) with respect to any Pledged Membership Interests acquired,
received or hereafter held by the Company, take such action as the Agent
shall deem necessary or appropriate to perfect the pledge and security
interest granted by Section 3 of this Agreement in such Pledged Membership
Interests, including without limitation (a) to the extent that they
constitute Securities (as defined in Section 8-102(a)(15) of the Uniform
Commercial Code) which are not represented by a certificate, cause the LLC
Issuer of such Pledged Membership Interests to either register the Agent
as the registered owner thereof or agree that it will comply with
Instructions (as defined in Section 8-102(a)(12) of the Uniform Commercial
Code) originated by the Agent with respect to such Pledged Membership
Interests without further consent by the Company and (b) to the extent
that they constitute Securities (as defined in Section 8-102(a)(15) of
the Uniform Commercial Code) which are represented by a certificate,
deliver to the Agent any such certificates representing the Pledged
Membership Interests and (ii)"
2.18. Section 5.04 of the Revolving Credit Security Agreement is
hereby amended by inserting a new clause (c) at the end thereto reading as
follows:
"(c) LLC Collateral.
(1) The Company will cause the LLC Collateral to constitute at all
times 100% of the aggregate ownership and membership interest of each LLC Issuer
then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the LLC Collateral for all purposes
not inconsistent with the terms of this Agreement, the Credit Agreement, the
Notes or any other instrument or agreement referred to herein or therein,
provided that the Company agrees that it will not vote the LLC Collateral in any
manner that is inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any such other instrument or agreement; and the Agent
shall execute and deliver to the Company or cause to be executed and delivered
to the Company all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as the Company may reasonably
request for the purpose of enabling the Company to exercise the rights and
powers that they are entitled to exercise pursuant to this Section 5.04(c).
<PAGE> 7
-7-
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any
distributions and dividends payable in respect of the LLC Collateral.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent or any Series
A Lender exercises any available right to declare any Revolving Credit Secured
Obligations due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Revolving Credit
Secured Obligations, all distributions and dividends on the LLC Collateral,
whether consisting of cash, checks and other near-cash items, shall be paid
directly to the Agent and retained by it as part of the Revolving Credit
Collateral, subject to the terms of this Agreement, and, if the Agent shall so
request in writing, the Company agrees to execute and deliver to the Agent
appropriate additional dividend, distribution and other orders and documents to
that end, and if the Company shall receive any such amounts, it shall hold the
same in trust for the Agent and deliver the same forthwith to the Agent in the
exact form received, duly indorsed by the Company to the Agent, if required;
provided that if such Event of Default is cured, any such dividend or
distribution theretofore paid to the Agent shall, upon request of the Company
(except to the extent theretofore applied to the Revolving Credit Secured
Obligations), be returned by the Agent to the Company."
2.19. Section 5.11 of the Revolving Credit Security Agreement is
hereby amended by deleting "and" at the end of clause (ii) therein, inserting
"and" at the end of clause (iii) therein and inserting and clause (iv) thereto
reading as follows:
"(iv), in the case of the Pledged Membership Interests, take such
action as the Agent shall deem necessary or appropriate to perfect the
pledge and security interest granted by Section 3 of this Agreement in
such Pledged Membership Interests, including without limitation (x) to the
extent that they constitute Securities (as defined in Section 8-102(a)(15)
of the Uniform Commercial Code) which are not represented by a
certificate, cause the LLC Issuer of such Pledged Membership Interests to
either register the Agent as the registered owner thereof or agree that it
will comply with Instructions (as defined in Section 8-102(a)(12) of the
Uniform Commercial Code) originated by the Agent with respect to such
Pledged Membership Interests without further consent by the Company and
(y) to the extent that they constitute Securities (as defined in Section
8-102(a)(15) of the Uniform Commercial Code) which are represented by a
certificate, deliver to the Agent any such certificates representing the
Pledged Membership Interests"
2.20. Annex 1 to the Revolving Credit Security Agreement is hereby
amended by adding the following at the end thereof:
1,000 shares of
common stock
"B/E Services, Inc. 1 BE Aerospace Inc. $0.0l par value"
<PAGE> 8
-8-
2.21. The Revolving Credit Security Agreement is hereby amended by
adding a new Annex 7 thereto as follows:
"Annex 7
PLEDGED MEMBERSHIP INTERESTS
<TABLE>
<CAPTION>
Certificate Nos. Percentage of
LLC Issuer (if any) Registered Owner Ownership Interest
- ---------- --------------- ---------------- ------------------
<S> <C> <C> <C>
In-Flight
Entertainment, LLC None BE Aerospace, Inc. 100%"
</TABLE>
Section 3. Representations and Warranties. The Company represents
and warrants to the Lenders that the representations and warranties set forth in
Section 7 of the Credit Agreement (as amended hereby) are true and complete on
the date hereof as if made on and as of the date hereof (or, if such
representation or warranty is expressly stated to be made as of a specific date,
as of such specific date) and as if each reference in said Section 7 to "this
Agreement" included reference to this Amendment No. 1. The Company represents
and warrants to the Lenders that the representations and warranties set forth in
Section 2 of the Revolving Credit Security Agreement (as amended hereby) are
true and complete on the date hereof as if made on and as of the date hereof
(or, if such representation or warranty is expressly stated to be made as of a
specific date, as of such specific date) and as if each reference in said
Section 2 to "this Agreement" included reference to this Amendment No. 1.
Section 4. Conditions Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement and Revolving Credit Security Agreement set
forth in said Section 2 shall become effective, as of the date hereof upon the
satisfaction of the following conditions:
4.01. Execution. This Amendment No. 1 shall have been executed and
delivered by the Company and the Majority Lenders.
4.02. Documents. The Administrative Agent shall have received the
following documents, each of which shall be satisfactory to the Administrative
Agent in form and substance:
(1) Corporate Documents. Certified copies of the organizational
documents of the Company, In-Flight Entertainment LLC and BE Services (or,
in the case of the Company, a certification to the effect that none of
such documents has been modified since delivery thereof on the Amendment
Effective Date pursuant to the Credit Agreement) and of all limited
liability company or corporate authority for the Company and In-Flight
Entertainment LLC (including, without limitation, board of director
resolutions, member approvals and evidence of incumbency, including
specimen signatures) with respect to the execution, delivery and
performance of this Amendment No. 1, the Credit Agreement as amended
hereby and the Guarantee and Security Agreement, as the case may be, and
each other document to be delivered by the Company and In-Flight
Entertainment LLC from time to time in connection
<PAGE> 9
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with the Credit Agreement as amended hereby and the Security Documents
(and the Administrative Agent and each Lender may conclusively rely on
such certificate until it receives notice in writing from the Company to
the contrary).
(2) Officer's Certificate. A certificate of a senior officer of the
Company, dated the date hereof, to the effect that, after giving effect to
this Amendment No. 1, no defaults shall have occurred and be continuing.
(3) Security. The Company and In-Flight Entertainment LLC shall have
taken such action (including, without limitation, delivery to the
Administrative Agent appropriately completed and duly executed copies of
the Guarantee and Security Agreement) as the Administrative Agent shall
have requested in order to perfect the security interests created pursuant
to the Security Documents after giving effect to the amendments
contemplated hereby.
(4) Opinion of Counsel to the Company and In-Flight Entertainment
LLC. An opinion, dated the date hereof, of Ropes & Gray, counsel to the
Company and In-Flight Entertainment LLC, in form and substance
satisfactory to the Administrative Agent (and the Company and In-Flight
Entertainment LLC hereby instruct such counsel to deliver such opinion to
the Lenders and the Administrative Agent).
(5) Compliance Certificate. A certificate of a senior officer of the
Company selling forth in reasonable detail the computations necessary to
demonstrate, effective as of the date hereof (and after giving effect to
this Amendment No. 1) that the Company will be in compliance with (x)
Section 1010 of the Senior Indenture, (y) Section 1010 of the Senior
Subordinated Indenture and (z) Section 1014 of the Senior Indenture.
(6) Expenses. Evidence of the payment or delivery by the Company of
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase, in connection with the negotiation,
preparation, execution and delivery of this Amendment No. 1 (to the extent
that statements for such fees and expenses shall have been delivered to
the Company.)
(7) Other Documents. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Chase may reasonably
request.
Section 5. Consent to Release. Upon the satisfaction of the
conditions precedent set forth in Section 4 hereof, the Majority Lenders hereby
consent to the release of the Lien under the Revolving Credit Security Agreement
(i) covering the equipment subject to the GE Lease Agreement which is to be
transferred to General Electric Capital Corporation and/or the Participants
under the GE Lease Agreement (ii) on all or any part of the Company's In-Flight
Entertainment Division to the extent such Property is transferred to In-Flight
Entertainment LLC and (iii) on all or any part of the Company's Services
Division to the extent such Property is transferred to BE Services.
Section 6. GE Lease Obligations. The Administrative Agent and the
Lenders agree that the obligations of the Company incurred pursuant to the GE
Lease Agreement (including, without
<PAGE> 10
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limitation, those attributable to the J. D. Edwards software (as so defined
therein)) shall not constitute "Indebtedness" under the Credit Agreement.
Section 7. Miscellaneous. Except as herein provided, the Credit
Agreement and Revolving Credit Security Agreement shall remain unchanged and in
full force and effect. This Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this Amendment
No. 1 by signing any such counterpart. This Amendment No. 1 shall be governed
by, and construed in accordance with, the law of the State of New York.
<PAGE> 11
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
-----------------------------------
Title: Chief Financial Officer
LENDERS
THE CHASE MANHATTAN BANK
By /s/ Matt Massie
-----------------------------------
Title: Vice President
NATIONSBANK, N.A. (SOUTH)
By /s/ Andrew M. Airheart
-----------------------------------
Title: Senior Vice President
LASALLE BUSINESS CREDIT, INC.
By /s/ Pat Killpatrick
-----------------------------------
Title: Vice President
LTCB TRUST COMPANY
By /s/ Philip A. Marsden
-----------------------------------
Title: Senior Vice President
<PAGE> 12
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CREDITANSTALT-BANKVEREIN
By /s/ Greg Roux
-----------------------------------
Title: Vice President
By /s/ John Macukas
-----------------------------------
Title: Senior Vice President
FUJI BANK & TRUST COMPANY
By /s/ Toshiaki Yakura
-----------------------------------
Title: Senior Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By /s/ Robert Ivosevich
-----------------------------------
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED
By /s/ Ann C. Bolduc
-----------------------------------
Title: Vice President & Manager
By /s/ Brian M. Smith
-----------------------------------
Title: Senior Vice President &
Regional Manager (East)
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Matt Massie
-----------------------------------
Title: Vice President
<PAGE> 13
EXHIBIT A
[Conformed Copy]
GUARANTEE AND SECURITY AGREEMENT
GUARANTEE AND SECURITY AGREEMENT dated as of November 19, 1997
between In-Flight Entertainment, LLC, a limited liability company duly organized
and validly existing under the laws of Delaware (the "Guarantor"); and THE CHASE
MANHATTAN BANK, as agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
BE Aerospace, Inc., a Delaware corporation (the "Company"), certain
lenders (the "Lenders") and the Administrative Agent are parties to a Credit
Agreement dated as of October 29, 1993, as amended and restated as of May 29,
1997 (as modified and supplemented and in effect from time to time, the "Credit
Agreement"), providing, subject to the terms and conditions thereof, for
extensions of credit (by making of loans and issuing letters of credit) to be
made by said lenders to the Company in an aggregate principal or face amount not
exceeding $125,000,000. Contemporaneously with the execution of this Agreement,
the Company has requested, and the Lenders and the Administrative Agent have
agreed to amend the Credit Agreement on the terms, and subject to the
conditions, set forth in Amendment No. 1 to the Credit Agreement ("Amendment No.
1").
To induce the Lenders to (i) enter into Amendment No. 1 and to
agree, pursuant to Amendment No. 1, to include the Eligible Inventory (as so
defined) and Eligible Receivables (as so defined) of the Guarantor in the
Borrowing Base (as so defined) under the Credit Agreement, (ii) to extend credit
under the Credit Agreement and (iii) for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Guarantor has
agreed to guarantee the Guaranteed Obligations (as hereinafter defined), and to
pledge and grant a security interest in the Series A Collateral (as so defined)
as security for the Series A Secured Obligations (as so defined). Accordingly,
the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement (as
amended by Amendment No. 1) are used herein as defined therein. In addition, as
used herein:
"Accounts" shall have the meaning ascribed thereto in Section 4(a)
hereof.
"Collateral Account" shall have the meaning ascribed thereto in
Section 5.01 hereof.
Guarantee and Security Agreement
<PAGE> 14
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"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Guarantor, including each Copyright
identified in Annex 1 hereto.
"Copyrights" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"Documents" shall have the meaning ascribed thereto in Section 4(g)
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 4(e)
hereof.
"Guaranteed Obligations" shall have the meaning ascribed thereto in
Section 2.01 hereof.
"Instruments" shall have the meaning ascribed thereto in Section
4(b) hereof.
"Intellectual Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together
with (a) all inventions, processes, production methods, proprietary
information, know-how and trade secrets; (b) all licenses or user or other
agreements granted to the Guarantor with respect to any of the foregoing,
in each case whether now or hereafter owned or used including, without
limitation, the licenses or other agreements with respect to the Copyright
Collateral, the Patent Collateral or the Trademark Collateral, listed in
Annex 4 hereto; (c) all information, customer lists, identification of
suppliers, data, plans, blueprints, specifications, designs, drawings,
recorded knowledge, surveys, engineering reports, test reports, manuals,
materials standards, processing standards, performance standards,
catalogs, computer and automatic machinery software and programs; (d) all
field repair data, sales data and other information relating to sales or
service of products now or hereafter manufactured; (e) all accounting
information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer
programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
Guarantee and Security Agreement
<PAGE> 15
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hereafter held by the Guarantor; and (g) all causes of action, claims and
warranties now or hereafter owned or acquired by the Guarantor in respect
of any of the items listed above.
"Inventory" shall have the meaning ascribed thereto in Section 4.(c)
hereof.
"LiveTV LLC" shall mean B/E Harris LiveTV LLC, a Delaware limited
liability company.
"LiveTV LLC Agreement" shall mean the Limited Liability Company
Agreement of B/E Harris LiveTV LLC.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Guarantor, including each Patent identified in
Annex 2 hereto.
"Patents" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Series A Collateral" shall have the meaning ascribed thereto in
Section 4 hereof.
"Series A Secured Obligations" shall mean, collectively, (a) all
obligations of the Guarantor in respect of its Guarantee under Section 2
hereof and (b) all other obligations of the Guarantor to the Series A
Lenders and the Administrative Agent hereunder.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Guarantor, including each Trademark
identified in Annex 3 hereto. Notwithstanding the foregoing, the Trademark
Collateral does not and shall not include any Trademark that would be
Guarantee and Security Agreement
<PAGE> 16
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rendered invalid, abandoned, void or unenforceable by reason of its being
included as part of the Trademark Collateral.
"Trademarks" shall mean all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and applications
for trademark and service mark registrations, including, without
limitation, all renewals of trademark and service mark registrations, all
rights corresponding thereto throughout the world, the right to recover
for all past, present and future infringements thereof, all other rights
of any kind whatsoever accruing thereunder or pertaining thereto,
together, in each case, with the product lines and goodwill of the
business connected with the use of, and symbolized by, each such trade
name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. The Guarantee.
2.01 The Guarantee. The Guarantor hereby guarantees to each Series A
Lender and the Administrative Agent and their respective successors and assigns
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the principal of and interest on the Series A Loans made by the
Series A Lenders to, and the Series A Note(s) held by each Series A Lender of,
the Company and all other amounts from time to time owing to the Series A
Lenders or the Administrative Agent by the Company under the Credit Agreement
and under the Basic Documents and all Reimbursement Obligations and interest
thereon, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the "Guaranteed Obligations"). The
Guarantor hereby further agrees that if the Company shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Guarantor will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
2.02 Obligations Unconditional. The obligations of the Guarantor
under Section 2.01 hereof are absolute and unconditional irrespective of the
value, genuineness, validity,
Guarantee and Security Agreement
<PAGE> 17
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regularity or enforceability of the Credit Agreement, the Basic Documents or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement or the Basic Documents or any other agreement or
instrument referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or the Basic Documents or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee of
any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Administrative Agent or any Series A Lender or Series A Lenders as
security for any of the Guaranteed Obligations shall fail to be perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Series A Lender exhaust any right, power or remedy or proceed
against the Company under the Credit Agreement or the Basic Documents or any
other agreement or instrument referred to herein or therein, or against any
other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
Guarantee and Security Agreement
<PAGE> 18
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2.03 Reinstatement. The obligations of the Guarantor under this
Section 2 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and the Guarantor agrees that it will indemnify
the Administrative Agent and each Series A Lender on demand for all reasonable
costs and expenses (including, without limitation, fees of counsel) incurred by
the Administrative Agent or such Series A Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
2.04 Subrogation. The Guarantor hereby agrees that until the payment
and satisfaction in full of all Guaranteed Obligations and the expiration or
termination of the Commitments and all Letter of Credit Liabilities of the
Series A Lenders under the Credit Agreement it shall not exercise any right or
remedy arising by reason of any performance by it of its guarantee in Section
2.01 hereof, whether by subrogation or otherwise, against the Company or any
other guarantor of any of the Guaranteed Obligations or any security for any of
the Guaranteed Obligations.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor
and the Series A Lenders, the obligations of the Company under the Credit
Agreement and the Basic Documents may be declared to be forthwith due and
payable as provided in Section 9 of the Credit Agreement (and shall be deemed to
have become automatically due and payable in the circumstances provided in said
Section 9) for purposes of Section 2.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Company and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the Company) shall forthwith become due and payable by the Guarantor for
purposes of said Section 2.01.
2.06 Instrument for the Payment of Money. The Guarantor hereby
acknowledges that the guarantee in this Section 2 constitutes an instrument for
the payment of money, and consents and agrees that any Series A Lender or the
Administrative Agent, at its sole option, in the event of a
Guarantee and Security Agreement
<PAGE> 19
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dispute by the Guarantor in the payment of any moneys due hereunder, shall have
the right to bring motion-action under New York CPLR Section 3213.
2.07 Continuing Guarantee. The guarantee in this Section 2 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
2.08 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Guarantor under Section 2.01
hereof would otherwise be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under said Section 2.01, then, notwithstanding
any other provision hereof to the contrary, the amount of such liability shall,
without any further action by the Guarantor, the Administrative Agent, the
Series A Lenders or any other Person, be automatically limited and reduced to
the highest amount that is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.
Section 3. Representations and Warranties. The Guarantor represents
and warrants to the Series A Lenders and the Administrative Agent that:
3.01 Action. The Guarantor has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by the Guarantor of this Agreement have been
duly authorized by all necessary action on its part; and this Agreement has been
duly and validly executed and delivered by the Guarantor and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3.02 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange are necessary for the execution, delivery or
performance by the Guarantor of this Agreement or for the validity or
Guarantee and Security Agreement
<PAGE> 20
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enforceability hereof, except for filings and recordings of the Liens created
pursuant to this Agreement.
3.03 Collateral.
(a) When the Guarantor acquires any rights therein, the Guarantor
will be the sole beneficial owner of the Series A Collateral and no Lien
will exist upon the Series A Collateral at any time (and no right or
option to acquire the same will exist in favor of any other Person),
except for Liens permitted under Section 8.06 of the Credit Agreement and
except for the pledge and security interest in favor of the Administrative
Agent for the benefit of the Series A Lenders created or provided for
herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of the Series A
Collateral (other than Intellectual Property registered or otherwise
located outside of the United States of America).
(b) Annexes 1, 2 and 3 hereto, respectively, set forth a complete
and correct list of all Copyrights, Patents and Trademarks owned by the
Guarantor on the date hereof; except pursuant to licenses and other user
agreements entered into by the Guarantor in the ordinary course of
business, that are listed in Annex 4 hereto, the Guarantor owns and
possesses the right to use, and has done nothing to authorize or enable
any other Person to use, any Copyright, Patent or Trademark listed in said
Annexes 1, 2 and 3, and all registrations listed in said Annexes 1, 2 and
3 are valid and in full force and effect; except as may be set forth in
said Annex 4, the Guarantor owns and possesses the right to use all
Copyrights, Patents and Trademarks.
(c) Annex 4 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property
on the date hereof.
(d) To the Guarantor's knowledge, (i) except as set forth in Annex 4
hereto, there is no violation by others of any right of the Guarantor with
respect to any Copyright, Patent or Trademark listed in Annexes 1, 2 and 3
hereto, respectively, and (ii) the Guarantor is not infringing in any
respect upon any Copyright, Patent or Trademark of any other Person; and
no proceedings have been instituted or are pending against the Guarantor
or, to the Guarantor's knowledge, threatened, and no claim against the
Guarantor
Guarantee and Security Agreement
<PAGE> 21
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has been received by the Guarantor, alleging any such violation, except as
may be set forth in said Annex 4.
(e) The Guarantor does not own any Trademarks registered in the
United States of America to which the last sentence of the definition of
Trademark Collateral applies.
(f) Any goods now or hereafter produced by the Guarantor included in
the Series A Collateral have been and will be produced in compliance with
the requirements of the Fair Labor Standards Act, as amended.
Section 4. Series A Collateral. As collateral security for the
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Series A Secured Obligations, the Guarantor hereby pledges and
grants to the Administrative Agent, for the benefit of the Series A Lenders as
hereinafter provided, a security interest in all of the Guarantor's right, title
and interest in the following property, whether now owned by the Guarantor or
hereafter acquired and whether now existing or hereafter coming into existence
(all being collectively referred to herein as "Series A Collateral"):
(a) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Guarantor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Guarantor in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Guarantor under any
guarantee (not including a letter of credit) of the purchase price of
Inventory or Equipment sold by the Guarantor and all tax refunds (such
accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
(b) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Guarantor evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called "Instruments")
(c) all inventory (as defined in the Uniform Commercial Code) of the
Guarantor, including Motor Vehicles
Guarantee and Security Agreement
<PAGE> 22
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held by the Guarantor for lease (including lease to Subsidiaries of the
Guarantor), fuel, tires and other spare parts, all goods obtained by the
Guarantor in exchange for such inventory, and any products made or
processed from such inventory including all substances, if any, commingled
therewith or added thereto (herein collectively called "Inventory");
(d) all Intellectual Property and all other accounts or general
intangibles not constituting Intellectual Property or Accounts;
(e) all equipment (as defined in the Uniform Commercial Code) of the
Guarantor, including all Motor Vehicles (herein collectively called
"Equipment");
(f) each contract and other agreement of the Guarantor relating to
the sale or other disposition of Inventory or Equipment;
(g) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Guarantor covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
(h) all rights, claims and benefits of the Guarantor against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by the Guarantor, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
(i) the balance from time to time in the Collateral Account; and
(j) all other tangible and intangible personal property of the
Guarantor, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of the Guarantor described in
the preceding clauses of this Section 4 (including, without limitation,
any proceeds of insurance thereon) and, to the extent related to any
property described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files, records, invoices and
other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of
the Guarantor or any
Guarantee and Security Agreement
<PAGE> 23
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computer bureau or service company from time to time acting for the
Guarantor.
Notwithstanding the foregoing, the Series A Collateral does not and shall
not include:
(i) any ownership interest in, or right, title or interest of the
Guarantor as a member in LiveTV LLC, but shall include (w) any and all
moneys, and any and all rights to receive such moneys, due or to become
due to the Guarantor now or in the future by way of distribution made to
the Guarantor in its capacity as a member of LiveTV LLC or otherwise
pursuant to the LiveTV LLC Agreement, (x) any other property or assets,
and any and all rights to receive such property or assets, of LiveTV LLC
to which the Guarantor now or in the future may be entitled in its
capacity as a member of LiveTV LLC, (y) any other claim which the
Guarantor now has or may acquire in its capacity as a member of LiveTV LLC
against LiveTV LLC and its property or arising out of or for breach or
default under the LiveTV Limited Liability Agreement and (z) all proceeds
of and to any of the foregoing clauses (w) through (y); and
(ii) the assets to be transferred to LiveTV LLC, including, without
limitation, rights and claims of the Company against In-Flight Phone
Corporation transferred to the Guarantor, whether asserted or unasserted
with respect to matters prior to the formation of LiveTV LLC and the
rights to certain technology, trademarks and trade names licensed to the
Guarantor by the Company and to be licensed by the Guarantor to LiveTV
LLC.
Section 5. Cash Proceeds of Series A Collateral.
5.01 Collateral Account. The Administrative Agent may establish with
Chase a cash collateral account (the "Collateral Account"), which may be a
"securities account" (within the meaning of Section 8-501 of the Uniform
Commercial Code), in the name and under the sole control of the Administrative
Agent into which there shall be deposited from time to time the cash proceeds of
any of the Series A Collateral (including proceeds of insurance thereon)
required to be delivered to the Administrative Agent pursuant hereto and into
which the Guarantor may from time to time deposit any additional amounts that it
wishes to pledge to the Administrative Agent for the benefit of the Series A
Lenders as additional collateral security hereunder. The balance from time to
time in the Collateral Account shall constitute part
Guarantee and Security Agreement
<PAGE> 24
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of the Series A Collateral hereunder and shall not constitute payment of the
Series A Secured Obligations until applied as hereinafter provided. Except as
expressly provided in the next sentence, the Administrative Agent shall remit
the collected balance outstanding to the credit of the Collateral Account to or
upon the order of the Guarantor as the Guarantor shall from time to time
instruct. However, at any time following the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if
instructed by the Series A Lenders as specified in Section 10.03 of the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied
(subject to collection) the balance from time to time outstanding to the credit
of the Collateral Account to the payment of the Series A Secured Obligations in
the manner specified in Section 6.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein.
5.02 Proceeds of Accounts. At any time after the occurrence and
during the continuance of an Event of Default, the Guarantor shall, upon the
request of the Administrative Agent, instruct all account debtors and other
Persons obligated in respect of all Accounts to make all payments in respect of
the Accounts either (a) directly to the Administrative Agent (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the control of the Administrative Agent) or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) under arrangements, in form and substance
satisfactory to the Administrative Agent pursuant to which the Guarantor shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the Administrative
Agent for deposit into the Collateral Account. All payments made to the
Administrative Agent, as provided in the preceding sentence, shall be
immediately deposited in the Collateral Account. In addition to the foregoing,
the Guarantor agrees that, at any time after the occurrence and during the
continuance of an Event of Default, if the proceeds of any Series A Collateral
hereunder (including the payments made in respect of Accounts) shall be received
by it, the Guarantor shall as promptly as possible deposit such proceeds into
the Collateral Account. Until so deposited, all such proceeds shall be held in
trust by the Guarantor for and as the property of the Administrative Agent and
shall not be commingled with any other funds or property of the Guarantor.
Guarantee and Security Agreement
<PAGE> 25
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5.03 Investment of Balance in Collateral Account. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Guarantor (or, after the occurrence and during the
continuance of a Default, the Administrative Agent) shall determine, which
Permitted Investments shall if the Collateral Account is a "securities account"
(within the meaning of Section 8-501 of the Uniform Commercial Code) be credited
to the Collateral Account and otherwise shall be held in the name and be under
the control of the Administrative Agent, provided that (i) at any time after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Series A Lenders as specified in Section
10.03 of the Credit Agreement, shall) in its (or their) discretion at any time
and from time to time elect to liquidate any such Permitted Investments and to
apply or cause to be applied the proceeds thereof to the payment of the Series A
Secured Obligations in the manner specified in Section 6.09 hereof and (ii) if
requested by the Guarantor, such Permitted Investments may be held in the name
and under the control of one or more of the Series A Lenders (and in that
connection each Series A Lender, pursuant to Section 10.10 of the Credit
Agreement) has agreed that such Permitted Investments shall be held by such
Series A Lender as a collateral sub-agent for the Administrative Agent
hereunder).
5.04 Cover for Letter of Credit Liabilities. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held
by the Administrative Agent in a separate sub-account (designated "Letter of
Credit Liabilities Sub-Account") and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
outstanding from time to time and second as collateral security for the other
Series A Secured Obligations hereunder.
Section 6. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 4 hereof, the Guarantor
hereby agrees with each Series A Lender and the Administrative Agent as follows:
6.01 Delivery and Other Perfection. The Guarantor shall:
(a) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and
Guarantee and Security Agreement
<PAGE> 26
-14-
substance as the Administrative Agent may request; provided, that so long
as no Default shall have occurred and be continuing, the Guarantor may
retain for collection in the ordinary course any Instruments received by
the Guarantor in the ordinary course of business and the Administrative
Agent shall, promptly upon request of the Guarantor, make appropriate
arrangements for making any Instrument pledged by the Guarantor available
to the Guarantor for purposes of presentation, collection or renewal (any
such arrangement to be effected, to the extent deemed appropriate by the
Administrative Agent, against trust receipt or like document);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent to exercise
and enforce its rights hereunder with respect to such pledge and security
interest, provided that notices to account debtors in respect of any
Accounts or Instruments shall be subject to the provisions of clause (h)
below;
(c) from time to time as requested by any Series A Lender, cause the
Administrative Agent to be listed as Lienholder of any Equipment covered
by a certificate of title or ownership, and within 120 days of such
request deliver evidence of the same to the Administrative Agent;
(d) keep full and accurate books and records relating to the Series
A Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(e) furnish to the Administrative Agent from time to time (but,
unless a Default shall have occurred and be continuing, no more frequently
than quarterly) statements and schedules further identifying and
describing the Copyright Collateral, the Patent Collateral and the
Trademark Collateral, and such other reports in connection with the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
as the Administrative Agent may reasonably request, all in reasonable
detail;
(f) promptly upon request of the Administrative Agent, following
receipt by the Administrative Agent of any
Guarantee and Security Agreement
<PAGE> 27
-15-
statements, schedules or reports pursuant to clause (e) above, modify this
Agreement by amending Annexes 1, 2 and/or 3 hereto, as the case may be, to
include any Copyright, Patent ,or Trademark which becomes part of the
Series A Collateral under this Agreement;
(g) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Series A
Collateral, and permit representatives of the Administrative Agent to be
present at the Guarantor's place of business to receive copies of all
communications and remittances relating to the Series A Collateral, and
forward copies of any notices or communications received by the Guarantor
with respect to the Series A Collateral, all in such manner as the
Administrative Agent may require; and
(h) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and
the Guarantor hereby authorizes the Administrative Agent so to notify)
each account debtor in respect of any Accounts or Instruments that such
Series A Collateral has been assigned to the Administrative Agent
hereunder, and that any payments due or to become due in respect of such
Series A Collateral are to be made directly to the Administrative Agent.
6.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Series A Lenders as specified in Section 10.09 of the Credit Agreement), the
Guarantor shall not file or suffer to be on file, or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Series A Collateral in which the Administrative
Agent is not named as the sole secured party for the benefit of the Series A
Lenders.
6.03 Preservation of Rights. The Administrative Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Series A Collateral.
6.04 Special Provisions Relating to Certain Collateral.
(a) Intellectual Property.
Guarantee and Security Agreement
<PAGE> 28
-16-
(1) For the purpose of enabling the Administrative Agent to exercise
rights and remedies under Section 6.05 hereof at such time as the Administrative
Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, the Guarantor hereby grants to the Administrative Agent, to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Guarantor) to use,
assign, license or sublicense any of the Intellectual Property now owned or
hereafter acquired by the Guarantor, wherever the same may be located, including
in such license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for the
compilation or printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 8.05 of the Credit Agreement which limit
the right of the Company and its Subsidiaries to dispose of their property, so
long as no Event of Default shall have occurred and be continuing, the Guarantor
will be permitted to exploit, use, enjoy, protect, license, sublicense, assign,
sell, dispose of or take other actions with respect to the Intellectual Property
in the ordinary course of the business of the Guarantor. In furtherance of the
foregoing, unless an Event of Default shall have occurred and be continuing the
Administrative Agent shall from time to time, upon the request of the Guarantor,
execute and deliver any instruments, certificates or other documents, in the
form so requested, that the Guarantor shall have certified are appropriate (in
its judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to clause (1) immediately above
as to any specific Intellectual Property). Further, upon the payment in full of
all of the Series A Secured Obligations and cancellation or termination of the
Series A Commitments and Letter of Credit Liabilities or earlier expiration of
this Agreement or release of the Series A Collateral, the Administrative Agent
shall grant back to the Guarantor the license granted pursuant to clause (1)
immediately above. The exercise of rights and remedies under Section 6.05 hereof
by the Administrative Agent shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by the Guarantor in accordance with
the first sentence of this clause (2).
6.05 Events of Default. Etc. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Guarantor shall, at the request of the Administrative Agent,
assemble the Series A Collateral owned by it at such place or places,
reasonably convenient to both
Guarantee and Security Agreement
<PAGE> 29
-17-
the Administrative Agent and the Guarantor, designated in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Series A Collateral
and may extend the time of payment, arrange for payment in installments,
or otherwise modify the terms of, any of the Series A Collateral;
(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Series A Collateral of a secured party under
the Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to exercise all voting, consensual
and other powers of ownership pertaining to the Series A Collateral as if
the Administrative Agent were the sole and absolute owner thereof (and the
Guarantor agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Administrative Agent in its discretion may, in its name or
in the name of the Guarantor or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Series A Collateral, but shall be under
no obligation to do so; and
(e) the Administrative Agent may, upon ten Business Days' prior
written notice to the Guarantor of the time and place, with respect to
the Series A Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Series A Lenders or any of their respective
agents, sell, lease, assign or otherwise dispose of all or any part of
such Series A Collateral, at such place or places as the Administrative
Agent deems best, and for cash or for credit or for future delivery
without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Administrative Agent or any Series A Lender or anyone else may be the
purchaser, lessee,
Guarantee and Security Agreement
<PAGE> 30
-18-
assignee or recipient of any or all of the Series A Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private
sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Guarantor, any such demand, notice and
right or equity being hereby expressly waived and released. In the event
of any sale, assignment, or other disposition of any of the Trademark
Collateral, the goodwill connected with and symbolized by the Trademark
Collateral subject to such disposition shall be included, and the
Guarantor shall supply to the Administrative Agent or its designee, for
inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Administrative Agent
may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time
or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
6.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 6.04(b) hereof, shall be applied in accordance
with Section 6.09 hereof.
The Guarantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Series A Collateral, to limit purchasers to those
who will agree, among other things, to acquire the Series A Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. The Guarantor acknowledges that any such private sales may be at prices
and on terms less favorable to the Administrative Agent than those obtainable
through a public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Administrative Agent shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Series A Collateral for the period of time necessary to permit the
respective Issuer or issuer thereof to register it for public sale.
6.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Series A Collateral pursuant to Section 6.05 hereof
are insufficient to cover the costs and
Guarantee and Security Agreement
<PAGE> 31
-19-
expenses of such realization and the payment in full of the Series A Secured
Obligations, the Guarantor shall remain liable for any deficiency.
6.07 Removals, Etc. Without at least 30 days' prior written notice
to the Administrative Agent, the Guarantor shall not (i) maintain any of its
books and records with respect to the Series A Collateral at any office or
maintain its principal place of business at any place, or permit any Inventory
or Equipment to be located anywhere, other than at the address indicated beneath
its signature hereto or at one of the locations identified in Part A of Annex 5
hereto or in transit from one of such locations to another or (ii) change its
corporate name, or the name under which it does business, from the name shown on
the signature pages hereto; provided, however, that the Guarantor may do
business in the states and under the names specified in Part B of Annex 5
hereto.
6.08 Private Sale. The Administrative Agent and the Series A Lenders
shall incur no liability as a result of the sale of the Series A Collateral, or
any part thereof, at any private sale pursuant to Section 6.05 hereof conducted
in a commercially reasonable manner. The Guarantor hereby waives any claims
against the Administrative Agent or any Series A Lender arising by reason of the
fact that the price at which the Series A Collateral may have been sold at such
a private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Series A Secured Obligations,
even if the Administrative Agent accepts the first offer received and does not
offer the Series A Collateral to more than one offeree.
6.09 Application of Proceeds. Except as otherwise herein expressly
provided and except as provided below in this Section 6.09, the proceeds of any
collection, sale or other realization of all or any part of the Series A
Collateral pursuant hereto, and any other cash at the time held by the
Administrative Agent under Section 5 hereof or this Section 6, shall be applied
by the Administrative Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, and all reasonable expenses incurred and
advances made by the Administrative Agent in connection therewith;
Guarantee and Security Agreement
<PAGE> 32
-20-
Next, to the payment in full of the Series A Secured Obligations, in
each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Series A Lenders holding the same may
otherwise agree; and
Finally, to the payment to the Guarantor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 5.04 hereof shall be applied first to the Letter of Credit
Liabilities outstanding from time to time and second to the other Series A
Secured Obligations in the manner provided above in this Section 6.09.
As used in this Section 6, "proceeds" of Series A Collateral shall
mean cash, securities and other property realized in respect of, and
distributions in kind of, Series A Collateral, including any thereof received
under any reorganization, liquidation or adjustment of debt of the Guarantor or
any issuer of or obligor on any of the Series A collateral.
6.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of the Guarantor for the purpose of carrying out the provisions
of this Section 6 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 6 to make collections
in respect of the Series A Collateral, the Administrative Agent shall have the
right and power to receive, endorse and collect all checks made payable to the
order of the Guarantor representing any dividend, payment or other distribution
in respect of the Series A Collateral or any part thereof and to give full
discharge for the same.
6.11 Termination. When all Series A Secured Obligations shall have
been paid in full and the Series A Commitments of the Series A Lenders under the
Credit Agreement and all Letter of Credit Liabilities shall have expired or been
Guarantee and Security Agreement
<PAGE> 33
-21-
terminated, this Agreement shall terminate, and the Administrative Agent shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Series A Collateral and money received in respect thereof, to or on the order of
the Guarantor and to be released and canceled all licenses and rights referred
to in Section 6.04(a) hereof. The Administrative Agent shall also execute and
deliver to the Guarantor upon such termination such Uniform Commercial Code
termination statements, certificates for terminating the Liens on the Motor
Vehicles and such other documentation as shall be reasonably requested by the
Guarantor to effect the termination and release of the Liens on the Series A
Collateral.
6.12 Further Assurances. The Guarantor agrees that, from time to
time upon the written request of the Administrative Agent, the Guarantor will
execute and deliver such further documents and do such other acts and things as
the Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
6.13 Release of Motor Vehicles. So long as no Event of Default shall
have occurred and be continuing, upon the request of the Guarantor, the
Administrative Agent shall execute and deliver to the Guarantor such instruments
as the Guarantor shall reasonably request to remove the notation of the
Administrative Agent as lienholder on any certificate of title for any Motor
Vehicle; provided that any such instruments shall be delivered, and the release
effective only upon receipt by the Administrative Agent of a certificate from
the Guarantor stating that the Motor Vehicle the lien on which is to be released
is to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss).
Section 7. Miscellaneous.
7.01 No Waiver. No failure on the part of the Administrative Agent
or any of its agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
Guarantee and Security Agreement
<PAGE> 34
-22-
7.02 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to either party, at such other address as shall be
designated by such party in a notice to the other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
7.03 Expenses. The Guarantor agrees to reimburse each of the Series
A Lenders and the Administrative Agent for all reasonable out-of-pocket costs
and expenses of the Series A Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceeding
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (w) performance by the Administrative Agent of any
obligations of the Guarantor in respect of the Series A Collateral that the
Guarantor has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Series A Collateral, and for the care of the
Series A Collateral and defending or asserting rights and claims of the
Administrative Agent in respect thereof, by litigation or otherwise, including
expenses of insurance, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 7.03, and all such costs and expenses shall be
Series A Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 4 hereof.
7.04. Amendments, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the
Guarantor and the Administrative Agent (with the consent of the Series A Lenders
as specified in Section 10.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Series A Lender,
each holder of any of the Series A Secured Obligations and the Guarantor.
7.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective
Guarantee and Security Agreement
<PAGE> 35
-23-
successors and assigns of the Guarantor, the Administrative Agent, the Series A
Lenders and each holder of any of the Series A Secured Obligations (provided,
however, that the Guarantor shall not assign or transfer its rights hereunder
without the prior written consent of the Administrative Agent).
7.06 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
7.07 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
7.08 Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the law of the State of New
York. The Guarantor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Guarantor hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
7.09 Waiver of Jury Trial. EACH OF THE GUARANTOR, THE ADMINISTRATIVE
AGENT AND THE SERIES A LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
7.10 Agents and Attorneys-in-Fact. The Administrative Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
7.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest
Guarantee and Security Agreement
<PAGE> 36
-24-
extent permitted by law, (i) the other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in favor
of the Administrative Agent and the Series A Lenders in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
Guarantee and Security Agreement
<PAGE> 37
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee
and Security Agreement to be duly executed and delivered as of the day and year
first above written.
IN-FLIGHT ENTERTAINMENT, LLC
By: BE Aerospace, Inc., Member
By /s/ Thomas P. McCaffrey
----------------------------------
Title: Chief Financial Officer
Address for Notices:
In-Flight Entertainment, LLC
17481 Red Hill Avenue
Irvine, California 92614
Attn: Thomas P. McCaffrey
Guarantee and Security Agreement
<PAGE> 38
-26-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Matt Massie
----------------------------------
Title: Vice President
Address for Notices:
The Chase Manhattan Bank, as
Administrative Agent
270 Park Avenue
38th Floor
New York, New York 10017
Attention: Matthew H. Massie
with a copy to:
The Chase Manhattan Bank
Agent Bank Services Group
8th Floor
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Frank Giacalone
Guarantee and Security Agreement
<PAGE> 39
ANNEX 1
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
<TABLE>
<CAPTION>
Title Date Filed Registration No. Effective Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
[None]
</TABLE>
Annex 1 to Guarantee and Security Agreement
<PAGE> 40
ANNEX 2
LIST OF PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
File Patent Country Registration No. Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[None]
</TABLE>
Annex 2 to Guarantee and Security Agreement
<PAGE> 41
ANNEX 3
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. Trademarks
<TABLE>
<CAPTION>
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
- --------------------------------------------------------------------------------
<S> <C> <C>
[None]
</TABLE>
Annex 3 to Guarantee and Security Agreement
<PAGE> 42
-2-
Foreign Trademarks
<TABLE>
<CAPTION>
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
[None]
</TABLE>
Annex 3 to Guarantee and Security Agreement
<PAGE> 43
ANNEX 4
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
[None]
Annex 4 to Guarantee and Security Agreement
<PAGE> 44
ANNEX 5
LIST OF LOCATIONS
Part A - List of Locations.
Part B - Trade Names/State
Trade Name State
---------- -----
BE Aerospace, Inc. California
In-Flight Entertainment California
Annex 5 to Guarantee and Security Agreement
<PAGE> 1
Exhibit 10.3
EXECUTION COPY
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of January 28, 1998, between BE AEROSPACE,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "Company") each of the lenders that is a signatory
hereto (individually, a "Lender" and, collectively, the "Lenders") and THE CHASE
MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
The Company, the Lenders and the Administrative Agent are parties to
a Third Amended and Restated Credit Agreement dated as of October 29, 1993, as
amended and restated as of May 29, 1997, as further amended as of November 19,
1997 (as heretofore modified and supplemented and in effect on the date hereof,
the "Credit Agreement"). The Company has requested that the Credit Agreement be
amended and accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 2, terms defined in the Credit Agreement (as amended hereby) are
used herein as defined therein.
Section 2. Amendments. Subject to the satisfaction of the condition
precedent specified in Section 5 below, but effective as of the date hereof (the
"Second Amendment Effective Date"), the Credit Agreement shall be amended as
follows:
2.01. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. The definition of "Restricted Payment" in Section 1.01 of the
Credit Agreement shall be amended to read in its entirety as follows:
"'Restricted Payment' shall mean, with respect to any Person, (a)
dividends (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking
or other analogous fund for, or the purchase, redemption, retirement or
other acquisition of, any shares of any class of stock of such Person or
of any warrants (other than of shares of common stock, warrants or options
of such Person as payment for the exercise price of options or warrants to
purchase common stock of such Person having a fair market value equal to
such exercise price), options or other rights to acquire the same (or to
make any payments to any other Person, such as "phantom stock" payments,
where the amount thereof is calculated with reference to the fair market
or equity value of such Person or any of its Subsidiaries), but excluding
dividends payable solely in shares of common stock or in options, warrants
or other rights to purchase such common stock of such Person or (b) any
payment (whether made by such Person or any of its Subsidiaries) on
account of the purchase, redemption, prepayment, defeasance or other
acquisition or retirement of value of any Indebtedness (such Indebtedness,
'Retired Indebtedness') (i) which is subordinated in right of payment to
the prior payment of the Loans or (ii) which is
<PAGE> 2
-2-
evidenced by the Senior Notes, except any such payment made from the
proceeds of (x) the issuance of any equity securities or (y) any
additional unsecured Indebtedness that does not rank senior in right of
payment to, and does not mature or have any mandatory prepayment, which
does not include required prepayments as a result of a change of control
or asset sale, prior to the maturity of, such Retired Indebtedness.".
Section 2.03. Section 6.02(b) of the Credit Agreement shall be
amended to read in its entirety as follows:
"The Administrative Agent shall have received a certificate of a
senior financial officer of the Company setting forth in reasonable
detail the computations necessary to demonstrate that both immediately
prior to the making of such Loan or other extension of credit and
immediately after giving effect thereto, the Company is or will be in
compliance with (i) Section 1010 of the Senior Subordinated Indenture,
(ii) any provisions in any other indenture to which the Company is a party
that restrict the incurrence or existence of Indebtedness or Liens and
(iii) the Borrowing Base as at the end of the quarterly fiscal period of
the Company ending on or most recently ended prior to the date of such
extension of credit."
Section 2.04. References in the Credit Agreement to the Senior
Subordinated Notes and to the Senior Subordinated Indenture shall be deemed to
include references to the Senior Subordinated Notes due 2008 issued by the
Company during the first quarter of 1998 and to the indenture pursuant to which
such Senior Subordinated Notes due 2008 are issued, respectively.
Section 2.05. The proviso at the end of Section 8.07 of the Credit
Agreement shall be amended to read in its entirety as follows:
"provided that the Company may incur additional unsecured Indebtedness
that has no regularly scheduled maturity or mandatory prepayments, which
does not include required prepayments as a result of a change of control
or asset sale, on or before the Series A Commitment Termination Date.
Section 3. Waiver. The Banks hereby waive any restriction in Section
8.18 of the Credit Agreement or otherwise to the redemption or repurchase by
means of a tender offer and consent solicitation of the Senior Notes with the
proceeds of the Senior Subordinated Notes due 2008 proposed to be issued by the
Company during the first quarter of 1998 and the amendments to the Senior
Indenture contemplated thereby.
Section 4. Representations and Warranties. The Company represents
and warrants to the Lenders that the representations and warranties set forth in
Section 7 of the Credit Agreement (as amended hereby) are true and complete on
the date hereof as if made on and as of the date hereof (or, if such
representation or warranty is expressly stated to be made as of a specific date,
as of such specific date) and as if each reference in said Section 7 to "this
Agreement" included reference to this Amendment No. 2.
<PAGE> 3
-3-
Section 5. Condition Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 and the waiver
set forth in Section 3 above shall become effective, as of the date hereof, upon
the due execution and delivery of this Amendment No. 2 by the Company, the
Guarantor referred to below, the Administrative Agent and the Majority Lenders.
Section 6. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 2 by signing any such counterpart. This
Amendment No. 2 shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE> 4
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
------------------------------
Title:
/s/ Karen Patturelli
KAREN PATTURELLI, Notary Public
My Commission Expires May 22, 2003
LENDERS
THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH)
By By
--------------------------- -------------------------------
Title: Title:
LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
By
---------------------------
Title:
<PAGE> 5
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By
------------------------------
Title:
LENDERS
THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH)
By /s/ [Illegible] By
--------------------------- -------------------------------
Title: Title:
LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
By
---------------------------
Title:
<PAGE> 6
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By
------------------------------
Title:
LENDERS
THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH)
By By /s/ [Illegible]
--------------------------- -------------------------------
Title: Title: Vice President
LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
By
---------------------------
Title:
<PAGE> 7
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By
------------------------------
Title:
LENDERS
THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH)
By By
--------------------------- -------------------------------
Title: Title:
LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY
By By /s/ [Illegible]
--------------------------- -------------------------------
Title: Title: SVP
CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
By
---------------------------
Title:
<PAGE> 8
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By
------------------------------
Title:
LENDERS
THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH)
By By
--------------------------- -------------------------------
Title: Title:
LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY
By By
--------------------------- -------------------------------
Title: Title:
CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY
By By /s/ [Illegible]
--------------------------- -------------------------------
Title: Title: Vice President and Manager
By
---------------------------
Title:
<PAGE> 9
-5-
CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /s/ Robert Ivosevich By
------------------------ ----------------------------
Title: Robert Ivosevich Title:
Senior Vice President
By
----------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
------------------------
Title:
GUARANTOR
Consent to the foregoing:
IN-FLIGHT ENTERTAINMENT, LLC
By
-----------------------------
Title:
<PAGE> 10
-5-
CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By By /s/ William N. Paty
------------------------ ----------------------------
Title: Title: WILLIAM N. PATY
VICE PRESIDENT AND MANAGER
By /s/ Brian M. Smith
----------------------------
Title: BRIAN M. SMITH
SENIOR VICE PRESIDENT &
REGIONAL MANAGER (EAST)
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
------------------------
Title:
GUARANTOR
Consent to the foregoing:
IN-FLIGHT ENTERTAINMENT, LLC
By
-----------------------------
Title:
<PAGE> 11
-5-
CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By By
------------------------ ----------------------------
Title: Title:
By
----------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ [Illegible]
------------------------
Title:
GUARANTOR
Consent to the foregoing:
IN-FLIGHT ENTERTAINMENT, LLC
By
-----------------------------
Title:
<PAGE> 12
-5-
CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By By
------------------------ ----------------------------
Title: Title:
By
----------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
------------------------
Title:
GUARANTOR
Consent to the foregoing:
IN-FLIGHT ENTERTAINMENT, LLC
By /s/ Thomas P. McCaffrey
-----------------------------
Title:
/s/ Karen Patturelli
KAREN PATTURELLI, Notary Public
My Commission Expires May 22, 2003
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of BE Aerospace, Inc. on
Form S-4 of our report, which includes an explanatory paragraph relating to the
Company's change in its method of accounting for engineering expenditures,
dated April 10, 1997, appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 9, 1998
