BE AEROSPACE, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended November 27, 1999
Commission File No. 0-18348
BE AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1209796
(State of Incorporation) (I.R.S. Employer Identification No.)
1400 Corporate Center Way
Wellington, Florida 33414-2105
(Address of principal executive offices)
(561) 791-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES[X] NO[ ]
The registrant has one class of common stock, $.01 par value, of which
24,872,948 shares were outstanding as of January 5, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
November 27, February 27,
1999 1999
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 32,429 $ 39,500
Accounts receivable - trade, less allowance for doubtful
accounts of $2,921 (November 27, 1999)
and $2,633 (February 27, 1999) 121,746 140,782
Inventories, net 136,179 119,247
Other current assets 32,738 14,086
------------ -----------
Total current assets 323,092 313,615
------------ -----------
Property and equipment, net 151,226 138,730
Intangibles and other assets, net 424,756 451,954
------------ -----------
$ 899,074 $ 904,299
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 69,355 $ 63,211
Accrued liabilities 110,548 97,065
Current portion of long-term debt 13,837 9,916
------------ -----------
Total current liabilities 193,740 170,192
------------ -----------
Long-term debt 599,086 583,715
Other liabilities 29,983 34,519
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;
24,872,948 (November 27, 1999) and 24,602,915
(February 27, 1999) shares issued and outstanding 249 246
Additional paid-in capital 249,170 245,809
Accumulated deficit (164,980) (124,077)
Accumulated other comprehensive loss (8,174) (6,105)
----------- ----------
Total stockholders' equity 76,265 115,873
----------- ----------
$ 899,074 $ 904,299
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 164,578 $ 195,751 $ 541,505 $ 492,094
Cost of sales 166,586 120,141 406,589 305,004
---------- ---------- ---------- -----------
Gross profit (loss) (2,008) 75,610 134,916 187,090
Operating expenses:
Selling, general and administrative 27,253 21,674 70,576 58,715
Research, development and engineering 16,740 16,085 40,265 40,827
Amortization 6,147 6,624 17,699 16,038
Acquisition-related expenses - - - 79,155
---------- ----------- ---------- -----------
Total operating expenses 50,140 44,383 128,540 194,735
---------- ----------- ---------- -----------
Operating earnings (loss) (52,148) 31,227 6,376 (7,645)
Equity in losses of unconsolidated subsidiary - - 1,289 -
Interest expense, net 13,890 11,370 39,707 27,816
---------- ---------- ---------- -----------
Earnings (loss) before income taxes (66,038) 19,857 (34,620) (35,461)
Income taxes - 3,376 6,283 7,428
---------- ----------- ---------- -----------
Net earnings (loss) $ (66,038) $ 16,481 $ (40,903) $ (42,889)
=========== =========== ========== ===========
Basic net earnings (loss) per common share $ (2.66) $ .61 $ (1.65) $ (1.72)
=========== =========== ========== ===========
Diluted net earnings (loss) per common share $ (2.66) $ .59 $ (1.65) $ (1.72)
=========== =========== ========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
November 27, November 28,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (40,903) $ (42,889)
Adjustments to reconcile net loss to net cash flows
provided by (used in) operating activities:
Acquisition-related expenses - 79,155
Depreciation and amortization 31,863 29,278
Deferred income taxes (172) (73)
Non-cash employee benefit plan contributions 1,586 1,701
Changes in operating working capital, net of effects from
acquisitions:
Accounts receivable 19,041 (8,815)
Inventories (17,307) (57,511)
Other current assets (3,547) 2,201
Payables, accruals and current taxes 14,578 4,301
----------- ----------
Net cash flows provided by operating activities 5,139 7,348
----------- ----------
Cash flows from investing activities:
Capital expenditures (27,457) (27,786)
Change in intangible and other assets (6,622) (16,185)
Acquisitions, net of cash acquired - (351,647)
----------- ----------
Net cash flows used in investing activities (34,079) (395,618)
----------- ----------
Cash flows from financing activities:
Net borrowings under bank credit facilities 20,341 83,270
Proceeds from issuance of long-term debt - 200,000
Proceeds from issuances of stock, net of expenses 1,759 4,453
Principal payments on long-term debt - (30,097)
----------- ----------
Net cash flows provided by financing activities 22,100 257,626
----------- ----------
Effect of exchange rate changes on cash flows (231) 507
----------- ----------
Net decrease in cash and cash equivalents (7,071) (130,137)
Cash and cash equivalents, beginning of period 39,500 164,685
----------- ----------
Cash and cash equivalents, end of period $ 32,429 $ 34,548
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest, net $ 46,078 $ 19,937
Income taxes, net $ 2,163 $ 2,017
Schedule of non-cash transactions:
Fair market value of assets acquired in acquisitions $ - $ 414,854
Cash paid for businesses acquired in acquisitions $ - $ 353,583
Liabilities assumed and accrued acquisition costs
incurred in connection with acquisitions $ - $ 71,100
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 27, 1999 AND NOVEMBER 28, 1998
(UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Note 1. Basis of Presentation
The condensed consolidated financial statements of BE
Aerospace, Inc. and its wholly-owned subsidiaries (the "Company" or
"B/E") have been prepared by the Company and are unaudited pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information related to the Company's
organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, these unaudited
condensed consolidated financial statements reflect all material
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations and
statements of financial position for the interim periods presented.
These results are not necessarily indicative of a full year's results
of operations. Certain reclassifications have been made to the
financial statements to conform to the November 27, 1999
presentation.
Although the Company believes that the disclosures provided
are adequate to make the information presented not misleading, these
unaudited interim condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended February 27, 1999.
Note 2. Acquisitions and Disposition
On April 13, 1998, the Company completed its acquisition of
Puritan-Bennett Aero Systems Co. ("PBASCO") for approximately $67,900
in cash and the assumption of approximately $9,200 of liabilities,
including related acquisition costs and certain liabilities arising
from the acquisition. PBASCO is a manufacturer of commercial aircraft
oxygen delivery systems and "WEMAC" air valve components and, in
addition, supplies overhead lights and switches, crew masks and
protective breathing devices for both commercial and general aviation
aircraft.
On April 21, 1998, the Company acquired substantially all of
the assets of Aircraft Modular Products ("AMP") for approximately
$117,300 in cash and the assumption of approximately $12,800 of
liabilities, including related acquisition costs and certain
liabilities arising from the acquisition. AMP is a manufacturer of
cabin interior products for general aviation (business jet) and
commercial-type VIP aircraft, providing a broad line of products
including seating, sidewalls, bulkheads, credenzas, closets, galley
structures, lavatories, tables and sofas, along with related spare
parts.
On August 7, 1998, the Company acquired all of the capital
stock of SMR Aerospace, Inc. and its affiliates, SMR Developers LLC
and SMR Associates (together, "SMR") for an aggregate purchase price
of approximately $141,500 in cash and the assumption of approximately
$32,600 of liabilities, including related acquisition costs and
<PAGE>
certain liabilities arising from the acquisition. The Company paid
for the acquisition of SMR by issuing four million shares (the "SMR
Shares") of Company stock (then valued at approximately $30 per
share) to the former stockholders of SMR and paying them $2,000 in
cash. The Company also paid $22,000 in cash to the employee stock
ownership plan ("ESOP") of a subsidiary of SMR Aerospace to purchase
the minority equity interest in such subsidiary held by the ESOP. The
Company agreed to register for sale the SMR Shares with the
Securities and Exchange Commission. If the net proceeds from the sale
of the shares, which included the $2,000 in cash already paid, was
less than $120,000, the Company agreed to pay such difference in cash
to the selling stockholders. Because of the market price for the
Company's common stock and the Company's payment obligation to the
selling stockholders described above, the Company decided to
repurchase the SMR Shares with approximately $118,000 of the proceeds
from the sale of 9 1/2% Senior Subordinated Notes instead of
registering the shares for sale (the $118,000 payment represents the
net proceeds of $120,000 the Company was obligated to pay the selling
stockholders, less the $2,000 in cash the Company already paid them).
SMR provides design, integration, installation and
certification services for commercial aircraft passenger cabin
interiors. SMR provides a broad range of interior reconfiguration
services that allow airlines to change the size of certain classes of
service, modify and upgrade the seating, install telecommunications or
entertainment options, relocate galleys, lavatories, and overhead bins
and install crew rest compartments. SMR is also a supplier of
structural design and integration services, including airframe
modifications for passenger-to-freighter conversions. In addition, SMR
provides a variety of niche products and components that are used for
reconfigurations and conversions. SMR's services are performed
primarily on an aftermarket basis and its customers include major
airlines such as United Airlines, Japan Airlines, British Airways, Air
France, Cathay Pacific and Qantas, as well as Airborne Express,
Federal Express and Boeing.
On September 3, 1998, the Company acquired substantially all
of the galley equipment assets and certain property and assumed
related liabilities of C.F. Taylor Interiors Limited and acquired the
common stock of C.F. Taylor (Wokingham) Limited (collectively "CF
Taylor"), both wholly owned subsidiaries of EIS Group PLC, for a total
cash purchase price of approximately $25,100, subject to adjustments,
and the assumption of approximately $16,500 of liabilities, including
related acquisition costs and certain liabilities arising from the
acquisition. CF Taylor is a manufacturer of galley equipment for both
narrow- and wide-body aircraft, including galley structures, crew
rests and related spare parts.
As a result of the acquisitions of PBASCO, AMP and SMR, the
Company recorded a charge aggregating $79,155 for the write-off of
acquired in-process research and development and acquisition-related
expenses associated with these and other transactions.
The Company determined that these projects ranged from 25% -
95% complete at November 27, 1999 and estimates that the cost to
complete these projects will aggregate approximately $5,300 and be
incurred over a three year period.
<PAGE>
The acquisitions of PBASCO, AMP, SMR and CF Taylor (the "1999
Acquisitions") have been accounted for using purchase accounting.
On February 25, 1999, the Company sold a 51% interest in its
In-Flight Entertainment ("IFE") subsidiary (the "IFE Sale") to a
wholly-owned subsidiary of Sextant Avionique SA for an initial sale
price of $62,000 (subject to adjustment based on the actual results of
operations during the two years following the IFE Sale). As a result
of the IFE Sale, the Company accounted for its remaining 49% interest
in IFE using the equity method of accounting.
On October 5, 1999, the Company completed the sale of its
remaining 49% equity interest in IFE to Sextant. Total consideration
for 100% of its equity interest in IFE, intra-entity obligations and
for the provision of marketing, product and technical consulting
services will range from a minimum of $93,600 up to $123,300
(inclusive of the $62,000 received in February 1999 for the sale of a
51% interest in IFE). Terms of the agreement provide for the Company
to receive payments of approximately $15,800 on the first and second
anniversary of the closing of this transaction. The third and final
payment will be based on the actual sales and booking performances
over the period from March 1, 1999 to December 31, 2001. The Company
intends to use the proceeds from this transaction to reduce
indebtedness. There was no gain or loss on the sale of the 49% equity
interest and any ultimate gain on the sale of the 51% equity interest
is dependent on the actual results of operations during the two years
following the IFE Sale.
Note 3. Comprehensive Income (Loss)
Comprehensive income (loss) is defined as all changes in a
company's net assets except changes resulting from transactions with
shareholders. It differs from net income (loss) in that certain items
currently recorded to equity would be a part of comprehensive income
(loss). The following table sets forth the computation of
comprehensive income (loss) for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- --------------------------
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net earnings (loss) $ (66,038) $ 16,481 $ (40,903) $ (42,889)
Other comprehensive income:
Foreign exchange translation adjustment 385 (606) (2,069) (191)
---------- --------- ---------- ---------
Comprehensive income (loss) $ (65,653) $ 15,875 $ (42,972) $ (43,080)
========== ========= ========== =========
</TABLE>
<PAGE>
Note 4. Segment Reporting
The Company is organized based on customer-focused operating
groups operating in a single segment. Each group reports its results
of operations and makes requests for capital expenditures and
acquisition funding to the Company's chief operation decision-making
group. This group is presently comprised of the Chairman, the
President and the Chief Executive Officer, and the Corporate Senior
Vice President of Administration and Chief Financial Officer. Under
this organizational structure, the Company's operating groups were
aggregated into two reportable segments: the Aircraft Cabin Interior
Products and Services segment and the In-Flight Entertainment segment.
The Aircraft Cabin Interior Products and Services segment ("ACIPS") is
comprised of four operating groups: the Seating Products Group, the
Interior Systems Group, the Flight Structures and Integration Group
and the Services Group, each of which have separate management teams
and infrastructures dedicated to providing a full range of products to
their commercial and general aviation operator customers. Each of
these groups demonstrates similar economic performance and utilizes
similar distribution methods and manufacturing processes. Customers
are supported by a single worldwide after-sale service organization.
As described in Note 2, the Company sold a 51% interest in IFE on
February 25, 1999 and its remaining 49% interest in IFE on October 5,
1999. IFE was a separate, reportable segment. The Company evaluates
the performance of its operating segments based primarily on sales,
gross profit before special costs and charges, operating earnings
before special costs and charges, and working capital management.
The following table presents sales and other financial
information by business segment for the three month and nine month
periods ended:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 27, 1999 November 27, 1999
------------------ ------------------
ACIPS ACIPS
----- -----
<S> <C> <C> <C>
Net sales $ 164,578 $ 541,505
Gross profit (loss) (2,008) 134,916
Operating earnings (loss)
as reported (52,148) 6,376
Operating earnings before
special costs and charges 20,152 78,676
Working capital 129,352 129,352
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 28, 1998 November 28, 1998
------------------------------- ---------------------------------
ACIPS IFE TOTAL ACIPS IFE TOTAL
----- --- ----- ----- --- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 180,576 $ 15,175 $ 195,751 $ 432,565 $ 59,529 $ 492,094
Gross profit 72,557 3,053 75,610 169,796 17,294 187,090
Operating earnings (loss)
as reported 34,103 (2,876) 31,227 4,224 (11,869) (7,645)
Operating earnings (loss)
before special costs
and charges 34,103 (2,876) 31,227 75,839 (4,329) 71,510
Working capital 195,427 30,307 225,734 195,427 30,307 225,734
</TABLE>
Note 5. Earnings (Loss) Per Common Share
Basic net earnings (loss) per common share is computed using
the weighted average common shares outstanding during the period.
Diluted net earnings (loss) per common share is computed by using the
average share price during the period when calculating the dilutive
effect of stock options. Shares outstanding for the periods presented
were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ----------------------------
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 24,835 27,195 24,757 24,946
Dilutive effect of employee stock - 571 -
---------- ---------- ---------- ----------
Diluted shares outstanding 24,835 27,766 24,757 24,946
========== ========== ========== ==========
</TABLE>
Note 6. Restructuring Charge
During the fourth quarter of fiscal 1999, the Company began to
implement a restructuring plan designed to lower its cost structure
and improve its long-term competitive position. This plan includes
consolidating seven facilities reducing the total number from 21 to
14, reducing its employee base by approximately 8% and rationalizing
its product offerings. The restructuring costs and charges are
comprised of $61,089 related to impaired inventories and property,
plant and equipment as a result of the rationalization of its product
offerings, plus severance and related separation costs, lease
termination and other costs of $4,949. The Company anticipates that it
will be substantially complete with this restructuring by the end of
the current fiscal year.
<PAGE>
The assets impacted by this program include inventories,
factories, warehouses, assembly operations, administration facilities
and machinery and equipment.
The following table summarizes the utilization of the
restructuring accrual:
<TABLE>
<CAPTION>
Balance at Balance at
Feb. 27, 1999 Utilized Nov. 27, 1999
----------------------------------------------
<S> <C> <C> <C> <C>
Severance, lease termination and other costs $ 4,298 1,895 $ 2,403
Impaired inventories, property and equipment 19,911 11,323 8,588
----------------------------------------------
$ 24,209 13,218 $10,991
==============================================
</TABLE>
<PAGE>
Note 7. Cost of Sales and Operating Expenses
During the latter part of fiscal 1999 and throughout fiscal 2000,
the Company's operating results have been negatively impacted by
operating inefficiencies at its seating products group. The operating
inefficiencies have resulted in delayed deliveries to customers,
increased re-work of seating products, claims for warranty, penalties,
out of sequence charges, substantial increases in air freight and other
expedite-related costs. Late customer deliveries have resulted in
certain airlines diverting seating programs to other manufacturers and
the deferral of other seating programs.
During the current quarter, the Company incurred approximately
$22,500 of costs associated with claims for penalties, out of sequence
charges and warranties related to its poor delivery performance as
described above. All of these costs have been included as a component
of cost of sales in the accompanying statement of operations.
During the three months ended November 27, 1999, the Company
completed a review of its businesses, and has decided to discontinue
certain product and service offerings. This product line
rationalization will reduce the number of facilities by two, and is
expected to result in a headcount reduction of approximately 700. The
total cost of this product and service line rationalization is expected
to be approximately $35,700, of which $32,600 was accrued during the
current quarter. Approximately $29,800 of this accrual was included in
cost of sales with the balance charged to selling, general and
administrative expenses in the accompanying statement of operations.
The balance of this charge of approximately $3,100 is expected to be
included as a component of cost of sales during the fourth quarter of
this fiscal year.
<PAGE>
The following summarizes the penalties, out of sequence claims
and product line rationalization charges included in the accompanying
statement of operations:
<TABLE>
<CAPTION>
Cost of Operating
Sales Expenses Total
----- -------- -----
<S> <C> <C> <C>
Penalties, warranty and out of sequence claims $ 22,500 - $ 22,500
Product and service line rationalization costs-cash 4,900 2,800 7,700
Product and service line rationalization costs-non cash 24,900 - 24,900
-------- ------ --------
Total special costs $ 52,300 $2,800 $ 55,100
======== ====== ========
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following discussion and analysis addresses the results of the
Company's operations for the three months ended November 27, 1999, as
compared to the Company's results of operations for the three months
ended November 28, 1998. The discussion and analysis then addresses the
results of the Company's operations for the nine months ended November
27, 1999, as compared to the Company's results of operations for the nine
months ended November 28, 1998. The discussion and analysis then
addresses the liquidity and financial condition of the Company and other
matters.
For comparability purposes, the Company has provided additional
pro forma information giving effect to each of the acquisitions (the
"1999 Acquisitions") and disposition (the "IFE Sale") the Company
completed during fiscal 1999, exclusive of any acquisition-related
expenses, as if they all occurred at the beginning of the year.
THREE MONTHS ENDED NOVEMBER 27, 1999, AS COMPARED TO THE RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 28, 1998
Net sales for the three-month period ended November 27, 1999 of
$164,578 were $31,173 and 15.9% less than sales of $195,751 for the
comparable period in the prior year. The decrease in sales is primarily
due to the impact of the sale of the Company's IFE business. On a pro
forma basis, sales decreased by $15,998, or 8.9%. The decrease in pro
forma sales is primarily due to a lower level of seating, service and
galley structures revenues.
Gross profit (loss) was $(2,008) or (1.2)% of sales for the three
months ended November 27, 1999. This was $77,618, or 102.7%, less than
the comparable period in the prior year of $75,610, which represented
38.6% of sales. The decrease in gross profit in the current period is
primarily attributable to the poor performance of the Company's seating
products group.
During the latter part of fiscal 1999 and throughout fiscal 2000,
the Company's operating results were negatively impacted by operating
inefficiencies at its seating products group. The operating
inefficiencies have resulted in delayed deliveries to customers,
increased re-work of seating products, claims for warranty, penalties,
out of sequence charges, substantial increases in air freight and other
expedite-related costs. Late customer deliveries have resulted in certain
airlines diverting seating programs to other manufacturers and the
deferral of other seating programs.
The current quarter's decrease in revenues, coupled with the
operating inefficiencies described above have negatively impacted the
current quarter's results of operations by approximately $17,200, which
has been presented as a component of cost of sales and operating
expenses. In addition, claims for penalties, out of sequence charges, and
warranties related to its poor delivery performance during the current
period aggregating approximately $22,500, were incurred during the
quarter and been included as a component of cost of sales in the
accompanying statement of operations. Further, during the current
<PAGE>
quarter, the Company announced that it will discontinue certain product
and service offerings. This product and service line rationalization will
reduce the number of facilities by two, and is expected to result in a
headcount reduction of approximately 700. The total cost of this product
and service line rationalization is expected to be approximately $35,700,
of which $32,600 was accrued during the current quarter. Approximately
$29,800 of this accrual was included in cost of sales with the balance
charged to selling, general and administrative expenses in the
accompanying statement of operations. The balance of this charge of
approximately $3,100 is expected to be included as a component of cost of
sales during the fourth quarter of this fiscal year.
The aggregate impact of these operating inefficiencies, penalties,
and product line rationalization costs was to increase cost of sales and
operating expenses by approximately $72,300 during fiscal 2000. Future
margin expansion will largely depend on the success of the seating
business in four areas: achieving planned efficiencies for
recently-introduced products, optimizing its manufacturing processes with
the new management information system, successfully implementing lean
manufacturing techniques and rationalizing facilities and personnel.
While management expects its seating operations to improve over the next
six months, there can be no assurance that the improvements will occur or
that the future negative impact of operational inefficiencies will not be
material.
While management expects its seating operations to improve over
the next six months, there can be no assurance that the improvements will
occur or that the negative impact of operational inefficiencies will not
be material.
Selling, general and administrative expenses were $27,253 or 16.6%
of sales for the current quarter ended November 27, 1999 as compared to
$21,674 or 11.1% of sales in the prior year. The increase in selling,
general and administrative expenses is primarily attributable to product
and service line rationalization costs and related expenses.
Research, development and engineering expenses were $16,740 or
10.2% of sales for the three months ended November 27, 1999, an increase
of $655 over the comparable period in the prior year of $16,085 or 8.2%
of sales. Research, development and engineering expenses as a percent of
sales increased during the current quarter primarily due to the
inefficiencies at the Company's seating products group.
The Company generated an operating loss of $(52,148), or (31.7)%
of sales as compared to operating earnings of $31,227 or 16% during the
comparable period in the prior year. The operating loss in the current
period is the result of the manufacturing inefficiencies and related
costs described above.
Interest expense, net was $13,890 for the three months ended
November 27, 1999, or $2,520 greater than interest expense of $11,370 for
the comparable period in the prior year. The increase in interest expense
is due to the increase in the Company's long-term debt used, primarily,
to finance the 1999 Acquisitions.
<PAGE>
The loss before income taxes in the current quarter was $(66,038),
as compared to earnings before income taxes of $19,857 in the prior
year's comparable period. Due to the current period loss, there was no
income tax expense for the quarter ended November 27, 1999 as compared to
$3,376 in the prior year's comparable period. The Company recorded a net
loss and net loss per share of $(66,038) and $(2.66) (basic and diluted),
respectively, as compared to net earnings and diluted net earnings per
share in the prior year of $16,481 and $.59 respectively. On a pro forma
basis, net earnings and net earnings per share in the prior year were
$17,561 and $.63 (diluted), respectively.
<PAGE>
NINE MONTHS ENDED NOVEMBER 27, 1999, AS COMPARED TO THE RESULTS OF
OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 28, 1998
Net sales for the fiscal 2000 nine-month period were $541,505, an
increase of $49,411 or 10.0% over the comparable period in the prior
year. The year over year increase in sales is primarily attributable to a
higher level of seating sales in the first half of the year together with
higher sales of general aviation and interior systems product sales in
fiscal 2000 over the prior year, offset by a lower level of galley
structures sales and the sale of the IFE business. On a pro forma basis,
sales increased by $36,719 or 7.3%.
Gross profit was $134,916 (24.9% of sales) for the nine months
ended November 27, 1999. This was $52,174 or 27.9%, lower than the
comparable period in the prior year of $187,090, which represented 38.0%
of sales. The decrease in gross profit in fiscal 2000 is primarily
attributable to the poor performance of the company's seating products
group as described above.
During the latter part of fiscal 1999 and throughout fiscal 2000,
the Company's operating results were negatively impacted by operating
inefficiencies at its seating products group. The operating
inefficiencies have resulted in delayed deliveries to customers,
increased re-work of seating products, claims for warranty, penalties,
out of sequence charges, substantial increases in air freight and other
expedite-related costs. Late customer deliveries have resulted in certain
airlines diverting seating programs to other manufacturers and the
deferral of other seating programs.
The current quarter's decrease in revenues, coupled with the
operating inefficiencies described above have negatively impacted the
current quarter's results of operations by approximately $17,200, which
has been presented as a component of cost of sales and operating
expenses. In addition, claims for penalties, out of sequence charges, and
warranties related to its poor delivery performance during the current
period aggregating approximately $22,500, were incurred during the
quarter and been included as a component of cost of sales in the
accompanying statement of operations. Further, during the nine months
ended November 27, 1999, the Company announced that it will discontinue
certain product and service offerings. This product and service line
rationalization will reduce the number of facilities by two, and is
expected to result in a headcount reduction of approximately 700. The
total cost of this product and service line rationalization is expected
to be approximately $35,700, of which $32,600 was accrued during the
current quarter. Approximately $29,800 of this accrual was included in
cost of sales with the balance charged to selling, general and
<PAGE>
administrative expenses in the accompanying statement of operations. The
balance of this charge of approximately $3,100 is expected to be included
as a component of cost of sales during the fourth quarter of this fiscal
year.
The aggregate impact of these operating inefficiencies, penalties,
and product line rationalization costs was to increase cost of sales and
operating expenses by approximately $72,300 during fiscal 2000. Future
margin expansion will largely depend on the success of the seating
business in four areas: achieving planned efficiencies for
recently-introduced products, optimizing its manufacturing processes with
the new management information system, successfully implementing lean
manufacturing techniques and rationalizing facilities and personnel.
While management expects its seating operations to improve over the next
six months, there can be no assurance that the improvements will occur or
that the negative impact of operational inefficiencies will not be
material.
Selling, general and administrative expenses during the current
period were $70,576 or $11,861 higher than the prior year. Severance and
other facility consolidation costs associated with the charges described
above, together with increased operating expenses during the quarter at
the Company's seating products group for consultants, and increased MIS
training costs and related expenses were the principal reasons for the
increase.
Research, development and engineering expenses were $40,265 (7.4%
of sales) for the nine months ended November 27, 1999, a decrease of $562
over the comparable period in the prior year.
Amortization expense for the nine months ended November 27, 1999 of
$17,699 was $1,661 greater than the amount recorded in the comparable
period in the prior year. The increase is due to the 1999 Acquisitions.
Based on management's assumptions, a portion of the 1999
Acquisitions' purchase price was allocated to purchased research and
development that had not reached technological feasibility and had no
future alternative use. During the first nine months of fiscal 1999, the
Company recorded a charge of $79,155 for the write-off of the acquired
in-process research and development and acquisition-related expenses.
The Company generated operating earnings of $6,376 (1.2% of sales)
for the nine months ended November 27, 1999, as compared to an operating
loss of $(7,645) in the comparable period of the prior year. Pro forma
operating earnings for the nine month period in fiscal 1999 were $77,291.
<PAGE>
Interest expense, net was $39,707 for the nine months ended
November 27, 1999, or $11,891 greater than interest expense of $27,816
for the comparable period in the prior year and is due to the increase in
the Company's long-term debt used, in part, to finance the 1999
Acquisitions.
The net loss for the nine months ended November 27, 1999 was
$(40,903) or $(1.65) per share (diluted), as compared to a net loss of
$(42,889) or $(1.72) per share (diluted), for the comparable period in
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist of working capital
needs, on-going capital expenditures and scheduled payments of interest
and principal on its indebtedness. B/E's primary requirements for working
capital have been directly related to accounts receivable and inventory
levels as a result of both acquisitions and revenue growth. B/E's working
capital was $129,352 as of November 27, 1999, as compared to $143,423 as
of February 27, 1999.
At November 27, 1999, the Company's cash and cash equivalents were
$32,429, as compared to $39,500 at February 27, 1999. Cash provided by
operating activities was $5,139 for the nine months ended November 27,
1999. The primary source of cash during the nine months ended November
27, 1999 was non-cash charges for depreciation and amortization of
$31,863, a decrease in accounts receivable of $19,041 and an increase in
payables, accruals and current taxes of $14,578, offset by a net loss of
$40,903 and use of cash of $20,854 related to increases in inventories
and other current assets.
The Company's capital expenditures were $27,457 and $27,786
during the nine months ended November 27, 1999 and November 28, 1998,
respectively. The gross increase in capital expenditures was primarily
attributable to (1) acquisitions completed during fiscal 1999, (2) the
purchase of previously leased facilities, (3) the development of a new
management information system to replace the Company's existing systems,
many of which were inherited in acquisitions and (4) expenditures for
plant modernization. The Company anticipates on-going annual capital
expenditures of approximately $28,000 for the next several years.
The Company has credit facilities with The Chase Manhattan Bank
(the "Bank Credit Facility"). The Bank Credit Facility consists of a
$100,000 revolving credit facility (of which $50,000 may be utilized for
acquisitions) and an acquisition facility of $34,200. The revolving credit
facility expires in April 2004 and the acquisition facility is amortizable
over five years beginning in August 1999. The Bank Credit Facility is
collateralized by the Company's accounts receivable, inventories and by
substantially all of its other personal property. Indebtedness under the
existing Bank Credit Facility consisted of revolving credit facility
outstanding borrowings of $19,000 (bearing interest at LIBOR plus 1%, or
approximately 6.5%), letters of credit aggregating approximately $2,853
and outstanding borrowings under the acquisition
<PAGE>
facility aggregating $34,200 (bearing interest at LIBOR plus 1.0%, or
approximately 7.1%) as of November 27, 1999. The Bank Credit Facility was
amended on December 21, 1999 and contains customary affirmative covenants,
negative covenants and conditions of borrowing, all of which were met by
the Company as of November 27, 1999.
The Company believes that the cash flow from operations and
availability under the Bank Credit Facility will provide adequate funds
for its working capital needs, planned capital expenditures and debt
service requirements through the term of the Bank Credit Facility. The
Company believes that it will be able to refinance the Bank Credit
Facility prior to its termination, although there can be no assurance that
it will be able to do so. The Company's ability to fund its operations,
make planned capital expenditures, make scheduled payments and refinance
its indebtedness depends on its future operating performance and cash
flow, which, in turn, are subject to prevailing economic conditions and to
financial, business and other factors, some of which are beyond its
control.
Deferred Tax Assets
The Company has established a valuation allowance related to the
utilization of its deferred tax assets because of uncertainties that
preclude it from determining that it is more likely than not that it will
be able to generate taxable income to realize such assets during the
operating loss carryforward period, which begins to expire in 2011. Such
uncertainties include recent cumulative losses by the Company, the highly
cyclical nature of the industry in which it operates, economic conditions
in Asia which is impacting the airframe manufacturers and the airlines,
the Company's high degree of financial leverage, risks associated with
the implementation of its integrated management information system, risks
associated with its seat manufacturing operations and risks associated
with the integration of acquisitions. The Company monitors these
uncertainties, as well as other positive and negative factors that may
arise in the future, as it assesses the necessity for a valuation
allowance for its deferred tax assets.
Year 2000 Costs
The "Year 2000" ("Y2K") issue is the result of computer programs
using two digits rather than four to define the applicable year. Because
of this programming convention, software, hardware or firmware may
recognize a date using "00" as the year 1900 rather than the year 2000.
Use of non-Y2K compliant programs could result in system failures,
miscalculations or errors causing disruptions of operations or other
business problems, including, among others, a temporary inability to
process transactions and invoices or engage in similar normal business
activities.
B/E Technology Initiatives Program. The Company has experienced
substantial growth as a result of having completed 15 acquisitions since
1989. Essentially all of the acquired businesses were operating on
separate information systems, using different hardware and software
platforms. In fiscal 1997, the Company analyzed its systems, both
pre-existing and acquired, for Y2K compliance with a view to replacing
non-compliant systems and creating an integrated Y2K compliant system. In
addition, the Company has developed a comprehensive program to address
the Y2K issue with respect to the following non-system areas: (1) network
switching, (2) the Company's non-information technology systems (such as
<PAGE>
buildings, plant, equipment and other infrastructure systems that may
contain embedded microcontroller technology) and (3) the status of major
vendors, third-party network service providers and other material service
providers (insofar as they relate to the Company's business). As
explained below, the Company's efforts to assess its systems as well as
non-system areas related to Y2K compliance involve: (1) a wide-ranging
assessment of the Y2K problems that may affect the Company, (2) the
development of remedies to address the problems discovered in the
assessment phase and (3) testing of the remedies.
Assessment Phase. The Company has identified substantially all of its
major hardware and software platforms in use as well as the relevant
non-system areas described above. The Company has determined its systems
requirements on a company-wide basis and has begun the implementation of
an enterprise resource planning ("ERP") system, which is intended to be a
single system database onto which all the Company's individual systems
will be migrated. In relation thereto, the Company has signed contracts
with substantially all of its significant hardware, software and other
equipment vendors and third-party network service providers related to
Y2K compliance.
Remediation and Testing Phase. In implementing the ERP system, the
Company undertook and has completed a remediation and testing phase of
all internal systems, LANs, WANs and PBXs. This phase was intended to
address potential Y2K problems of the ERP system in relation to both
information technology and non-information technology systems and then to
demonstrate that the ERP software was Y2K compliant. ERP system software
was selected and applications implemented by a team of internal users,
outside system integrator specialists and ERP application experts. The
ERP system was tested between June 1997 and March 1998 by this team of
experts. To date, ten locations have been fully implemented on the ERP
system. This company-wide solution has been deployed in a manner designed
to meet full implementation for all remaining non-Y2K compliant sites.
Program to Assess and Monitor Progress of Third Parties. As noted above,
B/E has also undertaken an action plan to assess and monitor the progress
of third-party vendors in resolving Y2K issues. To date, the Company has
(1) obtained guidance from outside counsel to ensure legal compliance,
(2) generated correspondence to each of its third-party vendors to assess
the Y2K readiness of these vendors and (3) contracted a `Vendor Y2K'
fully automated tracking program to track all correspondence to/from
vendors, to track timely responses via an automatic computer generated
`trigger' to provide an electronic folder for easy reference and
retention and to specifically track internally identified `critical'
vendors. The Company is also currently developing an internal
consolidated database of the Company's vendors. To date, approximately
90% of the Company's critical vendors have responded. The Company is
directly contacting those vendors who have not responded and will
evaluate the feasibility of establishing second source parts to other
vendors, where possible.
Contingency Plans. The Company is analyzing contingency plans to handle
the worst-case Y2K scenarios that the Company believes reasonably could
occur and, if necessary, intends to develop a timetable for completing
such contingency plans.
<PAGE>
Costs Related to the Y2K Issue. The Company has incurred approximately
$41,000 in costs related to the implementation of the ERP system and for
routine replacement of hardware and software. The Company currently
estimates the total ERP implementation, including routine replacement of
hardware and software, will cost approximately $49,000 and a portion of
the costs have and will be capitalized to the extent permitted under
generally accepted accounting principles.
Risks Related to the Y2K Issue. The Company's efforts to be Y2K compliant
are intended to minimize the adverse effects of the Y2K issue on the
Company's business and operations. Difficulties in implementing the ERP
system or failure by the Company to fully implement the ERP system or the
failure of its major vendors, third-party network service providers, and
other material service providers and customers to adequately address
their respective Y2K issues in a timely manner would have a material
adverse effect on the Company's business, results of operations and
financial condition. The Company's capital requirements may differ
materially from the foregoing estimate as a result of regulatory,
technological and competitive developments (including market developments
and new opportunities) in the Company's industry.
Fiscal 1999 Acquisitions
During fiscal 1999, the Company completed four major acquisitions
and two smaller transactions. In April 1998, the Company acquired
Puritan-Bennett Aero Systems Co., a manufacturer of commercial aircraft
oxygen systems, "WEMAC" air valve components, overhead lights and
switches, crew masks and protective breathing devices for both general
aviation and commercial aircraft. Also during April 1998, the Company
acquired Aircraft Modular Products, a manufacturer of business jet
seating, cabinetry and structures. In August 1998, the Company acquired
SMR Aerospace, Inc. and its affiliates, which is a leading supplier of
design, integration, installation and certification services for the
reconfiguration of aircraft allowing an airline to modify or upgrade the
seating arrangements, install telecommunications, move galley structures
or modify overhead containers or sidewalls, etc. SMR also manufactures
and installs crew rest compartments, and performs the engineering
required to make structural modifications and supplies the kits necessary
for the conversion of passenger to freighter aircraft. In September 1998,
the Company acquired CF Taylor, a leading manufacturer of galley
equipment for both narrow and wide-body aircraft, including galley
structures, crew rests.
Fiscal 1999 Disposition
In February 1999, the Company sold a 51% interest in its
In-Flight Entertainment subsidiary (the "IFE Sale") to a wholly-owned
subsidiary of Sextant Avionique SA for an initial sale price of $62,000
(subject to adjustment based on the actual results of operations during
the two years following the IFE Sale). See Note 2 to the unaudited
interim condensed consolidated financial statements for the period ended
November 27, 1999.
<PAGE>
Fiscal 2000 Disposition
On October 5, 1999, the Company announced that it had entered into an
agreement to sell its remaining 49% equity interest in IFE to Sextant.
Total consideration for 100% of its equity interest in IFE, and for the
provision of marketing, product and technical consulting services will
range from a minimum of $83,300 up to $123,300 (inclusive of the $62,000
received in February 1999 for the sale of a 51% interest in IFE - see
Note 2). Terms of the agreement provide for the Company to receive
payments of approximately $15,800 on the first and second anniversary of
the closing of this transaction. The third and final payment will be
based on the actual sales and booking performances over the period from
March 1, 1999 to December 31, 2001. The Company intends to use the
proceeds from this transaction to reduce indebtedness.
Fiscal 1999 Restructuring Plan
During the fourth quarter of fiscal 1999, the Company began to
implement a restructuring plan designed to lower its cost structure and
improve its long-term competitive position. This plan includes
eliminating seven of its principal facilities, reducing the total number
from 21 to 14, reducing its employee base by approximately eight percent
and rationalizing its product offerings. The Company identified seven
facilities, four domestic and three in Europe, for consolidation. The
consolidation activities commenced during the first quarter of fiscal
2000 and will be substantially complete by the end of the fiscal year.
When fully implemented, management expects that this program will
generate pretax savings of approximately $15,000 - $20,000 annually.
The worldwide reduction in facilities, personnel and product
offerings is expected to aid the Company in several ways. It will
strengthen the global business management focus on the core product
categories, achieve a more effective leveraging of resources and improve
the Company's ability to rapidly react to changing business conditions.
The rationalization of product offerings, which was brought about as a
result of the 1999 Acquisitions and the large number of new product
introductions during the past year, will provide an on-going benefit of a
generally lower cost structure.
The assets impacted by this program include factories, warehouses,
assembly operations, administration facilities, machinery and equipment
and inventories. Management anticipates that the Company will continue to
incur pressure on its gross margins during the upcoming year as it
achieves learning-curve efficiencies associated with the introduction of
new products in volume for the first time and as it implements its
integrated management information system throughout the Company, and such
costs could be material.
Seating Manufacturing Inefficiencies
During the latter part of fiscal 1999 and throughout fiscal 2000,
the Company's operating results were negatively impacted by operating
inefficiencies at its seating products group. The operating
inefficiencies have resulted in delayed deliveries to customers,
increased re-work of seating products, claims for warranty, penalties,
out of sequence charges, substantial increases in air freight and other
expedite-related costs. Late customer deliveries have resulted in certain
airlines diverting seating programs to other manufacturers and the
deferral of other seating programs.
<PAGE>
The current quarter's decrease in revenues, coupled with the
operating inefficiencies described above have negatively impacted the
current quarter's results of operations by approximately $17,200, which
has been presented as a component of cost of sales and operating
expenses. In addition, claims for penalties, out of sequence charges, and
warranties related to its poor delivery performance during the current
period aggregating approximately $22,500, were incurred during the
quarter and been included as a component of cost of sales in the
accompanying statement of operations. Further, during the current
quarter, the Company announced that it will discontinue certain product
and service offerings. This product and service line rationalization will
reduce the number of facilities by two, and is expected to result in a
headcount reduction of approximately 700. The total cost of this product
and service line rationalization is expected to be approximately $35,700,
of which $32,600 was accrued during the current quarter. Approximately
$29,800 of this accrual was included in cost of sales with the balance
charged to selling, general and administrative expenses in the
accompanying statement of operations. The balance of this charge of
approximately $3,100 is expected to be included as a component of cost of
sales during the fourth quarter of this fiscal year.
The aggregate impact of these operating inefficiencies, penalties,
and product line rationalization costs was to increase cost of sales and
operating expenses by approximately $72,300 during fiscal 2000. Future
margin expansion will largely depend on the success of the seating
business in four areas: achieving planned efficiencies for
recently-introduced products, optimizing its manufacturing processes with
the new management information system, successfully implementing lean
manufacturing techniques and rationalizing facilities and personnel.
While management expects its seating operations to improve over the next
six months, there can be no assurance that the improvements will occur or
that the negative impact of operational inefficiencies will not be
material.
Dependence upon Conditions in the Airline Industry
The Company's principal customers are the world's commercial
airlines. As a result, the Company's business is directly dependent upon
the conditions in the highly cyclical and competitive commercial airline
industry. In the late 1980s and early 1990s, the world airline industry
suffered a severe downturn, which resulted in record losses and several
air carriers seeking protection under bankruptcy laws. As a consequence,
during such period, airlines sought to conserve cash by reducing or
deferring scheduled cabin interior refurbishment and upgrade programs and
by delaying purchases of new aircraft. This led to a significant
contraction in the commercial aircraft cabin interior products industry
and a decline in our business and profitability. Since early 1994, the
airlines have experienced a turnaround in operating results, leading the
domestic airline industry to record operating earnings during calendar
years 1995 through 1998. This financial turnaround has, in part, been
driven by record
<PAGE>
load factors, rising fare prices and declining fuel costs. The airlines
have substantially improved their balance sheets through cash generated
from operations and the sale of debt and equity securities. As a result,
the levels of airline spending on refurbishment and new aircraft
purchases have expanded. However, due to the volatility of the airline
industry and the current general economic and financial turbulence, the
current profitability of the airline industry may not continue and the
airlines may not be able to maintain or increase expenditures on cabin
interior products for either existing fleet or new aircraft.
In addition, the airline industry is undergoing a process of
consolidation and significantly increased competition. Such consolidation
could result in a reduction of future aircraft orders as overlapping
routes are eliminated and airlines seek greater economies through higher
aircraft utilization. Increased airline competition may also result in
airlines seeking to reduce costs by promoting greater price competition
from airline cabin interior products manufacturers, thereby adversely
affecting our revenues and margins.
Recently, turbulence in the financial and currency markets of many
Asian countries has led to uncertainty with respect to the economic
outlook for these countries. Although not all carriers have been affected
by the current economic events in the Pacific Rim, certain carriers,
including non-Asian carriers that have substantial Asian routes, could
cancel or defer their existing orders. In addition, Boeing has announced
that in light of the continued severe economic conditions in Asia, it
will be substantially scaling back production of a number of aircraft
types, including particularly wide-body aircraft which require up to five
times the dollar content for B/E's products as compared to narrow-body
aircraft.
This report includes forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ
materially from that anticipated in such statements. Factors that might
cause such a difference include, but are not limited to, those discussed
in the Company's most recent proxy statement and "Risk Factors" contained
in Exhibit 99 of the Company's Annual Report on Form 10-K for the fiscal
year ended February 27, 1999, as well as future events that may have the
effect of reducing the Company's available operating income and cash
balances, such as unexpected operating losses, delays in the integration
of the Company's acquired businesses, conditions in the airline industry,
customer delivery requirements, new or expected refurbishments, capital
expenditures, cash expenditures related to possible future acquisitions,
delays in the implementation of the Company's integrated management
information system, labor disputes involving the Company, its significant
customers or airframe manufacturers, delays or inefficiencies in the
introduction of new products or fluctuations in currency exchange rates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
During the nine months ended November 27, 1999, there were no
material changes to the disclosure about market risk included in the
Company's Annual Report on Form 10-K for the fiscal year ended February
27, 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings Not applicable.
Item 2. Changes in Securities Not applicable.
Item 3. Defaults Upon Senior Securities Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders Not applicable.
Item 5. Other Information None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
1. Exhibit 10.8a Amendment No. 1 to the Chase Manhattan Bank
credit facility
2. Exhibit 10.8b Amendment No. 2 to the Chase Manhattan Bank
credit facility
3. Exhibit 10.8c Agreement with Thomson-CSF Sextant, Inc.
for the sale of a 49% interest in the
Company's In-Flight Entertainment ("IFE")
business
4. Exhibit 27 Financial Data Schedule for the nine months
ended November 27, 1999
b. Reports on Form 8-K
1. March 3, 1999 Sale of a 51% interest in the Company's IFE
business
2. March 12, 1999 Sale of a 51% interest in the Company's IFE
business
3. November 18, 1999 Resignation of Paul E. Fulchino, President
and Chief Operating Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BE AEROSPACE, INC.
Date: January 7, 2000 By: /s/ Robert J. Khoury
--------------------------------
President and
Chief Executive Officer
Date: January 7, 2000 By: /s/ Thomas P. McCaffrey
-----------------------------
Corporate Senior Vice President
of Administration and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-27-2000
<PERIOD-END> NOV-27-1999
<CASH> 32,429
<SECURITIES> 0
<RECEIVABLES> 124,667
<ALLOWANCES> (2,921)
<INVENTORY> 136,179
<CURRENT-ASSETS> 323,092
<PP&E> 217,527
<DEPRECIATION> (66,301)
<TOTAL-ASSETS> 899,074
<CURRENT-LIABILITIES> 193,740
<BONDS> 599,086
0
0
<COMMON> 249
<OTHER-SE> 76,016
<TOTAL-LIABILITY-AND-EQUITY> 899,074
<SALES> 541,505
<TOTAL-REVENUES> 541,505
<CGS> 406,589
<TOTAL-COSTS> 535,129
<OTHER-EXPENSES> 1,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,707
<INCOME-PRETAX> (34,620)
<INCOME-TAX> 6,283
<INCOME-CONTINUING> (40,903)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,903)
<EPS-BASIC> (1.65)
<EPS-DILUTED> (1.65)
</TABLE>
PURCHASE AGREEMENT
dated as of September 1, 1999,
among
IFE SALES, LLC,
BE AEROSPACE, INC.,
BE INTELLECTUAL PROPERTY, INC.,
PURITAN-BENNETT AEROSYSTEMS CO.
and
THOMSON-CSF SEXTANT, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE IDEFINITIONS
1.01. Incorporation by Reference...............................................2
1.02. Additional Defined Terms.................................................2
1.03. Other Additional Defined Terms...........................................4
1.04. Use of Defined Terms.....................................................5
ARTICLE IIPURCHASE AND SALE
2.01. Purchase and Sale........................................................5
2.02. Fixed Purchase Price.....................................................5
2.03. Closing..................................................................5
2.04. Contingent Purchase Price................................................6
2.05. Initial Purchase Agreement Purchase Price Adjustment.....................8
ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF THE SELLER AND
BE AEROSPACE
3.01. Incorporation and Authority..............................................8
3.02. No Conflict..............................................................9
3.03. Consents, Approvals, Licenses, Etc.......................................9
3.04. Membership Interests of the Seller in the Company........................10
3.05. Absence of Litigation....................................................10
3.06. Brokers..................................................................10
ARTICLE IVREPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Incorporation and Authority of the Purchaser.............................10
4.02. No Conflict..............................................................11
4.03. Consents and Approvals...................................................11
4.04. Absence of Litigation....................................................12
4.05. Investment Purpose.......................................................12
4.06. Financing................................................................12
4.07. Brokers..................................................................12
ARTICLE VADDITIONAL AGREEMENTS
5.01. Regulatory and Other Authorizations; Releases; Consents..................12
5.02. Further Action...........................................................13
5.03. Conveyance Taxes.........................................................13
5.04. Reports..................................................................13
5.05. Non-Competition..........................................................13
5.06. No Solicitation of Employees.............................................15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.07. Transitional Services....................................................15
5.08. Conduct of the Business by the Purchaser.................................15
5.09. Access to Information....................................................16
5.10. Confidentiality..........................................................16
5.11. Governance...............................................................17
5.12. Guarantee of BE Aerospace................................................17
5.13. Assumption of BE Aerospace Obligations...................................19
ARTICLE VICONDITIONS TO CLOSING
6.01. Conditions to Obligations of the Seller and the Former Interest Holders..19
6.02. Conditions to Obligations of the Purchaser...............................20
ARTICLE VII INDEMNIFICATION
7.01. Survival.................................................................21
7.02. Indemnification by the Purchaser.........................................21
7.03. Indemnification by the Seller and BE Aerospace...........................23
7.04. Indemnification Procedures...............................................24
ARTICLE VIIITERMINATION, AMENDMENT AND WAIVER
8.01. Termination..............................................................27
8.02. Effect of Termination....................................................27
8.03. Waiver...................................................................27
ARTICLE IXGENERAL PROVISIONS
9.01. Expenses.................................................................28
9.02. Notices..................................................................28
9.03. Public Announcements.....................................................29
9.04. Headings.................................................................30
9.05. Severability.............................................................30
9.06. Entire Agreement.........................................................30
9.07. Assignment...............................................................30
9.08. No Third-Party Beneficiaries.............................................30
9.09. Waivers and Amendments...................................................30
9.10. Specific Performance.....................................................31
9.11. Governing Law; Dispute Resolution........................................31
9.12. Counterparts.............................................................31
</TABLE>
<PAGE>
PURCHASE AGREEMENT, dated as of September 1, 1999, among IFE
SALES, LLC, a Delaware limited liability corporation (the "Seller"), BE
AEROSPACE, INC., a Delaware corporation ("BE Aerospace"), BE INTELLECTUAL
PROPERTY, INC., a Delaware corporation ("BE IP") and PURITAN-BENNETT AERO
SYSTEMS CO., a Delaware corporation ("Puritan-Bennett" and, together with BE
Aerospace and BE IP, the "Former Interest Holders"), and THOMSON-CSF SEXTANT,
INC., a Florida corporation (the "Purchaser").
WHEREAS, the Seller owns 49% of the membership interests (the
"Interests") in Sextant In-Flight Systems, LLC (formerly known as In-Flight
Entertainment, LLC), a Delaware limited liability company (the "Company" or
"SIFS"), such Interests consisting of 100% of the Class Two Interests in the
Company;
WHEREAS, the Purchaser previously purchased the Class One
Interests in the Company from BE Aerospace pursuant to a Purchase Agreement
dated as of January 25, 1999 (the "Initial Purchase Agreement");
WHEREAS, the Former Interest Holders transferred the Interests
to the Seller pursuant to an Assignment and Assumption Agreement dated as of
September 1, 1999 among the Former Interest Holders, the Seller and the
Purchaser;
WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, 100% of the Class Two Interests in
the Company (the "Purchased Interest"), upon the terms and subject to the
conditions set forth herein; and
WHEREAS, pursuant to a Guaranty to be executed on the Closing
Date in the form attached hereto as Exhibit 6.01(d) (the "Guaranty"),
Thomson-CSF Sextant, a societe anonyme organized under the laws of France (the
"Guarantor"), or, if the Board of Directors of the Guarantor has not had the
opportunity to approve the Guaranty prior to the Closing Date (as defined in
Section 2.03(a)), Aerospatiale Thomson Electronique de Vol, ATEV, S.A. ("ATEV"),
has agreed to guarantee the obligations of the Purchaser under this Agreement
until such approval is received;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, the Purchaser, the Seller
and the Former Interest Holders hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Incorporation by Reference. Capitalized terms
used but not defined herein have the definitions given such terms in the Initial
Purchase Agreement, except as specified in Section 1.02. Unless otherwise
<PAGE>
specified herein, section references in this Agreement are to Sections of this
Agreement. Except for Sections 2.04, 5.03, 5.06, 5.07, 7.01(h) and 7.02(f) of
the Initial Purchase Agreement, which are terminated in their entirety as of the
Closing Date, and as otherwise provided herein, all terms of the Initial
Purchase Agreement remain in full force and effect.
SECTION 1.02. ADDITIONAL DEFINED TERMS. As used in this
Agreement, the following additional terms have the following meanings:
"AGREEMENT" means this Purchase Agreement, dated as of
September 1, 1999, among the Seller, the Former Interest Holders and the
Purchaser (including the Exhibits hereto and the Disclosure Schedule) and all
amendments and modifications hereto made in accordance with Section 9.09.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and
Assumption Agreement, dated as of the date of this Agreement, among the Former
Interest Holders, the Seller and the Purchaser.
"BOOKINGS" means, for any period, a written commitment
consistent with industry practice by a customer of the Company or a firm
purchase order, in either case accepted by the Company during such period, minus
previously recorded orders canceled during such period, for SIFS Product Lines
(excluding SIFS Product Lines of B/E Harris LiveTV LLC ("LiveTV")), provided
that, with respect to Bookings in calendar year 1999, the term "Bookings" shall
mean Bookings for the period from March 1 through December 31, 1999.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated as
of the date of this Agreement and delivered to the Purchaser by the Seller
herewith.
"DISCLOSURE SCHEDULE OF THE INITIAL PURCHASE AGREEMENT" means
the Disclosure Schedule dated as of the date of the Initial Purchase Agreement
delivered to the Purchaser by BE Aerospace with the Initial Purchase Agreement.
"LLC AGREEMENT" means the Amended and Restated Limited
Liability Company Agreement of Sextant In-Flight Systems, LLC, dated as of
February 25, 1999, among the Former Interest Holders and the Purchaser, as such
Agreement may be amended from time to time.
"PRODUCT LINES" means the lines of business, operations and
activities conducted by or under development by any Person.
"SALES" means, for any period, net sales for such period,
determined in accordance with GAAP applied consistently with the current
practice of the Company since February 25, 1999 through the date hereof, of SIFS
<PAGE>
Product Lines (excluding SIFS Product Lines of LiveTV), provided that, with
respect to Sales in calendar year 1999, the term "Sales" shall mean net sales
for the period from March 1 through December 31, 1999.
"SIFS PRODUCT LINES" means the following Product Lines of the
Company in existence, for which development was previously initiated or under
development at the date of this Agreement, together with reasonable
modifications thereof and derivative products therefrom:
1. In-Seat Power Distribution Systems;
2. Audio Distribution Systems - audio hardwired systems;
3. FDM Audio System;
4. Overhead Video System, in-seat audio (B/E 2020);
5. Distributed Video and Audio Systems (B/E 2000, BVS video system);
6. Distributed Video and Audio System, interactive games (B/E 4000);
7. Interactive Video, Audio, Telephony, Games-on-Demand System (MDDS);
8. Interactive Digital Video, Audio, Telephony and Games-on-Demand
System (Panther);
9 Video Content Loading System;
10. Cameras:
(a) Landscape Single Camera;
(b) Landscape Dual Camera;
(c) Down and Forward Camera;
(d) Worldview Camera System;
(e) Landing Gear Cameras; and
(f) Cockpit, Cabin and Flight Attendant Cameras;
<PAGE>
11. Passenger Control Systems (PCUs), mechanical and digital (various types);
12. Noise Canceling Devices;
13. Spares and individual system or product components to support the
product lines in items (1) through (12) above;
14. Provision of services to support the product lines in items (1)
through (12) above;
15. Test equipment to support the product lines in items (1) through (12)
above; and
16. Non-recurring engineering related to the product lines in items (1)
through (15) above, including installation, design and other related
fee-generating activities.
SECTION 1.03. OTHER ADDITIONAL DEFINED TERMS. The following
additional terms have the meanings defined for such terms in the Sections set
forth below:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Adjustment Statement 2.04(a)(i)
Adjustment Years 2.04(a)(i)
ATEV Recitals
Closing 2.03(a)
Closing Date 2.03(a)
Company Certificate 5.04(a)
Company Debt 2.06
Confidential Information 5.10(a)
Contingent Purchase Price 2.01
Fixed Purchase Price 2.01
Former Interest Holders Preamble
Guaranteed Obligations 5.12(a)
In-Flight Entertainment Business 5.05(a)
In-Flight Entertainment Systems 5.05(a)
Indemnified Party 7.04(a)
Indemnifying Party 7.04(a)
Initial Purchase Agreement Recitals
Non-Competition Period 5.05(a)
Non-Objecting Party 2.04(a)(ii)
Pro Forma Company Certificate 5.04(c)
Purchased Interest Recitals
Seller Preamble
SIFS Guarantees Section 5.13
</TABLE>
<PAGE>
SECTION 1.04. USE OF DEFINED TERMS. The meanings of the terms
defined in this Agreement shall be applicable to the singular as well as the
plural forms of such terms, unless otherwise stated.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE. Upon the terms and subject to
the conditions set forth in this Agreement, the Seller agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Seller, the Purchased
Interest. The purchase price shall consist of a fixed portion (the "Fixed
Purchase Price"), payable as provided in Section 2.03(c), and a contingent
portion (the "Contingent Purchase Price"), payable as provided in Section 2.04.
SECTION 2.02. FIXED PURCHASE PRICE. The aggregate Fixed
Purchase Price shall be $22,000,000.
SECTION 2.03. CLOSING. (a) Subject to the terms and conditions
of this Agreement, the sale and purchase of the Class Two Interests contemplated
hereby shall take place at a closing (the "Closing") to be held at 10:00 a.m.,
local time, on the first Business Day that is not a Monday, after the later of
the following occurs: (i) the expiration or termination of the applicable
waiting periods under the HSR Act and (ii) the satisfaction or waiver of all
other conditions to the obligations of the parties set forth in Article VI, at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022, or at such other time or on such other date or at such other place as the
Seller, BE Aerospace and the Purchaser may mutually agree upon in writing (the
day on which the Closing takes place being the "Closing Date").
(b) At the Closing, the Seller shall deliver or cause to be
delivered to the Purchaser: (i) such instruments and documents as shall be
reasonably necessary to effect the transfer of the Purchased Interest to the
Purchaser; and (ii) the certificate required to be delivered pursuant to Section
6.02(a).
(c) At the Closing, the Purchaser shall deliver to the Seller:
(i) a promissory note, substantially in the form of Exhibit 2.03(c) hereto, in
favor of the Seller which provides for payments of $11,000,000, together with
<PAGE>
interest thereon from the Closing Date at a rate of 5% per annum, on each of the
first and second anniversaries of the Closing Date; (ii) the Guaranty,
substantially in the form of Exhibit 6.01(d) hereto; and (iii) the certificate
required to be delivered pursuant to Section 6.01(a).
SECTION 2.04. CONTINGENT PURCHASE PRICE. (a) Adjustment
Statement. (i) As soon as practicable after the end of the Company's fiscal year
in each of 1999, 2000 and 2001 (collectively, the "Adjustment Years"), but in
any event no later than 60 days after the end of each Adjustment Year, the
Company shall cause to be prepared and delivered to the Seller and BE Aerospace
a preliminary statement (each, an "Adjustment Statement") setting forth the
aggregate amount of Sales and Bookings of the Company during each such
Adjustment Year or, if applicable, the aggregate Sales and Bookings of SIFS
Product Lines as presented on any Pro Forma Company Certificate prepared
pursuant to Section 5.04(c) during such Adjustment Year, and the amount of the
Contingent Purchase Price, if any, credited with respect to such Adjustment Year
pursuant to the provisions of Section 2.04 of the Disclosure Schedule. Each
Adjustment Statement will be prepared in accordance with GAAP in accordance with
the current practice of the Company since February 25, 1999 through the date
hereof.
(ii) In the event that neither the Purchaser nor BE Aerospace
objects to the determination by the Company of any preliminary Adjustment
Statement by Notice of Objection delivered to the Company and BE Aerospace or
the Purchaser, as the case may be, (the "Non-Objecting Party") within thirty
(30) days after the delivery of such Adjustment Statement (such Notice of
Objection to describe in reasonable detail the proposed adjustments or
objections to such preliminary Adjustment Statement), such Adjustment Statement
shall be deemed final and binding on the parties hereto.
(iii) If either the Purchaser or BE Aerospace delivers a
Notice of Objection to such Adjustment Statement, then any dispute shall be
resolved in accordance with Section 2.04(b).
(iv) The Company will make available to the Purchaser and BE
Aerospace all work papers and records used in the preparation of each Adjustment
Statement.
(b) Resolution of Disputes. (i) If either or both of the
Purchaser or BE Aerospace delivers a Notice of Objection, then the Purchaser and
BE Aerospace shall promptly endeavor to resolve any differences with respect to
such Adjustment Statement. In the event that a written agreement as to the
matters contained in such Adjustment Statement has not been reached within 30
days after the date of receipt by the Company and the Non-Objecting Party of the
Notice of Objection, then the determination of the matters contained in such
Adjustment Statement shall be submitted to PricewaterhouseCoopers LLP (or, in
the event that PricewaterhouseCoopers LLP is unwilling or unable to act in such
capacity or is not, at the time of such submission, independent of the Purchaser
and BE Aerospace, to another Accounting Firm chosen by the Purchaser and BE
Aerospace within 30 days of the determination that PricewaterhouseCoopers LLP is
<PAGE>
unavailable to determine such matters; provided that if the Purchaser and BE
Aerospace are unable to agree on the appointment of an Accounting Firm within 30
days, either the Purchaser or BE Aerospace may apply to the American Arbitration
Association to appoint another Accounting Firm within 30 days, which selection
shall be binding on the parties).
(ii) Nothing herein shall be construed to authorize or permit
the Accounting Firm to determine any question or matter whatever under or in
connection with this Agreement, except the determination of what adjustments, if
any, should be made in one or more of the items reflected in an Adjustment
Statement in order for the Sales and Bookings covered thereby to be determined
in accordance with the provisions of this Agreement. In making its
determination, the Accounting Firm shall act as an expert and not as an
arbitrator in an arbitration proceeding.
(iii) Within forty-five (45) days of the submission of any
dispute concerning the determination of an Adjustment Statement to the
Accounting Firm, the Accounting Firm shall render a decision in accordance with
this Section 2.04(b) along with a statement of reasons therefor. The decision of
the Accounting Firm shall be final and binding upon each party hereto.
(iv) The fees and expenses of the Accounting Firm for any
determination under this Section 2.04(b) shall be apportioned equally between
the Purchaser and BE Aerospace.
(c) Any payment required to be made by any party hereto
pursuant to this Agreement shall bear interest from the date such payment is due
through the date of payment at a rate equal to the one month London Interbank
Offered Rate as announced in The Wall Street Journal plus 300 basis points.
(d) Within 30 days of the final determination of the final
Adjustment Statement, payment of the Contingent Purchase Price shall be
made in accordance with Section 2.04 of the Disclosure Schedule.
SECTION 2.05. INITIAL PURCHASE AGREEMENT PURCHASE PRICE
ADJUSTMENT. BE Aerospace and the Purchaser agree that Section 2.04 of the
Initial Purchase Agreement is deleted in its entirety and that any adjustments
to the Purchase Price described therein shall not be made. In consideration of
the elimination of such purchase price adjustments, BE Aerospace agrees to
provide to or on behalf of the Purchaser, upon request, the consulting services
specified in Section 2.05 of the Disclosure Schedule.
SECTION 2.06. DEBT OF THE COMPANY. The Purchaser shall cause
the Company to pay to BE Aerospace the debt of the Company to BE Aerospace in
the aggregate principal amount of $9,350,289.15 outstanding as of the date
<PAGE>
hereof (the "Company Debt"). The Company Debt shall be repaid in two equal
installments of $4,675,144.58, without interest thereon, on each of the first
and second anniversaries of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND BE AEROSPACE
The representations of BE Aerospace made as of February 25,
1999 contained in Sections 3.02 through 3.04, 3.06 through 3.10, 3.12 through
3.16 and 3.18 through 3.30 of the Initial Purchase Agreement are incorporated
herein by reference, with effect as of such date. In addition, the Seller and BE
Aerospace, jointly and severally, represent and warrant as of the date hereof to
the Purchaser as follows:
SECTION 3.01. INCORPORATION AND AUTHORITY. Each of the Seller
and BE Aerospace is a corporation validly existing and in good standing under
the laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. Each of the Seller and
BE Aerospace is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such qualification necessary, except to the extent that the
failure to be so qualified would not have a Material Adverse Effect. The
execution and delivery of this Agreement by each of the Seller and BE Aerospace,
the performance by each of the Seller and BE Aerospace of its obligations
hereunder and the consummation by each of the Seller and BE Aerospace of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Seller and BE Aerospace, respectively. This Agreement
has been duly executed and delivered by each of the Seller and BE Aerospace, and
(assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes a legal, valid and binding obligation of each of the
Seller and BE Aerospace enforceable against each of the Seller and BE Aerospace
in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally and subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 3.02. NO CONFLICT. Assuming all consents, approvals,
authorizations and other actions described in Section 3.03 of this Agreement and
Section 3.03 of the Initial Purchase Agreement have been obtained and all
filings and notifications listed in Section 3.11 of the Disclosure Schedule of
the Initial Purchase Agreement have been made, and except as may result from any
<PAGE>
facts or circumstances relating solely to the Purchaser, the execution, delivery
and performance of this Agreement by each of the Seller and BE Aerospace does
not and will not (a) violate, conflict with or result in a breach of any
provision of the charter or by-laws (or similar organizational documents) of the
Seller or BE Aerospace and, to the best knowledge of the Seller and BE
Aerospace, the Company or any subsidiary; (b) conflict with or violate any Law
or Governmental Order applicable to the Seller or BE Aerospace and, to the best
knowledge of the Seller and BE Aerospace, the Company or any subsidiary, except
as would not, individually or in the aggregate, (i) have a material adverse
effect on the ability of the Seller or BE Aerospace to consummate, or (ii) delay
the consummation of, the transactions contemplated by this Agreement; or (c)
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any Encumbrance on the Interests pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument to which the Seller or BE Aerospace, and to the
best knowledge of BE Aerospace, the Company or any subsidiary is a party or by
which any of such assets or properties is bound or affected, including, without
limitation, the indenture dated as of November 2, 1998 between BE Aerospace and
the Bank of New York, except as would not, individually or in the aggregate, (i)
(A) have a material adverse effect on the ability of the Seller or BE Aerospace
to consummate, or (B) delay the consummation of, the transactions contemplated
by this Agreement, (ii) have a Material Adverse Effect or (iii) create any claim
against the Purchaser.
SECTION 3.03. CONSENTS, APPROVALS, LICENSES, ETC. No consent,
approval, authorization, license, order or permit of, or declaration, filing or
registration with, or notification to, any Governmental Authority, or any other
Person, is required to be made or obtained by the Seller or BE Aerospace in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, except: (i) applicable
requirements, if any, of the HSR Act; (ii) where the failure to obtain such
consents, approvals, authorizations, licenses, orders or permits of, or to make
such declarations, filings or registrations or notifications would not,
individually or in the aggregate, prevent the Seller or BE Aerospace from
performing its obligations under this Agreement and would not have a Material
Adverse Effect; and (iii) as may be necessary as a result of any facts or
circumstances relating solely to the Purchaser.
SECTION 3.04. MEMBERSHIP INTERESTS OF THE SELLER IN THE
COMPANY. The Class Two Interests constitute 49% of the Interests in the Company.
The Interests have been duly authorized and validly issued, are fully paid and
nonassessable, and were not issued in violation of or subject to any preemptive
rights. The Seller owns all of the Interests, free and clear of all
Encumbrances. There are no voting trusts, stockholder agreements, proxies or
other similar such agreements or arrangements in effect with respect to the
voting or transfer of Interests, other than the LLC Agreement. The delivery to
<PAGE>
the Purchaser of the Interests pursuant to the provisions of this Agreement will
transfer to the Purchaser good and valid title thereto, free and clear of all
Encumbrances arising through the Seller, the Former Interest Holders, the
Company or their Affiliates.
SECTION 3.05. ABSENCE OF LITIGATION. (a) There are no Actions
pending or, to the knowledge of the Seller and BE Aerospace, threatened against
the Seller, BE Aerospace or any of the assets or properties of the Seller or BE
Aerospace that, individually or in the aggregate, would have a Material Adverse
Effect or would restrain or prevent the Seller or BE Aerospace from consummating
the transactions contemplated hereby or performing its obligations hereunder and
(b) none of the Seller, BE Aerospace nor any subsidiary nor their respective
assets and properties is subject to any Governmental Order having a Material
Adverse Effect or that would restrain or prevent the Seller or BE Aerospace from
consummating the transactions contemplated hereby or performing its obligations
hereunder.
SECTION 3.06. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement or the Initial Purchase
Agreement based upon arrangements made by or on behalf of the Seller or the
Former Interest Holders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller and the
Former Interest Holders as follows:
SECTION 4.01. INCORPORATION AND AUTHORITY OF THE PURCHASER.
The Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser, the
performance by the Purchaser of its obligations hereunder and the consummation
by the Purchaser of the transactions contemplated hereby will have been duly
authorized by all requisite corporate action on the part of the Purchaser prior
to the Closing Date. This Agreement has been duly executed and delivered by the
Purchaser, and (assuming due authorization, execution and delivery by the other
parties hereto) at the Closing Date will constitute a legal, valid and binding
obligation of the Purchaser enforceable against it in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
<PAGE>
SECTION 4.02. NO CONFLICT. Except as may result from any facts
or circumstances relating solely to the other parties hereto, the execution,
delivery and performance of this Agreement by the Purchaser does not and will
not: (a) conflict with or violate the Certificate of Incorporation or By-laws
(or other similar applicable documents) of the Purchaser, the Company or any
subsidiary; (b) conflict with or violate any Law or Governmental Order
applicable to the Purchaser, the Company or any subsidiary, except as would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Purchaser to consummate, or delay the consummation of, the transactions
contemplated by this Agreement; or (c) result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of the Purchaser pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which the
Purchaser, the Company or any subsidiary is a party or by which any of such
assets or properties is bound or affected, except as would not, individually or
in the aggregate, have a material adverse effect on the ability of the Purchaser
to consummate, or delay the consummation of, the transactions contemplated by
this Agreement.
SECTION 4.03. CONSENTS AND APPROVALS. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of this
Agreement by the Purchaser will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except (i) the notification and waiting
period requirements of the HSR Act, (ii) where failure to obtain such consent,
approval, authorization or action, or to make such filing or notification, would
not prevent or delay the Purchaser from performing any of its material
obligations under this Agreement and (iii) as may be necessary as a result of
any facts or circumstances relating solely to the other parties hereto.
SECTION 4.04. ABSENCE OF LITIGATION. No Action is pending or,
to the knowledge of the Purchaser, threatened against the Purchaser which seeks
to delay or prevent the consummation of the transactions contemplated hereby or
which would be reasonably likely materially and adversely to affect or restrict
the Purchaser's ability to consummate the transactions contemplated hereby or to
perform its obligations hereunder.
SECTION 4.05. INVESTMENT PURPOSE. The Purchaser is acquiring
the Class Two Interests solely for the purpose of investment and not with a view
to, or for offer or sale in connection with, any distribution thereof.
<PAGE>
SECTION 4.06. FINANCING. The Purchaser has all funds necessary
to consummate the transactions contemplated by this Agreement.
SECTION 4.07. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. REGULATORY AND OTHER AUTHORIZATIONS; RELEASES;
CONSENTS. (a) Each party hereto shall use its best efforts to obtain all
authorizations, consents, orders, permits, licenses and approvals of, and to
give all notices to and make all filings with, all Governmental Authorities and
other third parties that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to, this Agreement
and will cooperate fully with the other parties in promptly seeking to obtain
all such authorizations, consents, orders and approvals, giving such notices,
and making such filings. Each party hereto agrees to make, or cause to be made,
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby as promptly as practicable,
but in no event later than September 15, 1999 and to supply promptly any
additional information and documentary material that may be requested pursuant
to the HSR Act. The parties hereto agree not to take any action that will have
the effect of unreasonably delaying, impairing or impeding the receipt of any
required authorizations, consents, orders or approvals.
(b) Without limiting the generality of the parties'
undertakings pursuant to Section 5.01(a), each of the parties hereto shall use
all reasonable efforts to (i) respond to any inquiries by any Governmental
Authority regarding antitrust or other matters with respect to the transactions
contemplated by this Agreement, (ii) avoid the imposition of any order or the
taking of any action that would restrain, alter or enjoin the transactions
contemplated by this Agreement and (iii) in the event any Governmental Order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement has been issued, to have such Governmental Order
vacated or lifted.
SECTION 5.02. FURTHER ACTION. Subject to the terms and
conditions herein provided, each of the parties hereto covenants and agrees to
use its best efforts to deliver or cause to be delivered such documents and
<PAGE>
other papers and to take or cause to be taken such further actions as may be
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated hereby.
SECTION 5.03. CONVEYANCE TAXES. BE Aerospace and the Purchaser
agree that each shall pay one-half of all sales, use, transfer, stamp, stock
transfer, real property transfer or gains and similar taxes incurred as a result
of the sale of the Purchased Interest contemplated hereby.
SECTION 5.04. REPORTS. (a) Within 60 days after the end of
each fiscal quarter of each Adjustment Year the Company shall prepare, at its
expense, and deliver to BE Aerospace a certificate setting forth the Company's
Sales and Bookings for such fiscal quarter (each, a "Company Certificate").
(b) Within 60 days after the end of each Adjustment Year, the
Company shall prepare, at its expense, and deliver to BE Aerospace a reconciled
Company Certificate for such fiscal year.
(c) In the event that the Purchaser, or any of its successors
or assigns, transfers any SIFS Product Line to another entity during an
Adjustment Year, at the times set forth in Sections 5.04(a) and (b) the
Purchaser shall prepare a pro forma Company Certificate (each, a "Pro Forma
Company Certificate") aggregating Sales and Bookings for all such SIFS Product
Lines, whether or not transferred, for each period set forth in Sections 5.04(a)
and (b).
(d) The Company Certificate and the Pro Forma Company
Certificate, if any, delivered pursuant to Section 5.04(b) and (c) shall be the
basis of preparation of Adjustment Statements pursuant to Section 2.04(a).
SECTION 5.05. NON-COMPETITION. (a) The Seller and the Former
Interest Holders agree that, from the date hereof until the date three years
after the Closing Date or, if earlier, the date of the dissolution or
liquidation of the Company (or any successor thereto) (the "Non-Competition
Period"), within any jurisdiction or marketing area in which the Company or any
of its Affiliates is doing business or is qualified to do business, directly or
indirectly, they shall not own, manage, operate, control, or participate in the
ownership, management, operation or control of, or be connected in any manner
with any manufacturer of products, including systems, equipment, software,
services, and support services related thereto, for entertainment, passenger
information, passenger communication and monitoring purposes used solely by
passengers and cabin crew on board commercial passenger transport aircraft
("In-Flight Entertainment Systems") (an "In-Flight Entertainment Business")
other than the Company, other than with respect to the current business of the
Seller and the Former Interest Holders in connection with (i) the provision of
aircraft-specific engineering services to commercial airlines, (ii) the
<PAGE>
installation in aircraft of systems manufactured by third parties and (iii) the
servicing of such systems on an ongoing basis; provided, that any of the Seller
and the Former Interest Holders may incorporate goods and services produced by
an In-Flight Entertainment Business other than the Company in such party's
products if customers of such party request it to do so; and provided, further,
that nothing contained in this Section 5.05 shall restrict or prohibit any of
the Seller and the Former Interest Holders from providing repair or maintenance
service to Persons manufacturing, selling or servicing In-Flight Entertainment
Systems.
(b) Each of the Seller and the Former Interest Holders also
agrees for the duration of the Non-Competition Period not to persuade or attempt
to persuade any potential customer to which the Company or any of its
subsidiaries has made a presentation, or with which the Company or any of its
subsidiaries has been having discussions, not to hire the Company or such
subsidiary, or to hire another company.
(c) Each of the Seller and the Former Interest Holders also
agrees for the duration of the Non-Competition Period not to solicit for itself
or any Person other than the Company or any of its subsidiaries the business of
any Person, in connection with the sale of In-Flight Entertainment Systems,
which is a customer, supplier or distributor of the Company or any of its
subsidiaries, or was its customer, supplier or distributor within two years
prior to the date of this Agreement.
(d) Each of the Seller and the Former Interest Holders
acknowledges that a breach of its covenants contained in Sections 5.05(a)
through (c) may cause irreparable damage to the Purchaser, the exact amount of
which will be difficult to ascertain, and that the remedies at law for any such
breach will be inadequate. Accordingly, each of the Seller and the Former
Interest Holders agrees that if it breaches any of the covenants contained in
Sections 5.05(a) through (c) in addition to any other remedy which may be
available at law or in equity, the Purchaser shall be entitled to specific
performance and injunctive relief.
(e) Each of the Seller and the Former Interest Holders further
acknowledges that the time, scope, geographic areas and other provisions of
Section 5.05(a) have been specifically negotiated by sophisticated commercial
parties and agree that all such provisions are reasonable under the
circumstances of the activities contemplated by this Agreement. In the event
that the agreements in Section 5.05(a) shall be determined by any court of
competent jurisdiction to be unenforceable by reason of their extending for too
great a period of time or over too great a geographical area or by reason of
their being too extensive in any other respect, they shall be interpreted to
extend only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be enforceable
and/or to the maximum extent in all other respects as to which they may be
enforceable, all as determined by such court in such action.
<PAGE>
SECTION 5.06. NO SOLICITATION OF EMPLOYEES. Each of the Seller
and the Former Interest Holders agrees that it shall not, during the period from
the date hereof until the Closing Date and, if the Closing occurs, for a period
of four (4) years from February 25, 1999, without the prior written consent of
the Purchaser, directly or indirectly, solicit on a specific or targeted basis
for employment or employ any person who is, at the time of such hiring or
solicitation, an employee of the Company, provided that this Section 5.06 shall
not prohibit any form of employment advertising or prevent the hiring of any
individual who contacts the Seller or any Former Interest Holder after
terminating his or her employment with the Company. This Section 5.06 replaces
Section 5.07 of the Initial Purchase Agreement in its entirety.
SECTION 5.07. TRANSITIONAL SERVICES. BE Aerospace agrees to
continue to provide administrative services to the Company in accordance with
Section 5.09 of the Initial Purchase Agreement for an additional 180 days after
the expiration of the period specified therein.
SECTION 5.08. CONDUCT OF THE BUSINESS BY THE PURCHASER. (a)
The Purchaser agrees that from the date of this Agreement through the end of the
final Adjustment Year, the Company will book orders and record sales and
revenues of SIFS Product Lines in accordance with the current practice of the
Company from February 25, 1999 through the date hereof; provided, that if an
SIFS Product Line is transferred to another Person, the Company will secure from
such Person an undertaking to provide the Company a statement of Sales and
Bookings for such transferred SIFS Product Line for all remaining Adjustment
Years prepared in accordance with the then-current practice of the Company.
(b) The Purchaser agrees to use commercially reasonable
efforts to maximize Sales and Bookings during the period from the date hereof
until the end of the final Adjustment Year; provided, that if an SIFS Product
Line is transferred to an Affiliate of the Purchaser prior to the end of the
final Adjustment Year, the Purchaser will secure from such Affiliate an
undertaking to use commercially reasonable efforts to maximize the Sales and
Bookings of such transferred SIFS Product Line during the period from the date
of transfer until the end of the final Adjustment Year. In the event that the
Company or any Affiliate of the Purchaser acquires or develops new Product Lines
after the date hereof, the Purchaser agrees to use commercially reasonable
efforts to ensure that the business relating to SIFS Product Lines will be
maintained and not be diverted to or disadvantaged by such subsequently acquired
or developed Product Lines.
SECTION 5.09. ACCESS TO INFORMATION. From the date of this
Agreement through the second anniversary of the Closing, upon reasonable prior
notice, the Purchaser shall, and the Purchaser shall cause the officers,
employees, auditors and agents of the Company to, (a) afford the officers,
<PAGE>
employees and authorized agents and representatives of BE Aerospace reasonable
access, during normal business hours, to the financial Books and Records of the
Company to the extent that such financial Books and Records relate to a period
prior to the Closing Date and (b) furnish to the officers, employees, agents and
representatives of BE Aerospace, at the expense of BE Aerospace, such additional
existing financial and operating data and other information regarding the
assets, properties, goodwill and business of the Company with respect to Tax
matters for all fiscal years of the Company through 1999 as BE Aerospace may
from time to time reasonably request; provided, however, that BE Aerospace shall
have reasonable access to information as outlined above at any time after such
two-year period if such access is necessary to enable BE Aerospace to respond to
audits and inquiries of any taxing authority and provided, further that BE
Aerospace shall not unreasonably interfere with any of the businesses or
operations of the Company.
SECTION 5.10. CONFIDENTIALITY. (a) Any information relating to
the business, operations, and finances of any party hereto or the Company which
are proprietary to, or considered proprietary by, such party or the Company is
hereinafter referred to as "Confidential Information". All Confidential
Information in tangible form (plans, writings, drawings, computer software and
programs, etc.) or provided to or conveyed orally or visually to a receiving
party, shall be presumed to be proprietary at the time of delivery to the
receiving party. All such proprietary information shall be protected by the
receiving party from disclosure with the same degree of care with which the
receiving party protects its own Confidential Information from disclosure. Each
party hereto agrees: (i) not to disclose such Confidential Information to any
Person except to those of its employees or representatives who need to know such
Confidential Information in connection with the performance of such party's
obligations hereunder and who have agreed to maintain the confidentiality of
such Confidential Information; and (ii) neither it nor any of its employees or
representatives will use the Confidential Information for any purpose other than
the performance of such party's obligations hereunder; provided that such
restrictions shall not apply if such Confidential Information:
(x) is or hereafter becomes public, unless such publication
is a breach of this Agreement;
(y) was already in the receiving party's possession prior
to any disclosure of the Confidential Information to the receiving
party by the divulging party; or
(z) has been or is hereafter obtained by the receiving party
from a third party and the receiving party is not aware that such third
party is bound by any confidentiality obligation to the divulging party
with respect to the Confidential Information;
<PAGE>
provided further that nothing herein shall prevent any party hereto from
disclosing any portion of such Confidential Information pursuant to judicial
order, but only to the extent of such order and after reasonable notice to the
original divulging party.
(b) TERMINATION. The obligations contained in this Section
5.10 shall terminate two years after the final
Adjustment Year.
SECTION 5.11. Governance. The Seller agrees that during the
period from the date hereof through the earlier to occur of the Closing Date and
the termination of this Agreement pursuant to Section 8.01, the Seller's rights
with respect to the governance of the Company contained in Section 10.6.1 and
10.7 of the LLC Agreement shall be suspended and the Purchaser shall be entitled
to take any actions set forth in Section 10.6.1 without the approval of the
Seller; provided that the Seller shall retain its rights with respect to the
following items contained in Schedule 10.6.1 of the LLC Agreement: (a), (c),
(h)(to the extent that such investment exceeds $500,000), (l), (o), (p), (r),
(s), (t) and the making of any modifications to the items listed in this
proviso.
SECTION 5.12. GUARANTEE OF BE AEROSPACE. (a) BE Aerospace
hereby unconditionally and irrevocably guarantees the punctual performance and
payment when due of all obligations, amounts and other liabilities of the Seller
now or hereafter existing under this Agreement, the LLC Agreement and the
Assignment and Assumption Agreement (such obligations, amounts and other
liabilities being the "Guaranteed Obligations"), and agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by the
Purchaser in successfully enforcing any rights under this Section 5.12. Without
limiting the generality of the foregoing, BE Aerospace's liability hereunder
shall extend to all amounts and obligations that constitute part of the
Guaranteed Obligations and would be owed by the Seller under this Agreement but
for the fact that they are unenforceable or not allowable in either case due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Seller or any Former Interest Holder or any breach or failure to perform of
the Seller or any Former Interest Holder under the Assignment and Assumption
Agreement.
(b) BE Aerospace guarantees that the Guaranteed Obligations
will be paid or performed strictly in accordance with the terms of this
Agreement, the LLC Agreement or the Assignment and Assumption Agreement, as the
case may be, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Purchaser with respect thereto. The obligations of BE Aerospace under this
Section 5.12 are independent of the Guaranteed Obligations or any other
obligations of BE Aerospace pursuant to this Agreement, and a separate action or
actions may be brought and prosecuted against BE Aerospace to enforce this
Section 5.12, irrespective of whether any action is brought against the Seller
or whether the Seller is joined in any such action or actions. The liability of
<PAGE>
BE Aerospace under this Section 5.12 shall be irrevocable, absolute and
unconditional irrespective of, and BE Aerospace hereby irrevocably waives any
defenses it may now or hereafter have in any way relating to, any or all of the
following:
(i) any lack of validity or enforceability of this Agreement,
the Assignment and Assumption Agreement or any agreement or instrument
relating thereto arising from the failure of the Seller to properly
authorize, execute and deliver this Agreement or the Assignment and
Assumption Agreement;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other obligations of the Seller under this Agreement or any agreement
or instrument relating thereto, or any other amendment or waiver of or
any consent to departure from this Agreement;
(iii) any change, restructuring or termination of the
corporate structure or existence of the Seller, the Company or any of
their respective subsidiaries; or
(iv) any failure of the Purchaser to disclose to BE Aerospace
any information relating to the financial condition, operations,
properties or prospects of the Company or any of its subsidiaries now
or in the future known to the Purchaser (BE Aerospace waiving any duty
on the part of the Purchaser to disclose such information).
This Section 5.12 shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Purchaser or any other Person
upon the insolvency, bankruptcy or reorganization of the Seller, any Former
Interest Holder or the Company or otherwise, all as though such payment had not
been made.
(c) (i) BE Aerospace hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Section 5.12 and any requirement that the Purchaser exhaust
any right, pursue any remedy or take any action against the Seller, any Former
Interest Holder or any other Person.
(ii) BE Aerospace hereby waives any right to revoke this
Section 5.12, and acknowledges that this Section 5.12 is continuing in nature
and applies to all Guaranteed Obligations, whether existing now or in the
future.
SECTION 5.13. ASSUMPTION OF BE AEROSPACE OBLIGATIONS. As of
the Closing Date, the Purchaser shall assume all obligations of BE Aerospace
with respect to providing guarantees of SIFS obligations, including with respect
to LiveTV, and any indemnities by BE Aerospace with respect to any obligations
of SIFS post-Closing contained in any of the Material Contracts listed on
<PAGE>
Sections 3.13(b) and 3.16(a) of the Disclosure Schedule to the Initial Purchase
Agreement ("SIFS Guarantees"); provided, that nothing in this Section 5.13 shall
affect the indemnification obligations of BE Aerospace to SIFS with respect to
any Material Contracts to which BE Aerospace or any Affiliate thereof and SIFS
are the only parties. The Purchaser shall use its best efforts to assist in
securing the consent to the assignment to it of all SIFS Guarantees and, in the
event that consent to the assignment of any SIFS Guarantee is not received by
the Purchaser, to indemnify BE Aerospace for the full amount of any payments
under any SIFS Guarantee for liabilities arising after the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller and the
Former Interest Holders. The obligations of the Seller and the Former Interest
Holders to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver, at or prior to the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The
representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of
determining whether this Section 6.01(a) has been satisfied with
respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true
and correct in all respects), (ii) the covenants and agreements
contained in this Agreement to be complied with by the Purchaser at or
prior to the Closing shall have been complied with in all material
respects; and (iii) the Seller and the Former Interest Holders shall
have received a certificate of the Purchaser as to the matters set
forth in clauses (i) and (ii) above signed by a duly authorized officer
of the Purchaser.
(b) HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the purchase of the Purchased Interest
contemplated hereby shall have expired or shall have been terminated.
(c) NO ORDER. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Governmental Order which
is in effect and has the effect of making the transactions contemplated
by this Agreement illegal or otherwise prohibiting consummation of such
transactions.
<PAGE>
(d) GUARANTY. The Guarantor or, if the Board of Directors of
the Guarantor has not had the opportunity to approve the Guaranty prior
to such date, ATEV, shall have executed and delivered the Guaranty
substantially in the form of Exhibit 6.01(d) hereto.
(e) STATEMENT OF SALES AND BOOKINGS. The Purchaser shall have
delivered a statement of the Sales and Bookings of the Company for the
period from March 1, 1999 through June 30, 1999.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The
representations and warranties of the Seller and BE Aerospace contained
in this Agreement shall be true and correct in all material respects as
of the Closing, with the same force and effect as if made as of the
Closing Date, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such
date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of
determining whether this Section 6.02(a) has been satisfied with
respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true
and correct in all respects); (ii) the covenants and agreements
contained in this Agreement to be complied with by the Seller and the
Former Interest Holders at or prior to the Closing shall have been
complied with in all material respects; and (iii) the Purchaser shall
have received a certificate of each of the Seller and BE Aerospace as
to the matters set forth in clauses (i) and (ii) above signed by an
officer of each such party.
(b) HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the purchase of the Purchased Interest
contemplated hereby shall have expired or shall have been terminated.
(c) NO ORDER. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the
effect of making the transactions contemplated by this Agreement
illegal or otherwise prohibiting consummation of such transactions.
<PAGE>
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. SURVIVAL. The provisions of Article VIII of the
Initial Purchase Agreement remain in full force and effect. In addition, subject
to the limitations and other provisions of this Agreement, the representations,
warranties, covenants and agreements of the parties hereto contained herein
shall survive the Closing and shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Seller, the Former Interest
Holders or the Purchaser, (a) as to the representations and warranties
incorporated herein by reference, for the periods set forth in Section 8.01 of
the Initial Purchase Agreement and (b) as to the other representations,
warranties, covenants and agreements set forth herein, for a period extending
from the Closing Date until the earlier of March 31, 2000 and the date of the
completion by the Company's auditors of the audit for the fiscal year ending
December 31, 1999; provided, however, that the covenant set forth in Section
5.03 hereof shall survive until the expiration of the applicable statute of
limitations for the Tax in question, the representations and warranties set
forth in the last sentence of Section 3.04 hereof shall survive until the
expiration of the applicable statute of limitations; and the covenants and
agreements set forth in Sections 2.04, Article V (with the exception of Section
5.03), Articles VII and IX hereof shall remain in full force and effect for the
applicable periods specified in the respective Sections or Articles or, if no
such period is specified, until the expiration of the applicable statute of
limitations.
SECTION 7.02. INDEMNIFICATION BY THE PURCHASER. (a) The
Purchaser agrees, subject to the other terms and conditions of this Agreement
and on an after Tax basis, to indemnify each Seller Indemnified Party against
and hold each Seller Indemnified Party harmless from all Losses arising out of
(i) the breach of any representation or warranty contained in Article IV hereof,
(ii) the breach of any covenant or agreement of the Purchaser herein and (iii)
the conduct of the business of SIFS after the Closing Date. Anything in Section
7.01 hereof to the contrary notwithstanding, no claim may be asserted nor may
any action be commenced against the Purchaser for breach of any representation,
warranty, covenant or agreement contained herein, unless written notice of such
claim or action is received by the Purchaser describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation, warranty, covenant or agreement
on which such claim or action is based ceases to survive as set forth in Section
7.01 hereof, irrespective of whether the subject matter of such claim or action
shall have occurred before or after such date.
(b) The indemnification obligations of the Purchaser pursuant
to Sections 7.02(a)(i) and (iii) hereof shall not be effective until the
aggregate dollar amount of all Losses which would otherwise be indemnifiable
pursuant to Sections 7.02(a)(i) and (iii) hereof and to Section 8.02(a)(i) of
<PAGE>
the Initial Purchase Agreement exceeds the Purchaser's Threshold Amount, in
which event such claims shall be indemnifiable from the first dollar thereof. In
addition, no claim may be made against the Purchaser for indemnification
pursuant to Sections 7.02(a)(i) and (iii) hereof with respect to any individual
item (or aggregation of similar items) of Loss, unless such item (or aggregation
of similar items) exceeds $10,000, nor shall any such item (or aggregation of
similar items) which does not exceed $10,000 be applied to or considered part of
the Purchaser's Threshold Amount. The indemnification obligations of the
Purchaser pursuant to Sections 7.02(a)(i) and (iii) hereof shall be effective
only until the dollar amount paid in respect of all Losses indemnified against
under Sections 7.02(a)(i) and (iii) hereof and to Section 8.02(a)(i) of the
Initial Purchase Agreement aggregates to an amount equal to $15,000,000. For the
purposes of this Section 7.02(b), in computing such individual or aggregate
amounts of claims, the amount of each claim shall be deemed to be an amount (i)
net of any Tax benefit actually realized by the Seller Indemnified Party making
such claim on or prior to the date of an indemnification payment under this
Section 7.02 and (ii) net of any insurance proceeds and any indemnity,
contribution or other similar payment actually recovered by the Seller
Indemnified Party making such claim from any third party with respect thereto
(on an after Tax basis).
(c) Payments by the Purchaser to any Seller Indemnified Party
pursuant to Section 7.02(a) hereof shall be limited to the amount of any Losses
that remains after deducting therefrom (i) any Tax benefit actually realized by
such Seller Indemnified Party on or prior to the date of an indemnification
payment under this Section 7.02 and (ii) any insurance proceeds and any
indemnity, contribution or other similar payment actually recovered by such
Seller Indemnified Party from any third party with respect thereto (on an after
Tax basis). If a payment is made by the Purchaser to any Seller Indemnified
Party in accordance with this Section 7.02, and if a Tax benefit subsequently is
actually realized by such Seller Indemnified Party or any Affiliate of such
Seller Indemnified Party (that was not previously taken into account to reduce
an amount otherwise payable by the Purchaser to such Seller Indemnified Party
under this Section 7.02), such Seller Indemnified Party shall promptly pay to
the Purchaser at the time of such realization the amount of such Tax benefit to
the extent that such amount would have resulted in a reduction in an obligation
of the Purchaser under Section 7.02 hereof if the Tax benefit had been obtained
at the time that such obligation was satisfied.
SECTION 7.03. INDEMNIFICATION BY THE SELLER AND BE AEROSPACE.
(a) The Seller and BE Aerospace agree, subject to the other terms and conditions
of this Agreement and on an after Tax basis, jointly and severally to indemnify
each Purchaser Indemnified Party against and hold each Purchaser Indemnified
Party harmless from all Losses arising out of (i) the breach of any
representation or warranty of the Seller or BE Aerospace contained in Article
III, (ii) the breach by the Seller or any Former Interest Holders of any
covenant or agreement of the Seller or such Former Interest Holders contained
<PAGE>
herein, (iii) the actions taken by the Company prior to February 25, 1999 and
described in Section 3.20 of the Disclosure Schedule of the Initial Purchase
Agreement and (iv) Taxes imposed on or with respect to the income, assets, or
operations of the Company and its subsidiaries for taxable periods (or portions
thereof) ending on or prior to February 25, 1999 to the extent such Taxes were
required to have been paid to the appropriate taxing authority prior to February
25, 1999. Anything in Section 7.01 hereof to the contrary notwithstanding, no
claim may be asserted nor any action commenced against the Seller or BE
Aerospace for breach of any representation, warranty, covenant or agreement
contained herein, unless written notice of such claim or action is received by
BE Aerospace describing in detail the facts and circumstances with respect to
the subject matter of such claim or action within thirty days after the date on
which the representation, warranty, covenant or agreement on which such claim or
action is based ceases to survive as set forth in Section 7.01 hereof,
irrespective of whether the subject matter of such claim or action shall have
occurred before or after such date.
(b) The indemnification obligations of the Seller and BE
Aerospace pursuant to Section 7.03(a)(i) hereof shall not be effective until the
aggregate dollar amount of all Losses which would otherwise be indemnifiable
pursuant to Section 7.03(a)(i) hereof and to Section 8.03(a)(i) of the Initial
Purchase Agreement exceeds the Seller's Threshold Amount, in which event such
claims shall be indemnifiable from the first dollar thereof. In addition, no
claim may be made against the Seller or BE Aerospace for indemnification
pursuant to Section 7.03(a)(i) hereof with respect to any individual item of
Loss (or aggregation of similar items), unless such item (or aggregation of
similar items) exceeds $10,000, nor shall any such item (or aggregation of
similar items) which does not exceed $10,000 be applied to or considered part of
the Seller's Threshold Amount. The indemnification obligations of the Seller and
BE Aerospace pursuant to Section 7.03(a)(i) hereof shall be effective only until
the dollar amount paid by the Seller or BE Aerospace in respect of all Losses
indemnified against under Section 7.03(a)(i) hereof together with the dollar
amount paid by BE Aerospace under Section 8.03(a)(i) of the Initial Purchase
Agreement aggregates to an amount equal to $15,000,000, provided, however, that
with respect to claims relating to the representations and warranties contained
in the last sentence of Section 3.04 hereof and the covenant set forth in
Section 5.03 only, the indemnification obligations shall be effective until the
dollar amount paid in respect of all Losses aggregates to an amount equal to the
Fixed Purchase Price plus the Contingent Purchase Price, if any. For the
purposes of this Section 7.03(b), in computing such individual or aggregate
amounts of claims, the amount of each claim shall be deemed to be an amount (i)
net of any Tax benefit actually realized on or prior to the date of an
indemnification payment under this Section 7.03, and (ii) net of any insurance
proceeds and any indemnity, contribution or other similar payment actually
recovered by any Purchaser Indemnified Party from any third party with respect
thereto (on an after Tax basis).
(c) Payments by the Seller or BE Aerospace pursuant to Section
7.03(a) hereof shall be limited to the amount of any Losses that remains after
deducting therefrom (i) any Tax benefit actually realized on or prior to the
<PAGE>
date of an indemnification payment under this Section 7.03, by such Purchaser
Indemnified Party and (ii) any insurance proceeds and any indemnity,
contribution or other similar payment actually recovered by any Purchaser
Indemnified Party from any third party with respect thereto (on an after Tax
basis). If a payment is made by the Seller or BE Aerospace in accordance with
this Section 7.03, and if a Tax benefit subsequently is actually realized by
such Purchaser Indemnified Party or any Affiliate of any Purchaser Indemnified
Party (that was not previously taken into account to reduce an amount otherwise
payable by the Seller and BE Aerospace to such Purchaser Indemnified Party under
this Section 7.03), the Purchaser shall promptly pay to the Seller or BE
Aerospace, as the case may be, at the time of such realization, the amount of
such Tax benefit to the extent that such amount would have resulted in a
reduction in an obligation of the Seller and BE Aerospace under this Section
7.03 if the Tax benefit had been obtained at the time that such obligation was
satisfied.
SECTION 7.04. INDEMNIFICATION PROCEDURES. (a) A Seller
Indemnified Party or a Purchaser Indemnified Party, as the case may be (for
purposes of this Section 7.04, an "Indemnified Party"), shall give the
indemnifying party under Section 7.02 or 7.03 hereof, as applicable (for
purposes of this Section 7.04, an "Indemnifying Party"), prompt written notice
of any claim, assertion, event or proceeding by or in respect of a third party
as to which it may request indemnification hereunder or as to which the Seller's
Threshold Amount or the Purchaser's Threshold Amount, as applicable, may be
applied as soon as is practicable and in any event within 45 days of the time
that such Indemnified Party learns of such claim, assertion, event or
proceeding; provided, that the failure to so notify the Indemnifying Party shall
not affect rights to indemnification hereunder except to the extent that the
Indemnifying Party is actually prejudiced by such failure. The Indemnifying
Party shall have the right to direct, through counsel of its own choosing, the
defense or settlement of any such claim or proceeding at its own expense;
provided, however, that the Indemnifying Party shall not, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld), enter into any settlement or otherwise compromise any
such claim or proceeding that relates to Taxes if such settlement or compromise
may adversely affect the Tax liability of the Indemnified Party or the Company,
or any Affiliate of either of the foregoing, for any taxable period. With
respect to such claims or proceedings relating to Taxes, the Indemnifying Party
shall allow the Indemnified Party to reasonably request updates regarding
developments that may be relevant to the Taxes of the Company or the Indemnified
Party, and shall allow the Indemnified Party to provide comments regarding the
direction of such claim or proceeding (which comments, subject to the foregoing
consent requirements with respect to settlements or compromises, the
Indemnifying Party will be free to accept or reject in its sole discretion). If
<PAGE>
the Indemnifying Party elects to assume the defense of any such claim or
proceeding, the Indemnified Party may participate in such defense, but in such
case the expenses of such Indemnified Party shall be paid by such Indemnified
Party. Such Indemnified Party shall provide the Indemnifying Party with access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with the
Indemnifying Party in the defense or settlement thereof, and the Indemnifying
Party shall reimburse such Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith. If the Indemnifying Party elects
to direct the defense of any such claim or proceeding, such Indemnified Party
shall not pay, or permit to be paid, any part of any claim or demand arising
from such asserted liability, unless the Indemnifying Party consents in writing
to such payment or unless the Indemnifying Party, subject to the last sentence
of this Section 7.04(a), withdraws from the defense of such asserted liability,
or unless a final judgment from which no appeal may be taken by or on behalf of
the Indemnifying Party is entered against such Indemnified Party for such
liability. If the Indemnifying Party shall fail to defend against such claim or
proceeding, or if, after commencing or undertaking any such defense, the
Indemnifying Party fails to prosecute or withdraws from such defense, such
Indemnified Party shall have the right to undertake the defense or settlement
thereof, at the Indemnifying Party's expense. If such Indemnified Party assumes
the defense of any such claim or proceeding pursuant to this Section 7.04(a) and
proposes to settle such claim or proceeding prior to a final judgment thereon or
to forego appeal with respect thereto, then such Indemnified Party shall give
the Indemnifying Party prompt written notice thereof and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding.
(b) Each party hereto hereby acknowledges and agrees that from
and after the Closing, its sole and exclusive remedy with respect to any and all
claims relating to the representations and warranties contained in Article III
and Article IV and the covenants contained in this Agreement to be performed
prior to the Closing shall be pursuant to the indemnification provisions set
forth in this Article VII. In furtherance of the foregoing, each party hereto
hereby waives, to the fullest extent permitted under applicable law, any and all
other rights, claims and causes of action it may have, from and after the
Closing, against the other parties hereto or its officers, directors, employees,
agents, representatives and Affiliates relating thereto.
(c) Except as set forth in this Agreement, the parties hereto
are not making any representation, warranty, covenant or agreement with respect
to the matters contained herein. Notwithstanding anything to the contrary
contained in this Agreement, no breach of any representation, warranty, covenant
or agreement contained herein shall give rise to any right on the part of any
party hereto, after the consummation of the purchase and sale of the Purchased
Interest contemplated by this Agreement, to rescind this Agreement or any of the
transactions contemplated hereby.
(d) Notwithstanding anything to the contrary contained in this
Agreement, no party hereto shall have any liability under any provision of this
Agreement for, and in no event shall the Purchaser's Threshold Amount or the
Seller's Threshold Amount, as the case may be, be applied to, any consequential
damages. Each party hereto shall take all reasonable steps to mitigate its
Losses upon and after becoming aware of any event which could reasonably be
expected to give rise to any Losses.
<PAGE>
(e) For purposes of Sections 7.02 and 7.03 hereof, a Tax
benefit shall be considered realized in the taxable year in which the Taxes of
an Indemnified Party are reduced as a result of any deduction, loss, credit,
allowance or similar item that relates to a claim or action for which an
indemnification payment was made by an Indemnifying Party under this Agreement
(it being understood that no Indemnifying Party shall forgo any Tax Benefit to
which it is properly entitled). Prior to the time that any indemnification
payment is made under this Article VII, and thereafter on a quarterly basis (on
January 15, April 15, July 15 and October 15 of each calendar year), the
Indemnified Party shall provide the Indemnifying Party with a certificate of an
internationally-recognized independent accounting firm, signed by a duly
authorized member of such firm and providing such firm's determination of the
amount that may be taken into account under Sections 7.02 or 7.03 hereof, as the
case may be, as the Tax benefits of the Indemnified Party that are actually
realized; it being understood that if the foregoing certificate is to be
provided by the Purchaser, such certificate shall be provided by Mazars &
Guerard or such other internationally-recognized independent accounting firm
chosen by the Purchaser, and if such certificate is to be provided by the Seller
or BE Aerospace, such certificate shall be provided by Deloitte & Touche, LLP or
such other internationally-recognized independent accounting firm chosen by BE
Aerospace; provided, however, that if the Indemnifying Party objects to the
determination set forth in the certificate, the matter shall be submitted to an
internationally-recognized independent accounting firm mutually acceptable to
the parties, whose determination of the Tax benefits actually realized by an
Indemnified Party shall be final and binding (and whose fees shall be paid by
the Indemnifying Party); it being further understood that the Indemnified Party
shall not be obligated to disclose and no accounting firm providing the
above-described certificate shall disclose to the Indemnifying Party any
information relating to the income or operations of the Indemnified Party or its
Affiliates or any other information relating to any Returns of such Indemnified
Party.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of BE Aerospace and the
Purchaser;
(b) by BE Aerospace or the Purchaser, if any Governmental
Authority with jurisdiction over such matters shall have issued a
Governmental Order restraining, enjoining or otherwise prohibiting the
<PAGE>
sale of the Purchased Interest hereunder and such order, decree, ruling
or other action shall have become final and unappealable; provided,
that the provisions of this Section 8.01(b) shall not be available to
any party unless such party shall have complied with its obligations
under Section 5.01 or otherwise used its best efforts to oppose any
such Governmental Order or to have such Governmental Order vacated or
made inapplicable to the transactions contemplated by this Agreement;
or
(c) by BE Aerospace or the Purchaser, if the Closing shall not
have occurred on or prior to December 31, 1999; provided, however, that
the right to terminate this Agreement under this Section 8.01(c) shall
not be available to any party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur prior to such date.
SECTION 8.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 8.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except that nothing herein shall relieve any party from liability for any
willful breach hereof.
SECTION 8.03. WAIVER. At any time prior to the Closing, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of another party hereto, (b) waive any inaccuracies in
the representations and warranties made to such party herein or in any document
<PAGE>
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EXPENSES. Except as otherwise provided in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 9.02. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 9.02):
(a) if to the Seller and the Former Interest Holders:
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, FL 33414
Attention: Thomas P. McCaffrey
Corporate Senior Vice President
of Administration and Chief
Financial Officer
Edmund J. Moriarty
Corporate Vice President
and General Counsel
Telecopier: (561) 791-3966
with a copy to:
Shearman & Sterling
599 Lexington Avenue
<PAGE>
New York, New York 10022
Attention: Alfred J. Ross, Esq.
Telecopier: (212) 848-7179
(b) if to the Purchaser:
Thomson-CSF Sextant, Inc.
1924 NW 84th Avenue
Miami, Florida 33126
Attention: Franck Hebert
President
Telecopier: (305) 597-6366
with a copy to:
Thomson-CSF Sextant
Zone Aeronautique
Louis Breguet-BP 200
78141 Velizy-Villacoublay Cedex
France
Attention: Alain Villevieille
Telecopier: (011) 33.1.46.29.88.88
and
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Alison M. Dreizen, Esq.
Telecopier: (212) 354-8113
SECTION 9.03. PUBLIC ANNOUNCEMENTS. Unless otherwise required
by applicable Law, no party to this Agreement shall make any public
announcements in respect of this Agreement or the transactions contemplated
hereby or otherwise communicate with any news media without prior notification
to the other parties, and the parties hereto shall cooperate as to the timing
and contents of any such announcement.
SECTION 9.04. HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
<PAGE>
SECTION 9.05. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 9.06. ENTIRE AGREEMENT. This Agreement (including the
Disclosure Schedule and the Exhibits hereto) together with the Initial Purchase
Agreement (including the Disclosure Schedule of the Initial Purchase Agreement
and the Exhibits thereto) and the Assignment and Assumption Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the Seller, the Former Interest Holders and the
Purchaser with respect to the subject matter hereof and except as otherwise
expressly provided herein.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned
by any party hereto, provided that the Purchaser may, by written notice
delivered to BE Aerospace not less than three (3) days prior to the Closing
Date, designate an Affiliate to assume all or a portion of the obligations and
rights of the Purchaser under this Agreement, provided further, however, that no
such assignment shall release the Guarantor of its obligations under the
Guaranty.
SECTION 9.08. NO THIRD-PARTY BENEFICIARIES. Except as
specifically provided in Article VII, this Agreement is for the sole benefit of
the parties hereto and their permitted successors, assigns and nothing herein,
express or implied, is intended to or shall confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.09. Waivers and Amendments. This Agreement may be
amended or modified, and the terms and conditions hereof may be waived, only by
a written instrument signed by the parties hereto or, in the case of a waiver,
by each party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any other right,
<PAGE>
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any party may otherwise have at Law or in equity.
SECTION 9.10. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing was not performed in accordance
with the terms hereof and that, prior to the Closing, the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
SECTION 9.11. GOVERNING LAW; DISPUTE RESOLUTION. (a) This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts executed in and to be performed in
that State.
(b) In the event of any Dispute, the parties hereto shall
attempt in good faith to negotiate and resolve any such Dispute. If after good
faith negotiations the Dispute shall have not been resolved, either party may
deliver an Arbitration Notice to the other party. If the matter is not resolved
within ten (10) Business Days after the delivery of the Arbitration Notice, or
such later date as may be mutually agreed upon, then all Disputes shall be
finally settled by arbitration.
(c) The seat of the arbitration shall be in New York, and the
arbitration shall be conducted in English, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with such rules. The arbitrators are
precluded from considering or awarding consequential, special, punitive or
exemplary damages to any party in any arbitration conducted pursuant hereto. The
parties shall have the right to present documentary evidence and witnesses. The
parties shall also have the right to cross-examine witnesses. The decision of
the arbitrators shall be final and binding upon the parties, and no party shall
seek recourse to a law court or other authorities to appeal for revisions of
such decision. Nothing herein shall limit the ability of a party to seek
temporary or preliminary injunctive relief pending arbitration.
SECTION 9.12. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto each by its
respective officers thereunto duly authorized have caused this Agreement to be
executed as of the date first written.
IFE SALES, LLC
By:____________________
Name:
Title:
BE AEROSPACE, INC.
By:____________________
Name:
Title:
BE INTELLECTUAL PROPERTY INC.
By:____________________
Name:
Title:
PURITAN-BENNETT AEROSYSTEMS CO.
By:____________________
Name:
Title:
THOMSON-CSF SEXTANT, INC.
By:______________________
Name: Franck Hebert
Title: President
PROMISSORY NOTE
U.S.$22,000,000 Dated: October 5, 1999
FOR VALUE RECEIVED, the undersigned, THOMSON-CSF HOLDING
CORPORATION, a Delaware corporation (the "Payor"), HEREBY PROMISES TO PAY to the
order of IFE SALES, LLC, a Delaware limited liability company (the "Payee") (i)
the principal amount of $11,000,000 on the first anniversary of the making of
this Note, plus interest on such amount at an interest rate per annum equal at
all times to 5% and (ii) the principal amount of $11,000,000 on the second
anniversary of the making of this Note (the "Maturity Date"), plus interest on
such amount at an interest rate per annum equal at all times to 5%; provided,
however, that any overdue amount (after giving effect to any applicable grace
period) of principal, interest or other amounts payable hereunder shall, to the
fullest extent permitted by law, bear interest, payable on demand, at 8% per
annum.
SECTION 1. REPAYMENT. The Payor shall repay to the Payee on
the Maturity Date the aggregate principal amount hereof then outstanding.
SECTION 2. PREPAYMENTS. The Payor may, upon at least one
Business Day's (as defined below) notice to the Payee stating the proposed date
and principal amount of the prepayment, and if such notice is given the Payor
shall, prepay the outstanding principal amount hereof in whole or in part, with
accrued interest to the date of such prepayment on the amount prepaid, provided
that each optional partial prepayment shall be in a principal amount not less
than $250,000. "Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City or Washington, D.C.
SECTION 3. PAYMENTS AND COMPUTATIONS. (a) The Payor shall make
each payment hereunder not later than 1:00 P.M. (New York City time) on the day
when due in U.S. dollars to the Payee at its address referred to in Section 6 or
at an account maintained by the Payee with a commercial bank organized under the
laws of the United States, or any State thereof, and designated by the Payee for
such purposes at least two Business Days in advance, in same day funds.
(b) All computations of interest shall be made on the basis of
a year of 365 or 366 days, as the case may be, for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
(c) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.
(d) In this Note in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding".
SECTION 4. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) (i) The Payor shall fail to perform its obligations
pursuant to Section 1; or (ii) the Payor shall fail to pay any interest
on the outstanding principal amount hereof within 15 Business Days
after the same becomes due and payable; or
<PAGE> 2
(b) The Payor shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Payor seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 60
days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur;
then, and in any such event, the Payee may, by written notice to the
Payor, declare this Note, all interest thereon and all other amounts
payable under this Note to be forthwith due and payable, whereupon this
Note, all such interest and all such amounts shall become and be
forthwith due and payable.
SECTION 5. RIGHT OF SET-OFF. Payor shall have the right to set
off against amounts due under this Note any amount then due and unpaid by the
Payee or the other parties to each of (i) the Purchase Agreement dated as of
January 25, 1999 between Thomson-CSF Sextant, Inc. and BE Aerospace, Inc. and
(ii) the Purchase Agreement dated as of September 1, 1999 among Thomson-CSF
Sextant, Inc., the Payee, BE Aerospace, Inc., BE Intellectual Property, Inc. and
Puritan-Bennett Aero Systems, Inc. owing to the Payor or any Affiliate thereof.
SECTION 6. NOTICES, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier) and mailed,
telecopied or delivered, if to the Payor, at its address at 100 West Commons
Boulevard, One Corporate Commons, Suite 302, New Castle, Delaware 19720, fax no.
(302) 326-0837, Attention: Dan O'Brien, with a copy to Thomson-CSF North
America, Inc., 99 Canal Center Plaza, Suite 480, Alexandria, Virginia 22314, fax
no. (703) 836-2967, Attention: Martita Cooper, Esq., and if to the Payee, at its
address at 1400 Corporate Center Way, Wellington, Florida 33414, fax no. (561)
791-3966, Attention: Thomas P. McCaffrey, or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party. All such notices and communications shall, when mailed, be effective when
deposited in the mails, or when telecopied, be effective upon confirmation of
the sending thereof, or when delivered, be effective upon delivery thereof.
SECTION 7. BINDING EFFECT. This Note shall be binding upon and
inure to the benefit of the Payor and the Payee and their respective successors
and assigns, except that neither the Payor nor the Payee shall have the right to
assign or transfer its rights hereunder or any interest herein without the prior
written consent of the other party.
SECTION 8. GOVERNING LAW, JURISDICTION, WAIVER OF JURY TRIAL,
ETC. (a) This Note shall be governed by, and construed in accordance with, the
laws of the State of New York.
<PAGE> 3
(b) In the event of any Dispute, the parties hereto shall
attempt in good faith to negotiate and resolve any such Dispute. If after good
faith negotiations the Dispute shall have not been resolved, either party may
deliver written notice of its intent to submit the matter to arbitration (the
"Arbitration Notice") to the other party. If the matter is not resolved within
ten (10) Business Days after the delivery of the Arbitration Notice, or such
later date as may be mutually agreed upon, then all Disputes shall be finally
settled by arbitration.
(c) The seat of the arbitration shall be in New York, and the
arbitration shall be conducted in English, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with such rules. The arbitrators are
precluded from considering or awarding consequential, special, punitive or
exemplary damages to any party in any arbitration conducted pursuant hereto. The
parties shall have the right to present documentary evidence and witnesses. The
parties shall also have the right to cross-examine witnesses. The decision of
the arbitrators shall be final and binding upon the parties, and no party shall
seek recourse to a law court or other authorities to appeal for revisions of
such decision. Nothing herein shall limit the ability of a party to seek
temporary or preliminary injunctive relief pending arbitration.
(d) Each of the Payor and the Payee hereby irrevocably waives
all right to trial by jury in any action, proceeding or counterclaim (whether
based on contract, tort or otherwise) arising out of or relating to this Note.
IN WITNESS WHEREOF, each of the Payor and the Payee has caused
this Note to be executed by its officer thereunto duly authorized, as of the
date first above written.
THOMSON-CSF HOLDING CORPORATION
By_____________________________
Name:
Title:
Acknowledged and Agreed to:
IFE SALES, LLC
By ______________________________________
Name: Thomas P. McCaffrey
Title: Vice President
GUARANTY
Dated October 5, 1999
From
THOMSON-CSF SEXTANT
as Guarantor
in favor of
IFE SALES, LLC,
BE AEROSPACE, INC.,
BE INTELLECTUAL PROPERTY, INC.
and
PURITAN-BENNETT AERO SYSTEMS CO.
<PAGE>
T A B L E OF C O N T E N T S
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1. Guaranty............................................................1
2. Guaranty Absolute...................................................1
3. Waivers and Acknowledgments.........................................2
4. Representations and Warranties......................................3
5. Amendments, Etc.....................................................4
6. Notices, Etc........................................................4
7. No Waiver; Remedies.................................................4
8. Indemnification.....................................................4
9. Continuing Guaranty.................................................5
10. Governing Law; Arbitration.........................................5
</TABLE>
<PAGE>
GUARANTY
GUARANTY dated October 5, 1999 made by Thomson-CSF Sextant, a
societe anonyme organized under the laws of France (the "Guarantor"), in favor
of IFE Sales, LLC, a Delaware limited liability company (the "Seller"), BE
Aerospace, Inc., a Delaware corporation ("BE Aerospace"), BE Intellectual
Property, Inc., a Delaware corporation ("BE IP"), Puritan-Bennett Aero Systems
Co., a Delaware corporation ("Puritan-Bennett" and together with BE Aerospace
and BE IP, the "Former Interest Holders").
PRELIMINARY STATEMENT. The Seller and the Former Interest
Holders are parties to a Purchase Agreement dated as of September 1, 1999
(together with the attached Disclosure Schedule and exhibits, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Purchase Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Thomson-CSF Sextant
Inc., a Florida corporation ("Sextant"), pursuant to which Sextant agreed to
purchase from the Seller 100% of the Class Two Interests in Sextant In-Flight
Systems, LLC (formerly known as In-Flight Entertainment LLC), a Delaware limited
liability company ("SIFS"). Pursuant to an Assignment and Assumption Agreement
dated as of September 30, 1999, Sextant assigned its rights and obligations
under the Purchase Agreement to Thomson-CSF Holding Corporation, a Delaware
corporation (the "Purchaser"). The Guarantor is an Affiliate of the Purchaser.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Seller and the Former Interest Holders to enter into the Purchase
Agreement, the Guarantor hereby agrees as follows:
Section 1. GUARANTY. The Guarantor hereby unconditionally and
irrevocably guarantees the punctual performance and payment when due of all
obligations, amounts and other liabilities of the Purchaser now or hereafter
existing under the Purchase Agreement, and the obligations of SIFS to BE
Aerospace referred to in Section 2.06 of the Purchase Agreement (such
obligations, amounts and other liabilities being the "Guaranteed Obligations"),
and agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Seller and the Former Interest Holders in successfully
enforcing any rights under this Guaranty. Without limiting the generality of the
foregoing, the Guarantor's liability shall extend to all amounts and obligations
that constitute part of the Guaranteed Obligations and would be owed by the
Purchaser to the Seller and the Former Interest Holders under the Purchase
Agreement but for the fact that they are unenforceable or not allowable in
either case due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Purchaser.
Section 2. GUARANTY ABSOLUTE. The Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Purchase Agreement, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Seller and the Former Interest Holders with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations or any other obligations of the Purchaser under the
Purchase Agreement, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Purchaser or whether the Purchaser is
<PAGE> 1
joined in any such action or actions. The liability of the Guarantor under this
Guaranty shall be irrevocable, absolute and unconditional irrespective of, and
the Guarantor hereby irrevocably waives any defenses it may now or hereafter
have in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of the Purchase
Agreement or any agreement or instrument relating thereto arising from
the failure of the Purchaser to properly authorize, execute and deliver
the Purchase Agreement;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other obligations of the Purchaser under the Purchase Agreement or any
agreement or instrument relating thereto, or any other amendment or
waiver of or any consent to departure from the Purchase Agreement;
(c) any change, restructuring or termination of the corporate
structure or existence of the Purchaser, SIFS or any of their
respective subsidiaries; or
(d) any failure of the Seller or the Former Interest Holders
to disclose to the Guarantor any information relating to the financial
condition, operations, properties or prospects of SIFS or any of its
subsidiaries now or in the future known to the Seller and the Former
Interest Holders (the Guarantor waiving any duty on the part of the
Seller and the Former Interest Holders to disclose such information).
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Seller, any Former Interest Holder or any
other Person upon the insolvency, bankruptcy or reorganization of the Purchaser
or SIFS or otherwise, all as though such payment had not been made.
Section 3. WAIVERS AND ACKNOWLEDGMENTS. (a) The Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Seller and the Former Interest Holders exhaust any right,
pursue any remedy or take any action against the Purchaser or any other Person.
<PAGE> 2
(b) The Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
Section 4. REPRESENTATIONS AND WARRANTIES. The Guarantor
hereby represents and warrants as follows:
(a) The Guarantor is a societe anonyme duly incorporated,
validly existing and in good standing under the laws of France and has all
necessary corporate power and authority to enter into this Guaranty, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby.
(b) The Guarantor has taken all requisite corporate action to
duly authorize the execution and delivery of this Guaranty by the Guarantor, the
performance by the Guarantor of its obligations hereunder and the consummation
by the Guarantor of the transactions contemplated hereby.
(c) This Guaranty has been duly executed and delivered by the
Guarantor, and constitutes a legal, valid and binding obligation of the
Guarantor enforceable against it in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) Except as may result from any facts or circumstances
relating solely to the Seller and the Former Interest Holders, the execution,
delivery and performance of this Guaranty by the Guarantor does not and will
not: (i) conflict with or violate the Certificate of Incorporation or By-laws
(or other similar applicable documents) of the Guarantor; (ii) conflict with or
violate any Law or Governmental Order applicable to the Guarantor, except as
would not, individually or in the aggregate, have a material adverse effect on
the ability of the Guarantor to consummate, or delay the consummation of, the
transactions contemplated by this Guaranty; or (iii) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Guarantor
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument relating to such assets or
properties to which the Guarantor or any of its subsidiaries is a party or by
which any of such assets or properties is bound or affected, except as would
not, individually or in the aggregate, have a material adverse effect on the
ability of the Guarantor to consummate, or delay the consummation of, the
transactions contemplated by this Guaranty.
<PAGE> 3
(e) The execution and delivery of this Guaranty by the
Guarantor do not, and the performance of this Guaranty by the Guarantor will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any governmental or regulatory authority.
(f) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
Section 5. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Guaranty and no consent to any departure by the Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Guarantor, the Seller and the Former Interest Holders, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
Section 6. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to the Guarantor, addressed to it at Thomson-CSF Sextant, Zone
Aeronautique, Louis Breguet - BP 200, 78141 Velizy - Villacoublay Cedex, France,
Attention: Alain Villevieille, if to the Seller and the Former Interest Holders,
to BE Aerospace, at its address specified in the Purchase Agreement. All such
notices and other communications shall, when mailed, telegraphed, telecopied or
telexed, be effective when deposited in the mails, delivered to the telegraph
company, transmitted by telecopier or confirmed by telex answerback,
respectively.
Section 7. NO WAIVER; REMEDIES. No failure on the part of the
Seller or any Former Interest Holders to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
Section 8. INDEMNIFICATION. Without limitation on any other
obligations of the Guarantor or remedies of the Seller and the Former Interest
Holders under this Guaranty, the Guarantor shall, to the fullest extent
permitted by law, indemnify, defend and save and hold harmless the Seller and
the Former Interest Holders from and against, and shall pay on demand, any and
all losses, liabilities, damages, expenses and charges (including the fees and
disbursements of legal counsel to the Seller and the Former Interest Holders)
suffered or incurred by the Seller and the Former Interest Holders as a result
of any failure of any Guaranteed Obligations to be the legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with their terms arising from the failure of the Purchaser to properly
authorize, execute and deliver the Purchase Agreement.
<PAGE> 4
Section 9. CONTINUING GUARANTY. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the performance by the Purchaser of all its
obligations under the Purchase Agreement and (b) not be assignable by the
Guarantor, the Seller or the Former Interest Holders.
Section 10. GOVERNING LAW; ARBITRATION. (a) This Guaranty
shall be goverened by, and construed in accordance with, the laws of the State
of New York.
(b) In the event of any dispute in connection with or arising
out of the existence, validity, construction or performance of this Guaranty (or
any terms hereof) (collectively, a "Dispute"), the Guarantor shall attempt in
good faith to negotiate and resolve any such Dispute with the Seller and the
Former Interest Holders. If after good faith negotiations the Dispute shall have
not been resolved, any party may deliver to any other party written notice of
its intention to submit the matter to arbitration (the "Arbitration Notice"). If
the matter is not resolved within 10 Business Days after the delivery of the
Arbitration Notice, or such later date as may be mutually agreed upon, then all
Disputes shall be finally settled by arbitration. The seat of the arbitration
shall be in New York, and the arbitration shall be conducted in English, in
accordance with the Rules of Conciliation and Arbitration of the International
Chamber of Commerce by one or more arbitrators appointed in accordance with such
rules. The arbitrators are precluded from considering or awarding consequential,
special, punitive or exemplary damages to any party in any arbitration conducted
pursuant hereto. The parties shall have the right to present documentary
evidence and witnesses. The parties shall also have the right to cross-examine
witnesses. The decision of the arbitrators shall be final and binding upon all
the parties, and no party shall seek recourse to a law court or other
authorities to appeal for revisions of such decision. Nothing herein shall limit
the ability of any party to seek temporary or preliminary injunctive relief
pending arbitration.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
THOMSON-CSF SEXTANT
By ________________________
Title:
AMENDMENT, RELEASE AND WAIVER NO. 1
AMENDMENT, RELEASE AND WAIVER NO. 1 dated as of December 4,
1998 by and among BE Aerospace, Inc., a Delaware corporation (the "Company"),
In-Flight Entertainment, LLC, a Delaware limited liability company
("In-Flight"), the lenders party hereto (the "Lenders") and The Chase Manhattan
Bank, as administrative agent (the "Administrative Agent").
WHEREAS the Company, the Lenders and the Administrative Agent
are party to a Fifth Amended and Restated Credit Agreement dated as of October
29, 1993, amended and restated as of August 7, 1998 (as amended, supplemented
and otherwise modified and in effect to but excluding the date hereof, the
"Credit Agreement").
WHEREAS In-Flight and the Administrative Agent are parties to
an Amended and Restated Guarantee and Security Agreement (the "In-Flight
Guarantee and Security Agreement") providing, inter alia, for the guarantee by
In-Flight of the obligations of the Company under the Credit Agreement.
WHEREAS the Company and the Administrative Agent are parties
to an Amended and Restated Security Agreement (the "Security Agreement")
providing, inter alia, for the pledge by the Company, as collateral security for
the payment of the obligations of the Company under the Credit Agreement, of all
of the membership interests of In-Flight owned by the Company.
WHEREAS the Company has advised the Lenders and the
Administrative Agent that the Company wishes to (i) sell, at any time or from
time to time, all or any part of the membership interests it holds in In-Flight
(collectively, the "In-Flight Disposition"), (ii) transfer certain assets of
Puritan-Bennett Aero Systems Corp. ("Puritan-Bennett") associated with the
business of In-Flight in an amount not to exceed $2,000,000 to a special purpose
subsidiary of the Company ("Puritan-Bennett Subsidiary") after which the Company
shall then transfer all of the issued and outstanding stock of Puritan-Bennett
Subsidiary to In-Flight (the "Puritan-Bennett Transfer") and (iii) terminate the
In-Flight Guarantee and Security Agreement and release the remaining membership
interests of In-Flight owned by the Company from the Collateral under the
Security Agreement. Therefore, the Company has requested that the Lenders agree,
and the Lenders party hereto are willing, on the basis set forth herein, to
waive and amend various provisions contained in Sections 8.05, 8.08 and 8.17 of
the Credit Agreement and to consent to the termination of the In-Flight
Guarantee and Security Agreement and the release of the remaining membership
interests of In-Flight from the Collateral, all on the terms and conditions of
this Amendment, Release and Waiver No. 1. Capitalized terms used but not defined
herein shall have the respective meanings ascribed to such terms in the Credit
Agreement.
<PAGE>
NOW THEREFORE in consideration of the premises and the mutual
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. WAIVER, TERMINATION AND RELEASE.
(a) Subject to the satisfaction of the conditions to
effectiveness specified in Section 5 hereof, but with effect on the date hereof,
each of the Lenders hereby agrees with the Company that:
(i) any violation of Section 8.05 of the Credit Agreement
shall be waived to the extent necessary to permit the In-Flight
Disposition;
(ii) any violation by the Company or Puritan-Bennett of
Section 8.08(d) of the Credit Agreement shall be waived to the extent
necessary to permit the Puritan-Bennett Transfer and any investment by
the Company or Puritan-Bennett in connection therewith shall not
constitute an Investment for the purpose of Section 8.08(d); and
(iii) Section 8.17 of the Credit Agreement, which requires
that the Company maintain its ownership interest in each of its
Subsidiaries and prohibits the sale, transfer, pledge or disposal of
such ownership interests, shall be waived to the extent necessary to
permit the In-Flight Disposition.
(b) Subject to the satisfaction of the conditions to
effectiveness specified in Section 5 hereof, but with effect on the date of the
initial In-Flight Disposition, each of the Lenders hereby further agrees with
the Company that In-Flight shall be released from its obligations under the
In-Flight Guarantee and Security Agreement.
(c) Subject to the satisfaction of the conditions to
effectiveness specified in Section 5 hereof, but with effect on the date of the
initial In-Flight Disposition, each of the Lenders hereby further agrees with
the Company that, all membership interests of In-Flight owned by the Company
shall be released from the Collateral under the Security Agreement.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 5 hereof, but with effect on the date
hereof, the Credit Agreement shall be amended as follows:
(a) Section 8.08(d) shall be amended to read in its entirety:
"(d) Investments by the Company in Subsidiaries of the Company
in the ordinary course of business; provided that (i) 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
<PAGE>
outstanding and (ii) the aggregate amount of Customer Obligations (as
defined in paragraph (h) below) 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 December 2, 1998 to
any Minority-Owned Entities (as defined in paragraph (h) below) plus
the aggregate book value (at the time of its transfer) of all Property
(not including cash and not including any Property that is subject to a
Lien in favor of the Administrative Agent for the benefit of the
Lenders) transferred by the Company to any one or more Subsidiaries
since December 2, 1998 minus any cash dividends or other distributions
received by the Company from any Minority-Owned Entity (as defined in
paragraph (h) below) since December 2, 1998 shall not exceed in the
aggregate at any one time outstanding the greater of (x) $25,000,000
and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for
which financial statements have been provided hereunder; provided
further, that any increase in the net worth of any Minority-Owned
Entity (determined in accordance with GAAP) shall not be considered in
determining the amounts under (x) and (y) above;"
(b) Section 8.08(h) shall be amended to read in its entirety:
"(h) Investments of the Company and its Subsidiaries (i) in
corporations, companies, limited liability companies, partnerships and
other entities in each case that are not, or do not thereby become,
Subsidiaries of the Company ("Minority-Owned Entities") or (ii)
representing obligations of customers owing to the Company and its
Subsidiaries in respect of the deferred purchase price of products or
services sold or the leasing of products to customers ("Customer
Obligations"), in each case in the ordinary course of business of the
Company and its Subsidiaries as provided for in Section 8.14 hereof and
on such terms as the management of the Company may determine in its
reasonable business judgment, provided that the aggregate amount of
such Customer Obligations that are not fully secured (whether by a
perfected Lien on, or an indefeasible title retention to, the products
so sold or leased, or otherwise) plus the aggregate fair market value
of all Property (whether now owned or hereafter acquired) of the
Company or any of its Subsidiaries (as determined in good faith by the
chief financial officer of the Company) sold, assigned, transferred or
otherwise disposed of on or after December 2, 1998 to any such
Minority-Owned Entities plus the aggregate book value (at the time of
its transfer) of all Property (not including cash and not including
Property that is subject to a Lien in favor of the Administrative Agent
for the benefit of the Lenders) transferred by the Company to any one
or more Subsidiaries since December 2, 1998 minus any cash dividends or
other distributions received by the Company from any Minority-Owned
Entity since December 2, 1998 shall not exceed in the aggregate at any
one time outstanding the greater of (x) $25,000,000 and (y) 5% of
Adjusted Net Worth as of the most recent Fiscal Date for which
financial statements have been provided hereunder; provided further,
that any increase in the net worth of any Minority-Owned Entity
(determined in accordance with GAAP) shall not be considered in
determining the amounts under (x) and (y) above."
<PAGE>
Section 3. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Lenders and the Administrative Agent that this
Amendment, Release and Waiver No. 1 has been duly and validly executed and
delivered by the Company and constitutes the Company's legal and valid
obligation, enforceable in accordance with its terms. The Company further
represents and warrants to the Lenders and the Administrative Agent that both
before and after giving effect to this Amendment, Release and Waiver No. 1 (i)
no Default has occurred and is continuing and (ii) the representations and
warranties made by the Company in Section 7 of the Credit Agreement are true and
complete on and as of the date hereof 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). It
shall be an Event of Default for all purposes of the Credit Agreement (as
amended hereby) if any representation, warranty or certification made by the
Company in this Amendment, Release and Waiver No. 1, or in any certificate or
other writing furnished to any Lender or the Administrative Agent pursuant to
this Amendment, Release and Waiver No. 1, shall prove to have been incorrect as
of the time made or furnished in any material respect.
Section 4. DOCUMENTS OTHERWISE UNCHANGED. The parties hereto
agree that, except as expressly provided herein, the Credit Agreement and the
Security Agreement shall remain unchanged and in full force and effect.
Section 5. CONDITIONS TO EFFECTIVENESS. The waivers set forth
in Section 1 hereof and the amendments to the Credit Agreement set forth in
Section 2 hereof shall be subject to the satisfaction of each of the following
conditions to effectiveness:
(a) the Administrative Agent shall have received one or more
counterparts of this Amendment, Release and Waiver No. 1 duly executed
by the Company, In-Flight, the Majority Lenders and the Administrative
Agent; and
(b) the Administrative Agent shall have received satisfactory
evidence from the chief financial officer of the Company as to the Net
Available Proceeds that the Company shall receive in connection with
the sale of the membership interests of In-Flight and the chief
financial officer shall have given the Administrative Agent irrevocable
notice that such Net Available Proceeds shall be applied to the
prepayment of the Series B Loans.
Section 6. COUNTERPARTS. This Amendment, Release and Waiver
No. 1 may be executed in any number of counterparts, each of which
shall be identical and all of which, when taken together, shall
constitute one and the same instrument, and any of the parties
hereto may execute this Amendment, Release and Waiver No. 1 by
signing any such counterpart.
Section 7. EXPENSES. Without limiting its obligations under
Section 11.03 of the Credit Agreement, the Company agrees to pay, on demand, all
reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, reasonable fees and expenses of Milbank, Tweed,
Hadley & McCloy, special counsel to the Administrative Agent) incurred in
connection with the negotiation, preparation, execution and delivery of this
Amendment, Release and Waiver No. 1.
<PAGE>
Section 8. BINDING EFFECT. This Amendment, Release and Waiver
No. 1 shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
Section 9. GOVERNING LAW. This Amendment, Release and Waiver
No. 1 shall be governed by, and construed in accordance with, the law of the
State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment, Release and Waiver No. 1 to be duly executed as of the date first
above written.
BE AEROSPACE, INC.
By_______________________
Name:
Title:
Address for Notices:
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Attention: Jeffrey P. Holtzman,
Vice President and Treasurer
Telecopier No.: (561) 791-3966
Telephone No.: (561) 791-5000
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7000
<PAGE>
IN-FLIGHT ENTERTAINMENT, LLC
By BE Aerospace, Inc., Member
By_______________________
Name:
Title:
Address for Notices:
In-Flight Entertainment, LLC
17481 Red Hill Avenue
Irvine, California 92614
Attention: Thomas P. McCaffrey
Telephone No.:
Telecopier No.:
<PAGE>
LENDERS
THE CHASE MANHATTAN BANK
By_______________________
Name:
Title:
NATIONSBANK, N.A.
By_______________________
Name:
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By_______________________
Name:
Title:
LASALLE BUSINESS CREDIT, INC.
By_______________________
Name:
Title:
<PAGE>
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By_______________________
Name:
Title:
THE FUJI BANK AND TRUST COMPANY
By_______________________
Name:
Title:
WACHOVIA BANK, N.A.
By_______________________
Name:
Title:
AMSOUTH BANK
By_______________________
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
By_______________________
Name:
Title:
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By_______________________
Name:
Title:
By_______________________
Name:
Title:
FIRST UNION NATIONAL BANK
By_______________________
Name:
Title:
<PAGE>
SUNTRUST BANK, SOUTH FLORIDA, N.A.
By_______________________
Name:
Title:
ABN AMRO BANK N.V.
By_______________________
Name:
Title:
By_______________________
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_______________________
Name:
Title:
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Loan and Agency Services Group
1 Chase Manhattan Plaza
New York, New York 10081
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of December 21, 1999, 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 Fifth Amended and Restated Credit Agreement dated as of August 7,
1998, as amended by Amendment, Release and Waiver No. 1 dated as of December 4,
1998 (as amended, 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 4 below, but effective as of the date
hereof (the "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 "Adjusted Net Worth" in Section 1.01
of the Credit Agreement shall be amended by adding following words at the end
thereof:
" plus (f) an amount not to exceed $28,000,000 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 the non-cash portion of the
non-recurring charges and operating inefficiencies discussed by the
Company in its November 22, 1999 press release."
2.03. The definition of "Applicable Margin" in Section 1.01 of
the Credit Agreement shall be amended to read in its entirety as follows:
"'APPLICABLE MARGIN' shall mean with respect to Base Rate
Loans and Eurodollar Loans, the rate for such Type of Loan for each level period
set forth in the schedule below:
<TABLE>
<CAPTION>
Applicable Margin
Level Period Base Rate Loans Eurodollar Loans
- --------------------------------------- ----------------------------- -------------------
<S> <C> <C>
Level I Period 0.00% 0.750%
Level II Period 0.00% 0.875%
Level III Period 0.00% 1.000%
Level IV Period 0.50% 1.500%
Level V Period 0.75% 1.750%
Level VI Period 1.00% 2.000%
Level VII Period 1.50% 2.500%
</TABLE>
<PAGE>
PROVIDED that notwithstanding anything herein to the contrary, the Applicable
Margin shall not be less than the rate for a Level V Period from the Amendment
Effective Date until the third Business Day following of the receipt of the
financial statements under Section 8.01(b) as at and for the fiscal quarter
ending on the Fiscal Date in November, 1999."
2.04. The definition of "Commitment Fee Rate" in Section 1.01
of the Credit Agreement shall be amended to read in its entirety as follows:
"'COMMITMENT FEE RATE' shall mean (a) 0.2000% for any Level I
Period, (b) 0.2500% for any Level II Period, (c) 0.2500% for any Level
III Period, (d) 0.3750% for any Level IV Period, (e) 0.3750% for any
Level V Period, (f) 0.5000% for any Level VI Period and (e) 0.5000% for
any Level VII Period, provided that notwithstanding anything herein to
the contrary, the Commitment Fee Rate shall not be less than the rate
for a Level V Period from the Amendment Effective Date until the third
Business Day following of the receipt of the financial statements under
Section 8.01(b) as at and for the fiscal quarter ending on the Fiscal
Date in November, 1999."
2.05. The definition of "EBITDA" in Section 1.01 of the Credit
Agreement shall be amended by adding following words at the end thereof:
"; PROVIDED, HOWEVER, that for the purpose of calculating
EBITDA for the five fiscal quarters of the Company beginning with
November 1999 and ending with November 2000, EBITDA shall be adjusted
to add back the non-recurring charges and operating inefficiencies
discussed by the Company in its November 22, 1999 press release in an
amount not to exceed, without duplication, (i) $72,300,000 for the
quarter ending November 1999, (ii) $83,900,000 for each of the three
quarters ending February 2000, May 2000 and August 2000 and (iii)
$11,600,000 for the quarter ending November 2000."
2.06. The definition of "Indebtedness" in Section 1.01 of the
Credit Agreement shall be amended by inserting at the end thereof the words
"excluding, however, any guaranty or indemnity given by the Company in
connection with the sale of the Sextant In-Flight Entertainment Note".
2.07. Section 8.10 of the Credit Agreement shall be amended to
read in its entirety as follows:
"8.10 Leverage Ratio. The Company will not permit the Leverage
Ratio to exceed the following respective ratios at any time during the following
respective periods:
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C>
From the Fiscal Date in
November 1999 through
the Fiscal Date in February 2001 5.25 to 1
<PAGE>
From (but not including) the
Fiscal Date in February 2001
through the Fiscal Date in
February 2002 4.75 to 1
From (but not including) the
Fiscal Date in February 2002
through the Fiscal Date in
February 2003 4.25 to 1
Thereafter 4.00 to 1"
</TABLE>
2.08. Section 8.11 of the Credit Agreement shall be amended to
read in its entirety as follows:
"ADJUSTED NET WORTH. The Company will not at any date permit
Adjusted Net Worth to be less than the sum of (a) $170,000,000 plus (b)
75% of the aggregate amount of Net Available Proceeds of Equity
Issuances received after November 27, 1999 plus (c) 75% of the sum of
consolidated net earnings of the Company and its Subsidiaries
(determined on a consolidated basis without duplication in accordance
with GAAP) for each fiscal quarter of the Company ending after November
27, 1999; provided that consolidated net earnings for any fiscal
quarter in which there is a consolidated net loss shall be deemed to be
zero."
2.09. Section 8.12 of the Credit Agreement shall be amended to
read in its entirety as follows:
"INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio to be less than the following respective ratios during
the following respective periods:
<TABLE>
<CAPTION>
Period Ratio
<S> <C> <C>
From the Fiscal Date in
November 1999 through
the Fiscal Date in February 2001 2.00 to 1
From (but not including) the
Fiscal Date in February 2001
through the Fiscal Date in
February 2002 2.25 to 1
From (but not including) the
Fiscal Date in February 2002
through the Fiscal Date in
February 2003 2.50 to 1
Thereafter 2.75 to 1"
</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
<PAGE>
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.
Section 4. CONDITION PRECEDENT. As provided in Section 2
above, the amendments to the Credit Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon receipt by the Administrative
Agent of the following documents, each of which shall be satisfactory to the
Administrative Agent in form and substance:
4.01. AMENDMENT NO. 2. Duly executed counterparts of this
Amendment No. 2 by the Company, the Administrative Agent and the Majority
Lenders.
4.02. OPINION OF COUNSEL TO THE COMPANY. An opinion, dated the
Amendment Effective Date, of Shearman & Sterling, counsel to the
Company, (i) as to the due authorization, execution and delivery of
this Amendment No. 2 and (ii) that this Amendment No. 2 is legal,
valid, binding and enforceable in accordance with its terms (subject to
customary exceptions) and the Company hereby instructs such counsel to
deliver such opinions to the Lenders and the Administrative Agent.
4.03. OTHER DOCUMENTS. Such other documents that the
Administrative agent or special New York counsel to Chase may
reasonably request.
Section 5. 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.
[Remainder of this page intentionally left blank]
<PAGE>
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_______________________
Name:
Title:
Address for Notices:
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Attention: Jeffrey P. Holtzman,
Vice President - Finance and Treasurer
Telecopier No.: (561) 791-3966
Telephone No.: (561) 791-5000
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Maura O'Sullivan, Esq.
Telecopier No.: (212) 848-7179
Telephone No.: (212) 848-7897
<PAGE>
LENDERS
THE CHASE MANHATTAN BANK
By_______________________
Name:
Title:
BANK OF AMERICA, N.A.
(f/k/a NationsBank, N.A.)
By_______________________
Name:
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By_______________________
Name:
Title:
LASALLE BUSINESS CREDIT, INC.
By_______________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By_______________________
Name:
Title:
<PAGE>
THE FUJI BANK AND TRUST COMPANY
By_______________________
Name:
Title:
WACHOVIA BANK, N.A.
By_______________________
Name:
Title:
AMSOUTH BANK
By_______________________
Name:
Title:
THE BANK OF NEW YORK
By_______________________
Name:
Title:
FIRST UNION NATIONAL BANK
By_______________________
Name:
Title:
<PAGE>
DG BANK, DEUTSCHE GENOSSENSCHAFTSBANK AG,
CAYMAN ISLANDS BRANCH
By_______________________
Name:
Title:
By_______________________
Name:
Title:
SUNTRUST BANK, SOUTH FLORIDA, N.A.
By_______________________
Name:
Title:
ABN AMRO BANK N.V.
By_______________________
Name:
Title:
By_______________________
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_______________________
Name:
Title:
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Loan and Agency Services Group
1 Chase Manhattan Plaza
New York, New York 10081
