<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 1997
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DECRANE AIRCRAFT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3728 34-1645569
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code No.) Identification
Incorporation or Organization) No.)
</TABLE>
155 MONTROSE WEST AVENUE
SUITE 210
COPLEY, OH 44321
(330) 668-3061
(Address, including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
R. JACK DECRANE
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
DECRANE AIRCRAFT HOLDINGS, INC.
155 MONTROSE WEST AVENUE
SUITE 210
COPLEY, OH 44321
(330) 668-3061
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
--------------------------
WITH COPIES TO:
STEPHEN A. SILVERMAN, ESQ. PETER P. WALLACE, ESQ.
SPOLIN & SILVERMAN MILBANK, TWEED, HADLEY & McCLOY
100 Wilshire Boulevard, Suite 940 601 S. Figueroa, 30th Floor
Santa Monica, California 90401 Los Angeles, California 90017
(310) 576-1221 (213) 892-4000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE (2)
<S> <C> <C> <C> <C>
Common Stock, Par Value, $.01 Shares $ $43,125,000 $13,068
</TABLE>
(1) Includes shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(a) OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Forepart of the Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus; "Additional Information"
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... "Prospectus Summary;" "Business;" "Risk Factors"
4. Use of Proceeds...................................... "Use of Proceeds"
5. Determination of Offering Price...................... "Underwriting"
6. Dilution............................................. "Dilution"
7. Selling Security Holders............................. Not applicable
8. Plan of Distribution................................. "Underwriting"
9. Description of Securities to be Registered........... "Description of Capital Stock"
10. Interests of Named Experts and Counsel............... Not applicable
11. Information with Respect to the Registrant........... "Prospectus Summary;" "Recent Developments;"
"Selected Consolidated Financial Data;"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations;" "Business;"
"Management;" "Principal Stockholders;" "Certain
Transactions;" "Description of Capital Stock;"
"Shares Eligible for Future Sale" Consolidated
Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Not applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 17, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SHARES
[LOGO]
DECRANE AIRCRAFT HOLDINGS, INC.
COMMON STOCK
($.01 PAR VALUE)
The shares of Common Stock of DeCrane Aircraft Holdings, Inc.
offered hereby are being sold by the Company. Prior to this offering, there has
been no public market for the Common Stock of the Company. It currently is
estimated that the initial public offering price will be between $ .00 and
$ .00 per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price.
Application has been made for quotation and trading of the Common Stock on
the Nasdaq National Market under the symbol "DAHX."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................ $ $ $
Total (3)........................ $ $ $
</TABLE>
(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional shares of Common Stock at the Price to Public,
less Underwriting Discounts and Commissions shown above, solely to cover
over-allotments, if any. If this option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in part.
It is expected that the Common Stock will be available for delivery on or about
, 1997 at the offices of Schroder Wertheim & Co. Incorporated, New
York, New York.
SCHRODER WERTHEIM & CO. DEAN WITTER REYNOLDS INC.
, 1997
<PAGE>
[PHOTOGRAPH OF SILHOUETTE OF AN AIRPLANE FLYING]
[PHOTOGRAPH OF AN AIRPLANE FLIGHT DECK]
[COMPANY LOGO]
The Company is a manufacturer of products and a provider of services for
certain niche markets of the commercial aircraft industry. The Company's
products and services typically are utilized to provide an interface between an
aircraft and its avionics systems, such as those pictured above.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
<TABLE>
<S> <C>
[PHOTOGRAPH OF CONTACTS] [PHOTOGRAPH OF CONNECTORS]
[PHOTOGRAPH OF BINS OF CONTACTS]
The variety of contacts manufactured by the The Company manufactures specialty connectors
Company conduct electronic signals or which are used within an aircraft to provide
electricity within an aircraft and must be an electronic or electrical link between
precision machined to conform to strict discreet wires or devices. Many of the
design tolerances. The Company manufactures connectors manufactured by the Company
millions of contacts each month. utilize the Company's contacts.
[PHOTOGRAPH OF HARNESS ASSEMBLIES] [PHOTOGRAPH OF INSTALLATION KITS]
The Company manufactures harness assemblies The Company manufactures avionics support
for use with aircraft avionics systems. The structures used to secure avionics systems
harness assemblies depicted utilize contacts within an aircraft. The connectors and
and connectors manufactured by the Company. harness assemblies manufactured by the
Company form the foundation of the
installation kits shown above.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
[PHOTOGRAPH OF MAN AT A CAD STATION] [PHOTOGRAPH OF WOMAN SITTING IN AIRPLANE SEAT
WATCHING A VIDEO MONITOR]
The Company employs more than 50 engineers, Many of the Company's systems integration
who design, engineer and certify projects involve in-flight entertainment and
modifications to existing aircraft as part of passenger telecommunication systems.
the Company's systems integration efforts.
</TABLE>
[PHOTOGRAPH OF MEN INSTALLING A SYSTEM ONTO AN AIRCRAFT]
The Company-employed, FAA-certified mechanics shown above are installing an
installation kit for a flight deck avionics system.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES
IN THIS PROSPECTUS TO THE "COMPANY" MEAN DECRANE AIRCRAFT HOLDINGS, INC., A
DELAWARE CORPORATION, AND ITS PREDECESSORS AND SUBSIDIARIES. EXCEPT AS OTHERWISE
INDICATED, ALL OF THE INFORMATION IN THIS PROSPECTUS WITH REGARD TO SHARES AND
PER SHARE AMOUNTS PERTAINING TO THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER
SHARE (THE "COMMON STOCK"), HAS BEEN ADJUSTED TO GIVE EFFECT TO A REVERSE STOCK
SPLIT WHICH IS PART OF THE RECAPITALIZATION OF THE COMPANY (THE
"RECAPITALIZATION") DESCRIBED UNDER "DESCRIPTION OF CAPITAL STOCK--THE
RECAPITALIZATION." UNLESS OTHERWISE INDICATED, THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS HAVE NOT EXERCISED THEIR OVER-ALLOTMENT OPTION.
THE COMPANY
The Company is a manufacturer of avionics components and a provider of
avionics systems integration services in certain niche markets of the commercial
aircraft industry. The products and services offered by the Company are utilized
primarily in commercial aircraft to connect, support and/or integrate various
avionics systems, including cabin management, in-flight entertainment and
passenger telecommunications systems ("cabin avionics systems") and navigation
and safety systems ("flight deck avionics systems"). The Company's targeted
markets consist of commercial aircraft and avionics original equipment
manufacturers ("OEMs"), the commercial aircraft retrofit market and the
commercial aircraft aftermarket. The Company also sells products and services to
the military aircraft market.
The Company seeks to maximize its sales by emphasizing the complementary
nature of its products and services. Components manufactured by the Company
include: (i) contacts (of which the Company believes it is the largest supplier
to the commercial aircraft industry); (ii) connectors (which often utilize the
contacts manufactured by the Company); (iii) harness assemblies (which often
utilize the connectors manufactured by the Company); and (iv) avionics support
structures (which often are packaged with the Company's connectors and harness
assemblies in installation kits). In addition, the Company manufactures dichroic
liquid crystal display ("LCD") devices, which are used with flight deck
avionics, and believes it is the largest supplier of such devices to the
commercial aircraft industry. The systems integration services provided by the
Company include design and engineering, Federal Aviation Administration ("FAA")
certification, manufacture of installation kits and systems installation. The
Company manufactures many of the components required to complete a systems
integration project, which it believes provides it a critical competitive
advantage.
The Company believes that every commercial aircraft currently produced by
the Boeing Company ("Boeing"), Airbus Industrie ("Airbus") and McDonnell Douglas
Corporation ("McDonnell Douglas") contains components manufactured by the
Company. In addition, the Company has entered into supply agreements with
Boeing, pursuant to which the Company believes that it is the supplier of a
substantial majority of the contacts for all aircraft currently manufactured by
Boeing and is the sole-source supplier of certain connectors for in-flight
entertainment systems installed by Boeing on its 777 aircraft. As a result, the
Company expects to benefit from the continuing recovery of the commercial
aircraft industry. According to the 1996 CURRENT MARKET OUTLOOK (the "Boeing
Report") published by the Boeing Commercial Airplane Group, expenditures for new
aircraft production are expected to total approximately $230 billion for the
period 1996 through 2000. This compares to expenditures for new aircraft of
approximately $170 billion for the period 1991 through 1995. The Boeing Report
also estimates that for the period 1996 through 2000, revenue passenger miles
will increase from 1.6 trillion to 2.1 trillion and the worldwide fleet of
aircraft will increase from 11,000 to 13,500 (net of approximately 1,000
retirements). The Company believes that the increase in new aircraft production
is being driven by numerous factors, including: (i) a general increase in demand
for air travel; (ii) an increase in the capacity utilization (load factor) of
aircraft currently in service; (iii) an increase in the average age of the
worldwide aircraft
3
<PAGE>
fleet; (iv) the cost-effectiveness of using new aircraft versus old aircraft;
and (v) a general improvement in the financial condition of the airline
industry.
The Company believes that its position as a primary supplier of products and
services to manufacturers of cabin avionics systems and flight deck avionics
systems provides the Company with opportunities for growth independent of the
aircraft OEM market upturn because such systems typically are installed on a
retrofit basis by purchasers of aircraft and not by aircraft OEMs. The Company's
customers in these markets include AT&T Wireless Services, Inc. ("AT&T") for
passenger telecommunications systems, Interactive Flight Technologies, Inc.
("IFT") for in-flight casino-style gaming and video-on-demand systems,
Matsushita Avionics Systems ("Matsushita") for in-flight entertainment systems
and the Rockwell Collins Division ("Rockwell Collins") of Rockwell International
Corp. for flight deck avionics systems. The Company believes that demand for
cabin avionics systems and flight deck avionics systems is increasing, primarily
as a result of: (i) a desire by airlines for additional revenue-producing
services; (ii) longer flights combined with a demand by airline passengers for
more sophisticated forms of in-flight services; and (iii) the advent of new
technologies and FAA mandates related to aircraft safety and navigation.
The Company's principal strategy is to establish and expand leading
positions in high-margin, niche markets within the commercial aircraft industry,
with a focus on the manufacture of avionics components and the integration of
avionics systems. Historically, the Company has demonstrated an ability to
increase revenues during times of industry decline which it attributes to
several actions, including: (i) the establishment of a balanced offering of
products and services for the OEM market, the retrofit market and the
aftermarket; (ii) the initiation of private labeling programs pursuant to which
the Company manufactures contacts for other connector manufacturers, including
certain of the Company's competitors; (iii) the development of new products such
as specialty connectors for Boeing's 777 aircraft; and (iv) the diversification
into new services such as the integration of in-flight entertainment systems. In
the future, the Company will seek to grow by: (i) capitalizing on growth in
commercial aircraft production; (ii) exploiting increased demand for cabin
avionics systems; (iii) expanding and diversifying the Company's systems
integration services; (iv) completing additional strategic acquisitions; and (v)
capitalizing on the Company's complementary products and services.
RECENT ACQUISITION ACTIVITY
The Company was formed in 1989 to capitalize on emerging trends in the
aircraft market through acquisitions. Since its formation, the Company has
completed eight acquisitions of businesses or assets, three of which were
completed in 1996.
- In December 1996, the Company expanded its contact manufacturing
capability and capacity by purchasing certain manufacturing assets
(collectively, the "AMP Facility") from AMP, Inc. ("AMP"). The AMP
Facility enables the Company to produce contact blanks (unfinished
contacts) using a cold-heading manufacturing process which, when used for
high volume production, is more cost-effective than the Company's existing
screw machine operations. Therefore, the Company is seeking to optimize
its contact production by converting a portion of its existing high volume
manufacturing runs to the cold-heading process. The plating and finishing
of contact blanks produced at the AMP Facility will be conducted at the
existing facilities of the Company.
- In December 1996, the Company acquired Elsinore Aerospace Services, Inc.
and the Elsinore Engineering Services division (collectively, "Elsinore")
of Elsinore, L.P. The acquisition of Elsinore provided the Company with
the ability to issue certain FAA design approvals for modification to
designated aircraft through Elsinore's FAA-issued Designated Alteration
Station ("DAS") approval. As a systems integrator, the Company regularly
seeks such FAA approvals on behalf of its customers when it integrates a
system onto an aircraft. The ability to issue FAA approvals through
Elsinore eliminates the need, in most instances, for the Company to apply
to the FAA for
4
<PAGE>
such approvals, thereby expediting the approval process. In addition, the
acquisition of Elsinore increased by approximately 50% the number of the
Company's engineering professionals dedicated to systems integration
functions.
- In September 1996, the Company acquired the Aerospace Display Systems
division ("ADS") of Allard Industries, Inc. ADS is a manufacturer of
dichroic LCD devices for use with flight deck avionics systems and it
believes that is the largest supplier of such devices to the commercial
aircraft industry. The acquisition of ADS expanded the Company's offering
of components used in flight deck avionics systems and strengthened its
position as a leading supplier of niche avionics components.
In addition, in February 1996, the Company acquired the remaining 25%
interest in Cory Components, Inc. ("Cory Components") which it did not already
own (the "Minority Interest Acquisition").
The Company believes that the fragmented nature of the market for aircraft
components and systems integration services will provide it with additional
opportunities to exploit industry consolidation trends.
* * * *
The Company's corporate offices are located at 155 Montrose West Avenue,
Suite 210, Copley, OH 44321. The Company's telephone number is (330) 668-3061.
All inquiries or notices should be directed to the attention of R. Jack DeCrane,
Chairman of the Board and Chief Executive Officer of the Company.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................... shares
Common Stock to be outstanding after
the Offering......................... shares (1)
Use of Proceeds........................ To repay certain indebtedness. See "Use of
Proceeds."
Nasdaq National Market symbol.......... DAHX
</TABLE>
- ------------------------
(1) Includes 152,915 shares of Common Stock issuable upon exercise of warrants
to purchase Common Stock (the "Nassau
Warrants") held by Nassau Capital Partners L.P. and NAS Partners I L.L.C.
(collectively, "Nassau") which will remain outstanding after the
Recapitalization. Does not include 172,155 shares of Common Stock reserved
for issuance pursuant to the Company's Amended and Restated 1993 Share
Incentive Plan (the "Share Incentive Plan").
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1993 1994 1995 1995 1996(1)
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 48,197 $ 47,092 $ 55,839 $ 42,274 $ 43,059
Gross profit...................................... 11,939 10,685 12,376 9,896 9,782
Operating income.................................. 2,776 1,760 1,835 2,230 2,172
Income (loss) before cumulative effect of
accounting change and extraordinary item........ (636) (2,429) (3,446) (1,572) (1,097)
Net loss.......................................... (757) (2,693) (3,446) (1,572) (1,097)
Net loss applicable to common stockholders........ (865) (3,080) (4,003) (1,989) (1,941)
Income (loss) per common share:
Pro forma for the Recapitalization.............. $ (1.47) $ (.71)
Pro forma as adjusted (3).......................
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization.............. 2,728 2,728
Pro forma as adjusted (4).......................
OTHER FINANCIAL DATA:
EBITDA (5)........................................ $ 6,195 $ 4,608 $ 5,174 $ 4,764 $ 4,479
Bookings (6)...................................... 46,830 47,896 50,785 37,406 53,863
Backlog at end of period (7)...................... 23,933 24,493 19,761 19,821 38,300
<CAPTION>
PRO FORMA
AS ADJUSTED(2)
-------------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- --------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 65,791 $ 50,765
Gross profit...................................... 15,290 12,349
Operating income.................................. 2,972 3,292
Income (loss) before cumulative effect of
accounting change and extraordinary item........ 1,752 2,615
Net loss..........................................
Net loss applicable to common stockholders........
Income (loss) per common share:
Pro forma for the Recapitalization..............
Pro forma as adjusted (3)....................... $ $
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization..............
Pro forma as adjusted (4).......................
OTHER FINANCIAL DATA:
EBITDA (5)........................................
Bookings (6)......................................
Backlog at end of period (7)......................
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
PRO FORMA
AS
ACTUAL ADJUSTED(8)
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $ 11,191 $ 16,620
Total assets............................ 54,228 52,553
Total debt.............................. 33,546 4,079
Mandatorily redeemable common stock
warrants.............................. 2,054 566
Stockholders' equity.................... 5,736 35,267
</TABLE>
- ------------------------------
(1) Includes the effect of the Minority Interest Acquisition beginning February
20, 1996, the date on which the transaction occurred, and the results of ADS
beginning September 18, 1996, the date on which it was acquired.
(2) Pro forma for the Minority Interest Acquisition and the acquisition of ADS
as if they had occurred on January 1, 1995. Adjusted to reflect the sale by
the Company of shares of Common Stock in this offering (the
"Offering") and the application of the net proceeds therefrom as set forth
under "Use of Proceeds." Excludes an extraordinary charge of $3.0 million to
be incurred as a result of the repayment of debt with the net proceeds from
the Offering.
(3) Reflects the Recapitalization as well as the acquisitions and the Offering,
as described in Note (2) above. Does not include 525,000 shares of Common
Stock reserved for issuance pursuant to the Share Incentive Plan.
(4) Pro forma for the Recapitalization and adjusted for the shares of Common
Stock offered hereby. Does not include 525,000 shares of Common Stock
reserved for issuance pursuant to the Share Incentive Plan.
(5) EBITDA represents earnings before interest expense (including amortization
of debt discounts), income taxes, depreciation, amortization (including
non-compete covenants, goodwill, and other intangibles) and minority
interest. EBITDA is presented because it may be used as one indicator of a
company's cash flow. The Company believes that EBITDA, while providing
useful information, should not be considered in isolation or as a substitute
for net income (loss) as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity, in each case determined
in accordance with generally accepted accounting principles. The Company
further believes that EBITDA is a meaningful measure of performance that is
commonly used in the aerospace industry to analyze comparable companies on
the basis of operating performance, leverage and liquidity.
(6) Bookings represent the total invoice value of purchase orders received
during the period.
(7) Orders are generally subject to cancellation by the customer prior to
shipment. The level of unfilled orders at any given date during the year
will be materially affected by the timing of the Company's receipt of orders
and the speed with which those orders are filled.
(8) Reflects: (i) the Recapitalization; and (ii) the sale by the Company of
shares of Common Stock in the Offering and the application of the
net proceeds therefrom as set forth under "Use of Proceeds."
6
<PAGE>
RISK FACTORS
POTENTIAL PURCHASERS OF THE COMMON STOCK SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, BEFORE DECIDING TO PURCHASE SHARES OF COMMON STOCK OFFERED HEREBY.
COMMERCIAL AIRCRAFT INDUSTRY RISKS
Among the Company's principal customers are the world's commercial aircraft
and avionics OEMs. The principal market for such OEMs is the commercial airline
industry, which is cyclical and has been adversely affected by a number of
factors, including, but not limited to, increased fuel and labor costs and
intense price competition. The commercial airline industry may be adversely
affected by increased regulatory scrutiny in the wake of several major airline
disasters and threats of terrorism. Several domestic and foreign commercial
airlines have encountered significant financial difficulties, resulting in
certain of such airlines ceasing to conduct business or seeking protection from
creditors. These financial difficulties, as well as certain other factors,
caused new commercial aircraft deliveries to decline from a peak of
approximately 770 aircraft in 1991 to approximately 370 aircraft in 1995
according to AEROSPACE AND AIRTRANSPORT CURRENT ANALYSIS published by Standard
and Poor's Industry Surveys (the "S&P Report"). Another industry downturn could
adversely affect the Company's business. See "Business--Industry Overview and
Trends."
SUBSTANTIAL LEVERAGE; HISTORY OF NET LOSSES AND DEFAULTS
The Company has operated with substantial leverage and debt service
requirements since its first acquisition in 1990. As a result, since 1990, the
Company has experienced net losses in each year through 1995, despite positive
operating income. In addition, the Company was not in compliance with certain
financial covenants contained in its debt agreements at various times since its
inception. In each case such non-compliance was waived by the lenders. Since
March 1996, the Company has been in compliance with all financial covenants
contained in its existing debt agreements. Although the Company intends to use
the net proceeds of this Offering to repay a significant portion of its
outstanding indebtedness, there can be no assurance as to the future
profitability of the Company nor can there be assurance that the Company will
remain in compliance with the covenants contained in its debt agreements. See
"Use of Proceeds," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Notes to Consolidated Financial Statements."
FLUCTUATIONS IN QUARTERLY AND YEARLY RESULTS
The Company's business is subject to quarterly and yearly fluctuations.
Specifically, the magnitude of certain systems integration programs relative to
the Company's overall business has the potential to expose the Company's results
of operations to fluctuations in quarterly and yearly results. In addition,
irregular timing of awards or cancellations of systems integration contracts, as
well as development and technology delays by OEMs or their suppliers, could
further exacerbate such fluctuations in quarterly and yearly operations. If such
events occur, the results of operations of the Company may be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DEPENDENCE ON KEY CUSTOMERS
The Company's three largest customers are Boeing, AT&T and Matsushita, which
accounted for approximately 9.0%, 21.6% and 7.4%, respectively, of the Company's
consolidated revenues (pro forma for the acquisition of ADS) for the fiscal year
ended December 31, 1995 and 12.8%, 8.9% and 8.5%, respectively, of the Company's
consolidated revenues (pro forma for the acquisition of ADS) for the nine
7
<PAGE>
months ended September 30, 1996. In addition, a significant portion of the
Company's sales of components are sold to Boeing indirectly through sales to
suppliers of Boeing. Most of the Company's sales to Boeing are pursuant to
contracts which may be terminated by Boeing at any time. In addition, under
certain circumstances, Boeing may enforce alternative economic terms pursuant to
such contracts in which case the contracts could become less commercially
favorable to the Company or the Company may elect to terminate the applicable
portion of such contracts. There can be no assurance that Boeing will not
terminate any of its contracts with the Company.
The Company expects that IFT, a new entrant into the in-flight entertainment
business and a publicly traded company, will be a significant customer in 1997.
The Company entered into a contract with IFT in July 1996 and expects to realize
a substantial portion of the revenues from such contract in 1997. The Company
will account for revenues generated under the IFT contract using the percentage
of completion method of accounting. Pursuant to this contract, which provides
for monthly progress payments, the Company will provide systems integration
services for IFT's new in-flight entertainment system (the "IFT System") on 21
wide-body aircraft for Swiss Air Transport Co. Ltd. ("Swissair"). The Swissair
contract is the first large-scale commercial application of the IFT System. Any
delays in installation or problems in implementation of the IFT System may
result in the deferral or loss of potential revenues from IFT. The loss of any
one or more of the Company's key customers could have a material adverse effect
on the Company. See "Business--Customers" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
REGULATION
The FAA prescribes standards and licensing requirements for aircraft
components, licenses private repair stations and issues DAS approvals giving the
holder the right to certify aircraft modifications on behalf of the FAA. The
ability of the Company to arrange for rapid government certification of its
systems integration services is essential to the Company's business and depends
on its continuing access to or use of private repair stations, DASs, and
FAA-designated and FAA-certified engineering professionals. There can be no
assurance that: (i) the Company will continue to have adequate access to such
stations and professionals; or (ii) the current public and congressional
scrutiny of the FAA's inspection philosophy and mechanisms will not result in
the restriction or elimination of the use of such private repair stations or
DASs, either of which could have a material adverse effect on the Company. In
addition, although the Company believes that it possesses all required domestic
and foreign governmental licenses and certificates, including without limitation
Parts Manufacturer Approvals ("PMAs") and Supplemental Type Certificates
("STCs"), any delay in obtaining or failure to obtain a required license or
certificate, or the revocation or limitation of such licenses or certificates,
could have a material adverse effect on the Company's operations. See
"Business--Industry Regulation and Approvals."
RISKS ASSOCIATED WITH ACQUISITIONS
The Company's ability to grow by acquisition is dependent upon, and may be
limited by, the availability of suitable acquisition candidates and capital, and
by restrictions contained in the Company's debt agreements. In addition, growth
by acquisition involves risks that could adversely affect the Company's results
of operations, including difficulties in integrating the operations and
personnel of acquired companies, the amortization of acquired intangible assets
and the potential loss of key employees of acquired companies. There can be no
assurance that the Company will be able to identify suitable acquisition
candidates, obtain the capital necessary to pursue its acquisition strategy,
consummate acquisitions on satisfactory terms or, if any acquisitions are
consummated, satisfactorily integrate such acquired businesses into the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--General" and "Business--Growth Strategy."
8
<PAGE>
COMPETITION
The Company operates in a highly competitive industry and competes against a
number of companies, some of which have significantly greater financial,
technological and marketing resources than the Company. The Company believes
that its ability to compete depends on high product performance, short lead-time
and timely delivery, competitive price, and superior customer service and
support. There can be no assurance that the Company will be able to compete
successfully with respect to these or other factors. See
"Business--Competition."
GOLD AND COPPER
A significant portion of the cost of the materials used in the contacts
manufactured by the Company is comprised of the cost of gold, and to a lesser
extent, the cost of copper. Accordingly, a significant increase in the price of
gold or copper could have a material adverse effect on the Company's results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
FOREIGN CURRENCY
The Company has a manufacturing facility in Switzerland and incurs in Swiss
Francs a significant percentage of the cost of the contacts it manufactures in
Switzerland. Therefore the Company's financial results are subject to
fluctuations of the Swiss Franc in relation to the U.S. Dollar. In 1996, solely
in an effort to mitigate the effects of currency fluctuations, the Company began
to enter into forward exchange contracts to purchase Swiss Francs and it expects
to engage in such hedging transactions in the future. However, there can be no
assurance that such transactions will prevent currency fluctuations from
adversely affecting the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Notes to Consolidated Financial Statements."
SUPPLY OF QUALIFIED ENGINEERING PERSONNEL
The Company's ability to attract and retain a high-quality engineering staff
is important to its business. Competition for qualified avionics engineers is
intense. There can be no assurance that the Company will be able to retain its
existing engineering staff or fill new positions or vacancies created by
expansion or turnover. See "Business--Products and Services" and
"Business--Employees."
CONTROL OF COMPANY BY PRINCIPAL STOCKHOLDERS
Following the completion of the Offering and giving effect to the
Recapitalization, (i) Nassau, (ii) DSV Partners, IV ("DSV"), (iii) Electra
Investment Trust P.L.C. and Electra Associates, Inc. (collectively, "Electra")
and (iv) Brantley Venture Partners, II, L.P. ("Brantley") will beneficially own
%, %, %, and %, respectively, of the issued and outstanding Common
Stock. Nassau's ownership percentage includes shares of Common Stock which may
be acquired upon exercise of the Nassau Warrants, which warrants give Nassau the
right to vote with respect to matters presented to holders of Common Stock. See
"Description of Capital Stock--Warrants." By virtue of their stockholdings, such
beneficial owners will be able to exercise significant control over the
Company's business, policies and affairs and, together, could cause the Company
to take actions that may be adverse to the Company's other stockholders. See
"Principal Stockholders." Also, Nassau, DSV, Brantley and the Company are
parties to a shareholders agreement which requires the Company for so long as
the applicable stockholder owns at least 5% of the Common Stock (including
shares which may be acquired upon exercise of warrants) to include on the
Company's slate of nominees for director a person designated by the applicable
stockholder. See "Certain Transactions--Shareholders Agreement."
9
<PAGE>
EXCESS LOSS RISKS
The Company currently has in force aviation products insurance. To date, the
Company has not experienced any significant uninsured or insured
aviation-related claims or any material product liability claims. However, there
can be no assurance that the Company's existing insurance coverage will be
adequate to cover future claims that may arise or that such coverage can be
renewed at commercially reasonable rates.
ENVIRONMENTAL REGULATION
The Company's business operations and facilities are subject to a number of
federal, state, local and foreign environmental laws and regulations. Although
the Company believes that its operations and facilities are in material
compliance with all federal, state, local and foreign environmental laws and
regulations, there can be no assurance that the Company will not incur
significant costs in the future due to current or former operations and waste
disposal practices or changing environmental compliance requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters," "Business--Environmental Matters," and
"Business--Legal Proceedings."
DISRUPTIONS AT THE COMPANY'S FACILITIES
A significant portion of the Company's manufacturing and administrative
operations are currently located in the greater Los Angeles, California area, an
area that may be subject to earthquakes or other natural disasters. Although the
Company maintains standard property and business interruption insurance, as well
as earthquake insurance on its primary manufacturing facility, an earthquake or
other natural disaster could have a material adverse effect on its business and
operating results. See "Business--Facilities."
REPURCHASE OF WARRANTS
The Company has issued the Nassau Warrants pursuant to which the holders
thereof may purchase up to 152,915 shares of Common Stock for $.035 per share.
Under certain circumstances the Nassau Warrants may be terminated prior to
December 31, 2000. However, commencing December 31, 2000, if such warrants
remain outstanding the holders of the Nassau Warrants may require the Company to
repurchase the Nassau Warrants at prices specified in the warrant agreements
relating to the Nassau Warrants. If the Company were to be required to
repurchase the Nassau Warrants, the Company is unable to predict the effect of
such a repurchase on its liquidity. Also, there can be no assurance that the
debt instruments of the Company existing at the time the Nassau Warrants are
required to be repurchased will permit the Company to repurchase the Nassau
Warrants. See "Description of Capital Stock--Warrants."
ABSENCE OF PRIOR PUBLIC MARKET; VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active public market will develop or, if
developed, will be sustained after the completion of the Offering. The initial
public offering price of the Common Stock offered hereby will be determined
through negotiations between the Company and the representatives of the
Underwriters and may not be indicative of future market prices. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price of the Common Stock. Factors such as
announcements concerning the Company or its competitors, investor perception of
the Company, fluctuations in the Company's operating results and general market
conditions may cause the market price of the Common Stock to fluctuate
significantly.
10
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
after the Offering, or the expectation that such sales could occur, could
adversely affect the market price of the Common Stock and the Company's ability
to raise capital through a subsequent offering of securities. Of the
shares of Common Stock to be outstanding after the Offering and the
Recapitalization, shares will be available for resale in the public
market without restriction immediately following the Offering if held by holders
who are not "affiliates" of the Company (as defined in the Securities Act of
1933, as amended (the "Securities Act")). All of the remaining shares are
"restricted securities" within the meaning of Rule 144 adopted under the
Securities Act. These restricted securities were issued and sold by the Company
in private transactions in reliance upon exemptions from registration under the
Securities Act. After expiration of the 180-day lock-up period following the
Offering, pursuant to agreements with the Underwriters, (i) all restricted
securities will be available for resale pursuant to the limitations of Rule 144
and (ii) the Company, pursuant to its certificate of incorporation (the
"Certificate"), may authorize the issuance of additional shares of Common Stock
and shares of one or more series of voting preferred stock. The issuance of
additional shares of capital stock could result in the dilution of the voting
power of the shares of Common Stock purchased in the Offering. In addition,
following the expiration of the 180-day lock-up period, certain stockholders
have the right, pursuant to the terms and conditions of a registration rights
agreement (the "Registration Rights Agreement"), to require the Company to (i)
effect up to four registrations under the Securities Act covering all or any
portion of the shares of Common Stock held by such stockholders, provided that
if the Company effects a registration at the request of a stockholder, no
further demand may be made for a period of at least nine months and (ii) include
all or any portion of such stockholders' shares of Common Stock in any proposed
registration by the Company of shares of Common Stock (subject to reduction to
the extent that the managing underwriter, if any, is of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold
therein). See "Description of Capital Stock," "Shares Eligible for Future Sale"
and "Underwriting."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate and the Company's bylaws (the
"Bylaws") and of Delaware Law could have the effect of making it more difficult
for a third party to acquire, or discouraging a third party from attempting to
acquire, control of the Company. These provisions could limit the price that
certain investors might be willing to pay in the future for shares of the Common
Stock. See "Description of Capital Stock--Certain Certificate and Bylaw
Provisions and Delaware General Corporation Law Section 203."
DILUTION
Purchasers in the Offering will incur an immediate and substantial dilution
in the net tangible book value of their Common Stock. See "Dilution."
11
<PAGE>
RECENT DEVELOPMENTS
PURCHASE OF AMP FACILITY
On December 12, 1996, the Company expanded its contact manufacturing
capability and capacity by purchasing the AMP Facility. The AMP Facility enables
the Company to produce contact blanks using a cold-heading manufacturing process
which, when used for high volume production, is more cost-effective than the
Company's existing screw machine operations. Therefore, the Company is seeking
to optimize its contact production by converting a portion of its existing high
volume manufacturing runs to the cold-heading process. The plating and finishing
of contact blanks produced at the AMP Facility will be conducted at the existing
facilities of the Company.
The purchase price of the AMP Facility (including related fees and expenses
and post-closing adjustments) was $7.0 million, $5.4 million of which was paid
at the closing. The balance of the purchase price is payable in early 1997. The
Company financed the cash portion of the purchase price through the issuance of
$5.0 million principal amount of the Senior Term Notes (as defined in "Use of
Proceeds") and a $.4 million drawdown under the Senior Revolver (as defined in
"Use of Proceeds"). The Company has entered into agreements to supply AMP with a
portion of its contact requirements for up to two years. In addition, as a
result of the purchase of the AMP Facility, the Company will have the
opportunity to make increased sales to certain distributors that formerly
purchased contacts from other entities within AMP. The AMP Facility was not
purchased as a separate, stand-alone business and no meaningful historical
financial data is available.
ACQUISITION OF ELSINORE
On December 5, 1996, the Company expanded its systems integration
capabilities with the acquisition of Elsinore. Elsinore provides the Company
with the ability to issue certain FAA design approvals for modifications to
designated aircraft, which the Company believes is a key competitive advantage
for winning systems integration contracts. By acquiring Elsinore, the Company is
seeking to capitalize on increased outsourcing trends by aircraft OEMs, avionics
OEMs and airlines. By integrating the employees of Elsinore into its existing
operations, the Company increased by approximately 50% the number of the
Company's engineering professionals dedicated to its systems integration
functions. The acquisition of Elsinore also provided the Company with an
important new customer in the aircraft industry, Daimler Benz Aerospace Airbus
GmbH ("Daimler Benz Aerospace"), and the opportunity to obtain additional new
customers.
The purchase price of Elsinore (including related fees and expenses) was
$2.6 million, which the Company financed through (i) a drawdown under the Senior
Revolver of $1.3 million and (ii) the issuance to the seller of a note (the
"Seller Note") in a maximum principal amount of $1.3 million and bearing
interest at a rate of 15% per annum. The Seller Note will become due February
15, 1997 and is subject to reduction based on certain working capital
adjustments. In 1995, Elsinore generated revenues of approximately $3.7 million.
ACQUISITION OF ADS
On September 18, 1996, the Company expanded its presence in flight deck
avionics components with the acquisition of ADS, a manufacturer of dichroic LCD
devices for use with flight deck avionics systems. The acquisition of ADS, which
the Company believes is the largest supplier of dichroic LCD devices in the
commercial aircraft industry, is consistent with the Company's strategy to
achieve growth in operations and market share through strategic acquisitions.
The Company believes that the acquisition of ADS will allow it to capitalize on
the upturn in aircraft OEM production by increasing its revenue content per
aircraft as well as by enhancing the Company's position with its major
customers.
The purchase price of ADS (including related fees and expenses and
post-closing adjustments) was $13.3 million, including $2.0 million which the
Company is obligated to pay over the next three years. The Company financed the
cash portion of the purchase price through: (i) the issuance of $3.0 million of
Series E Preferred Stock and warrants to purchase 49,079 shares of Common Stock;
(ii) the issuance of $3.0 million of
12
<PAGE>
Convertible Notes (as defined in "Use of Proceeds"), together with warrants to
purchase 49,079 shares of Common Stock; and (iii) an increase in and subsequent
drawdown under the Company's Senior Revolver of $5.4 million. In 1995, ADS
generated revenues of $10.0 million.
IFT CONTRACT
On July 30, 1996, the Company entered into an agreement with IFT to
integrate the IFT System into 21 wide-body Swissair aircraft. The Swissair
project represents the first broad-based installation of an interactive
in-flight casino-style gaming and video-on-demand system in a commercial
aircraft fleet. The Company expects to realize a substantial portion of the
revenues from such contract in 1997. The Company will account for revenues
generated under the IFT contract using the percentage of completion method of
accounting.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering are
estimated to be $31.5 million, assuming an initial public offering price of
$ per share and after deducting underwriting discounts and commissions and
estimated expenses of the Offering. The Company estimates that it will use the
net proceeds from the Offering, together with approximately $9.2 million of the
proceeds from a new credit facility (the "New Credit Facility") which the
Company is in negotiations to obtain (see "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources"), to repay amounts due under the Company's revolving line of credit
(the "Senior Revolver"), the Company's senior term notes (the "Senior Term
Notes"), the Company's 15% Convertible Notes due 1997 (the "Convertible Notes")
and the Company's 12% Senior Subordinated Notes due 2001 (the "Senior
Subordinated Notes"), as described below.
The Company will use approximately $13.7 million to repay in full amounts
due under the Senior Revolver, of which $9.1 million was outstanding as of
September 30, 1996. Of the amounts outstanding under the Senior Revolver, $8.0
million bears interest at the Eurodollar Rate plus 4.5% per annum (10.0% as of
September 30, 1996), with the remainder bearing interest at the lender's prime
rate plus 3.25% per annum (11.5% as of September 30, 1996). Amounts outstanding
under the Senior Revolver become due on September 18, 1999. In September 1996,
the Company borrowed $5.4 million under the Senior Revolver to fund a portion of
the ADS purchase price. In December 1996, the Company borrowed $1.3 million and
$.4 million under the Senior Revolver to fund a portion of the purchase prices
of Elsinore and the AMP Facility, respectively.
The Company will use approximately $17.0 million to repay in full amounts
outstanding under the Senior Term Notes. Of the amounts outstanding under the
Senior Term Notes, $12.0 million bears interest at the Eurodollar Rate plus 5.0%
(10.5% as of September 30, 1996) and $5.0 million bears interest at a rate equal
to 3.5% above the greater of (i) the lender's prime rate or (ii) the federal
funds rate plus 1.5% (11.8% as of December 31, 1996). The Senior Term Notes
mature on September 30, 2001 and require quarterly payments of principal in
varying amounts. The Company issued $5.0 million of Senior Term Notes in
December 1996 to fund a portion of the purchase price of the AMP Facility.
The Company will use $3.0 million to repay in full amounts outstanding under
the Convertible Notes. The Convertible Notes bear interest at a rate of 15.0%
per annum, which is payable quarterly. The Company has certain rights to defer
cash interest payments. The Convertible Notes mature on the earlier of June 30,
1997 or the consummation of the Offering. The Company issued the Convertible
Notes in September 1996 to fund a portion of the purchase price of ADS.
The Company will use $7.0 million to repay in full the Senior Subordinated
Notes. The Senior Subordinated Notes bear interest at a rate of 12.0% per annum
and mature on December 31, 2001.
Pending the use of the net proceeds for the purposes described above, the
Company will invest such net proceeds in short-term, investment-grade,
interest-bearing securities.
DIVIDEND POLICY
The Company has never paid cash dividends on the Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to finance operations and the
expansion of its business. Any future determination to pay cash dividends will
be made at the discretion of the Company's board of directors (the "Board") and
will be dependent upon the Company's financial condition, operating results,
capital requirements and such other factors as the Board deems relevant.
Further, the Company's debt agreements prohibit payment of dividends, and the
Company expects that any future debt agreements also will include such
prohibitions.
14
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1996: (i) the
consolidated capitalization of the Company; and (ii) the pro forma consolidated
capitalization of the Company giving effect to the Recapitalization and the sale
of shares of Common Stock offered hereby and the application of the
net proceeds therefrom as described in "Use of Proceeds" (assuming an initial
public offering price of $ . per share), as if these transactions had occurred
on September 30, 1996. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
PRO FORMA AS
ACTUAL ADJUSTED (2)
--------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Short-term borrowings.............................................................. $ 530 $ 530
Current portion of long-term debt
Senior Term Notes................................................................ 1,745 --
Other (1)........................................................................ 1,146 1,146
Convertible Notes.................................................................. 2,882 --
--------- ---------------
Total short-term debt............................................................ $ 6,303 $ 1,676
--------- ---------------
--------- ---------------
Long-term debt:
Senior Revolver.................................................................... $ 9,143 $ --
Senior Term Notes.................................................................. 10,377 --
New Credit Facility (3)............................................................ -- 659
Senior Subordinated Notes.......................................................... 5,979 --
Other (1).......................................................................... 1,744 1,744
--------- ---------------
Total long-term debt............................................................. 27,243 2,403
--------- ---------------
Mandatorily redeemable common stock warrants......................................... 2,054 566
--------- ---------------
Stockholders' equity:
Cumulative convertible preferred stock............................................. 13,850 --
Common stock, no par value, 4,253,550 shares authorized;
85,593 shares issued and outstanding............................................. 62 --
Common Stock, $.01 par value, shares authorized; shares issued and
outstanding (4).................................................................. --
Additional paid-in capital......................................................... --
Accumulated deficit (5)............................................................ (8,406) (11,434)
Foreign currency translation adjustment............................................ 230 230
--------- ---------------
Total stockholders' equity....................................................... 5,736
--------- ---------------
Total capitalization (6)............................................................. $ 35,033 $
--------- ---------------
--------- ---------------
</TABLE>
- ------------------------------
(1) Includes capital lease obligations, equipment financing facility and
acquisition financing payable to the sellers in conjunction with the
Minority Interest Acquisition and the acquisition of ADS.
(2) Does not reflect borrowings of $9.6 million used to fund the acquisition of
Elsinore and the purchase of the AMP Facility, which occurred subsequent to
September 30, 1996. See "Recent Developments."
(3) Reflects New Credit Facility borrowings which, together with the net
proceeds from the Offering, will be used to repay the debt outstanding as
presented in the table above as of September 30, 1996. See "Use of
Proceeds."
(4) Includes shares of Common Stock offered hereby. Does not include
525,000 shares of Common Stock reserved for issuance pursuant to the Share
Incentive Plan.
(5) Pro forma as adjusted reflects an extraordinary charge of $3.0 million to be
incurred as a result of the debt repayment from the net proceeds from the
Offering. The extraordinary charge is comprised of: (i) $1.6 million for
unamortized deferred financing costs; (ii) $1.0 million for unamortized
original issue discounts; and (iii) $.4 million for a prepayment penalty.
(6) Total capitalization consists of long-term debt, mandatorily redeemable
common stock warrants and stockholders' equity.
15
<PAGE>
DILUTION
As of September 30, 1996, giving effect to the Recapitalization, the
Company's net tangible book value (deficit) was ($8.5 million), or ($3.45) per
share of Common Stock. Net tangible book value per share represents the amount
of the Company's total tangible assets reduced by the amount of its total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the sale by the Company of shares of Common Stock
in the Offering and the application of the net proceeds therefrom as described
in "Use of Proceeds," the Company's net tangible book value as of September 30,
1996 would have been $ million, or $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
shareholders and an immediate dilution of $ per share to purchasers of
shares of Common Stock in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $
Net tangible book value per share before the Offering (1)... $
Increase per share attributable to new investors............
---------
Net tangible book value per share after the Offering..........
---------
Dilution per share to new investors........................... $
---------
---------
</TABLE>
- ------------------------------
(1) Includes 152,915 shares of Common Stock issuable upon exercise of the Nassau
Warrants. Does not include 525,000 shares of Common Stock reserved for
issuance pursuant to the Share Incentive Plan.
The following table sets forth the total consideration and the average price
per share to be paid by the purchasers of the Common Stock offered hereby and
the total consideration paid and average price per share paid by existing
stockholders (based on an assumed initial public offering price of $ per
share).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ --------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 2,460,967 % $ 14,946,000 % $ 6.07
New investors.......................... % %
----------- ----- -------------- -----
Total................................ 100.0% $ 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations and balance
sheet data for the Company as of and for the year ended August 31, 1991, the
four months ended December 31, 1991, and the years ended December 31, 1992,
1993, 1994 and 1995 have been derived from the Company's audited consolidated
financial statements. The selected consolidated financial data as of and for the
nine months ended September 30, 1995 and 1996 have been derived from the
Company's unaudited consolidated financial statements, which in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the interim information. The
results of operations for the interim periods are not necessarily indicative of
results of operations for the full year. All of the information should be read
in conjunction with the Consolidated Financial Statements and related notes
thereto included elsewhere in this Prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FOUR MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
AUG 31, DEC 31, -----------------------------------------------------
1991 1991 (1) 1992 1993 1994 1995
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 7,206 $ 9,760 $ 42,620 $ 48,197 $ 47,092 $ 55,839
Cost of sales........................... 3,973 6,931 32,470 36,258 36,407 43,463
----------- ----------- ----------- ----------- ----------- -----------
Gross profit............................ 3,233 2,829 10,150 11,939 10,685 12,376
Selling, general and administrative
expenses.............................. 1,983 1,997 6,851 7,953 7,716 9,426
Amortization of intangible assets....... 539 338 1,209 1,210 1,209 1,115
----------- ----------- ----------- ----------- ----------- -----------
Operating income........................ 711 494 2,090 2,776 1,760 1,835
Interest expense........................ 871 621 2,779 2,940 3,244 3,821
Other (income) expense, net............. 122 80 (213) (148) 332 382
----------- ----------- ----------- ----------- ----------- -----------
Loss before provision for income taxes,
cumulative effect of accounting change
and extraordinary item................ (282) (207) (476) (16) (1,816) (2,368)
Provision for income taxes (3).......... -- (128) (299) (620) (613) (1,078)
----------- ----------- ----------- ----------- ----------- -----------
Loss before cumulative effect of
accounting change and extraordinary
item.................................. (282) (335) (775) (636) (2,429) (3,446)
Cumulative effect of accounting change
(4)................................... -- -- -- (121) -- --
Extraordinary loss from debt refinancing
(5)................................... -- -- -- -- (264) --
----------- ----------- ----------- ----------- ----------- -----------
Net loss................................ $ (282) $ (335) $ (775) $ (757) $ (2,693) $ (3,446)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Net loss applicable to common
stockholders.......................... $ (282) $ (335) $ (775) $ (865) $ (3,080) $ (4,003)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) per common share:
Pro forma for the Recapitalization.... $ (1.47)
Pro forma as adjusted (6)............. $
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization.... 2,728
Pro forma as adjusted (7).............
OTHER FINANCIAL DATA:
EBITDA (8).............................. $ 1,302 $ 1,276 $ 5,124 $ 6,195 $ 4,608 $ 5,174
Bookings (9)............................ N/A N/A 50,325 46,830 47,896 50,785
Backlog at end of period (10)........... N/A 17,595 25,330 23,933 24,493 19,761
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------------------
1995 1996 (2)
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 42,274 $ 43,059
Cost of sales........................... 32,378 33,277
----------- -----------
Gross profit............................ 9,896 9,782
Selling, general and administrative
expenses.............................. 6,764 7,072
Amortization of intangible assets....... 902 538
----------- -----------
Operating income........................ 2,230 2,172
Interest expense........................ 2,856 2,821
Other (income) expense, net............. 304 183
----------- -----------
Loss before provision for income taxes,
cumulative effect of accounting change
and extraordinary item................ (930) (832)
Provision for income taxes (3).......... (642) (265)
----------- -----------
Loss before cumulative effect of
accounting change and extraordinary
item.................................. (1,572) (1,097)
Cumulative effect of accounting change
(4)................................... -- --
Extraordinary loss from debt refinancing
(5)................................... -- --
----------- -----------
Net loss................................ $ (1,572) $ (1,097)
----------- -----------
----------- -----------
Net loss applicable to common
stockholders.......................... $ (1,989) $ (1,941)
----------- -----------
----------- -----------
Income (loss) per common share:
Pro forma for the Recapitalization.... $ (.71)
Pro forma as adjusted (6)............. $
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization.... 2,728
Pro forma as adjusted (7).............
OTHER FINANCIAL DATA:
EBITDA (8).............................. $ 4,764 $ 4,479
Bookings (9)............................ 37,406 53,863
Backlog at end of period (10)........... 19,821 38,300
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
AUG 31, DEC 31, -----------------------------------------------------
1991 1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $ 2,143 $ 782 $ 5,091 $ (637) $ 11,459 $ 12,583
Total assets............................ 10,532 32,548 33,911 34,653 37,685 36,329
Total debt.............................. 7,132 17,459 20,604 19,653 23,874 24,672
Redeemable preferred stock and
warrants.............................. 2,168 5,548 5,711 5,818 2,329 1,633
Stockholders' equity (deficit).......... (355) (578) (1,679) (2,618) 766 (1,697)
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $ 11,477 $ 11,191
Total assets............................ 37,077 54,228
Total debt.............................. 23,183 33,546
Redeemable preferred stock and
warrants.............................. 2,329 2,054
Stockholders' equity (deficit).......... (505) 5,736
</TABLE>
- --------------------------
(1) Includes the results of the Tri-Star Companies beginning October 15, 1991,
the date on which they were acquired.
(2) Includes the effect of the Minority Interest Acquisition beginning February
20, 1996, the date on which the transaction occurred, and the results of ADS
beginning September 18, 1996, the date on which it was acquired.
(3) Prior to the Minority Interest Acquisition in 1996, the Company did not
consolidate the earnings of its Cory Components subsidiary for tax purposes.
As such, despite a consolidated pre-tax loss in each of the years, the
Company recorded a provision for income taxes from 1991 to 1995 which
primarily relates to Cory Components.
(4) Represents the adoption, as of January 1, 1993, of SFAS 109, "Accounting
for Income Taxes."
(5) Represents the write-off of unamortized deferred financing costs, a charge
for unamortized debt discounts and a prepayment penalty incurred as result
of the refinancing by the Company of a substantial portion of its debt in
November 1994 (the "1994 Refinancing").
(6) Pro forma for the Minority Interest Acquisition and the acquisition of ADS
as if they had occurred on January 1, 1995. Adjusted to reflect the sale by
the Company of shares of Common Stock in the Offering and the
application of the net proceeds therefrom as set forth under "Use of
Proceeds." Excludes a $3.0 million extraordinary charge to be incurred as a
result of the debt repayment with the net proceeds from the Offering.
(7) Pro forma for the Recapitalization and adjusted for the shares of
Common Stock offered hereby. Does not include 525,000 shares of Common Stock
reserved for issuance pursuant to the Share Incentive Plan.
(8) EBITDA represents earnings before interest expense (including amortization
of debt discounts), income taxes, depreciation, amortization (including
non-compete covenants, goodwill and other intangibles) and minority
interest. EBITDA is presented because it may be used as one indicator of a
company's cash flow. The Company believes that EBITDA, while providing
useful information, should not be considered in isolation or as a substitute
for net income (loss) as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity, in each case determined
in accordance with generally accepted accounting principles. The Company
further believes that EBITDA is a meaningful measure of performance that is
commonly used in the aerospace industry to analyze comparable companies on
the basis of operating performance, leverage and liquidity.
(9) Bookings represent the total invoice value of purchase orders received
during the period.
(10) Orders are generally subject to cancellation by the customer prior to
shipment. The level of unfilled orders at any given date during the year
will be materially affected by the timing of the Company's receipt of orders
and the speed with which those orders are filled.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Financial Data presents the
results of operations of the Company as if the following transactions had
occurred on January 1, 1995: (i) the Minority Interest Acquisition; (ii) the
acquisition of ADS; (iii) the Recapitalization; and (iv) the sale by the Company
of shares of Common Stock in the Offering and the application of
the net proceeds therefrom as set forth under "Use of Proceeds." The Unaudited
Pro Forma Consolidated Financial Data does not include the acquisition of
Elsinore because such inclusion would not have had a material effect on such
data.
The Unaudited Pro Forma Consolidated Financial Data for the year ended
December 31, 1995 reflects the combination, with appropriate adjustments, of the
audited consolidated financial statements of the Company for the year ended
December 31, 1995 and the audited financial statements of ADS for the year ended
December 31, 1995.
The Unaudited Pro Forma Consolidated Financial Data for the nine months
ended September 30, 1996 reflects the combination, with appropriate adjustments,
of the unaudited consolidated financial statements of the Company for the nine
months ended September 30, 1996 and the unaudited financial statements of ADS
for the period from January 1 through September 18, 1996, the date on which it
was acquired.
The Unaudited Pro Forma Consolidated Financial Data is not necessarily
indicative of the results of operations that actually would have occurred had
the transactions referenced above been consummated on the dates indicated, or
that may be obtained in the future. The Unaudited Pro Forma Consolidated
Financial Data should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
DECRANE
AIRCRAFT AEROSPACE
HOLDINGS, DISPLAY ACQUISITION PRO
INC. SYSTEMS ADJUSTMENTS FORMA
------------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................................ $ 55,839 $ 9,952 $ -- $ 65,791
Cost of sales........................... 43,463 6,594 444(1) 50,501
------------- ----------- ----------- -----------
Gross profit............................ 12,376 3,358 (444) 15,290
Selling, general and administrative
expenses.............................. 9,426 1,991 (882)(2) 10,535
Amortization of intangible assets....... 1,115 -- 468(3) 1,583
------------- ----------- ----------- -----------
Operating income........................ 1,835 1,367 (30) 3,172
Interest expense........................ 3,821 150 1,955(4) 5,926
Other expenses.......................... 382 -- -- 382
------------- ----------- ----------- -----------
Income (loss) before (provision) benefit
for income taxes...................... (2,368) 1,217 (1,985) (3,136)
(Provision) benefit for income taxes.... (1,078) (495) 1,484(6) (89)
------------- ----------- ----------- -----------
Income (loss)........................... $ (3,446) $ 722 $ (501) $ (3,225)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Income (loss) applicable to common
stockholders.......................... $ (4,003) $ 722 $ (501) $ (3,782)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Income (loss) per common share:
Pro forma for the Recapitalization.... $ (1.47)(11)
Pro forma as adjusted.................
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization.... 2,728(11)
Pro forma as adjusted.................
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -------------
<S> <C> <C>
Revenues................................ $ -- $ 65,791
Cost of sales........................... -- 50,501
----------- -------------
Gross profit............................ -- 15,290
Selling, general and administrative
expenses.............................. 200(7) 10,735
Amortization of intangible assets....... -- 1,583
----------- -------------
Operating income........................ (200) 2,972
Interest expense........................ (5,177)(8) 749
Other expenses.......................... -- 382
----------- -------------
Income (loss) before (provision) benefit
for income taxes...................... 4,977 1,841
(Provision) benefit for income taxes.... -- (9) (89)
----------- -------------
Income (loss)........................... $ 4,977 $ 1,752
----------- -------------
----------- -------------
Income (loss) applicable to common
stockholders.......................... $ 5,534(10) $ 1,752
----------- -------------
----------- -------------
Income (loss) per common share:
Pro forma for the Recapitalization....
Pro forma as adjusted................. $ (13)
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization....
Pro forma as adjusted................. (13)
</TABLE>
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Data.
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
DECRANE
AIRCRAFT AEROSPACE
HOLDINGS, DISPLAY ACQUISITION PRO
INC. SYSTEMS ADJUSTMENTS FORMA
------------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................................ $ 43,059 $ 7,706 $ -- $ 50,765
Cost of sales........................... 33,277 4,855 284(1) 38,416
------------- ----------- ----------- -----------
Gross profit............................ 9,782 2,851 (284) 12,349
Selling, general and administrative
expenses.............................. 7,229 1,286 (203)(2) 8,312
Amortization of intangible assets....... 538 -- 214(3) 752
Gain on litigation settlement........... (157) -- -- (157)
------------- ----------- ----------- -----------
Operating income........................ 2,172 1,565 (295) 3,442
Interest expense........................ 2,821 52 935(4) 3,808
Other expenses.......................... 183 -- (89)(5) 94
------------- ----------- ----------- -----------
Income (loss) before (provision) benefit
for income taxes...................... (832) 1,513 (1,141) (460)
(Provision) benefit for income taxes.... (265) (615) 814(6) (66)
------------- ----------- ----------- -----------
Income (loss)........................... $ (1,097) $ 898 $ (327) $ (526)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Income (loss) applicable to common
stockholders.......................... $ (1,941) $ 898 $ (327) $ (1,370)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Income (loss) per common share:
Pro forma for the Recapitalization.... $ (.71)(11)
Pro forma as adjusted.................
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization.... 2,728(11)
Pro forma as adjusted.................
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -------------
<S> <C> <C>
Revenues................................ $ -- $ 50,765
Cost of sales........................... -- 38,416
----------- -------------
Gross profit............................ -- 12,349
Selling, general and administrative
expenses.............................. 150(7) 8,462
Amortization of intangible assets....... -- 752
Gain on litigation settlement........... -- (157)
----------- -------------
Operating income........................ (150) 3,292
Interest expense........................ (3,291)(8) 517
Other expenses.......................... -- 94
----------- -------------
Income (loss) before (provision) benefit
for income taxes...................... 3,141 2,681
(Provision) benefit for income taxes.... -- (9) (66)
----------- -------------
Income (loss)........................... $ 3,141 $ 2,615
----------- -------------
----------- -------------
Income (loss) applicable to common
stockholders.......................... $ 3,985(10) $ 2,615
----------- -------------
----------- -------------
Income (loss) per common share:
Pro forma for the Recapitalization....
Pro forma as adjusted................. $ (12)
Weighted average number of common shares
outstanding:
Pro forma for the Recapitalization....
Pro forma as adjusted................. (13)
</TABLE>
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Data.
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(1) Represents an increase in depreciation expense to reflect a $1.7 million
increase in the fair value of assets acquired in the acquisition of ADS. The
acquired assets are being depreciated using the straight-line method over
their remaining estimated useful lives, ranging from two to five years.
(2) For the year ended December 31, 1995, represents: (i) an increase in
depreciation expense of $85,000 to reflect an increase in the fair value and
useful lives of assets acquired in the acquisition of ADS; (ii) a decrease
of $666,000 in minority shareholder compensation expense paid pursuant to an
employment agreement which was cancelled upon the closing of the Minority
Interest Acquisition, net of $185,000 of estimated compensation that would
have been earned during the period as provided for in the post-acquisition
employment agreement; and (iii) a decrease in selling, general and
administrative expenses of $301,000 reflecting a reversal of corporate
expenses allocated to ADS by its former owner, net of estimated incremental
corporate expenses of ADS to the Company.
For the nine months ended September 30, 1996, represents: (i) an increase
in depreciation expense of $54,000 to reflect an increase in the fair value
and useful lives of assets acquired in the acquisition of ADS; and (ii) a
decrease in selling, general and administrative expenses of $257,000
reflecting a reversal of corporate expenses allocated to ADS by its former
owner, net of estimated incremental corporate expenses of ADS to the
Company.
(3) Represents an increase in amortization expense of: (i) $208,000 and $26,000
for the year ended December 31, 1995 and the nine months ended September 30,
1996, respectively, pertaining to the amortization on a straight-line basis
over 26 years of $5.3 million of goodwill related to the Minority Interest
Acquisition; and (ii) $260,000 and $188,000 for the year ended December 31,
1995 and the nine months ended September 30, 1996, respectively, pertaining
to the amortization on a straight-line basis over 30 years of $7.7 million
of goodwill related to the ADS acquisition.
(4) Represents: (i) additional interest expense for indebtedness incurred to
finance the acquisition of ADS and the Minority Interest Acquisition of $2.1
million and $1.0 million for the year ended December 31, 1995 and the nine
months ended September 30, 1996, respectively; and (ii) a reversal of
interest expense allocated to ADS by its former owner of $150,000 and
$52,000 for the year ended December 31, 1995 and the nine months ended
September 30, 1996, respectively, for debt obligations not assumed by the
Company.
(5) Represents the reversal of the minority stockholder's 25% equity in the
earnings of a consolidated subsidiary prior to the Minority Interest
Acquisition. For the year ended December 31, 1995, the subsidiary incurred a
net loss of $2,000 and, as a result, the minority stockholder's 25% equity
interest in the operating results was immaterial.
(6) Represents a reduction in the provision for income taxes to reflect income
tax expense assuming the taxable income of ADS and the Company's Cory
Components subsidiary, which was formerly 75% owned, was included in the
Company's consolidated federal and state income tax returns for the periods
presented and offset against the net operating losses incurred by the
Company's other operations for the year ended December 31, 1995 and the nine
months ended September 30, 1996, respectively.
(7) Represents incremental general and administrative expenses associated with
regulatory compliance requirements including listing, registrar and transfer
agent fees, quarterly and annual report and proxy statement preparation and
distribution expenses, legal and accounting fees and directors' and
officers' liability insurance premiums.
(8) Represents a decrease in interest expense to reflect the sale by the
Company of shares of Common Stock in the Offering and the
application of the net proceeds therefrom as set forth under "Use of
Proceeds."
(9) Increases in pro forma taxable income would have been offset by the
utilization of net operating loss carryforwards. Therefore, no adjustment to
the provision for income taxes is necessary.
(10) Reflects the elimination of preferred share dividends as a result of the
Recapitalization and the effect of the Offering adjustments.
(11) See "Notes to Consolidated Financial Statements."
(12) Reflects the Recapitalization as well as the acquisition and Offering
adjustments.
(13) Reflects the shares resulting from the Recapitalization and the Offering.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's results of operations have been affected by its history of
acquisitions. The Company commenced operations in October 1990 with the
acquisition of Hollingsead International, Inc. ("Hollingsead"), a manufacturer
of avionics support structures at the time of the acquisition. In October 1991,
the Company acquired Tri-Star Electronics International, Inc. ("Tri-Star"),
Tri-Star Electronics Europe, S.A. ("Tri-Star Europe"), 75% of Cory Components,
and 74.5% of Tri-Star Technologies ("TST") (collectively, the "Tri-Star
Companies") which primarily manufacture contacts, connectors and harness
assemblies for the commercial aircraft industry. In February 1996, the Company
completed the Minority Interest Acquisition. In September 1996, the Company
acquired ADS, a manufacturer of dichroic LCD devices and in December 1996, the
Company acquired Elsinore and purchased the AMP Facility.
From 1991 to 1995, a period of declining demand for new aircraft, the
Company's management refocused and expanded the businesses the Company acquired
in the Hollingsead and Tri-Star Companies transactions. The Company has
established Hollingsead, which was solely a manufacturing company when acquired,
as a full-service systems integrator of avionics concentrated in the retrofit
market. Concurrently, the Company has enhanced the market positions of the
Tri-Star Companies as a leading supplier of certain avionics components in the
OEM market. The Company's ability to improve the performance of its acquired
businesses is reflected in the revenue growth of Hollingsead and the Tri-Star
Companies, which increased 31.0% on a consolidated basis between 1992 and 1995.
This growth occurred despite a steep decline in new aircraft deliveries from a
peak of approximately 770 in 1991 to a low of approximately 370 in 1995,
according to the S&P Report. Specific contributors to the Company's growth
during this period of decline included: (i) the establishment of a balanced
offering of products and services for the OEM market, the retrofit market and
the aftermarket; (ii) the initiation of private labeling programs pursuant to
which the Company manufactures contacts for other connector manufacturers,
including certain of the Company's competitors; (iii) the development of new
products such as speciality connectors for Boeing's 777 aircraft; and (iv) the
diversification into new services such as the integration of in-flight
entertainment systems.
Historically, the Company's systems integration operations have been
affected by the timing and magnitude of program awards, at times resulting in
quarterly and yearly fluctuations in revenue and earnings. Specifically, the
Company's systems integration operations have been dominated in recent years by
sales to AT&T relating to the integration of AT&T's in-flight passenger
telecommunications systems. The Company believes it has lessened its exposure to
these fluctuations by developing capabilities in three additional major systems
integration areas: in-flight entertainment systems, satellite communication and
navigation systems, and safety systems. The Company has secured orders for
integration services in each of these targeted areas: in-flight entertainment
systems for Swissair (through IFT), satellite communication systems for American
Airlines, Inc. ("American Airlines") (through Rockwell Collins and Triad
International Maintenance Corporation ("TIMCO")), and safety systems for a major
package delivery service. In addition, the Company continues to provide systems
integration services to AT&T.
Certain of the contact blanks used by the Company in the production of its
contacts are manufactured at the Company's Swiss facility and shipped to its El
Segundo, California facility for plating and assembly. Accordingly, the Company
has been, and will continue to be, exposed to fluctuations in the currency
exchange rate between the U.S. Dollar and the Swiss Franc. Due to the weakening
of the U.S. Dollar against the Swiss Franc in 1995, the cost of contact blanks
in U.S. Dollars increased by $.9 million over 1994 levels. In 1996, solely in an
effort to mitigate the effects of currency fluctuations, the Company entered
into forward exchange contracts at fixed rates and plans to continue this
forward exchange program in the future.
23
<PAGE>
Materials constitute approximately 45% of the cost of a finished contact.
The most significant portion of the material cost is gold, although the use of
copper is also substantial. The Company is and will continue to be exposed to
fluctuations in gold and copper prices. The Company has undertaken programs to
reduce the use of gold in the Company's plating operations. These programs, on a
comparable basis, have saved the Company an estimated $.7 million for the nine
months ended September 30, 1996 compared to the same period in 1995. In addition
to providing cost savings, the Company believes that these programs reduced its
exposure to gold price fluctuations.
Prior to the Minority Interest Acquisition in 1996, the Company did not
consolidate the earnings of its Cory Components subsidiary for tax purposes. As
such, despite a consolidated pre-tax loss in each of the years, the Company
recorded a provision for income taxes from 1991 to 1995 which primarily relates
to Cory Components. Separately, as of December 31, 1995, the Company had net
operating loss carry-forwards ("NOLs") of approximately $4.1 and $2.0 for
federal and state income tax purposes, respectively. These NOLs expire in
varying amounts through 2010. The amount of NOLs that may be utilized in the
future may be subject to limitations due to a change in control of the Company.
RESULTS OF OPERATIONS
The following table sets forth the items in the Company's consolidated
statements of operations as percentages of its revenues for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................. 75.2 77.3 77.8 76.6 77.3
----- ----- ----- ----- -----
Gross profit.............................................. 24.8 22.7 22.2 23.4 22.7
Selling, general and administrative expenses.............. 16.5 16.4 16.9 16.0 17.2
Amortization of intangible assets......................... 2.5 2.6 2.0 2.1 1.2
----- ----- ----- ----- -----
Operating income.......................................... 5.8 3.7 3.3 5.3 5.0
Interest expense.......................................... 6.1 6.9 6.8 6.8 6.6
Other (income) expense, net............................... (.3) .7 .7 .7 .4
----- ----- ----- ----- -----
Loss before provision for income taxes, cumulative effect
of change in accounting principle and extraordinary
item.................................................... (0.0) (3.9) (4.2) (2.2) (1.9)
Provision for income taxes................................ (1.3) (1.3) (1.9) (1.5) (.6)
----- ----- ----- ----- -----
Loss before cumulative effect of change in accounting
principle and extraordinary item........................ (1.3) (5.2) (6.2) (3.7) (2.5)
Cumulative effect on prior years of change in accounting
for income taxes........................................ (.3) -- -- -- --
Extraordinary loss from debt refinancing.................. -- (.6) -- -- --
----- ----- ----- ----- -----
Net loss.................................................. (1.6) (5.7) (6.2) (3.7) (2.5)
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
REVENUES. Revenues increased $.8 million, or 1.9%, to $43.1 million for the
nine months ended September 30, 1996 from $42.3 million for the nine months
ended September 30, 1995. Revenues increased primarily due to the following: (i)
an increase in sales of specialty connectors for cabin management and in-flight
entertainment systems on Boeing's 777 aircraft; (ii) an increase in sales of
harness assemblies for in-flight entertainment systems; (iii) growth in contact
sales driven by new aircraft production rate increases and growth in the
Company's private labeling programs; and (iv) the inclusion of the revenues of
ADS for approximately two weeks in the nine months ended September 30, 1996.
24
<PAGE>
Partially offsetting this increase was a decline in sales to AT&T of $8.4
million, reflecting the completion in 1995 of a major systems integration
program primarily for American Airlines.
GROSS PROFIT. Gross profit decreased $.1 million, or 1.2%, to $9.8 million
for the nine months ended September 30, 1996 from $9.9 million for the nine
months ended September 30, 1995. Gross profit as a percent of revenues decreased
to 22.7% for the nine months ended September 30, 1996 from 23.4% for the nine
months ended September 30, 1995. This decrease was attributable to the decline
in sales to AT&T, as described above, which caused a shift in revenue mix from
higher margin systems integration revenues to lower margin contact sales.
Partially offsetting this decline was an improvement in gross profit as a
percent of revenues from the sale of contacts for the nine months ended
September 30, 1996, as compared to the nine months ended September 30, 1995.
This improvement resulted from sustained price increases, increased sales
volume, lower wage-related expenses and lower material costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased $.4 million, or 6.9%, to $7.2 million
for the nine months ended September 30, 1996 from $6.8 million for the nine
months ended September 30, 1995. SG&A expenses as a percent of revenues
increased to 16.8% for the nine months ended September 30, 1996 from 16.0% for
the nine months ended September 30, 1995. SG&A expenses increased primarily
because the Company added staff to pursue higher sales to OEMs and to develop
capabilities for in-flight entertainment, navigation and satellite communication
and safety systems integration services. This increase in SG&A expenses was
offset partially by the elimination of a $.5 million management fee as a result
of the Minority Interest Acquisition.
OPERATING INCOME. Operating income remained essentially unchanged for the
nine months ended September 30, 1996 from the nine months ended September 30,
1995. A decrease in operating income resulting from the factors described above
was offset by a decline of $.4 million in amortization of intangible assets as a
result of the termination of certain non-compete agreements.
INTEREST EXPENSE. Interest expense remained essentially unchanged for the
nine months ended September 30, 1996 from the nine months ended September 30,
1995.
NET LOSS. Net loss decreased $.5 million, or 30.2%, to $1.1 million for the
nine months ended September 30, 1996 from a net loss of $1.6 million for the
nine months ended September 30, 1995. The decrease in net loss resulted from the
factors described above and a lower tax provision resulting from the Minority
Interest Acquisition in February 1996.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
REVENUES. Revenues increased $8.7 million, or 18.6%, to $55.8 million for
1995 from $47.1 million for 1994. This increase was attributable to an
additional $6.8 million in sales to AT&T in 1995 relating to a major systems
integration program primarily for American Airlines, as well as increased sales
of: (i) products and services for in-flight entertainment systems; (ii)
connectors for cabin management and in-flight entertainment systems on Boeing's
777 aircraft; and (iii) contacts through the Company's private labeling program.
Partially offsetting this increase was a decline in sales of contacts to
aircraft OEMs in 1995 due to lower production rates for new aircraft and a
decline in systems integration reserves reflecting the completion of two systems
integration programs in early 1995.
GROSS PROFIT. Gross profit increased $1.7 million, or 15.8%, to $12.4
million for 1995 from $10.7 million for 1994. Gross profit as a percent of
revenues decreased marginally to 22.2% for 1995 from 22.7% for 1994. The
decrease in gross profit as a percent of revenues primarily resulted from
increased material cost of approximately $.9 million caused by the weakness of
the U.S. Dollar relative to the Swiss Franc.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased $1.7
million, or 22.2%, to $9.4 million for 1995 from $7.7 million for 1994. SG&A
expenses as a percent of revenues increased marginally to 16.9% for 1995 from
16.4% for 1994. This increase resulted from an effort to develop further the
sales, accounting and senior management functions of the Company's operating
subsidiaries in anticipation of continued revenue growth.
OPERATING INCOME. Operating income remained essentially unchanged from 1994
at $1.8 million for 1995 as a result of the factors discussed above and a
marginal decrease in amortization of intangible assets.
INTEREST EXPENSE. Interest expense increased $.6 million, or 17.8%, to $3.8
million for 1995 from $3.2 million for 1994 due to higher outstanding
indebtedness. The 1994 Refinancing resulted in lower effective interest rates
and higher outstanding indebtedness.
NET LOSS. Net loss increased $.7 million, or 28.0%, to $3.4 million for
1995 from a net loss of $2.7 million for 1994 as a result of the factors
described above and a higher tax provision for Cory Components, which was not
consolidated for income tax purposes.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993
REVENUES. Revenues decreased $1.1 million, or 2.3%, to $47.1 million for
1994 from $48.2 million for 1993. This decline in revenues reflects: (i) the
completion in 1993 of two systems integration programs totaling $3.3 million in
sales; and (ii) lower contact sales to aircraft OEMs as aircraft production
rates declined. Partially offsetting this decline were increased sales of
specialty connectors for cabin management and in-flight entertainment systems on
Boeing's 777 aircraft, as well as growth of the Company's private labeling
programs for contacts and connectors.
GROSS PROFIT. Gross profit decreased $1.2 million, or 10.5%, to $10.7
million for 1994 from $11.9 million for 1993. Gross profit as a percent of
revenues decreased from 24.8% for 1993 to 22.7% for 1994. This decline was
attributable to a shift in revenue mix resulting from the growth of the
Company's private labeling programs for contacts and connectors, which had lower
gross profits as a percent of revenues than the two systems integration programs
which were completed in 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses decreased $.3
million, or 3.0%, to $7.7 million for 1994 from $8.0 million for 1993 as the
Company reduced SG&A expenses to offset a decrease in sales volume. As a percent
of revenues, SG&A expenses decreased marginally to 16.4% for 1994 from 16.5% for
1993.
OPERATING INCOME. Operating income decreased $1.0 million, or 36.6%, to
$1.8 million for 1994 from $2.8 million for 1993. The decrease in operating
income resulted from the factors described above.
INTEREST EXPENSE. Interest expense increased $.3 million, or 10.3%, to $3.2
million for 1994 from $2.9 million for 1993. This increase resulted from higher
outstanding indebtedness after the 1994 Refinancing, partially offset by lower
effective interest rates.
NET LOSS. Net loss increased $1.9 million to $2.7 million for 1994 from a
net loss of $.8 million for 1993 due to the factors described above as well as:
(i) an increase of $.4 million in foreign exchange losses incurred on contact
blanks shipped from the Company's Swiss facility; and (ii) $.3 million in
extraordinary losses resulting from the write-off of deferred financing expenses
in association with the 1994 Refinancing.
LIQUIDITY AND CAPITAL RESOURCES
The Company has required cash primarily to fund acquisitions and, to a
lesser extent, to fund capital expenditures and for working capital.
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For the nine months ended September 30, 1996 and the year ended December 31,
1995, the Company generated cash from operating activities of $3.1 million and
$1.5 million, respectively. Cash from operating activities is net of interest
payments of $1.8 million and $3.3 million for the nine months ended September
30, 1996 and year ended December 31, 1995, respectively. With the net proceeds
of the Offering, the Company estimates that it will repay a significant portion
of the debt. As a result the related interest payments will decrease
substantially. See "Use of Proceeds."
The Company generated $.3 million in cash from a decrease in working capital
for the nine months ended September 30, 1996 and used $1.3 million in cash for
the year ended December 31, 1995 to increase working capital. Trade receivables
increased $.5 million for the nine months ended September 30, 1996 and $1.6
million in the year ended December 31, 1995, respectively, due to higher sales.
Unbilled receivables on revenues recognized under the percent of completion
method increased $.5 million for the nine months ended September 30, 1996 as a
result of the systems integration program for Swissair (through IFT) that began
in mid-1996. Unbilled receivables decreased by $3.9 million in 1995 as a result
of the completion of a systems integration program for AT&T in 1995. Inventories
decreased by $1.1 million for the nine months ended September 30, 1996 as a
result of inventory reduction programs in 1996. Inventories increased by $3.0
million in 1995 in support of sales growth. Accounts payable decreased by $.5
million in the nine months ended September 30, 1996 primarily as a result of a
reduction of inventory in 1996. Accounts payable decreased by $1.0 million in
1995 due to the application of cash made available by the 1994 Refinancing.
Net cash used in investing activities was $17.4 million for the nine months
ended September 30, 1996 and $1.5 million for the year ended December 31, 1995.
Of the $17.4 million used in 1996, $16.6 million related to the Minority
Interest Acquisition in February 1996 and the acquisition of ADS in September
1996. Capital expenditures of $.7 million and $1.2 million were made in the nine
months ended September 30, 1996 and in the year ended December 31, 1995,
respectively. Capital expenditures were incurred to: (i) purchase tooling in
support of proprietary products; (ii) upgrade machinery and equipment; and (iii)
increase manufacturing capacity in support of sales growth. Major ongoing
capital expenditure projects include $.6 million for improved plating controls
and $1.0 million for a new management information system.
Net cash provided by financing activities for the nine months ended
September 30, 1996, was $14.1 million. Specifically, the Company financed the
Minority Interest Acquisition (including the related fees and expenses) in
February 1996 through the sale of its Series D Convertible Preferred Stock and
warrants to Nassau for $6.5 million. In September 1996 the Company financed the
acquisition of ADS (including the related fees and expenses) through the sale of
its Series E Convertible Preferred Stock and warrants for $3.0 million, the
issuance of the Convertible Notes and warrants for $3.0 million and an increase
and a drawdown under the Senior Revolver of $5.4 million. The Series E
Convertible Preferred Stock, Convertible Notes and related warrants were issued
to Nassau and Electra. At the time of the ADS acquisition, availability under
the Senior Revolver was increased by an additional $1.5 million to fund
potential future working capital and capital expenditure requirements. In the
year ended December 31, 1995, repayments of senior debt and capital lease
obligations were offset by increased borrowing under the Senior Revolver,
resulting in DE MINIMIS net cash provided by financing activities.
Cash decreased by $.2 million for the nine months ended September 30, 1996
and increased $.1 million for the year ended December 31, 1995 due to the
factors described above. Availability under the Senior Revolver as of September
30, 1996 was $3.4 million versus $.7 million as of December 31, 1995.
Contributing to the increase in availability was a $1.5 million increase in the
maximum borrowings permitted under the Senior Revolver, net of the financing for
the ADS acquisition, as discussed above.
In December 1996, the Company acquired Elsinore and purchased the AMP
Facility. The acquisition of Elsinore was financed by the Seller Note and $1.3
million borrowed under the Senior Revolver. The initial cash portion of the
purchase price of the AMP Facility was financed through an increase of
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$5.0 million in the Senior Term Notes and the balance of $.4 million through a
drawdown under the Senior Revolver.
As of September 30, 1996, the maximum amount which the Company could borrow
under the Senior Revolver was $12.5 million and the principal amount outstanding
was $9.1 million. Of the amounts outstanding under the Senior Revolver, $8.0
million bear interest at the Eurodollar Rate plus 4.5% per annum (10.0% as of
September 30, 1996) with the remainder bearing interest at the lender's prime
rate plus 3.25% per annum (11.5% as of September 30, 1996). The Senior Revolver
becomes due on September 18, 1999. In September 1996, the Company borrowed $5.4
million under the Senior Revolver to fund a portion of the ADS purchase price.
The Company borrowed an additional $1.7 million under the Senior Revolver to
fund a portion of the purchase price of Elsinore and the purchase price of the
AMP Facility.
The Company is in negotiations with banks to provide the New Credit Facility
which is expected to provide for a term loan and a revolving credit facility in
an aggregate amount of $40.0 million. The New Credit Facility is expected to be
secured by substantially all the assets of the Company. It is a condition to the
consummation of the Offering that the Company obtain the New Credit Facility.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local, and foreign
environmental requirements, including those relating to discharges to air,
water, and land, the handling and disposal of solid and hazardous waste, and the
cleanup or properties affected by hazardous substances. In addition, certain
environmental laws, such as the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), and similar state laws
impose strict, retroactive, and joint and several liability upon persons
responsible for releases or potential releases of hazardous substances. Some
risk of environmental liability is inherent in the nature of the Company's
business, and the Company might in the future incur material costs to meet
current or more stringent compliance, cleanup, or other obligations pursuant to
environmental requirements. See "Risk Factors--Environmental Regulation,"
"Business--Environmental Regulation" and "Business--Legal Proceedings."
FORWARD-LOOKING STATEMENTS
This Prospectus, particularly the sections entitled "Prospectus Summary,"
"Use of Proceeds," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," contains certain
forward-looking statements and other statements that are not historical facts
concerning, among other things, market conditions of the aircraft industry, the
demand for avionics components and systems and future strategic acquisitions.
There can be no assurance that the Company has accurately identified and
properly weighed all of the factors which affect market conditions and demand
for the Company's products and services, that the public information upon which
the Company has relied is accurate or complete or that the Company's analysis of
the market and demand for its products and services is correct and, as a result,
the strategy based on such analysis will be successful. See "Risk Factors" for a
more detailed summary of factors which could affect future results.
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BUSINESS
GENERAL
The Company is a manufacturer of avionics components and a provider of
avionics systems integration services in certain niche markets of the commercial
aircraft industry. The products and services offered by the Company are utilized
primarily in commercial aircraft to connect, support and/or integrate various
avionics systems, including cabin avionics systems and flight deck avionics
systems. The Company's targeted markets consist of commercial aircraft and
avionics OEMs, the commercial aircraft retrofit market and the commercial
aircraft aftermarket. The Company also sells products and services to the
military aircraft market.
The Company seeks to maximize its sales by emphasizing the complementary
nature of its products and services. Components manufactured by the Company
include: (i) contacts (of which the Company believes it is the largest supplier
to the commercial aircraft industry); (ii) connectors (which often utilize the
contacts manufactured by the Company); (iii) harness assemblies (which often
utilize the connectors manufactured by the Company); and (iv) avionics support
structures (which often are packaged with the Company's connectors and harness
assemblies in installation kits). In addition, the Company manufactures dichroic
LCD devices, which are used with flight deck avionics, and believes it is the
largest supplier of such devices to the commercial aircraft industry. The
systems integration services provided by the Company include design and
engineering, FAA certification, manufacture of installation kits and systems
installation. The Company manufactures many of the components required to
complete a systems integration project, which it believes provides it a critical
competitive advantage.
The Company was formed in 1989 to capitalize on emerging trends in the
aircraft market through acquisitions. Since its formation, the Company has
completed eight acquisitions of businesses or assets. A summary of these
transactions follows:
<TABLE>
<CAPTION>
YEAR OF
TRANSACTION TARGET PRINCIPAL PRODUCTS AND SERVICES(1)
- ------------- ------------------------- ------------------------------------------ APPROXIMATE
PURCHASE PRICE(2)
-------------------
(IN MILLIONS)
<C> <S> <C> <C>
1990 Hollingsead Avionics support structures $ 9.1
1991 Tri-Star Contacts and connectors *(3)
1991 Tri-Star Europe Contact blanks *(3)
1991 TST Wire marking equipment *(3)
1991 Cory Components Connectors and harness assemblies 7.7(4)
1996 ADS Dichroic LCD devices 13.3
1996 Elsinore Engineering services 2.6
1996 AMP Facility Contact blanks 7.0
</TABLE>
- ------------------------
(1) At the time of the transaction.
(2) Includes, where applicable, related fees and expenses and post closing
adjustments.
(3) Although each of Tri-Star, Tri-Star Europe and TST was acquired pursuant to
a separate agreement, the purchase price, which was $10.4 million, for all
three entities was determined in the aggregate.
(4) The Company acquired 75% of Cory Components in 1991 for approximately $2.0
million. In February 1996, the Company acquired the 25% which it did not
already own for approximately $5.7 million.
The Company commenced its operations in October 1990 with the acquisition of
Hollingsead, which, at the time of the acquisition, was solely a manufacturer of
avionics support structures. The Company expanded its manufacturing operations
with the 1991 acquisition of the Tri-Star Companies. The Company's management
has refocused and expanded the businesses which were acquired in the
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Hollingsead and Tri-Star Companies transactions. By capitalizing on
Hollingsead's manufacturing strength in avionics support structures, which are
used extensively in the systems integration process, the Company has expanded
Hollingsead into a full-service systems integrator concentrated in the retrofit
market. Concurrently, the Company has enhanced the market positions of the
Tri-Star Companies as a leading supplier of certain low-cost, high-quality
avionics components. Management has focused on reducing costs, improving quality
and increasing the market penetration of the components manufactured by the
Tri-Star Companies.
In 1996, the Company completed: (i) the acquisitions of ADS and Elsinore;
(ii) the purchase of the AMP Facility; and (iii) the Minority Interest
Acquisition. The acquisition of ADS, a manufacturer of dichroic LCD devices,
which the Company believes is the largest supplier of such products to the
commercial aircraft industry, expanded the Company's offering of components used
in flight deck avionics systems. The Company believes that the acquisition of
ADS will allow it to capitalize on the upturn in aircraft OEM production by
increasing its revenue content per aircraft as well as enhancing the Company's
position with its major customers. The acquisition of Elsinore, with its DAS
approval, permits the Company to issue, through Elsinore, on behalf of the FAA,
certification that the designs of aircraft modifications performed in connection
with systems integration work conform to all pertinent FAA requirements. Such
certifications are issued as FAA-approved STCs, which constitute, in effect,
specific FAA design approval for each modification. In addition, the acquisition
of Elsinore enhanced the Company's systems integration capabilities and
increased the number of engineering professionals dedicated to the Company's
systems integration effort by approximately 50%. The acquisition of Elsinore
also provided the Company with an important new customer in the aircraft
industry, Daimler Benz Aerospace, and the opportunity to obtain additional
customers. The Company's purchase of the AMP Facility added contact capability
and capacity which will enable the Company to optimize and expand its contact
manufacturing operations. The AMP Facility enables the Company to produce
contact blanks using a cold-heading manufacturing process which, when used for
high volume production, is more cost effective than the Company's existing screw
machine operations. As a result of the purchase of the AMP Facility the Company
will have the opportunity to make increased sales to certain distributors that
formerly purchased contacts from other entities within AMP.
INDUSTRY OVERVIEW AND TRENDS
The Company participates in the commercial and military segments of the
aircraft industry. Within these segments, the Company sells to commercial and
military aircraft OEMs and major avionics equipment OEMs as well as to the
aircraft retrofit market and aircraft aftermarket.
On December 15, 1996, Boeing and McDonnell Douglas announced that they had
agreed to merge. The merger is subject to certain conditions, including the
receipt of regulatory approvals. Neither Boeing nor McDonnell Douglas has made
any announcements of any changes to their respective businesses following the
merger. The Company is unable to determine at this time the effect, positive or
negative, of the merger should it be consummated.
Prior to the announcement of the merger, the market for commercial aircraft
designed to carry 100 or more passengers was served principally by Boeing,
Airbus and McDonnell Douglas. The market for commercial aircraft designed to
carry fewer than 100 passengers is served by more than a half dozen other
manufacturers. The major systems installed on new commercial and military
aircraft, such as flight deck avionics systems, are produced by a limited number
of OEMs, including AlliedSignal Inc., Rockwell Collins, General Electric
Company, Honeywell, Inc. ("Honeywell"), Raytheon Co. and Sextant Avionique, Inc.
Components and sub-systems for new aircraft are provided by a much more
fragmented group of companies, consisting of numerous smaller, specialized
companies, such as the Company.
The aircraft retrofit market (the integration of new systems into existing
aircraft) and the aircraft aftermarket (the manufacture and sale of replacement
products for existing aircraft) are served by a
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highly fragmented group of companies. Many of these companies were formed
primarily in response to increased outsourcing by airlines of internal
engineering capabilities. Products and services provided within the aircraft
aftermarket and aircraft retrofit market include aircraft replacement components
and systems and aircraft repair, maintenance, overhaul and systems integration
services.
The Company believes that there are numerous barriers to entry which limit
access to the aircraft industry. These barriers include: (i) general FAA
certification requirements, including those necessary to perform aircraft
modifications or maintenance; (ii) required compliance with military
specifications for certain products sold to commercial and military markets;
(iii) required compliance with qualification and approval standards imposed by
aircraft and avionics systems OEMs in addition to FAA aircraft manufacturing and
aircraft modification design and installation standards; (iv) reluctance of OEMs
to list new companies as approved vendors on the engineering drawings of the
OEMs (referred to as "print position"); and (v) significant initial capital
investment and tooling requirements necessary for the manufacture of certain
aircraft components and systems.
The Company believes the following trends are affecting the commercial
aircraft industry:
INCREASED DEMAND FOR NEW AIRCRAFT. According to the Boeing Report,
expenditures on new aircraft production are expected to increase from an average
of approximately $34 billion per year for the period 1991 through 1995 to
approximately $46 billion per year for the period 1996 through 2000. These
expenditures are expected to result in the addition of nearly 3,500 new aircraft
to the worldwide fleet of 11,000 aircraft. The Company believes that the
following factors, among others, are causing this increase in new aircraft
orders: (i) projected worldwide airline traffic growth of 5.1% per year
(including growth of 7.1% per year in the Asia-Pacific region and 11.5% per year
in China); (ii) projected cargo traffic growth of 6.7% per year; (iii) projected
increase in the load factor of aircraft currently in service; (iv) increases in
the average age of commercial aircraft; (v) the cost effectiveness of using new
aircraft versus old aircraft; and (vi) a turnaround in worldwide airline
operating performance (from substantial operating losses in 1992 to
approximately $12 billion in operating profit in 1995).
DOWNSIZING AND OUTSOURCING. Airlines have come under increasing pressure to
reduce operating and capital costs associated with providing services. In
response, airlines have increased purchases of certain components from third
parties and have outsourced certain repair, overhaul and retrofit functions.
Similarly, aircraft and avionics OEMs increasingly are reducing their level of
vertical integration by outsourcing more manufacturing, repair and retrofit
functions to third parties. The Company believes that these trends are creating
increased demand for low-cost, high-quality component manufacturers and systems
integrators, such as the Company.
INDUSTRY CONSOLIDATION IN CERTAIN SEGMENTS. Certain segments of the
commercial aircraft industry, such as those that include manufacturers of
components and providers of aircraft retrofit, overhaul and repair services,
have been undergoing consolidation. The Company believes that several factors
are contributing to this consolidation, including: (i) the high level of
fragmentation within these segments; (ii) the continuing efforts by OEMs to
minimize purchasing costs, streamline operations and achieve greater control of
quality through a rationalization of their supplier bases; and (iii) the
increased demands placed on suppliers due to the just-in-time requirements of
their customers.
INCREASED DEMAND FOR CABIN AVIONICS SYSTEMS. In recent years, there has
been an increase in demand for cabin avionics systems, which include in-flight
passenger telecommunications systems as well as in-flight entertainment systems,
such as video, video-on-demand and casino-style electronic gaming. In-flight
passenger telecommunications systems primarily are produced by major providers
of terrestrial and satellite-based communication services and in-flight
entertainment systems primarily are produced by a diverse group of companies,
ranging from small entrepreneurial start-ups to large electronics and media
companies. In-flight entertainment and passenger telecommunication systems
generally are integrated onto aircraft by third parties, such as the Company, as
well as by airlines and
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<PAGE>
avionics OEMs. The Company believes that the increased demand primarily has
resulted from: (i) a desire by airlines for additional revenue-producing
services; and (ii) longer flights combined with a demand by airline passengers
for more sophisticated forms of in-flight services.
PROLIFERATION OF NEW AVIONICS TECHNOLOGIES FOR FLIGHT DECKS. The prevalence
of older generation avionics equipment is a primary limiting factor in
establishing a more efficient air traffic management system. The commercial
aircraft industry, including the world's airlines, aircraft and avionics OEMs
and regulatory agencies, have organized to develop the necessary industry
standards, regulations and system requirements for future air navigation systems
("FANS"). Through the implementation of FANS, a complete modernization of both
airborne and ground-based air traffic management systems is expected to be
introduced and to result in significant improvements over existing systems.
Anticipated benefits of FANS include cost savings and enhanced safety. As
overall navigation system accuracy is improved, new navigation systems, such as
satellite communication ("SATCOM") systems and global positioning systems
("GPS"), will be required which the Company believes will present numerous
aircraft avionics retrofit opportunities.
There also has been a proliferation of new safety systems for flight decks
driven by the advent of new technologies and FAA mandates. For example, traffic
collision avoidance systems ("TCAS") and windshear detection systems are now
required for passenger aircraft operating in the U.S. The Company believes that
these safety systems may be mandated for all cargo carriers and flights outside
the U.S. In addition, the Company believes that the FAA will recommend or
mandate additional safety systems such as an enhanced ground proximity warning
system, a predictive (forward-looking) windshear detection system and an
enhanced digital flight data recorder.
COMPETITIVE STRENGTHS
The Company believes that it is well-positioned to take advantage of the
current trends and expected growth in the commercial aircraft industry as a
result of the following competitive strengths:
LEADING POSITIONS IN NICHE MARKETS. The Company successfully has
established strong positions in several specialized niches within the commercial
aircraft industry. The Company believes that it is the largest supplier of
contacts and dichroic LCD devices for use in commercial aircraft and a major
supplier of harness assemblies for use in in-flight entertainment systems. The
Company seeks to utilize its strong market positions to compete more effectively
as well as to capitalize on industry consolidation trends.
RECORD OF SUCCESSFUL ACQUISITIONS. Since its formation in 1989, the Company
has completed eight acquisitions of businesses or assets, including, in 1996,
acquisitions of ADS and Elsinore and the purchase of the AMP Facility. The
Company has demonstrated its ability to: (i) identify strategic acquisition
targets; (ii) complete the acquisition of identified targets; and (iii) increase
revenues of an acquired company, often while refocusing that company's business
strategy. For example, the Company acquired Hollingsead in 1990, which was, at
that time, solely a manufacturer of avionics support structures. From 1992
through 1995, the Company increased revenues 74.3% at Hollingsead and expanded
its operations from that of a component manufacturer to that of a full-service
systems integrator. The Company believes that its acquisition success has
resulted from its ability to identify and screen acquisition candidates,
implement an effective cost reduction program and expand and diversify the
products and services provided by an acquired company.
ALIGNMENT WITH LEADING AVIONICS AND AIRCRAFT OEMS AND SUPPLIERS. The
Company seeks to maximize its growth by establishing long-term relationships
with leaders in the Company's primary markets. For example, the Company has
entered into supply agreements with Boeing. The Company believes that through
these agreements it is the supplier of a substantial majority of the contacts
for all aircraft currently manufactured by Boeing and the sole source supplier
of certain connectors for in-flight entertainment systems installed by Boeing on
its 777 aircraft. The Company is also: (i) a primary supplier
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<PAGE>
of harness assemblies to Matsushita for its in-flight entertainment systems;
(ii) the preferred integrator for the in-flight casino-style electronic gaming
and video-on-demand systems of IFT; and (iii) a preferred systems integrator for
the passenger telecommunications systems of AT&T.
NUMEROUS INDUSTRY AND REGULATORY APPROVALS. The Company holds three PMAs
from the FAA and 64 supplements to its PMA's authorizing the Company to
manufacture and install numerous parts in many different aircraft. The Company
also has three FAA domestic repair station certificates which authorize it to
perform certain aircraft modifications. The Company employs FAA-certified
airframe and power-plant mechanics who are authorized to perform certain
aircraft modification functions. In addition, through its acquisition of
Elsinore, the Company is one of only 26 DASs worldwide (as of March 28, 1996,
the date of the most recent available data from the FAA) which are authorized by
the FAA to provide FAA approval of aircraft modifications. The DAS approval
enables the Company to act as a designee of the FAA in issuing certain STCs.
LOW-COST, HIGH-QUALITY OPERATIONS. The Company believes that it has
established low-cost operations through well-defined cost reduction programs,
technological development and the use of vertical integration, where
appropriate. The Company's low-cost operations are demonstrated, for example, by
the growth of the Company's contact private labeling programs under which the
Company supplies contacts to many of its competitors.
The Company uses sophisticated procedures and processes to ensure its
products meet or exceed industry and customer quality requirements. Many
customers formally have recognized the effectiveness of the Company's quality
programs by issuing quality approval letters, awarding quality compliance
certificates and authorizing the Company's inspection personnel to act as the
authorized quality representative of the customer. For example, in February
1996, the Company became the 13th Boeing supplier to receive its D1-9000
Advanced Quality System award.
ENGINEERING AND RELATED TECHNICAL CAPACITY. More than 12% of the Company's
employees are engineering professionals, providing the Company with significant
in-house engineering capability and key technical expertise. For example, the
Company believes that it is one of a few companies with the capability to
perform full-service systems integration functions (design and engineering, FAA
certification, installation kit manufacturing and installation of cabin avionics
and flight deck avionics systems on aircraft). This level of expertise enables
the Company to respond rapidly and effectively to the technical requirements of
its customers as well as to capitalize on the outsourcing trends in the
commercial aircraft industry.
MANAGEMENT DEPTH AND EXPERIENCE. The Company has assembled a team of
executives, program managers and engineers from many of the major manufacturers
and suppliers to the aircraft industry. Key management and professional
employees of the Company bring experience with them from such companies as The
B.F. Goodrich Co. ("B.F. Goodrich"), B/E Aerospace, Inc., COMSAT Corp.,
Honeywell, Hughes-Avicom International, Inc., Litton Industries, Inc.,
Matsushita and McDonnell Douglas, providing the Company with a diversity of
commercial aircraft industry expertise. On average, the Company's executive
management has approximately 17 years of related industry experience.
GROWTH STRATEGY
The Company's principal strategy is to establish and expand leading
positions in high-margin, niche markets within the commercial aircraft industry,
with a focus on the manufacture of avionics components and the integration of
avionics systems. The Company seeks to achieve these leading positions while
maintaining a balance of revenues among the OEM market, the retrofit market and
the aftermarket. The Company believes that such a strategy will position it for
growth over an entire commercial aircraft industry economic cycle. Specifically,
the Company seeks to:
CAPITALIZE ON GROWTH IN COMMERCIAL AIRCRAFT PRODUCTION. The Company
believes its strong market positions and alignment with many of the leading
commercial aircraft industry participants will enable it to capitalize on the
projected increase in commercial aircraft production. The Company believes that
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<PAGE>
every aircraft currently produced by Boeing, Airbus and McDonnell Douglas
includes components manufactured by the Company. As orders for the Company's
aircraft components have increased, the Company has worked closely with OEMs to
meet their delivery and scheduling requirements. In addition, the Company seeks
to increase its revenue content per plane by introducing new products, expanding
the use of existing products and through strategic acquisitions of companies
which supply components to the OEMs.
EXPLOIT INCREASED DEMAND FOR CABIN AVIONICS SYSTEMS. The Company believes
that the demand for cabin avionics systems is increasing, primarily as a result
of: (i) a desire by airlines for additional revenue-producing services; and (ii)
longer flights combined with a demand by airline passengers for more
sophisticated forms of in-flights services. The Company manufactures components
(contacts, connectors, harness assemblies and avionics support structures) which
are used with cabin avionics systems, as well as provides the systems
integration services necessary to install such systems on aircraft. The Company
believes that it competes effectively in the cabin avionics market by offering
to its customers a full-service organization, capable of providing interconnect
hardware and support structures for cabin avionics systems combined with the
design and engineering, FAA certification and installation services required to
integrate such systems.
EXPAND AND DIVERSIFY SYSTEMS INTEGRATION SERVICES. Historically, the
Company's systems integration services have been concentrated in the in-flight
passenger telecommunications market. In 1995, the Company commenced an effort to
diversify the types of systems which it retrofits onto aircraft by expanding its
expertise and sales efforts to include navigation and satellite communication,
safety, and in-flight entertainment systems. As of September 30, 1996, the
Company had contracted to provide systems integration services for SATCOM
systems (American Airlines through Rockwell Collins and TIMCO), safety systems
(a major package delivery service), and in-flight entertainment systems
(Swissair through IFT). In addition, as of September 30, 1996, the Company had
drafted proposals in response to more than 40 active requests for proposals for
these and other types of systems.
COMPLETE ADDITIONAL STRATEGIC ACQUISITIONS. The Company seeks to identify
and pursue complementary acquisitions at attractive prices in the aircraft
industry that offer strategic value, such as cost savings, product line
extensions, increased manufacturing capacity or new customer relationships. The
Company initiated discussions with all three of the sellers in its recent
transactions (ADS, Elsinore and the AMP Facility), each of which is of
significant strategic value to the Company. ADS expands the Company's presence
on the flight deck with a product that has a leading niche market position.
Elsinore provides the Company with a DAS approval, increases its engineering
expertise and expands its customer base. The AMP Facility expands the Company's
manufacturing capacity and provides it with new low-cost manufacturing
techniques. While there can be no assurance that the Company will complete
additional acquisitions, the Company believes that the fragmented nature of the
market for aircraft components and systems integration services will provide the
Company with additional opportunities to exploit industry consolidation trends.
CAPITALIZE ON COMPLEMENTARY PRODUCTS AND SERVICES: The majority of the
Company's products and services are utilized to provide an interface between an
aircraft and its avionics systems. Over the past several years, the Company
increasingly has combined certain of the components which it manufactures to
create higher value-added products. For example, the contacts manufactured by
the Company often are utilized as an integral component of the Company's
connectors. In turn, the connectors manufactured by the Company often are
utilized as primary components of the Company's harness assemblies.
Additionally, in support of the systems integration services provided by the
Company, the Company's harness assemblies often are packaged with its avionics
support structures to form the foundation for the installation kits which are
then sold to the Company's systems integration customers. By emphasizing the
complementary nature of its products and services, the Company seeks to maximize
penetration with existing customers and compete more effectively for new
customers.
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PRODUCTS AND SERVICES
The Company's principal products and services are: contacts; connectors;
harness assemblies; avionics support structures; dichroic LCD devices and the
integration of certain cabin and flight deck avionics systems into different
aircraft models. The Company believes that its products are used in each of the
commercial aircraft models currently produced by Boeing, Airbus and McDonnell
Douglas, the three largest commercial aircraft OEMs.
CONTACTS. The Company believes that it is the largest producer of
precision-machined contacts for use in commercial aircraft. Contacts conduct
electronic signals or electricity and are installed at the terminus of a wire or
an electronic or electrical device. The Company supplies contacts for use in
connectors found in virtually every electronic and electrical system on the
aircraft. Over the last three years the Company has successfully initiated
private labeling programs whereby the Company manufactures contacts for several
of the major connector manufacturers. The Company sells contacts directly to
aircraft and avionics OEMs and, through its private labeling programs, to
connector manufacturers who sell connectors to the aircraft and avionics OEMs
under their brand name. The Company believes that it is able to sell contacts on
a private label basis because of its reputation for high-quality, its levels of
service and its low-cost manufacturing operations. The Company believes that it
is the supplier of a substantial majority of the contact requirements for all
aircraft currently manufactured by Boeing.
CONNECTORS. The Company manufactures and sells to the commercial aircraft
industry electronic and electrical connectors, which provide the electronic or
electrical link between discreet wires and devices. Connectors also serve as a
separable interface that facilitates assembly, installation, repair and removal
of wires or equipment. The Company manufactures a narrow range of electrical and
electronic connectors that are designed and manufactured specifically to operate
in the harsh airborne environment of an aircraft and to meet the critical
performance requirements demanded by the commercial aircraft market. The Company
produces connectors that are used in aircraft galleys, flight decks and control
panels in the passenger cabin. The Company is the sole-source supplier of
certain connectors for in-flight entertainment systems installed by Boeing on
its 777 aircraft.
The Company characterizes its connectors as follows: (i) application
specific--designed and developed by the Company for a specific application,
usually for a single customer; (ii) proprietary--Company-designed connectors
which are sold to the broad market for a variety of applications, often evolving
over time from an application specific product; and (iii) industry
standard--produced in accordance with an industry or military controlled design
or specification and sold to the broad market to which the design or
specification relates. Examples of the Company's application specific,
proprietary and industry standard connectors are as follows:
APPLICATION SPECIFIC. The Company manufactures a connector used as an
electrical distribution block for Boeing's 777 aircraft. Currently, this
product is used solely for this application; however, in the future, it
could be used in similar applications on other aircraft.
PROPRIETARY. The CQ connector family was originally an application specific
product designed by the Company for use with in-flight entertainment and
cabin management systems on Boeing's 777 aircraft. The CQ connector is now
sold to other customers for other applications.
INDUSTRY STANDARD. The Company sells standard connectors, built to ARINC
specifications, which can be used in many applications without further
testing or certification.
HARNESS ASSEMBLIES. The Company produces harness assemblies for use in
cabin avionics systems, primarily in-flight entertainment systems. A harness
assembly is made from wire, which the Company buys from its vendors, and
connectors, contacts and hardware, which the Company manufactures. The Company
sells its harness assemblies to avionics OEMs. In addition, the Company uses
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harness assemblies in its systems integration activities. The Company is
currently a primary supplier of harness assemblies to Matsushita, one of the
largest manufacturers of in-flight entertainment systems.
AVIONICS SUPPORT STRUCTURES. The Company has designed, patented and
produced a wide range of avionics support structures for use on commercial
aircraft. Avionics support structures are typically comprised of trays,
shelving, racks, mounts, and insertion and extraction devices which are combined
with other components to form the installation kit that securely holds and
connects avionics equipment to the aircraft and other systems or devices such as
antennae, flight instruments and power supplies. Avionics support structures are
used to support and environmentally cool (using fans and air chambers) the
avionics equipment, including navigation, communication and flight control
equipment. Avionics support structures are generally located in the avionics bay
of an aircraft and are secured to the frame of the aircraft. The Company's
avionic support structures are recognized by its customers under the Box-
Mount-TM- name which the Company believes is highly respected in the
marketplace. The Company sells its avionics support structures to aircraft and
avionics OEMs, airlines, and major modification centers. In addition, these
products are essential components included in the installation kits which are
used in the Company's systems integration operations.
DICHROIC LCD DEVICES. Through its recent acquisition of ADS, the Company
became a leading manufacturer of dichroic LCDs and modules (which are LCDs
packaged with a backlight source and direct drive electronics) used in
commercial and military aircraft. The Company also manufactures avionics
electronic clocks which utilize its dichroic LCD devices. The Company is the
leading (and often sole-source) supplier of dichroic LCD devices to aircraft and
avionics OEMs and the U.S. military.
The Company's dichroic LCD products, which provide output information to the
flight crew, are used in a variety of flight deck applications, including flight
control systems, fuel quantity indicators, airborne communications and safety
systems. Dichroic LCD products are widely used in the aerospace industry because
of their high performance characteristics and custom design. Key performance
characteristics of dichroic LCD devices include high readability in sunlight and
darkness, ability to withstand wide temperature fluctuations and readability
from extreme viewing angles. During the development phase of flight deck
avionics, the Company works closely with its customers to develop products that
meet the customer's requirements which are subsequently incorporated into new or
modified flight decks.
The Company's clocks utilize its dichroic LCD technology and are suitable
for use in general aviation, business, commercial and military aircraft. The
Company believes that it is the only clock manufacturer which has designed a
line of clocks capable of serving all types of aircraft.
SYSTEMS INTEGRATION. The Company performs all of the functions necessary to
retrofit an existing aircraft with an avionics system that previously did not
exist on the aircraft. As a full-service systems integrator, the Company
provides design and engineering, FAA certification, installation kit
manufacturing and systems installation services required to retrofit an aircraft
with a new system. A summary of these functions follows:
DESIGN AND ENGINEERING. The Company provides a full range of systems,
electrical and mechanical engineering services to its customers through its
staff of qualified and experienced engineers and program management
personnel. The Company's engineers work proactively with its customers in
all phases of the systems integration effort to achieve an engineering
design data package. This engineering design data package provides
information to: (i) certify product compliance with applicable industry and
FAA standards and regulations; (ii) define the manufacturing requirements
for kit implementation; and (iii) provide installation definition for actual
installation of the system onto aircraft.
FAA CERTIFICATION. The Company employs on a full-time basis or contracts
for FAA-certified designated engineering representatives ("DERs") to
evaluate the engineering design data package,
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coordinate compliance testing to applicable FAA regulations and obtain
formal FAA approval of the engineering design data package. These DERs
facilitate FAA approval of the Company's products and services. In general,
DERs evaluate the design of an aircraft modification, part or system, ensure
compliance with the applicable Federal Aviation Regulations and oversee
product testing to ensure the airworthiness of the aircraft as modified.
DERs also either issue, on behalf of the FAA, certain approvals, or work
with the FAA to obtain certain approvals directly from the FAA. Significant
aircraft modifications by anyone other than the aircraft manufacturer
require the issuance of an STC, which constitutes an FAA determination that
the design of the modification meets all pertinent FAA requirements. STCs
may be issued directly by the FAA or on behalf of the FAA by an approved
DAS. The acquisition of Elsinore and its DAS approval enables the Company to
issue STCs for certain modifications without applying directly to the FAA
for such certifications.
INSTALLATION KIT MANUFACTURE. The Company ordinarily applies for and
receives multi-aircraft STCs which constitute design approval for a
modification which may be applied to any aircraft of a particular type. The
approved modifications commonly are referred to as "installation kits." Such
installation kits generally include: (i) parts, components, and
subassemblies; and (ii) detailed instructions on approved installation. The
installation kit and all of its elements are defined in the STC in a Master
Data List. Once the Company has an STC, issued directly by the FAA or by the
Company's DAS through Elsinore, the Company applies to the FAA for a PMA or
a supplement to an existing PMA, which allows the Company to manufacture the
installation kit in accordance with the approved design and data package.
SYSTEMS INSTALLATION. The Company employs a dedicated team of FAA-certified
mechanics and repairmen to ensure proper installation of the installation
kits and associated avionics systems. These mechanics and repairmen, who
have extensive installation experience over a broad range of commercial
aircraft models, operate within the provisions and limitations of the FAA
repair station certificate which covers the Company's three repair stations.
The Company believes that its staff of kit installation personnel is
sufficiently large and diverse in talent to complete multiple installation
projects simultaneously at different locations.
The Company has focused its systems integration efforts on the following
four general categories of systems: (i) in-flight passenger telecommunication
systems; (ii) in-flight entertainment systems; (iii) SATCOM and navigation
systems; and (iv) safety systems. The Company has targeted these four areas
because it believes significant retrofit opportunities exist due to the advent
of new technologies and the need for the airlines to: (i) capture incremental
revenues without increased capital investment (in-flight passenger
telecommunications and in-flight entertainment); (ii) satisfy increased safety
and regulatory requirements; and (iii) reduce operating expenses (SATCOM). A
summary of recent Company activity in each of these categories follows:
IN-FLIGHT PASSENGER TELECOMMUNICATIONS SYSTEMS. The Company is a systems
integrator of in-flight passenger telecommunications systems for AT&T. The
Company has provided installation kits to AT&T for telephones on over 1,000
aircraft, as well as design and engineering and certification services for
certain of these aircraft. The Company is currently involved in proposals to
other in-flight passenger telecommunication systems providers.
IN-FLIGHT ENTERTAINMENT SYSTEMS. The Company is the preferred systems
integrator for IFT. IFT is a publicly traded company which has designed a
digital interactive passenger entertainment system which provides for
video-on-demand, video games, and casino-style electronic gaming in which
the aircraft passenger can gamble using a credit card. In July 1996, the
Company entered into an agreement with IFT to fully integrate the IFT System
into 21 wide-body aircraft for Swissair. The Company expects to realize a
substantial portion of the revenues from such contract in 1997. IFT has
advised the Company that it may place additional orders with the Company for
the integration of its in-flight entertainment system for other airlines.
Although IFT is not obligated to place such
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additional orders and there can be no assurance that IFT will do so, the
Company believes that its relationship with IFT represents a significant
opportunity. The Swissair contract is the first large-scale commercial
application of the IFT System. Delays in installation or problems in
implementation of the IFT System may result in the deferral or loss of
potential revenues from IFT.
SATCOM AND NAVIGATION SYSTEMS. The Company presently is providing systems
integration services in support of SATCOM systems. The Company recently
completed efforts as a systems integrator for SATCOM systems on certain U.S.
Government aircraft and has subsequently been awarded another contract.
Presently, the Company is providing the systems integration services for
SATCOM systems on 10 Airbus A300 for American Airlines (through Rockwell
Collins and TIMCO). The Company also has active proposals for various GPS
programs with both avionics OEMs and airlines. The Company believes that GPS
and SATCOM systems (consistent with the FANS initiative) will be retrofitted
into numerous aircraft over the next few years. In many cases, the airlines
are electing to replace older navigation systems with newer GPS technology
due to avionics obsolescence and significantly increased maintenance costs.
SAFETY SYSTEMS. The Company is an integrator of safety systems which are
required by the FAA, or voluntarily adopted by airlines. The Company
recently was selected to integrate TCAS and heads-up guidance systems
("HGS") on aircraft for a major package delivery service. Currently, several
major carriers in Europe and Asia actively are evaluating TCAS. In addition,
the Company believes that a new "forward-looking" windshear detection system
will be available by the end of 1997. The Company believes significant
opportunity exists for the integration of these types of safety systems onto
aircraft worldwide.
OTHER. The Company has designed, developed and applied for a patent on an
electrical retract mechanism to support in-flight video systems on McDonnell
Douglas narrow-body aircraft. Due to space constraints, in-flight video systems
generally are not available on McDonnell Douglas narrow-body aircraft. The
Company's retract mechanism is configured to fit in the available space. The
Company actively is marketing the system which management believes is the only
video system available for these narrow-body aircraft. The Company believes that
there are over 500 aircraft in the market which potentially could use such a
system.
INDUSTRY REGULATION AND APPROVALS
The aviation industry is highly regulated in the U.S. by the FAA and is
regulated in other countries by similar agencies to ensure that aviation
products and services meet stringent safety and performance standards. The
Company and its customers are subject to these regulations. In addition, many of
these customers impose their own compliance and quality requirements on the
Company.
The FAA prescribes standards and licensing requirements for aircraft
components, licenses private repair stations and issues DAS approvals giving the
holder the right to certify the design of aircraft modifications on behalf of
the FAA. As a result of the FAA's oversight of the Company, the FAA can
authorize or deny authorization of many of the services and products provided by
the Company. Any FAA denial of such required authorizations would preclude the
ability of the Company to provide the pertinent service or product. Should the
Company fail to comply with the applicable FAA standards or regulations, the FAA
would have available to it a wide-range of enforcement options. Such enforcement
options include: (i) issuance of a warning letter or a letter of correction to
the Company; (ii) initiation of a civil penalty action against the Company;
(iii) suspension or emergency suspension of a Company certificate or approval;
or (iv) the revocation or emergency revocation of a Company certificate or
approval. The FAA also has the power to issue cease and desist orders and orders
of compliance and to initiate court action for injunctive relief in support of
its enforcement powers. In the event the FAA were to suspend or revoke a Company
certificate or approval on an emergency basis, the Company would be obliged to
cease immediately the manufacture of products and the delivery of services which
require
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such certificate or approval. In the event the FAA were to suspend or revoke a
Company certificate or approval on other than an emergency basis, the Company
would be permitted to continue the manufacture of products and the delivery of
services which require such certificate or approval pending any available
appeals. However, if the FAA were to prevail in any such appeal, upon the
completion of the appeal process the Company would be obliged to cease the
manufacture of such products and the delivery of such services. In addition, in
the event the FAA were to determine that the Company's noncompliance with the
applicable FAA standards or regulations created a safety hazard, the FAA could
order that the pertinent component or aircraft immediately cease to be operated
until appropriate corrective action is taken. This could require the grounding
of aircraft and/or the removal of affected components from aircraft already
returned to service.
All aircraft operated by airlines in the United States must be of a type
which has received an FAA type certificate ("TC"). A TC is issued by the FAA
after the FAA determines that the aircraft type design meets the applicable FAA
airworthiness standards. After a type design has been approved through the
issuance of a TC by the FAA, a manufacturer with rights to the TC can apply for
FAA approval to produce the aircraft. This approval is a "production
certificate." Any major change in design of a type certificated aircraft which
is not significant enough to require a new application for a TC under the FAA's
rules must still be approved by the FAA. FAA approval of such a design change
developed by an entity other than the TC holder is issued under an STC. There
are two types of STCs: a "single-aircraft" STC, which may be applied to a single
aircraft, and a "multi-aircraft" STC, which may be applied to all aircraft of a
particular type design, for example, all Boeing 747-400s.
As of September 30, 1996, the Company had obtained 83 STCs, most of which
were obtained on behalf of its customers in connection with the Company's
systems integration services, and substantially all of which are multi-aircraft
STCs. The Company foresees the need to obtain additional STCs so that it can
expand the services it provides and the customers it serves.
Proposed aircraft modifications can be tested and approved and STCs issued
directly by the FAA or on behalf of the FAA by holders of DAS approvals. DAS
approvals are granted to domestic repair stations, air carriers, commercial
operators of large aircraft, and manufacturers which demonstrate their ability
to provide the personnel and follow specific procedures to ensure the issuance
of STCs only for appropriate design modifications. Each DAS approval holder is
specifically limited by the FAA as to the type of STCs which it can issue. The
Company, which holds a DAS approval through Elsinore, can now issue many of the
STCs it requires in connection with its systems integration operations. This has
eliminated the need for the Company, in most instances, to apply to the FAA for
STC approvals, enabling the Company to obtain STCs more quickly than in the
past.
After obtaining an STC, the Company must apply for a PMA or a PMA supplement
to produce the modification installation kit covered by the STC. The Company has
three PMAs and 64 supplements to its PMAs (as of September 30, 1996). Each
initial PMA is, in general, an approval of the manufacturing or modification
facility's production quality control system. Each supplement authorizes the
manufacture of a particular part in accordance with the requirements of the
corresponding STC. The Company routinely applies for and receives PMA
supplements. The Company also is required to have FAA authority to perform the
installation of a modification kit. This authority is provided either by the
Company's PMAs and supplements or its repair station certificates. In order for
a company to perform certain repair, engineering, installation or other services
on aircraft, its facility must be designated as an FAA-authorized repair
station. The Company has three such repair stations.
In addition to FAA approval of the design, production, and installation of
modifications, the FAA certifies personnel. Selected Company personnel have been
certified by the FAA to perform certain tasks related to the design, production,
and performance of aircraft modifications. Such certified personnel include
mechanics and repairmen. In addition, the FAA delegates some of its oversight
responsibilities, such as testing and inspection responsibilities, to
FAA-certified designees. The Company employs
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FAA designees on a full-time basis to facilitate FAA approval and oversight of
the Company's activities. In addition, the Company contracts with additional FAA
designees as they are needed.
Mil-specs are frequently used by both military and commercial customers in
the aerospace industry to define and control characteristics of a product.
Through the use of a government Qualified Parts List ("QPL") and Qualified
Vendor's List ("QVL"), the customer is assured that a product or service has met
all of the requirements set forth in the mil-specs. Parts listed with a QPL
allow others to reliably design parts to interface with such parts as a result
of the mil-spec standards used. The Company believes that it holds more QPLs for
its contact product line than any other manufacturer.
SALES AND MARKETING
The Company's products are sold through a group of geographically assigned
direct sales personnel and agents. Technical product sales support for these
sales personnel is provided through product line managers and the Company's
product engineering personnel. Customer service communication is provided by
geographically assigned sales correspondents located in the Company's
manufacturing facilities. The Company may also assign responsibility for
marketing, sales and/or services for certain key customers to one of the
Company's executives. The Company has five authorized distributors who purchase,
stock and resell certain of the Company's product lines.
The Company's systems integration services are sold by sales managers
employed by the Company who are assigned to geographic territories. Because of
the significant amount of technical engineering work required in the sales
process, these sales managers are generally assisted by a support team which
includes program management, installation and engineering personnel. The support
team specializes in one of: (i) in-flight passenger telecommunications; (ii)
in-flight entertainment; (iii) SATCOM and navigation; or (iv) safety systems. At
such time as the Company obtains a contract for the system proposed by the sales
manager, the support teams continue to manage the project throughout the entire
integration process.
CUSTOMERS
In 1995, the Company sold its products and services to more than 500
customers. The Company's primary customers include aircraft and avionics OEMs,
airlines, aircraft component manufacturers and distributors, and aircraft repair
and modification companies. The Company's three largest customers are Boeing,
AT&T and Matsushita, which accounted for approximately 9.0%, 21.6% and 7.4%,
respectively, of the Company's consolidated revenues (pro forma for the ADS
acquisition) for the fiscal year ended December 31, 1995 and 12.8%, 8.9% and
8.5%, respectively, of the Company's consolidated revenues (pro forma for the
ADS acquisition) in the nine months ended September 30, 1996. In addition, a
significant portion of the Company's sales of components are sold to Boeing
indirectly through sales to suppliers of Boeing.
The Company is the preferred systems integrator for IFT, and it expects that
IFT will become a significant customer in 1997. The Company signed a contract
with IFT in July 1996 and the Company expects to realize a substantial portion
of the revenues from such contract in 1997. The Company will account for
revenues generated under the IFT contract using the percentage of completion
method of accounting. Pursuant to this contract, which provides for monthly
progress payments, the Company will provide systems integration services for the
IFT System on 21 Swissair wide-body aircraft. The Swissair contract is the first
large-scale commercial application of the IFT System. Any delays in installation
or problems in implementation of the IFT System may result in the deferral or a
loss of potential revenues from IFT.
Most of the Company's sales to Boeing are pursuant to contracts which may be
terminated by Boeing at any time. One contract provides that: (i) if the Company
reduces its prices or leadtimes of like quantity of comparable items to
customers other than Boeing, then the Company must sell on the same
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terms to Boeing; and (ii) if other Boeing suppliers offer to sell to Boeing
products comparable to those of the Company at prices more than 5% lower than
the prices specified in such contract, the Company must either similarly reduce
its prices or permit Boeing to delete the affected products from the contract.
Another contract provides that Boeing is not obligated to order any products
covered by the agreement if: (i) Boeing's customers specify an alternate
product; (ii) the product in Boeing's judgement is not technologically
competitive at the time; (iii) Boeing changes the design of an aircraft such
that the Company's products are no longer required for such aircraft; or (iv)
Boeing reasonably determines that the Company cannot support Boeing's
requirements for products in the amounts and within the delivery schedules
Boeing requires.
MANUFACTURING AND QUALITY CONTROL
The Company manufactures contacts, connectors, harness assemblies, dichroic
LCD devices and avionics support structures. Many of these products involve
similar manufacturing processes which have become core competencies of the
Company. The Company manufactures these products using process-specific
equipment and procedures that have been custom-designed or fabricated to provide
high-quality products at the lowest possible cost to the Company. The Company is
vertically integrated from concept and design through final assembly, testing
and certification for these production processes. The Company believes this
vertical integration is critical to assuring product performance, customer
service and competitive pricing.
The Company has implemented programs to reduce costs, including overhead
expenses, and maximize return on capital. In some cases these programs have
involved the use of proprietary equipment or processes which have enabled the
Company to reduce costs while maintaining high quality levels. For example, the
Company uses a proprietary selective plating process which allows the Company to
minimize the usage of gold when plating contacts. The Company has enhanced and
expanded the use of this process, as well as other plating processes, which has
enabled it to realize estimated cost savings, on a comparable basis, of
approximately $.7 million in the first nine months of 1996 compared to the same
period in 1995.
Certain of the Company's customers have developed their own design, product
performance, manufacturing process and quality system standards and require
their suppliers, including the Company, to comply with such standards. As a
result, the Company has developed and implemented comprehensive quality system
policies and procedures which meet or exceed the requirements of its customers.
Many of the Company's customers have recognized formally the effectiveness of
the Company's quality programs by issuing quality approval letters and awarding
quality compliance certificates. In addition, certain customers have authorized
the Company's inspection personnel to act as the authorized quality
representative of the customer. This authorization enables the Company to ship
directly into the inventory stockrooms of these customers, eliminating the need
for receiving inspection activities by these customers.
The Company uses sophisticated equipment and procedures to ensure the
quality of its products and to comply with mil-specs and FAA certification
requirements. The Company performs a variety of testing procedures, including
environmental testing under different temperature, humidity and altitude levels,
shock and vibration testing and X-ray fluorescent measurement. These procedures,
together with other customer approved techniques for document, process and
quality control, are used throughout the Company's manufacturing facilities.
RAW MATERIALS AND COMPONENT PARTS
The components which the Company manufactures require the use of various raw
materials including gold, aluminum, copper, rhodium, plating chemicals and
plastics, the availability and prices of which may fluctuate. The price of raw
materials represents a significant portion of the sales price of many of the
Company's products. Although some of the Company's contracts have prices tied to
the price of raw materials, increases in raw materials prices cannot always be
recovered in product sale prices. The
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Company also purchases a variety of manufactured component parts from various
suppliers. Raw materials and component parts are generally available from
multiple suppliers at competitive prices. However, any delay in the Company's
ability to obtain necessary raw materials and component parts may affect its
ability to meet customer production needs.
PATENTS AND PROPRIETARY INFORMATION
The Company has various trade secrets, proprietary information, trademarks,
trade names, patents, copyrights and other intellectual property rights which
the Company believes, in the aggregate (but not individually) are important to
its business.
COMPETITION
The Company competes with a number of established companies that have
significantly greater financial, technological and marketing resources than the
Company. The Company believes that its ability to compete depends on high
product performance, short lead-time and timely delivery, competitive price, and
superior customer service and support.
The niche markets within the aircraft industry served by the Company are
relatively fragmented with several competitors for each of the products and
services provided by the Company. Due to the global nature of the commercial
airline industry, competition in these categories comes from both U.S. and
foreign companies. However, the Company knows of no single competitor that
provides the same range of products and services as those provided by the
Company.
The Company's principal competitors in contacts and connectors are large and
diversified corporations which produce a broad range of products. The Company's
principal competitor in the contact market is Deutch Engineered Connecting
Devices, a division of the Deutch Co. In the connector market, the Company's
principal competitors include ITT Canon (a division of ITT Corporation), AMP and
Radiall S.A. Several of these companies are also customers of the Company. The
Company's principal competitors for avionics support structures include smaller
companies such as Barry Controls, Inc., Electronic Cable Specialists ("ECS") and
Vibrachoc, a subsidiary of Compagnie Generale d'Electricite. The main competitor
for dichroic LCD devices is Cristalloid, Inc. Competitors which provide systems
integration services include ECS, the engineering departments of certain
airlines and numerous independent airframe maintenance and modification
companies.
BACKLOG
As of September 30, 1996, the Company had outstanding purchase orders
representing an aggregate invoice price of approximately $38.3 million,
including $7.1 million for ADS, which was acquired on September 18, 1996. The
Company expects to ship $16.7 million of the backlog by the end of 1996. As of
September 30, 1995, the Company had outstanding purchase orders representing an
aggregate invoice price of approximately $19.8 million, of which $8.4 million
was shipped by the Company by the end of 1995.
Orders are generally subject to cancellation by the customer prior to
shipment. The level of unfilled orders at any given date during the year will be
materially affected by the timing of the Company's receipt of orders and the
speed with which those orders are filled. Accordingly, the Company's backlog at
September 30, 1996 is not necessarily indicative of actual shipments or sales
for any future period, and period-to-period comparisons from 1995 to 1996 may
not be meaningful.
42
<PAGE>
EMPLOYEES
As of December 31, 1996, the Company had 982 employees (including 136
temporary employees), of whom 96 were engineers (including 3 temporary
employees), 24 were in sales, 769 were in manufacturing operations (including
130 temporary employees) and 93 were in finance and administration (including 3
temporary employees). None of the Company's employees is subject to a collective
bargaining agreement, and the Company has not experienced any material business
interruption as a result of labor disputes since it was formed. The Company
believes that it has a good relationship with its employees.
FACILITIES
The Company leases all of its facilities with terms ranging from one to nine
years as reflected in the following table.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE LEASE
LOCATION DESCRIPTION FOOTAGE EXPIRATION
- ------------------------------ -------------------------------------------- ------------- ----------
<S> <C> <C> <C>
El Segundo, CA Manufacturing and engineering facility 81,300 2005
Santa Fe Springs, CA Manufacturing and engineering facility 52,000 2000
Hatfield, PA Manufacturing and engineering facility 27,500 1999
Lugano, Switzerland Manufacturing facility 21,000 2001
Irvine, CA Manufacturing facility 16,400 1999
Wiltshire, United Kingdom Manufacturing facility 5,700 1998
El Segundo, CA Executive offices 5,000 2004
Santa Barbara, CA Engineering facility 3,500 1997
Seattle, WA Engineering facility 3,200 1999
Phoenix, AZ Engineering facility 3,000 1997
Copley, OH Executive offices 2,200 1997
Santa Ana, CA Engineering facility 1,000 1999
</TABLE>
The Company believes its properties are in good condition and are adequate
to support its operations for the foreseeable future.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local, and foreign
environmental requirements, including those relating to discharges to air,
water, and land, the handling and disposal of solid and hazardous waste, and the
cleanup of properties affected by hazardous substances. In addition, certain
environmental laws, such as CERCLA and similar state laws, impose strict,
retroactive, and joint and several liability upon persons responsible for
releases or potential releases of hazardous substances. The Company has sent
waste to treatment, storage, or disposal facilities that have been designated as
National Priority List sites under CERCLA or equivalent listings under state
laws. The Company has received CERCLA requests for information or allegations of
potential responsibility from the Environmental Protection Agency as to the
Company's use of certain such sites. In addition, some of the Company's
operations are located on properties which are contaminated to varying degrees.
However, the Company has not incurred, nor does it expect to incur, significant
costs to address such contamination because entities other than the Company have
been held primarily responsible for such contamination, the levels of
contamination are sufficiently low so as not to require remediation or the
Company is indemnified against such costs. In most cases the Company does not
believe that its liability for past waste disposal is material. However, in a
limited number of cases the Company does not have sufficient information to
assess its potential liability, if any. It is possible, given the retroactive
nature of CERCLA
43
<PAGE>
liability, that the Company will from time to time receive additional notices of
potential liability, relating to current or former activities.
The Company has been and is in substantial compliance with environmental
requirements and believes it has no liabilities under environmental
requirements, except those which would not be expected to have a material
adverse effect on the Company's business, results of operations, or financial
condition. However, some risk of environmental liability is inherent in the
nature of the Company's business and the Company might in the future incur
material costs to meet current or more stringent compliance, cleanup, or other
obligations pursuant to environmental requirements. See "Risk Factors--
Environmental Regulation," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Environmental Matters" and "Business--Legal
Proceedings."
LEGAL PROCEEDINGS
The Company's manufacturing facility in El Segundo, California, has received
several notices of violation ("NOV") related to its wastewater discharge permit.
The Company has taken various corrective measures. However, the Company
continues to experience difficulty in meeting the wastewater flow limitations
contained in its discharge permit and is evaluating additional measures,
including seeking modification to its permit. If the Company is not able to
resolve these issues, it may be required to install new treatment equipment.
However, the cost for such installation is not expected to be material, and the
Company does not believe that the NOVs will result in any material sanctions.
See "Risk Factors-- Environmental Regulation," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Environmental
Matters" and "Business--Environmental Matters."
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding the directors and
executive officers of the Company as of December 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ----------------------------------------------------------
<S> <C> <C>
R. Jack DeCrane 50 Chairman of the Board and Chief Executive Officer
R. G. MacDonald 66 Vice Chairman of the Board
Robert A. Rankin 44 Chief Financial Officer and Secretary
Roger L. Keller 52 Group Vice President of Systems
Charles H. Becker 50 Group Vice President of Components
James R. Bergman (a) 54 Director
Paul H. Cascio (b) 35 Director
Jonathan A. Sweemer (a)(b) 41 Director
</TABLE>
- ------------------------
(a) Member of the Compensation Committee.
(b) Member of the Audit Committee.
The Company is currently evaluating other director candidates and
anticipates that two additional independent, non-management directors will be
added to the Board upon the closing of the Offering or as soon thereafter as
practicable. Upon completion of the Offering, the Company's independent, non-
management directors will continue to represent a majority on each of the
Company's Audit Committee and Compensation Committee.
The Company's Board is divided into three classes. Directors of each class
will be elected at the annual meeting of stockholders of the Company (the
"Annual Meeting") held in the year in which the term of such class expires and
will serve thereafter for three years. Mr. MacDonald serves as a class I
director for a term expiring as of the Annual Meeting in 1998. Messrs. Cascio
and Bergman serve as class II directors for a term expiring as of the Annual
Meeting in 1999. Messrs. DeCrane and Sweemer serve as class III directors for a
term expiring as of the Annual Meeting in 2000.
R. Jack DeCrane is the founder of the Company and has been Chairman of the
Board of Directors of the Company since it was founded in December 1989. Mr.
DeCrane served as President of the Company, which office then included the
duties of chief executive officer, until April 1993 when he was elected to the
newly-created office of Chief Executive Officer. Prior to founding the Company,
Mr. DeCrane held various positions at the aerospace division of B.F. Goodrich.
Mr. DeCrane was a Group Vice President at the aerospace division of B.F.
Goodrich with management responsibility for three business units from 1986 to
1989. Mr. DeCrane is his own appointee to the Board under the terms of an
agreement between the Company and certain of its shareholders and lenders. See
"Certain Transactions--Shareholders Agreement."
R. G. MacDonald has been Vice Chairman of the Company since December 1996.
Mr. MacDonald has been a member of the Board since December 1994, and was
President of the Company from April 1993 until December 1996. The office of
President of the Company included the duties of chief operating officer. Mr.
MacDonald was a consultant to the Company from February 1993 to April 1993.
Prior to joining the Company, he served as President and Chief Executive Officer
of MDB Systems, Inc., a manufacturer of ruggedized computer disk systems, from
1990 to 1993.
45
<PAGE>
Robert A. Rankin has been Chief Financial Officer and Secretary of the
Company since November 1993. Mr. Rankin joined the Company in 1992 as Senior
Vice President of Tri-Star, which office then included the duties of chief
financial officer of the Company. Prior to joining the Company, he was Vice
President of Finance for the Chandler Evans Control Systems subsidiary of Coltec
Industries, Inc., an aerospace company, from 1990 to 1992. He was employed by
the aerospace division of B.F. Goodrich from 1977 to 1989 in various capacities,
the most recent of which was as Controller of the aircraft wheel and brake
business unit of B.F. Goodrich.
Roger L. Keller has been Group Vice President of Systems of the Company
since December 1996. Mr. Keller was President of Hollingsead from December 1995
until December 1996, and was employed by the Company as Vice President of
Engineering, Sales and Program Management from May 1994 through November 1995.
Prior to joining the Company, he was Vice President of Engineering for Active
Noise and Vibration Technologies, Inc. from 1992 to 1994, and Vice President of
Sales, Marketing and Program Management for the Airtransport Services division
of Honeywell from 1986 to 1992.
Charles H. Becker has been Group Vice President of Components of the Company
since December 1996. Mr. Becker was President of Tri-Star, from December 1994 to
December 1996. Prior to joining the Company, he was President of the
Interconnect Systems Division of Microdot, Inc. from 1984 to 1994.
James R. Bergman has been a member of the Board since October 1991. He is a
founder and, since 1974, has been a general partner of DSV Associates, DSV
Partners III and DSV Partners IV. Mr. Bergman is DSV's appointee to the Board
under the terms of an agreement between the Company and certain of its
shareholders and lenders. See "Certain Transactions--Shareholders Agreement." In
August 1996, Mr. Bergman became a general partner of Brantley Venture Partners
III, L.P. He is also a director of Maxim Integrated Products, Inc. and Quad
Systems Corporation.
Paul H. Cascio has been a member of the Board since September 1996. He is a
general partner of Brantley Venture Partners. Mr. Cascio also serves as Vice
President and Secretary of Brantley Capital Corporation. Mr. Cascio is
Brantley's appointee to the Board under the terms of an agreement between the
Company and certain of its shareholders and lenders. See "Certain
Transactions--Shareholders Agreement." Prior to becoming a general partner of
Brantley Venture Partners in May 1996, Mr. Cascio was a managing director and
head of the Industrial Manufacturing and Services Group in the corporate finance
department at Dean Witter Reynolds Inc.
Jonathan A. Sweemer has been a member of the Board since February 1996. He
has been a member of Nassau Capital Partners, L.P. since January 1995. From May
1992 to December 1994, Mr. Sweemer was a Vice President for Princeton University
Investment Co. Mr. Sweemer is Nassau's appointee to the Board under the terms of
an agreement between the Company and certain of its shareholders and lenders.
See "Certain Transactions--Shareholders Agreement."
46
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table describes all annual compensation awarded to, earned by
or paid to the Company's Chief Executive Officer and the four-most highly
compensated executive officers other than the Chief Executive Officer
(collectively the "Named Executive Officers") for the fiscal year ended December
31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------------------------------- COMPENSATION
OTHER ANNUAL --------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (1) OPTIONS (2) COMPENSATION
- ----------------------------- ----------- ----------- ------------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
R. Jack DeCrane $ 206,600 $ 146,000 $ 7,813 34,028 $ --
Chief Executive Officer
R. G. MacDonald 177,437 82,000 3,960 -- --
President and Vice Chairman
of the Board (3)
Robert A. Rankin 139,375 65,000 1,595 19,850 --
Chief Financial Officer and
Secretary
Roger L. Keller 150,000 -- 2,083 19,850 --
President of Hollingsead
and
Group Vice President
of Systems (4)
Charles H. Becker 148,750 65,000 1,899 19,850 30,586(6)
President of Tri-Star and
Group Vice President of
Components (5)
</TABLE>
- ------------------------
(1) Amounts paid by the Company for premiums on life and long-term disability
insurance for the benefit of the Named Executive Officer.
(2) Number of shares of Common Stock issuable upon exercise of options granted
during the last fiscal year.
(3) Mr. MacDonald served as President of the Company through December 1996. Mr.
MacDonald became Vice Chairman of the Board in December 1996.
(4) Mr. Keller served as President of Hollingsead through December 1996. Mr.
Keller became Group Vice President of Systems in December 1996.
(5) Mr. Becker served as President of Tri-Star through December 1996. Mr. Becker
became Group Vice President of Components in December 1996.
(6) Relocation costs.
47
<PAGE>
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options granted to
the Named Executive Officers during the fiscal year ended December 31, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ----------------------------- -------------- ----------------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
R. Jack DeCrane.............. 34,028 23.1% $ .14 2006 $ 78,297 $ 198,421
Robert A. Rankin............. 19,850 13.5% 2.89 2006 36,160 91,640
Roger L. Keller.............. 19,850 13.5% 2.89 2006 36,160 91,640
Charles H. Becker............ 19,850 13.5% 2.89 2006 36,160 91,640
</TABLE>
STOCK OPTIONS EXERCISED DURING FISCAL YEAR AND YEAR END VALUES OF
UNEXERCISED OPTIONS
The following table sets forth information about the stock options exercised
by the Named Executive Officers of the Company during the fiscal year ended
December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/ SARS
ACQUIRED OPTIONS/SARS AT FY-END AT FY-END(1)
ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------- ---------- --------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
R. Jack DeCrane................... -- -- 63,803/62,385 $ /
R. G. MacDonald................... -- -- 34,028/22,686 /
Robert A. Rankin.................. -- -- 12,832/21,197 /
Roger L. Keller................... -- -- 5,671/28,357 /
Charles H. Becker................. -- -- 8,507/25,521 /
</TABLE>
- ------------------------
(1) Assuming an initial public offering price of $ per share as of
December 31, 1996, the measuring date.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
R. Jack DeCrane and the Company have entered into an employment agreement
pursuant to which Mr. DeCrane is to serve as Chief Executive Officer for a term
of four years, effective September 1, 1994. The agreement requires Mr. DeCrane
to devote his full business time to the Company and contains a covenant not to
compete with the Company for a period of 12 months following termination of the
agreement. The agreement provides for various benefits including (i) an annual
salary of $180,000, which is subject to annual review and increase, but not
decrease; (ii) an annual bonus ranging from 30% to 70% of Mr. DeCrane's annual
base salary depending on the level of the Company's achievement of certain
performance goals; and (iii) vested stock options to purchase 77,982 shares of
Common Stock at an exercise price of $.529 per share. Additionally, Mr. DeCrane
is also entitled to life insurance (in an amount at least equal to $1,000,000),
and health care benefits generally provided by the Company to other senior
executives. The agreement also provides for various payments to Mr. DeCrane or
his beneficiaries in the event of his death, disability, or termination without
cause. In the event of his death, Mr. DeCrane's beneficiaries would be entitled
to: (i) a payment equal to Mr. DeCrane's then current salary for one year plus
his remaining bonus through year-end; and (ii) continuation of certain insurance
benefits for one year. Upon termination due to disability, Mr. DeCrane would be
entitled to: (i) receive the
48
<PAGE>
sum of his then current base salary for one year plus his bonus through year
end; and (ii) continuation of certain health benefits for one year. In the event
of a termination without cause by the Company or Mr. DeCrane's resignation due
to a material breach of the agreement by the Company or the Company's request
that he resign or retire, Mr. DeCrane would be entitled to: (i) his then current
base salary for one year and his remaining bonus through the end of the year of
termination plus an amount equal to the amount earned in the immediately
preceding year; (ii) continuation of certain health benefits for a one year
period; and (iii) reimbursement of certain relocation and outplacement expenses.
R. G. MacDonald and the Company entered into a letter agreement, dated June
28, 1993, pursuant to which Mr. MacDonald is to receive for an unspecified term:
(i) an annual base salary of $150,000; (ii) an annual bonus ranging from 20% to
50% of his annual base salary depending on the Company's level of achievement of
certain performance goals; and (iii) the Company's standard benefit package with
the addition of an executive term life insurance policy in the amount of
$200,000. Under the agreement, Mr. MacDonald received options to purchase 56,714
shares of the Company's Common Stock at an exercise price of $.53 per share.
Charles H. Becker and Tri-Star entered into a letter agreement, dated
November 28, 1994, pursuant to which Mr. Becker is to receive for an unspecified
term: (i) an annual base salary of $140,000; (ii) an annual bonus ranging from
10% to 40% of his annual base salary depending on Tri-Star's level of
achievement of certain performance goals; and (iii) other benefits available
under the Company's executive benefits program. Under the agreement, Mr. Becker
received options to purchase 14,179 shares of the Company's Common Stock at an
exercise price of $.53 per share.
SHARE INCENTIVE PLAN
Under the Share Incentive Plan, the Company may grant to its eligible
employees: (i) options ("Options") to purchase shares of Common Stock; (ii)
shares of Common Stock that vest upon the achievement of specified service or
performance conditions within a specified period of time (the "Restricted
Shares"); and (iii) options to receive payments based on the appreciation of
Common Stock ("SARs"). Options, Restricted Shares and SARs are collectively
referred to as "Grants."
Under the Share Incentive Plan, the Company may grant Options that qualify
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or Options that do not so
qualify. The Share Incentive Plan is to be administered by a committee selected
by the Company's Board and composed of at least two members of the Board (the
"Administrator"). The current members of the Administrator are Messrs. Bergman
and Sweemer. Restricted Shares may be granted to key employees of the Company at
the sole discretion of the Administrator. SARs may be specifically granted upon
the terms and conditions specified by the Administrator.
Grants are to be made to key employees of the Company designated by the
Administrator at its sole discretion. The Company has reserved 525,000 shares of
Common Stock for issuance under the Share Incentive Plan. The Share Incentive
Plan terminates on February 1, 2003, and thereafter no Grants may be made.
The exercise price of any Option may not be less than 100% (or 110% in the
case of an Option granted to a person owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company) of the fair market value of the Common Stock at
the time of the grant of the Option. No Option may be exercised after the
expiration of ten years from the date of grant of such Option. No Option may be
sold, pledged, assigned or transferred in any manner otherwise than by will or
the laws of descent or distribution. The purchase price of any shares of Common
Stock purchased under an Option must be paid in full at the time of the exercise
of an Option in cash, by check or, if permitted by the Administrator, by shares
of Common Stock
49
<PAGE>
having a fair market value on the date of the exercise equal to the purchase
price or a combination thereof.
In the event that a holder of a Grant (a "Grantee") ceases to be employed by
the Company for any reason other than death, retirement or disability or such
employee is terminated without cause, such Grants shall terminate upon the
termination of his employment, unless extended by the Administrator. In the
event of termination of employment due to death, retirement or disability of a
Grantee or in the event such termination is without cause, the Administrator may
allow the Grantee (or his estate) to exercise Options and SARs (to the extent
exercisable on the date of termination of employment) at any time within one
year after the date of such termination of employment. Restricted Shares held by
a Grantee will vest upon the Grantee's death and all restrictions will thereupon
lapse.
1996 INCENTIVE PLAN
In 1996 the Company introduced an incentive plan (the "1996 Incentive Plan")
for its management personnel tied to the Company's and each operating unit's
annual budget as approved each year by the Compensation Committee of the Board.
The 1996 Incentive Plan matrix provides for an annual bonus of up to 70% of the
employee's base salary if the Company or its relevant operating unit achieves
110% of budget. Fifty percent of the bonus is payable solely based on
performance of the Company or the relevant operating unit and the remainder is
payable upon the achievement by the employee of his or her individual objectives
in the discretion of the Chief Executive Officer of the Company or the President
of the relevant operating unit.
401(K) RETIREMENT PLANS
Effective April 1992, the Company adopted the Lincoln National Life
Insurance Company Non-Standardized 401(k) Salary Reduction Plan and Trust
Prototype Plan (the "401(k)"). The 401(k) allows employees as participants to
defer, on a pre-tax basis, a portion of their salary and accumulate tax deferred
earnings, plus interest, as a retirement fund. There may be employer matching
contributions made under this 401(k) which vest according to a specified
schedule, within six years of service. The full amount vested in a participant's
account will be distributed to a participant following termination of
employment, normal retirement or in the event of disability or death.
DIRECTORS' COMPENSATION
The directors of the Company do not receive annual fees or fees for
attending meetings of the Board of Directors or committees thereof. However,
they are reimbursed for out-of-pocket expenses.
LIMITATION ON DIRECTOR LIABILITY AND INDEMNIFICATION
Pursuant to the Certificate, and as permitted by Delaware Law, directors of
the Company are not liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty, except for liability in connection with a
breach of duty of loyalty, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, for dividend
payments or stock repurchases unlawful under Delaware Law or any transaction in
which a director has derived an improper personal benefit.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following chart provides information as to the beneficial ownership of
Common Stock as of December 31, 1996, as adjusted to give effect to the
Recapitalization (See "Description of Capital Stock--The Recapitalization"), by:
(i) each director and Named Executive Officer; (ii) directors and executive
officers of the Company as a group; and (iii) each person known to the Company
to be the beneficial owner of 5% or more of Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT BEFORE OFFERING
- ------------------------------------------------------------------- ---------------- -----------------------
<S> <C> <C>
Nassau Capital Partners L.P........................................ 741,645(1) 29.3%
22 Chambers Street
Princeton, NJ 08542
Jonathan A. Sweemer................................................ 741,645(2) 29.3%
22 Chambers Street
Princeton, NJ 08542
DSV Partners, IV................................................... 495,190 19.6%
1920 Main St.
Suite 820
Irvine, CA 92614
James R. Bergman................................................... 495,190(3) 19.6%
1920 Main St.
Suite 820
Irvine, CA 92614
Brantley Venture Partners II, L.P.................................. 495,188 19.6%
20600 Chagrin Blvd.,
Suite 1150
Cleveland, Ohio 44122
Paul H. Cascio..................................................... 495,188(4) 19.6%
20600 Chagrin Blvd.
Suite 1150
Cleveland, OH 44122
Electra Investment Trust P.L.C..................................... 456,531(5) 18.0%
65 Kings Way
London, England WC2B6QT
R. Jack DeCrane.................................................... 130,506(6) 5.0%
155 Montrose West Avenue
Suite 210
Copley, Ohio 44321
R. G. MacDonald.................................................... 42,536(7) 1.7%
2201 Rosecrans Avenue
El Segundo, California 90245
Robert A. Rankin................................................... 17,085(8) *
2201 Rosecrans Avenue
El Segundo, California 90245
Charles H. Becker.................................................. 14,179(9) *
2201 Rosecrans Avenue
El Segundo, California 90245
Roger L. Keller.................................................... 7,373(10) *
2201 Rosecrans Avenue
El Segundo, California 90245
All directors and executive officers as a group (eight persons).... 1,943,702(11) 73.1%
<CAPTION>
PERCENTAGE OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER AFTER OFFERING
- ------------------------------------------------------------------- -----------------------
<S> <C>
Nassau Capital Partners L.P........................................
22 Chambers Street
Princeton, NJ 08542
Jonathan A. Sweemer................................................
22 Chambers Street
Princeton, NJ 08542
DSV Partners, IV...................................................
1920 Main St.
Suite 820
Irvine, CA 92614
James R. Bergman...................................................
1920 Main St.
Suite 820
Irvine, CA 92614
Brantley Venture Partners II, L.P..................................
20600 Chagrin Blvd.,
Suite 1150
Cleveland, Ohio 44122
Paul H. Cascio.....................................................
20600 Chagrin Blvd.
Suite 1150
Cleveland, OH 44122
Electra Investment Trust P.L.C.....................................
65 Kings Way
London, England WC2B6QT
R. Jack DeCrane....................................................
155 Montrose West Avenue
Suite 210
Copley, Ohio 44321
R. G. MacDonald....................................................
2201 Rosecrans Avenue
El Segundo, California 90245
Robert A. Rankin...................................................
2201 Rosecrans Avenue
El Segundo, California 90245
Charles H. Becker..................................................
2201 Rosecrans Avenue
El Segundo, California 90245
Roger L. Keller....................................................
2201 Rosecrans Avenue
El Segundo, California 90245
All directors and executive officers as a group (eight persons)....
</TABLE>
- --------------------------
* Less than 1%
(1) Includes 4,638 shares held by NAS Partners I L.L.C., an affiliate of Nassau
Capital Partners, L.P. Excludes the shares underlying the Nassau Warrants.
(2) Represents 737,007 shares held by Nassau Capital Partners, L.P. and 4,638
shares held by NAS Partners I L.L.C., affiliates of Mr. Sweemer.
(3) Represents shares held by DSV of which Mr. Bergman is a general partner.
(4) Represents shares held by Brantley of which Mr. Cascio is a general partner
of the general partner.
(5) Includes 46,636 shares held by Electra Associates, Inc., an affiliate of
Electra Investment Trust P.L.C.
(6) Includes 63,803 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
December 31, 1996.
(7) Includes 34,028 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
December 31, 1996.
(8) Includes 12,832 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
December 31, 1996.
(9) Includes 8,507 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
December 31, 1996.
(10) Includes 7,373 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
December 31, 1996.
(11) Includes 126,543 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
December 31, 1996.
51
<PAGE>
CERTAIN TRANSACTIONS
SHAREHOLDERS AGREEMENT
Pursuant to the Shareholders Agreement dated (the "Shareholders
Agreement") among the Company, Nassau, Electra, Brantley, DSV and certain other
parties and subject to election by the Company's stockholders, Nassau, Brantley
and DSV each have the right to nominate a representative to serve as a director
so long as the relevant stockholder owns at least 5% of the Common Stock
(including Common Stock which may be acquired upon exercise of warrants).
Following completion of the Offering, Nassau, Brantley and DSV will beneficially
own %, %, and %, respectively, of the issued and outstanding Common Stock.
The ownership percentage for Nassau includes the 152,915 shares which may be
acquired upon exercise of the Nassau Warrants. The Shareholders Agreement also
provides that Mr. DeCrane may nominate a director for election by the Company's
stockholders for so long as he is the Chief Executive Officer of the Company.
ELECTRA SECURITIES PURCHASE AGREEMENT
Pursuant to a Securities Purchase Agreement dated November 2, 1994 (the
"Electra Securities Purchase Agreement") between the Company and Electra, the
Company issued the Senior Subordinated Notes in the principal amount of $7.0
million and warrants to purchase 266,990 shares of Common Stock for $.035 per
share. Such warrants expire in December 31, 2004 and contain certain rights to
require the Company to repurchase them. Such warrants will be exercised in
connection with the Recapitalization. See "Description of Capital Stock--The
Recapitalization." In addition, the Electra Securities Purchase Agreement
provided that Electra was to receive an advisory fee of $72,000 per annum. In
February 1996 the Electra Securities Purchase Agreement was amended to, among
other things, waive certain covenants relating to the Senior Subordinated Notes,
amend certain of Electra's rights to require the Company to repurchase the
warrants held by it and increase Electra's advisory fee to $25,000 each calendar
quarter.
SALES OF SECURITIES
Pursuant to a Securities Purchase Agreement and related Warrant Agreement
dated September 18, 1996 among the Company, Nassau and Electra, the Company
issued to Nassau and Electra the Convertible Notes and warrants to purchase an
aggregate of 49,079 shares of Common Stock (the "Note Warrants") for an
aggregate purchase price of $3.0 million. The Company also sold to Nassau and
Electra an aggregate of 750,000 shares of Series E Preferred Stock and issued
warrants (the "Preferred Stock Warrants") to purchase an additional 49,079
shares of Common Stock for a purchase price of $3.0 million. Each share of
Series E Preferred Stock has a liquidation preference of $4.00, provides for
annual dividends of $.40 and is convertible into approximately .28357 shares of
Common Stock. The Note Warrants and Preferred Stock Warrants are exercisable at
$.035 per share and contain certain rights to require the Company to repurchase
such warrants. All accrued but unpaid dividends will be cancelled and eliminated
if the Offering is consummated by May 5, 1997. The Note Warrants and Preferred
Stock Warrants expire on December 31, 2006. The Series E Preferred Stock will be
exchanged for 212,678 shares of Common Stock in the Recapitalization. The
Preferred Stock Warrants will be exercised in connection with the
Recapitalization and the Note Warrants will be terminated in accordance with
their terms. See "Description of Capital Stock--The Recapitalization."
Pursuant to a Securities Purchase Agreement and related Warrant Agreements
dated February 20, 1996 between the Company and Nassau, the Company issued to
Nassau an aggregate of 2,000,000 shares of Series D Preferred Stock and the
Nassau Warrants for an aggregate purchase price of $6.5 million. Each share of
Series D Preferred Stock has a liquidation preference of $3.25, provides for
annual dividends of $.325 and is convertible into approximately .28357 shares of
Common Stock. All accrued but unpaid dividends will be cancelled and eliminated
if the Offering is consummated by May 5,
52
<PAGE>
1997. The Series D Preferred Stock will be exchanged for 567,140 shares of
Common Stock in the Recapitalization. See "Description of Capital Stock--The
Recapitalization." See "Description of Capital Stock--Warrants" for a
description of the Nassau Warrants.
Pursuant to a Securities Purchase Agreement dated February 9, 1996 among the
Company, R.G. MacDonald, Charles H. Becker, Robert A. Rankin and another officer
of the Company, the Company sold an aggregate of 75,000 shares of Series C
Preferred Stock for a purchase price of $1.50 per share. Each share of Series C
Preferred Stock has a liquidation preference of $1.50, provides for annual
dividends of $.15 and is convertible into approximately .28357 shares of Common
Stock. All accrued but unpaid dividends will be cancelled and eliminated if the
Offering is consummated by May 5, 1997. Such Series C Preferred Stock will be
exchanged for 21,268 shares of Common Stock in the Recapitalization. See
"Description of Capital Stock--The Recapitalization."
Pursuant to a Share Purchase Agreement dated November 2, 1994 among the
Company and Electra, DSV, Brantley and certain other parties the Company issued
an aggregate of 271,471 shares of Series C Preferred Stock for $1.50 per share.
The Series C Preferred Stock will be exchanged for 76,981 shares of Common Stock
in the Recapitalization. See "Description of Capital Stock--The
Recapitalization."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 35 million shares of
Common Stock, par value $.01 per share, and 10 million shares of preferred
stock, par value $.01 per share.
THE RECAPITALIZATION
On January , 1997, the Company, formerly an Ohio corporation, was
incorporated in the State of Delaware. Each outstanding share of common stock
and preferred stock, as well as all warrants. Grants and options were exchanged
for substantially similar securities of the Delaware corporation.
As a condition to the consummation of the Offering, the Company's existing
shareholders have approved a recapitalization (the "Recapitalization") of the
Company which includes: (i) a change in the authorized capital of the Company to
consist of 35,000,000 shares of Common Stock and 10,000,000 shares of
undesignated Preferred Stock (the "Undesignated Preferred Stock"); (ii) the
conversion of 6,847,705 shares of Series A, B, C, D, and E Convertible Preferred
Stock (the "Existing Preferred Stock") into 1,941,804 shares of Common Stock;
(iii) the exercise of all warrants (the cancellation of which is not triggered
by the Offering), other than the Nassau Warrants, for 433,570 shares of Common
Stock; and (iv) a 3.53-for-1 reverse stock split. In connection with the
Recapitalization, certain of the Company's existing shareholders and the holders
of the warrants (other than Nassau) have agreed, effective immediately prior to
the effectiveness of the Offering, to waive a number of rights under the
agreements by which such shareholders and holders of the warrants acquired such
rights from the Company. The effect of such waivers would be to release the
Company from certain dividend payment requirements, voting requirements and
certain other rights granted to such shareholders and such holders of the
warrants pursuant to their respective agreements with the Company, as well as
eliminating certain negative and affirmative covenants contained therein. In
connection with the Recapitalization, the Company entered into the Registration
Rights Agreement with such shareholders and warrant holders providing such
shareholders and warrant holders with certain demand and piggyback registration
rights with respect to the Common Stock. See "Description of Capital
Stock--Registration Rights."
COMMON STOCK
As of December 31, 1996, giving effect to the Recapitalization, there were
2,460,967 shares of Common Stock outstanding and held of record by 15
stockholders. An additional 578,836 shares were reserved for issuance upon
exercise of all outstanding options and warrants. Each holder of Common
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<PAGE>
Stock is entitled to one vote for each share held and does not have cumulative
voting rights. The holders of the Nassau Warrants are entitled to vote together
with the holders of Common Stock. See "Description of Capital Stock--Warrants."
The holders of the Common Stock and the Nassau Warrants are entitled to
elect all of the directors, subject to the rights of certain stockholders and
lenders under the Shareholders Agreement to nominate candidates and subject to
relevant rights (if any) of the holders of any outstanding Undesignated
Preferred Stock. The Common Stock is not convertible into any other security.
See "Certain Transactions--Shareholders Agreement."
Subject to preferences that may be applicable to any then outstanding
Preferred Stock and to the restrictions on payments of dividends imposed by the
Company's debt agreements, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock would be entitled to share in
the Company's assets remaining after the payment of liabilities and the
satisfaction of any liquidation preference granted the holders of any then
outstanding shares of preferred stock. The Common Stock has no preemptive or
other subscription rights. The outstanding shares of Common Stock are fully paid
and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 10 million shares of Undesignated
Preferred Stock, none of which was issued as of December 31, 1996. The Board,
without further action by the holders of Common Stock, may issue shares of
Undesignated Preferred Stock in one or more series and may fix or alter the
rights, preferences, privileges and restrictions, including the voting rights,
redemption provisions (including sinking fund provisions), dividend rights,
dividend rates, liquidation rates, liquidation preferences, conversion rights
and the description and number of shares constituting any wholly unissued series
of Undesignated Preferred Stock. The Board, without further approval of the
holders of Common Stock, may issue shares of Undesignated Preferred Stock with
rights that could adversely affect the rights of the holders of Common Stock.
The issuance of shares of Undesignated Preferred Stock under certain
circumstances could have the effect of delaying or preventing a change of
control of the Company or other corporate action.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement certain stockholders may,
following the expiration of a 180-day lock-up period, require the Company to use
its best efforts to register such holders' Company securities (including the
Common Stock and the Nassau Warrants) under the Securities Act, in each case
pursuant to the procedures and subject to restrictions specified in the
Registration Rights Agreement.
Each party to the Registration Rights Agreement may require the Company to
file one registration statement to register securities owned by it for a
four-year period (subject to extension under certain limited circumstances). In
general, the Company is not required to effect the registrations described above
more than once in any 12 month period or, if the Company intends in good faith
to file a registration statement pertaining to an underwritten public offering
by the Company, within 90 days. Also, the Company is not obligated to file more
than four registration statements, provided that if the Company effects a
registration at the request of a stockholder, no further demand by any other
party to such agreement may be made for a period of at least nine months.
In addition to the registration rights described above, following the
expiration of the 180-day lock-up period, each holder which is a party to the
Registration Rights Agreement may cause the Company to use its best efforts to
include such holder's Common Stock in any of the Company's registered offerings
("piggyback offerings") of its Common Stock (other than under Forms S-4 and S-8
of the Securities Act,
54
<PAGE>
or under other forms not available for registering sales to the public) (subject
to reduction to the extent that the managing underwriter, if any, is of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold therein). The Registration Rights Agreement provides that
the Company is to bear the expenses of registrations described above, other than
expenses consisting of underwriting discounts and commissions applicable to
securities sold by holders.
The Registration Rights Agreement also restricts the transfer of certain
shares of Common Stock held by the stockholders party to such agreement prior to
the registration and sale (or other registered disposition) of such Common Stock
under the Securities Act.
WARRANTS
Pursuant to Warrant Agreements dated February 20, 1996 between the Company
and Nassau the Company issued the Nassau Warrants. The Nassau Warrants entitle
the holders to purchase for $.035 per share (i) up to 55,605 shares of Common
Stock commencing December 31, 1997, (ii) an additional 55,605 shares of Common
Stock commencing December 31, 1998, and (iii) an additional 83,408 shares of
Common Stock commencing December 31, 1999; provided, however, that if the
Company consummates a registered underwritten public offering pursuant to which
the fully diluted common equity of the Company has a value in excess of certain
specified amounts (the "Minimum Equity Targets"), the Nassau Warrants which are
to become exercisable after the consummation of such public offering will
terminate. The Minimum Equity Target for offerings consummated prior to December
31, 1997 is $ . The Minimum Equity Target for offerings consummated on or
after December 31, 1997 and prior to December 31, 1998 is $ . The Minimum
Equity Target for offerings consummated on or after December 31, 1998 is
$ . There can be no assurance that the Company will be able to consummate
a registered underwritten public offering meeting the Minimum Equity Targets.
The Nassau Warrants expire on December 31, 2003. Holders of the Nassau Warrants
are entitled to vote with the holders of Common Stock the number of votes equal
to the number of shares of Common Stock which may be acquired upon exercise of
the Nassau Warrants. The Nassau Warrants further provide that commencing on
December 31, 2000 the holders may require the Company to repurchase the Nassau
Warrants for a per share amount equal to (i) the greater of (a) the fair market
value of the common equity of the Company on a fully diluted basis, (b) the net
book value of the Company, and (c) an amount equal to 6.0 times the Company's
EBITDA, less outstanding indebtedness of the Company, and plus cash and cash
equivalents of the Company, in each case divided by (ii) the number of shares of
Common Stock then outstanding on a fully diluted basis. If the Company does not
have a legal source of funds to repurchase the Nassau Warrants the Company would
be required to deliver a promissory note for the purchase price. Such promissory
note will bear interest at a rate of 14.0% per annum. If the Company were to be
required to repurchase the Nassau Warrants the Company is unable to predict the
effect of such a repurchase on its liquidity. Also, there can be no assurance
that the terms of its existing debt instruments would permit the Company to
repurchase the Nassau Warrants or issue any promissory note therefor. See "Risk
Factors--Repurchase of Warrants."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is State Street Bank
and Trust Company.
CERTAIN CERTIFICATE AND BYLAW PROVISIONS AND DELAWARE GENERAL CORPORATION LAW
SECTION 203
The provisions of the Company's Certificate and the Bylaws and the
provisions of Delaware Law summarized in the succeeding paragraphs may be deemed
to have anti-takeover effects and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider to be in such stockholder's
best interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
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<PAGE>
CLASSIFIED BOARD. The Certificate provides that the Board will be divided
into three classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board will be elected each year. Currently, the
size of the Board is fixed at five members, who are divided into three classes
serving staggered three-year terms. However, the Company is presently evaluating
other director candidates and anticipates that two additional independent,
non-management directors will be added to the Board upon the closing of the
Offering or as soon thereafter as practicable. The classified board provisions
could have the effect of discouraging a third party from making a tender offer
or otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and the stockholders. The Certificate
also provides that a director may not be removed from office unless for cause
and the affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of capital stock (including any warrants with voting rights) entitled to
vote.
MERGERS AND SALES OF ASSETS. The Certificate provides that except as
provided in Section 203 of the General Corporation Law of the State of Delaware
(the "GCLSD") any merger or sale of substantially all of the assets of the
Company which has not been approved by at least two-thirds of the Board must be
approved by the affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of capital stock (including any warrants with voting rights)
entitled to vote. Such provision may have the effect of preventing a merger or
sale of substantially all the Company's assets that a stockholder might consider
to be in such stockholders best interest, including those which might result in
a premium over the market price for the shares held by stockholders.
LIMITATIONS ON STOCKHOLDER ACTION BY WRITTEN CONSENT. Effective upon
consummation of the Offering the Certificate will prohibit stockholder action by
written consent in lieu of a meeting, and will provide that stockholder action
can be taken only at an annual or special meeting of stockholders. Such
provision may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting, unless a special meeting is called by
the Board, the Chairman of the Board, the Chief Executive Officer or President
of the Company.
ADVANCED NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws establish certain advance notice procedures with regard
to stockholder proposals and the nomination, other than by the direction of the
Board or a committee thereof, of candidates for election as directors. The
Company may reject a stockholder proposal or nomination that is not made in
accordance with such procedures.
AMENDMENT OF CERTAIN PROVISIONS OF THE CERTIFICATE AND BYLAWS. The
Certificate provides that the affirmative vote of the holders of at least
66 2/3% of the outstanding shares of capital stock of the Company (including any
warrants with voting rights) then entitled to vote on the matter is required to
amend certain provisions of the Certificate, including those provisions relating
to the classification of the Board of Directors; the filling of vacancies on the
Board; removal of directors; the calling of special meetings of stockholders;
the prohibition of stockholder action without a meeting; indemnification of
directors, officers and others; the limitation on liability of directors; the
approval of any merger or sale of substantially all of the assets of the Company
which has not been approved by at least two-thirds of the Board; the Amendment
of the Bylaws; and the supermajority voting requirements in the Certificate. The
Certificate further provides that the Bylaws may be amended by the Board, except
with respect to the authorized number of directors, or by an affirmative vote of
the holders of not less than 66 2/3% of the total voting power of all
outstanding shares of capital stock of the Company (including any warrants with
voting rights) then entitled to vote on the matter. These voting requirements
will have the effect of making more difficult any amendment by stockholders,
even if a majority of the Company's stockholders believe that such amendment
would be in its best interests.
DELAWARE GENERAL CORPORATION LAW SECTION 203. The Company is subject to
Section 203 of the GCLSD, which imposes restrictions on "business combinations"
(as defined therein) with interested stockholders (being any person who acquired
15% or more of the Company's outstanding voting stock).
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In general, the Company is prohibited from engaging in business combinations
with an interested stockholder, unless (i) before such person became an
interested stockholder, the Board approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the Company outstanding at the time the
transaction commenced (excluding for purposes of determining the number of
shares outstanding stock held by directors who are also officers of the Company
and by employee stock plans that do not provide employees with the rights to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer) or (iii) on or subsequent to the date on
which such person became an interested stockholder, the business combination is
approved by the Board and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the Company not owned by the interested stockholder. Under Section 203, the
restrictions described above also do not apply to certain business combinations
proposed by an interested stockholder following the earlier of the announcement
of certain extraordinary transactions involving the Company and a person who had
not been an interested stockholder during the previous three years or who became
an interested stockholder with the approval of the Company's directors, if such
extraordinary transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an interested
stockholder during the previous three years or who were recommended for election
or elected to succeed such directors by a majority of such directors. By
restricting the ability of the Company to engage in business combinations with
an interested person, the application of Section 203 to the Company may provide
a barrier to hostile or unwanted takeovers.
VESTING OF MANAGEMENT RIGHTS UPON CERTAIN ACQUISITIONS. The terms of stock
option agreements between the Company and certain members of management provide
that all unvested options granted thereunder will vest upon either: (i) the
acquisition by any one purchaser or group of more than 50% of the voting power
of the stock of the Company; (ii) a replacement during any 12 month period of a
majority of the Board (whose appointment is not endorsed by a majority of the
Board prior to the date of such appointment); or (iii) the acquisition of assets
having more than one-third of the total fair market value of the assets of the
Company by any person or group of persons (a "Change of Control"). As of
December 31, 1996 options to purchase an aggregate of 214,575 shares of Common
Stock were unvested and subject to vesting upon a Change of Control, including
options to purchase 62,385, 22,686, 21,197, 28,357 and 25,521 shares of Common
Stock, by Messrs. DeCrane, MacDonald, Rankin, Keller and Becker, respectively.
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SHARES ELIGIBLE FOR FUTURE SALE
Of the shares of Common Stock to be outstanding after the
Offering, shares will be available for resale in the public market
without restriction immediately following the Offering if held by holders who
are not "affiliates" of the Company (as defined in the Securities Act). All of
the remaining shares are "restricted securities" within the meaning of Rule 144
adopted under the Securities Act. These restricted securities were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act. After expiration of the 180-day lock-up
period following the Offering pursuant to agreements with the Underwriters, (i)
all restricted securities will be available for resale pursuant to limitations
of Rule 144 and (ii) the Company, pursuant to its Certificate, may authorize the
issuance of additional shares of Common Stock and shares of one or more series
of voting preferred stock. The issuance of additional shares of capital stock
could result in the dilution of the voting power of the shares of Common Stock
purchased in the Offering. In addition, following the expiration of the 180-day
lock-up period, pursuant to the Registration Rights Agreement, certain
stockholders have the right, subject to the terms and conditions of the
Registration Rights Agreement, to require the Company to: (i) effect up to four
registrations under the Securities Act covering all or any portion of the shares
of Common Stock held by such stockholders, provided that if the Company effects
a registration at the request of a stockholder, no further demand may be made by
any stockholder for a period of at least nine months; and (ii) include all or
any portion of such stockholders' shares of Common Stock in any proposed
registration by the Company of shares of Common Stock (subject to reduction to
the extent that the managing underwriter, if any, is of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold
therein).
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active public market will develop, or if
developed, will be sustained after the completion of the Offering. Factors such
as announcements concerning the Company or its competitors, investor perception
of the Company, fluctuations in the Company's operating results and general
market conditions may cause the market price of the Common Stock to fluctuate
significantly. Sales of a substantial number of shares of Common Stock in the
public market after the Offering, or the expectation that such sales could
occur, could adversely affect the market price of the Common Stock and the
Company's ability to raise capital through a subsequent offering of securities.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters") have severally agreed to purchase and the
Company has agreed to sell to them, severally, the aggregate number of shares of
Common Stock set forth opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------ -----------
<S> <C>
Schroder Wertheim & Co. Incorporated........................
Dean Witter Reynolds Inc....................................
-----------
Total...................................................
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the several Underwriters are
obligated, subject to the approval of certain legal matters by their counsel and
certain other conditions, to purchase all the shares of Common Stock offered
hereby (other than those covered by the Underwriters' over-allotment option
described below), if any are purchased. Schroder Wertheim & Co. Incorporated and
Dean Witter Reynolds Inc., as representatives of the several Underwriters (the
"Representatives"), have advised the Company that the Underwriters propose to
offer the shares to the public at the initial public offering price set forth on
the cover page of this Prospectus; that the Underwriters propose initially to
allow a concession not in excess of $ per share to certain dealers,
including the Underwriters; that the Underwriters and such dealers may initially
allow a discount of not in excess of $ per share to other dealers;
and that the initial public offering price and the concession and discount to
dealers may be changed by the Representatives after the initial public offering.
The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of the Underwriting Agreement, to
purchase up to an additional shares of Common Stock, at the initial
public offering price set forth on the cover page of this Prospectus, less
underwriting discounts and commissions. The Underwriters may exercise the option
only to cover over-allotments, if any, in the sale of shares of Common Stock in
the Offering. To the extent that the Underwriters exercise this option, each
Underwriter shall be committed, subject to certain conditions, to purchase a
number of additional shares proportionate to such Underwriter's initial
commitment.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company, certain management stockholders, directors and certain other
stockholders have agreed not to offer to sell, sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock, subject to certain
exceptions, for a period of 180 days after the date of this Prospectus without
the prior written consent of Schroder Wertheim & Co. Incorporated.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price of the Common Stock will be
determined by negotiations between the Company and the Representatives. Among
the factors to be considered in such negotiations are the Company's results of
operations and financial condition, the prospects for the Company and for the
59
<PAGE>
industry in which the Company operates, the Company's capital structure and
prevailing conditions in the securities market.
The Representatives have informed the Company that the Underwriters do not
intend to confirm shares to accounts over which they exercise discretionary
authority in excess of 5% of the total number of shares offered hereby.
LEGAL MATTERS
The validity of the Common Stock offered by this Prospectus is being passed
on for the Company by Spolin & Silverman, Santa Monica, California. Certain
legal matters will be passed upon for the Underwriters by Milbank, Tweed, Hadley
& McCloy, Los Angeles, California.
EXPERTS
The consolidated financial statements of the Company and the financial
statements of Aerospace Display Systems as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by its independent auditors and
quarterly reports containing unaudited interim financial information for the
first three quarters of each year.
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Act for registration of the shares
of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to do not purport to be complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved and each statement shall be deemed qualified in its entirety by this
reference. The Registration Statement and the exhibits and schedules thereto may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the public reference facilities of the Commission's Regional
Offices: New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material may also be
obtained from the Public Reference Section of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a Web site (http:// www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
60
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Accountants....................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996 (Unaudited)........................................ F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995 and the nine months ended September 30, 1995 and
1996 (Unaudited)...................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1993, 1994 and 1995 and the nine months ended
September 30, 1996 (Unaudited)........................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and the nine months ended September 30, 1995 and
1996 (Unaudited)...................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
AEROSPACE DISPLAY SYSTEMS (A DIVISION OF ALLARD INDUSTRIES, INC.)
Report of Independent Accountants....................................... F-47
Balance Sheets as of December 31, 1994 and 1995 and September 18, 1996
(Unaudited)........................................................... F-48
Statements of Income for the years ended December 31, 1993, 1994 and
1995, the nine months ended September 30, 1995 (Unaudited) and the
period from January 1 to September 18, 1996 (Unaudited)............... F-49
Statements of Changes in Owner's Net Investment for the years ended
December 31, 1993, 1994 and 1995 and the period from January 1 to
September 18, 1996 (Unaudited)........................................ F-50
Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995, the nine months ended September 30, 1995 (Unaudited), and the
period from January 1 to September 18, 1996 (Unaudited)............... F-51
Notes to Financial Statements........................................... F-52
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
DeCrane Aircraft Holdings, Inc.
The reverse stock split, a part of the Recapitalization described in Note 1
to the consolidated financial statements, has not been consummated at January
16, 1997. When it has been consummated, we will be in a position to furnish the
following report:
"In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of operations, of
stockholders' equity (deficit) and of cash flows present fairly,
in all material respects, the financial position of DeCrane
Aircraft Holdings, Inc. and its subsidiaries at December 31, 1994
and 1995 and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits
of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1, during 1993, the Company changed its
method of accounting for income taxes."
PRICE WATERHOUSE LLP
Cleveland, Ohio
April 9, 1996
F-2
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
DECEMBER 31, -----------------------------
-------------------- PRO FORMA FOR
1994 1995 HISTORICAL RECAPITALIZATION
--------- --------- ----------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 236 $ 305 $ 81 $ 81
Accounts receivable, net.................................. 10,810 8,792 10,750 10,750
Inventories............................................... 11,066 14,116 15,801 15,801
Prepaid expenses and other current assets................. 207 362 602 602
--------- --------- ----------- --------
Total current assets.................................... 22,319 23,575 27,234 27,234
Property and equipment, net................................. 8,349 7,387 9,092 9,092
Other assets, principally intangibles, net.................. 7,017 5,367 17,902 17,902
--------- --------- ----------- --------
Total assets............................................ $ 37,685 $ 36,329 $ 54,228 $ 54,228
--------- --------- ----------- --------
--------- --------- ----------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Short-term borrowings..................................... $ 835 $ 911 $ 530 $ 530
Current portion of long-term obligations to unaffiliated
lenders................................................. 1,608 1,612 2,891 2,891
Convertible subordinated notes payable to related
parties................................................. -- -- 2,882 2,882
Accounts payable.......................................... 5,939 5,079 5,118 5,118
Accrued expenses.......................................... 2,313 3,046 4,105 4,105
Income taxes payable...................................... 165 344 517 517
--------- --------- ----------- --------
Total current liabilities............................... 10,860 10,992 16,043 16,043
--------- --------- ----------- --------
Long-term liabilities
Long-term obligations
Unaffiliated lenders.................................... 15,793 16,316 21,264 21,264
Related parties......................................... 5,638 5,833 5,979 5,979
Deferred income taxes..................................... 2,175 3,110 3,109 3,109
Minority interests........................................ 124 142 43 43
--------- --------- ----------- --------
Total long-term liabilities............................. 23,730 25,401 30,395 30,395
--------- --------- ----------- --------
Commitments and contingencies (Note 17)
Mandatorily redeemable common stock warrants................ 2,329 1,633 2,054 1,020
--------- --------- ----------- --------
Stockholders' equity (deficit)
Cumulative convertible preferred stock, no par value;
4,804,018 shares authorized as of December 31, 1994 and
1995 and 8,304,018 shares as of September 30, 1996;
4,022,705 shares issued and outstanding as of December
31, 1994 and 1995 and 6,847,705 shares as of September
30, 1996 (none on a pro forma basis).................... 5,549 5,549 13,850 --
Common stock, no par value; 2,268,560 shares authorized as
of December 31, 1994 and 1995 and 4,253,550 shares as of
September 30, 1996; 85,593 shares issued and outstanding
as of December 31, 1994 and 1995 and September 30, 1996
(none on a pro forma basis)............................. 58 58 62 --
Common stock, $.01 par value; 4,253,550 shares authorized
as of January , 1997; 2,460,967 shares issued and
outstanding............................................. -- -- -- 25
Additional paid-in capital................................ -- -- -- 14,921
Accumulated deficit....................................... (5,057) (7,807) (8,406) (8,406)
Foreign currency translation adjustment................... 216 503 230 230
--------- --------- ----------- --------
Total stockholders' equity (deficit).................... 766 (1,697) 5,736 6,770
--------- --------- ----------- --------
Total liabilities and stockholders' equity
(deficit)........................................... $ 37,685 $ 36,329 $ 54,228 $ 54,228
--------- --------- ----------- --------
--------- --------- ----------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................................... $ 48,197 $ 47,092 $ 55,839 $ 42,274 $ 43,059
Cost of sales.......................................... 36,258 36,407 43,463 32,378 33,277
--------- --------- --------- --------- ---------
Gross profit....................................... 11,939 10,685 12,376 9,896 9,782
--------- --------- --------- --------- ---------
Operating expenses
Selling, general and administrative expenses......... 7,953 7,716 9,426 6,764 7,229
Amortization of intangible assets.................... 1,210 1,209 1,115 902 538
Gain on litigation settlement, net................... -- -- -- -- (157)
--------- --------- --------- --------- ---------
Total operating expenses........................... 9,163 8,925 10,541 7,666 7,610
--------- --------- --------- --------- ---------
Income from operations................................. 2,776 1,760 1,835 2,230 2,172
Other expenses (income)
Interest expense
Unaffiliated lenders............................... 2,805 2,966 2,822 2,107 2,024
Related parties.................................... 135 278 999 749 797
Other (income) expenses.............................. (161) 324 297 250 33
Minority interests................................... 13 8 85 54 150
--------- --------- --------- --------- ---------
Loss before provision for income taxes, cumulative
effect of change in accounting principle and
extraordinary item................................... (16) (1,816) (2,368) (930) (832)
Provision for income taxes............................. (620) (613) (1,078) (642) (265)
--------- --------- --------- --------- ---------
Loss before cumulative effect of change in accounting
principle and extraordinary item..................... (636) (2,429) (3,446) (1,572) (1,097)
Cumulative effect on prior years of change in
accounting for income taxes.......................... (121) -- -- -- --
Extraordinary loss from debt refinancing............... -- (264) -- -- --
--------- --------- --------- --------- ---------
Net loss............................................... (757) (2,693) (3,446) (1,572) (1,097)
Cumulative convertible preferred stock dividends....... (108) (387) (557) (417) (844)
--------- --------- --------- --------- ---------
Net loss applicable to common stockholders............. $ (865) $ (3,080) $ (4,003) $ (1,989) $ (1,941)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net loss per common share (Unaudited)........ $ (1.47) $ (.71)
--------- ---------
--------- ---------
Pro forma weighted average number of common shares
outstanding (Unaudited).............................. 2,728 2,728
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CUMULATIVE COMMON STOCK FOREIGN
CONVERTIBLE ------------------------ CURRENCY
PREFERRED NUMBER OF ACCUMULATED TRANSLATION
STOCK SHARES AMOUNT DEFICIT ADJUSTMENT TOTAL
----------- ----------- ----------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992........................ $ -- 83,324 $ 57 $ (1,656) $ (80) $ (1,679)
Net loss.......................................... -- -- -- (757) -- (757)
Adjustment to redemption value of mandatorily
redeemable common stock warrants................ -- -- -- (107) -- (107)
Translation adjustment............................ -- -- -- -- (75) (75)
----------- ----------- --- ------------- ------ ---------
Balance, December 31, 1993........................ -- 83,324 57 (2,520) (155) (2,618)
Reclassification of mandatorily redeemable
cumulative convertible preferred stock.......... 5,168 -- -- -- -- 5,168
Net loss.......................................... -- -- -- (2,693) -- (2,693)
Adjustment to redemption value of mandatorily
redeemable common stock warrants................ -- -- -- 189 -- 189
Issuance of cumulative convertible preferred
stock, net...................................... 381 -- -- -- -- 381
Mandatorily redeemable common stock warrants
issued pursuant to anti-dilution provisions..... -- -- -- (33) -- (33)
Stock option exercised............................ -- 2,269 1 -- -- 1
Translation adjustment............................ -- -- -- -- 371 371
----------- ----------- --- ------------- ------ ---------
Balance, December 31, 1994........................ 5,549 85,593 58 (5,057) 216 766
Net loss.......................................... -- -- -- (3,446) -- (3,446)
Adjustment to redemption value of mandatorily
redeemable common stock warrants................ -- -- -- 696 -- 696
Translation adjustment............................ -- -- -- -- 287 287
----------- ----------- --- ------------- ------ ---------
Balance, December 31, 1995........................ 5,549 85,593 58 (7,807) 503 (1,697)
Net loss.......................................... -- -- -- (1,097) -- (1,097)
Adjustment to redemption value of mandatorily
redeemable common stock warrants................ -- -- -- 505 -- 505
Issuance of cumulative convertible preferred
stock, net...................................... 8,301 -- -- -- -- 8,301
Mandatorily redeemable common stock warrants
issued pursuant to anti-dilution provisions..... -- -- -- (7) -- (7)
Stock option compensation expense................. -- -- 4 -- -- 4
Translation adjustment............................ -- -- -- -- (273) (273)
----------- ----------- --- ------------- ------ ---------
Balance, September 30, 1996 (Unaudited)........... $ 13,850 85,593 $ 62 $ (8,406) $ 230 $ 5,736
----------- ----------- --- ------------- ------ ---------
----------- ----------- --- ------------- ------ ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net loss............................................................... $ (757) $ (2,693) $ (3,446) $ (1,572) $ (1,097)
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities
Depreciation and amortization........................................ 3,553 3,868 4,244 3,241 2,806
Amortization of debt discount...................................... 89 121 298 224 259
Deferred income taxes.............................................. 540 521 867 571 33
Minority interests in earnings of subsidiaries..................... 13 8 85 54 150
Cumulative effect of change in accounting for income taxes......... 121 -- -- -- --
Extraordinary loss from debt refinancing........................... -- 264 -- -- --
Gain on sale of equipment.......................................... (109) (37) (15) (20) --
Changes in assets and liabilities
Accounts receivable.............................................. (2,270) (1,549) 2,256 1,844 (949)
Inventories...................................................... (539) (1,381) (2,962) (2,474) 1,149
Prepaid expenses and other assets................................ 238 390 274 (296) 207
Accounts payable................................................. 908 (973) (1,004) (205) (536)
Accrued expenses................................................. 667 (920) 682 702 880
Income taxes payable............................................. 20 59 178 43 184
--------- --------- --------- --------- ---------
Net cash provided by (used for) operating activities........... 2,474 (2,322) 1,457 2,112 3,086
--------- --------- --------- --------- ---------
Cash flows from investing activities
Purchase of net assets of Aerospace Display Systems.................... -- -- -- -- (11,401)
Purchase of minority stockholder's interest............................ -- -- -- -- (5,207)
Capital expenditures................................................... (666) (1,016) (1,203) (1,133) (748)
Other, net............................................................. 37 23 (259) 35 (29)
--------- --------- --------- --------- ---------
Net cash used for investing activities......................... (629) (993) (1,462) (1,098) (17,385)
--------- --------- --------- --------- ---------
Cash flows from financing activities
Financing of acquisitions
Proceeds from issuance of cumulative convertible preferred stock,
net................................................................ -- -- -- -- 8,806
Revolving line of credit borrowings.................................. -- -- -- -- 5,000
Convertible subordinated note borrowings from related parties........ -- -- -- -- 3,000
Senior and senior subordinated term loan borrowings (including amounts
allocated to mandatorily redeemable common stock warrants)........... 750 23,000 -- -- --
Senior, senior subordinated and related party debt repaid.............. -- (19,769) -- -- --
Net borrowings (payments) under revolving line of credit agreements.... (880) 3,167 1,972 (472) (481)
Principal payments on capitalized lease and other long-term
obligations.......................................................... (1,389) (1,024) (1,665) (634) (1,416)
Proceeds from issuance of cumulative convertible preferred stock,
net.................................................................. -- 381 -- -- 112
Payment of deferred financing costs.................................... (119) (2,670) -- -- (648)
Other, net............................................................. 180 (57) (266) (53) (249)
--------- --------- --------- --------- ---------
Net cash (used for) provided by financing activities........... (1,458) 3,028 41 (1,159) 14,124
--------- --------- --------- --------- ---------
Effect of foreign currency translation on cash........................... (33) 82 33 26 (49)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents..................... 354 (205) 69 (119) (224)
Cash and cash equivalents at beginning of period......................... 87 441 236 236 305
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period............................... $ 441 $ 236 $ 305 $ 117 $ 81
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
DeCrane Aircraft Holdings, Inc. and subsidiaries (the "Company") is a
manufacturer of avionics components and a provider of avionics systems
integration services in certain niche markets of the commercial aircraft
industry.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Preparation of these consolidated financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts on the consolidated balance
sheets, disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
The consolidated financial information as of September 30, 1996 and for the
nine months ended September 30, 1995 and 1996 is unaudited. In the opinion of
the Company, the unaudited financial information is presented on a basis
consistent with the audited financial statements and contains all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for such interim periods. The results of operations for interim
periods are not necessarily indicative of results of operations for the full
year.
RECAPITALIZATION
In January 1997, the holders of certain securities agreed, subject to board
of director and stockholder approval, to a plan for the recapitalization of the
Company (the "Recapitalization"). The Recapitalization is a condition to the
consummation of the anticipated initial public offering (the "Offering") and
would be effective concurrent therewith.
The Recapitalization provides for: (i) the conversion of all 6,847,705
shares of issued and outstanding cumulative convertible preferred stock into
1,941,804 shares of common stock; (ii) the exercise and conversion of all 52,784
and 9,355 issued and outstanding Series B preferred stock warrants and common
stock warrants, respectively, into a total of 24,323 shares of common stock;
(iii) the exercise of 409,247 mandatorily redeemable common stock warrants (the
"Redeemable Warrants") for the purchase of common stock; and (iv) a 3.53-for-1
reverse stock split. All common share information set forth in the consolidated
financial statements and notes thereto has been restated to reflect the reverse
stock split.
Redeemable Warrants exercisable into 403,586 common shares would remain
after the Recapitalization. Of this amount, 138,076 Redeemable Warrants would be
cancelled upon the consummation of the Offering and repayment of the Company's
senior subordinated debt and convertible notes in accordance with the terms of
the respective warrant agreements.
The Company intends to reorganize as a Delaware corporation. In conjunction
with the reorganization, the Company will establish a $.01 par value for its
common stock.
F-7
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market, as determined under
the first-in, first-out ("FIFO") method. Costs include materials, labor and
manufacturing overhead.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over their estimated useful lives, ranging from two to
twenty years. Leasehold improvements are amortized using the straight-line
method over their estimated useful lives or remaining lease term, whichever is
less. Expenditures for maintenance and repairs are expensed as incurred. The
cost of improvements are capitalized. Upon retirement or disposal, the cost and
accumulated depreciation of property and equipment are reduced and any gain or
loss is recorded in income or expense.
OTHER ASSETS
Goodwill is amortized on a straight-line basis over periods ranging from 26
to 30 years. The covenants not to compete are amortized on a straight-line basis
over five years. Other intangibles are amortized on a straight-line basis over
their estimated useful lives, ranging from ten to twenty years. Revolving credit
agreement deferred financing costs are amortized on a straight-line basis over
the term of the agreement. Term debt deferred financing costs are amortized
using the interest method over the terms of their respective agreements.
The Company periodically evaluates goodwill to assess recoverability based
upon expectations of future non-discounted operating cash flows related to the
acquired businesses. Based upon the most recent analysis, the Company believes
that no impairment of goodwill existed at December 31, 1995 or September 30,
1996.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). SFAS
121 requires the Company to review long-lived assets and certain intangible
assets for impairment when events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. In the event the sum of the
expected undiscounted future cash flows resulting from the use of the asset is
less than the carrying amount of the asset, an impairment loss equal to the
excess of the asset's carrying value over its fair value is recorded. SFAS 121
also requires that long-lived assets and certain intangible assets to be
disposed of be recorded at the lower of carrying value or fair value less
disposal costs.
SFAS 121 is effective for financial statements issued for fiscal years
beginning after December 15, 1995, and must be adopted on a prospective basis.
The Company adopted SFAS 121 prospectively in the first quarter of 1996, the
adoption of which had no impact on the consolidated financial statements.
F-8
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVES
The premium paid for an interest rate cap agreement is amortized to interest
expense using the interest method of amortization over the term of the cap
assurance period. The unamortized premium is classified as other current and
long-term assets in the consolidated financial statements. Amounts receivable
under the cap agreement are accrued as a reduction of interest expense.
Market value gains and losses on forward foreign exchange contracts are
recognized in the consolidated statements of operations and aggregated a net
loss of $161,000 for the nine months ended September 30, 1996 (none in prior
periods).
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). Under
the liability method specified in SFAS 109, a deferred tax asset or liability is
determined based on the difference between the financial statement and tax basis
of assets and liabilities as measured by the enacted tax rates which will be in
effect when these differences reverse. Deferred tax expense is the result of
changes in the liability for deferred taxes.
The deferred method used in years prior to 1993 required the Company to
provide for deferred tax expense based on certain items of income and expense
which were reported in different years in the consolidated financial statements
and tax returns as measured by the tax rate in effect for the year the
difference originated.
The cumulative effect on prior years of adopting SFAS 109 in 1993 was to
decrease net income by $121,000, which is reported in the consolidated
statements of operations as the effect of the change in accounting for income
taxes.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's U.K. and Swiss subsidiaries have
been translated into U.S. dollars from their functional currencies, pounds
sterling and Swiss francs, respectively, in the consolidated financial
statements. Assets and liabilities have been translated at the exchange rate on
the balance sheet date and income statement amounts have been translated at
average exchange rates in effect during the period. The net translation
adjustment is reflected as a component of stockholders' equity (deficit).
Realized foreign currency exchange gains (losses) included in other expenses
(income) in the consolidated statements of operations were $43,000, $(361,000)
and $(314,000) for the years ended December 31, 1993, 1994 and 1995,
respectively.
STOCK OPTION PLAN
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation ("SFAS 123"). SFAS 123 establishes a "fair value" method of
accounting for the value of grants under stock based compensation plans. As
permitted under SFAS 123, the Company will elect to continue to measure
compensation expense
F-9
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
related to the employee stock option plan utilizing the intrinsic value method
as prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees.
However, beginning in 1996, the Company will present in the notes to its
consolidated financial statements the pro forma effect on its results of
operations as if the fair value method of measuring compensation expense related
to the employee stock option plan was utilized as described in SFAS 123.
REVENUE RECOGNITION
Revenues from the sale of manufactured products, except for products
manufactured under long-term contracts, are recorded when products are shipped.
Revenues on long-term contracts are recognized using the
percentage-of-completion method based on costs incurred to date compared with
total estimated costs at completion. Unbilled accounts receivable were
$3,938,000, $81,000 and $710,000 at December 31, 1994 and 1995 and September 30,
1996, respectively. Unbilled accounts receivable are expected to be billed
during the succeeding twelve month period.
PRO FORMA LOSS PER COMMON SHARE (UNAUDITED)
The Company's historical capital structure is not indicative of its
prospective structure due to the Recapitalization that will occur concurrent
with the closing of the Offering. Accordingly, historical loss per common share
is not considered meaningful and has not been presented herein.
Pro forma loss per common share reflects the Recapitalization and is
computed using the weighted average number of common shares assumed to have been
outstanding during the periods. The dilutive effect of common equivalent shares,
other than for certain stock options granted in 1996 and Redeemable Warrants and
preferred stock sold in 1996, has not been included because their inclusion
would have decreased the loss per share. Shares issuable for options granted in
1996 and Redeemable Warrants and preferred stock sold in 1996 at prices less
than the anticipated initial public offering price have been included for all
periods presented using the treasury stock method. In addition, the weighted
average number of shares assumes that Redeemable Warrants and preferred stock
which will be converted into common stock pursuant to the Recapitalization had
been converted and thus outstanding since the dates of issuance.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, cash equivalents include
short-term, highly liquid investments with original maturities of three months
or less.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities ("SFAS 125"). SFAS 125 is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is to be applied
prospectively. The new standard provides accounting and reporting standards for
transfers and servicing of financial assets and
F-10
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
extinguishments of liabilities. The Company does not expect adoption of SFAS 125
will have a material effect on the consolidated financial statements.
NOTE 2--ACQUISITIONS
MINORITY STOCKHOLDER'S 25% INTEREST
On February 20, 1996, the Company purchased the remaining 25% of a
subsidiary's stock it did not already own from the subsidiary's minority
stockholder (the "Minority Stockholder") for a total purchase price of
$5,748,000, including $334,000 of acquisition related costs and expenses (the
"Minority Interest Acquisition"). The purchase price consisted of $4,873,000
paid in cash at closing and a $600,000 non-interest bearing obligation payable
to the Minority Stockholder (Note 10). The cash portion of the purchase price
was funded with the proceeds from the sale of Series D preferred stock and
Redeemable Warrants (Notes 14 and 15).
The acquisition was accounted for as a purchase and the $5,333,000
difference between the purchase price and 25% of the fair value of the net
assets acquired was recorded as goodwill and is being amortized over 26 years,
representing the remaining useful life of the goodwill recorded upon the initial
75% acquisition in October 1991 (Note 6).
The consolidated results of operations for the nine months ended September
30, 1996 include 100% of the operating results of the subsidiary subsequent to
February 20, 1996. For the periods prior to February 20, 1996, the consolidated
results of operations include a charge for the Minority Stockholder's 25%
ownership interest.
For the periods prior to February 20, 1996, the Minority Stockholder, who is
also President of the subsidiary, was compensated pursuant to an employment
agreement. Compensation was the greater of $130,000 per year or 25% of the
subsidiary's earnings before interest, taxes and certain expenses. Compensation
was payable on or before April 15th of each year, although the Minority
Stockholder received a bi-monthly draw amounting to $185,000 per year, plus
additional periodic payments, which were offset against the compensation
payable. The employment agreement was cancelled as of February 20, 1996. For the
years ended December 31, 1993, 1994 and 1995, the Minority Stockholder earned
compensation of $669,000, $619,000 and $851,000, respectively. Accrued
compensation payable of $652,000 as of December 31, 1995 was paid to the
Minority Stockholder on February 20, 1996. No accrued compensation was payable
as of December 31, 1994.
AEROSPACE DISPLAY SYSTEMS
On September 18, 1996, the Company purchased substantially all of the
assets, subject to certain liabilities assumed, of the Aerospace Display Systems
division ("ADS") of Allard Industries, Inc. ("Allard"). The total purchase price
was $13,395,000, including $402,000 in acquisition related costs and an
estimated $292,000 of additional consideration payable pursuant to working
capital adjustment provisions contained in the purchase agreement. ADS develops
and manufactures dichroic liquid crystal displays and modules for commercial and
military avionics systems.
F-11
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 2--ACQUISITIONS (CONTINUED)
The acquisition was funded with the proceeds from the sale of Series E
preferred stock, convertible subordinated notes and Redeemable Warrants (Notes
8, 14 and 15), borrowings under the Company's revolving line of credit and a
$2,000,000 non-interest bearing obligation payable to certain Allard
stockholders (Note 10).
The acquisition was accounted for as a purchase and the $7,691,000
difference between the purchase price and the fair value of the net assets
acquired was recorded as goodwill and is being amortized over 30 years (Note 6).
The consolidated results of operations for the nine months ended September
30, 1996 include the operating results of ADS subsequent to September 18, 1996.
ELSINORE
On December 5, 1996, the Company acquired Elsinore Aerospace Services, Inc.
and the Elsinore Engineering Services Division (collectively, "Elsinore") of
Elsinore, L.P.. Elsinore provides engineering services to the commercial
aircraft industry. The total purchase price was $2,550,000, including $300,000
of estimated acquisition related costs. The purchase price consisted of
$1,300,000 paid in cash at closing and a $1,250,000 15% promissory note payable
to the sellers, due on the earlier of February 15, 1997 or three days following
the closing of the Offering. The purchase agreement provides for an adjustment
of the purchase price should the amount of working capital decline as of the
closing date. The purchase price will be allocated to the assets acquired and
liabilities assumed using estimated fair values and it is anticipated that
approximately $1,800,000 will be assigned to goodwill and other intangibles,
subject to final determination of the purchase price.
PRO FORMA RESULTS OF OPERATIONS FOR ACQUISITIONS
Unaudited pro forma consolidated results, assuming the Minority Interest and
ADS acquisitions had been consummated on January 1, 1995, are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Revenues.............................................. $ 65,791 $ 49,923 $ 50,765
Net loss.............................................. (3,225) (1,403) (526)
Net loss applicable to common stockholders............ (3,782) (1,820) (1,370)
</TABLE>
The above information reflects adjustments for depreciation, amortization,
minority interest and interest expense based on the new cost basis and debt
structure of the Company. The pro forma effect of the Elsinore Acquisition is
not material and, accordingly, is not reflected in the above information. In
addition, pro forma per share information is not considered meaningful and has
not been presented above due to the Recapitalization that will occur concurrent
with the closing of the Offering.
F-12
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 3--ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS
ACCOUNTS RECEIVABLE
Accounts receivable is net of an allowance for doubtful accounts of
$243,000, $259,000 and $362,000 at December 31, 1994 and 1995 and September 30,
1996, respectively.
The Company is potentially subject to concentrations of credit risk as the
Company relies heavily on customers operating in the domestic and foreign
commercial aircraft industry. Generally, the Company does not require collateral
or other security to support accounts receivable subject to credit risk. Under
certain circumstances, deposits or cash on delivery terms are required. The
Company maintains reserves for potential credit losses and generally, such
losses have been within management's expectations.
SIGNIFICANT CUSTOMERS
Two customers each accounted for more than 10% of the Company's consolidated
revenues, as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Customer A................................... 12.9% 11.9% 8.9% 9.0% 13.9%
Customer B................................... 11.1% 13.7% 25.4% 30.6% 10.5%
--- --- --- --- ---
Total...................................... 24.0% 25.6% 34.3% 39.6% 24.4%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
Complete loss of either customer could have a significant adverse impact on
the results of operations expected in future periods. The Company anticipates
that sales to Customer B will further decrease subsequent to September 30, 1996.
However, the Company believes this decrease will be offset by sales to other
customers.
NOTE 4--INVENTORIES
Inventories are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Raw material.......................................... $ 6,460 $ 7,857 $ 8,703
Work-in process....................................... 1,253 1,732 2,616
Finished goods........................................ 3,353 4,527 4,482
--------- --------- --------------
Total inventories................................... $ 11,066 $ 14,116 $ 15,801
--------- --------- --------------
--------- --------- --------------
</TABLE>
Included above are costs relating to long-term contracts recognized on the
percentage of completion method of $1,927,000 and $175,000 at December 31, 1995
and September 30, 1996, respectively (none in 1994). At December 31, 1995, costs
incurred included $1,457,000 pertaining to a contract which was partially
terminated and settled. The settlement was received in March 1996 with no
resulting loss.
F-13
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment includes the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment............................... $ 10,761 $ 11,634 $ 13,515
Tooling............................................... 2,290 2,557 3,120
Computer equipment, furniture and fixtures............ 1,338 1,639 2,198
Leasehold improvements................................ 1,007 1,057 1,306
--------- --------- --------------
Total cost.......................................... 15,396 16,887 20,139
Accumulated depreciation and amortization........... (7,047) (9,500) (11,047)
--------- --------- --------------
Net property and equipment........................ $ 8,349 $ 7,387 $ 9,092
--------- --------- --------------
--------- --------- --------------
</TABLE>
Machinery and equipment under capital leases included above consists of the
following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Total cost................................................ $ 1,008 $ 864 $ 1,084
Accumulated depreciation and amortization................. (128) (237) (508)
--------- --------- -------
Net machinery and equipment............................. $ 880 $ 627 $ 576
--------- --------- -------
--------- --------- -------
</TABLE>
Depreciation of machinery and equipment under capital leases is included in
cost of sales in the consolidated financial statements.
On December 12, 1996, the Company purchased all of the manufacturing assets
relating to the cold-heading manufacturing facility of the Qualitronix Division
of AMP, Inc. (the "AMP Facility"). The purchase price of $7,000,000 (subject to
adjustment) consisted of $5,399,000 paid in cash at closing with the balance
payable in early 1997.
F-14
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 6--OTHER ASSETS
Other assets includes the following and is net of accumulated amortization
for the respective periods as parenthetically noted (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill (net of $359, $445 and $647).................... $ 2,226 $ 2,140 $ 14,962
Deferred financing costs (net of $100, $708 and $1,174)
(Notes 10 and 21)...................................... 2,534 1,926 2,287
Covenants not to compete (net of $3,958 and $2,350)...... 1,434 442 --
Other intangibles (net of $136, $173 and $155)........... 357 322 284
Other assets............................................. 466 537 369
--------- --------- --------------
Other assets, net...................................... $ 7,017 $ 5,367 $ 17,902
--------- --------- --------------
--------- --------- --------------
</TABLE>
As of December 31, 1995, fully amortized covenants not to compete and
goodwill aggregating $2,600,000 were eliminated against the related accumulated
amortization. As of June 25, 1996, the remaining net unamortized balance of
covenants not to compete aggregating $163,000 ($2,792,000 cost and $2,629,000
accumulated amortization) were written off pursuant to the litigation settlement
with the former owner of acquired businesses (Note 17). As of September 30,
1996, goodwill included $13,024,000, resulting from the Minority Interest
Acquisition and ADS acquisition.
NOTE 7--SHORT-TERM BORROWINGS
The Company's Swiss subsidiary has a short term revolving line of credit
with a Swiss bank under which borrowings of $835,000, $911,000 and $530,000 were
outstanding at December 31, 1994 and 1995 and September 30, 1996, respectively.
Interest on the line accrues at the bank's prime rate (6.25% at December 31,
1995) plus 0.25%. The line of credit is secured by inventory and accounts
receivable, and is guaranteed by the Company.
NOTE 8--CONVERTIBLE SUBORDINATED NOTES PAYABLE TO RELATED PARTIES
Convertible subordinated notes payable (the "Convertible Notes") are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Convertible Notes, 15% interest and principal payable as
described below........................................ $ -- $ -- $ 3,000
Unamortized original issue discount...................... -- -- (118)
--------- --------- -------
Convertible Notes, net................................. $ -- $ -- $ 2,882
--------- --------- -------
--------- --------- -------
</TABLE>
In conjunction with the ADS acquisition, the Company sold Convertible Notes
and Redeemable Warrants to a group of investors, who are also related parties
(Note 21). As described in Note 14,
F-15
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 8--CONVERTIBLE SUBORDINATED NOTES PAYABLE TO RELATED PARTIES (CONTINUED)
$124,000 of the aggregate $3,000,000 proceeds was allocated to Redeemable
Warrants in the consolidated financial statements. The corresponding reduction
in the recorded principal amount of the notes is treated as debt discount and is
being amortized as interest expense over the life of the notes resulting in a
20.5% effective interest rate.
The Convertible Notes mature on the earlier of June 30, 1997 or the
occurrence of an initial public offering ("IPO"), as defined. If an IPO does not
occur by June 30, 1997, the $3,000,000 outstanding principal balance will
convert into 750,000 shares of Series E preferred stock at a $4.00 per share
conversion price.
Interest is payable quarterly commencing December 31, 1996. On each
quarterly interest payment date, the Company may elect to either pay the
interest in cash or defer the interest payment until the principal portion of
the Convertible Notes is due and payable (the "Deferred Interest"). The Deferred
Interest is added to the principal balance of the Convertible Notes for the
purpose of computing the interest payable for subsequent quarters. The Company's
senior debt agreements, as described in Note 10, prohibit the Company from
making interest payments in cash until the senior debt is repaid in full.
When the Deferred Interest is payable, each note holder may elect to receive
the amount payable in either cash, in Series E preferred stock at a $4.00 per
share conversion price if an IPO has not occurred or if an IPO has occured in
shares of common stock, the number of which is calculated using the per share
price at which such shares were offered in the IPO.
The Convertible Notes are subordinate in right of payment to the senior and
senior subordinated obligations described in Note 10, pari passu with the
acquisition financing payable to sellers described in Note 10 and senior to all
capital shares of the Company.
NOTE 9--ACCRUED EXPENSES
Accrued expenses are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Salaries, wages, compensated absences and payroll related
taxes.................................................. $ 1,167 $ 1,413 $ 2,120
Compensation payable to Minority Stockholder (Note 17)... -- 652 --
Due to former owner of acquired businesses (Note 17)..... -- 242 --
Acquisition and related financing costs (Note 21)........ -- 9 520
Interest payable to related parties (Notes 10 and 21).... 379 19 251
Other accrued expenses................................... 767 711 1,214
--------- --------- -------
Total accrued expenses................................. $ 2,313 $ 3,046 $ 4,105
--------- --------- -------
--------- --------- -------
</TABLE>
F-16
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 10--LONG-TERM OBLIGATIONS
Long-term obligations outstanding includes the following (amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C>
SENIOR DEBT
Senior revolving line of credit......................................... $ 2,282 $ 4,304 $ 9,143
Senior term notes payable, due in quarterly installments through
September 30, 2001 plus interest...................................... 14,575 13,178 12,122
SENIOR SUBORDINATED DEBT PAYABLE TO RELATED PARTIES
Senior subordinated notes payable, due on December 31, 2001 plus 12%
interest payable semi-annually........................................ 5,638 5,833 5,979
OTHER SECURED DEBT
Capital lease obligations, with interest at 8.63% to 16.47%, secured by
leased equipment (Note 5)............................................. 544 446 526
Equipment financing facility, due in quarterly installments of $17,000
through December 31, 2000 plus accrued interest at 6.25%.............. -- -- 240
ACQUISITION FINANCING PAYABLE TO SELLERS
Payable to Allard Stockholders, due in monthly installments of $56,000
through August 18, 1999............................................... -- -- 1,651
Payable to Minority Stockholder, due in monthly installments of $33,000
through December 15, 1997............................................. -- -- 473
--------- --------- --------------
Total long-term obligations........................................... 23,039 23,761 30,134
Less current portion payable to unaffiliated lenders.................. (1,608) (1,612) (2,891)
--------- --------- --------------
Long-term obligations, less current portion......................... $ 21,431 $ 22,149 $ 27,243
--------- --------- --------------
--------- --------- --------------
</TABLE>
1994 DEBT REFINANCING
In November 1994, the Company refinanced substantially all of its debt. A
maximum $5,000,000 senior revolving line of credit and $15,000,000 of senior
term notes (collectively "Senior Debt") were provided by two banks (the "Senior
Lenders"). Senior subordinated notes aggregating $7,000,000 were provided by two
institutional lenders (the "Senior Subordinated Lenders"). Fees and expenses
associated with obtaining the financing aggregated $2,634,000 and are
capitalized as deferred financing costs. As described in Note 14, $1,835,000 of
the proceeds were allocated to Redeemable Warrants issued to the lenders.
Proceeds from the refinancing were used to repay existing debt outstanding of
$19,769,000, including $960,000 of notes payable to related parties, and costs
incurred in connection with the refinancing.
The Company incurred a $264,000 extraordinary loss in connection with the
debt refinancing related to the write-off of unamortized deferred financing
costs, a charge for unamortized debt discounts and a prepayment penalty.
F-17
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 10--LONG-TERM OBLIGATIONS (CONTINUED)
SENIOR DEBT
The Senior Debt is secured by the Company's assets of $34,755,000 at
December 31, 1995 ($52,402,000 at September 30, 1996), which excludes equipment
under capital lease obligations (Note 5) and certain accounts receivable and
inventory of the Company's Swiss subsidiary.
In September 1996, the Senior Debt agreement was amended to provide for a
portion of the funds for the ADS acquisition. The terms of the amendment are
described below under "ADS Acquisition Amendment."
SENIOR REVOLVING LINE OF CREDIT
At December 31, 1995, the Company had a $5,000,000 senior revolving line of
credit, subject to a defined borrowing base, expiring on November 2, 1997. The
Company is required to pay an annual commitment fee of 0.5% on the unused
portion. At December 31, 1995, additional borrowings of $696,000 were available
under the agreement. In February 1996, the Senior Debt agreement was amended to
permit the sale of Series D Preferred Stock (Note 15) in conjunction with the
Minority Interest Acquisition. The amendment temporarily reduced the $5,000,000
maximum availability under the agreement to $4,400,000 until such time the
$33,000 monthly installments due to the Minority Stockholder for the acquisition
financing are paid.
At the Company's option, borrowings under the revolving line of credit bear
interest at either the Base Rate plus 1.25% or the Eurodollar Rate plus 2.5% per
annum. The Base Rate is the higher of the Federal Funds rate plus 1.5% or the
prime rate. The Eurodollar Rate is the London Interbank Offered Rate ("LIBOR").
At December 31, 1995, the Company had selected the Base Rate interest option
(Base Rate was 8.5% at December 31, 1995).
SENIOR TERM NOTES
The senior term notes are due in quarterly installments as follows (amounts
in thousands):
<TABLE>
<S> <C>
March 31, 1996 through and including December 31, 1996............. $ 375
March 31, 1997 through and including December 31, 1997............. 469
March 31, 1998 through and including December 31, 1998............. 563
March 31, 1999 through and including June 30, 2001................. 656
September 30, 2001................................................. 1,312
</TABLE>
At the Company's option, the senior term notes bear interest at either the
Base Rate plus 1.5% or the Eurodollar Rate plus 3.0% per annum. The Base Rate
and Eurodollar Rate are the same rates as under the senior revolving line of
credit. On December 29, 1995, the Company elected to fix the interest rate
charged on the term notes at the Eurodollar Rate of 5.6875% until April 1, 1996.
On March 29, 1996, the Company elected to fix the interest rate at the
Eurodollar Rate of 5.48% until June 28, 1996. During 1995, the Company entered
into an interest rate cap agreement to reduce the potential impact of increases
in interest rates on the senior term notes (Note 12).
As described in Note 14, $442,000 of the proceeds of the senior term notes
were allocated to Redeemable Warrants in the consolidated financial statements.
The corresponding reduction in the
F-18
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 10--LONG-TERM OBLIGATIONS (CONTINUED)
recorded principal amounts of the notes is treated as debt discount and is being
amortized as interest expense over the life of the notes resulting in a 10.31%
effective interest rate based on the interest rates in effect at December 31,
1995 (9.30% at September 30, 1996). Unamortized debt discount was $425,000,
$322,000 and $253,000 at December 31, 1994 and 1995 and September 30, 1996,
respectively.
ADMINISTRATIVE FEES
The Senior Lenders receive various administrative fees during the term of
the Senior Debt agreement, payable on a monthly and quarterly basis. These fees
aggregated $49,000 for the year ended December 31, 1995. Administrative fees for
the two month period from the inception of the debt agreement to December 31,
1994 were not significant. On February 20, 1996, the administrative fees were
increased to $112,000 per year commencing January 1, 1996.
ADS ACQUISITION AMENDMENT
In September 1996, the Senior Debt agreement was amended to provide a
portion of the funds for the ADS acquisition. Maximum borrowings permitted under
the senior revolving line of credit were increased from $7,500,000 to
$12,500,000, subject to a defined borrowing base, and the expiration date was
extended from November 2, 1997 to September 18, 1999. The interest rates charged
on senior revolving line of credit borrowings were increased to either the Base
Rate plus 3.25% or the Eurodollar Rate plus 4.5% per annum. The interest rates
charged on the senior term notes were increased to either the Base Rate plus
3.5% or the Eurodollar Rate plus 5.0% per annum.
Fees and expenses associated with obtaining the amendment aggregated
$512,000 and are capitalized as deferred financing costs. Fees and expenses
includes $179,000 ascribed to the value of Redeemable Warrants issued to the
Senior Lenders in conjunction with obtaining the amendment (Note 14).
INTEREST RATES AS OF SEPTEMBER 30, 1996
On September 30, 1996, the Company elected to fix the interest rate charged
on $8,000,000 of the senior revolving line of credit borrowings at the
Eurodollar Rate of 5.5% until December 9, 1996; the remaining borrowings are at
the Base Rate (Base Rate was 8.25% at September 30, 1996). On September 26,
1996, the Company elected to fix the interest rate charged on the senior term
notes at the Eurodollar Rate of 5.5% until December 9, 1996.
AMP FACILITY PURCHASE AMENDMENT
On December 12, 1996, the Senior Debt agreement was amended to provide the
funds for the AMP Facility purchase. The Company issued an additional $5,000,000
of senior term notes, and maximum borrowings permitted under the senior
revolving line of credit were increased from $12,500,000 to $15,750,000 under
the same terms and interest rates described above. The $5,000,000 additional
senior term notes are due in varying quarterly installments beginning March 31,
1998 through September 30, 2001.
F-19
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 10--LONG-TERM OBLIGATIONS (CONTINUED)
The Company was charged an initial $250,000 fee for the financing and agreed
to pay additional semi-annual fees on May 15 and November 15 each year
commencing May 15, 1997 and continuing until the Company receives a firm
commitment for an underwritten public offering with at least $20,000,000 of net
cash proceeds to the Company. The semi-annual fee payable on May 15, 1997 is
$67,000 and each succeeding such semi-annual fee payment increases by $67,000
over the previous payment amount.
SENIOR SUBORDINATED NOTES PAYABLE TO RELATED PARTIES
The Senior Subordinated Lenders, who are also related parties (Note 21),
provided the Company with unsecured senior subordinated (to Senior Debt) term
loans aggregating $7,000,000 (collectively referred to as "Senior Subordinated
Debt") in conjunction with the Company's 1994 debt refinancing.
As described in Note 14, $1,393,000 of the proceeds of the senior
subordinated notes were allocated to Redeemable Warrants in the consolidated
financial statements. The corresponding reduction in the recorded principal
amounts of the notes is treated as debt discount and is being amortized as
interest expense over the life of the notes resulting in a 14.78% effective
interest rate. Unamortized debt discount was $1,362,000, $1,167,000 and
$1,021,000 at December 31, 1994 and 1995 and September 30, 1996, respectively.
One of the Senior Subordinated Lenders receives an advisory fee for as long
as the Senior Subordinated Debt is outstanding. During the years ended December
31, 1994 and 1995, the Company paid advisory fees of $12,000 and $72,000,
respectively. On February 20, 1996, the advisory fee was increased to $100,000
per year, payable quarterly.
SENIOR AND SENIOR SUBORDINATED DEBT RESTRICTIVE COVENANTS
The Senior and Senior Subordinated Debt agreements contain certain
restrictive covenants which require the Company to maintain certain defined
financial ratios such as leverage, EBITDA, fixed charges, interest coverage,
selling, general and administrative expense, accounts payable and current
ratios, establish minimum levels of net worth, limit capital expenditures,
including capital lease obligations, and limit additional indebtedness which may
be incurred. The debt agreements also prohibit the Company from making any
dividend payments on its preferred or common stock.
At December 31, 1995, the Company was in default of the leverage, EBITDA,
fixed charges, interest coverage and net worth restrictive covenants. On
February 20, 1996, the Company received waivers of the defaults from its Senior
and Senior Subordinated Lenders. Since March 31, 1996, the Company has been in
compliance with the restrictive covenants.
ACQUISITION FINANCING PAYABLE TO SELLERS
In conjunction with the Minority Interest Acquisition and the ADS
acquisition, the sellers provided financing that is payable in monthly
installments over an eighteen-month and a three-year period, respectively. The
Minority Stockholder and ADS payment obligations are non-interest bearing;
original issue discounts of 9.75% and 11.5%, respectively, are being amortized
over the payment obligation
F-20
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 10--LONG-TERM OBLIGATIONS (CONTINUED)
terms. Unamortized debt discounts were $27,000 and $293,000 as of September 30,
1996 for the Minority Stockholder and ADS payment obligations, respectively.
AGGREGATE MATURITIES
The aggregate maturities of long-term obligations are as follows as of
December 31, 1995 (amounts in thousands):
<TABLE>
<S> <C>
Year ending December 31,
1996............................................................ $ 1,648
1997............................................................ 6,338
1998............................................................ 2,375
1999............................................................ 2,641
2000............................................................ 2,624
2001 and thereafter............................................. 9,624
---------
Total aggregate maturities.................................... 25,250
Less unamortized debt discounts............................... (1,489)
---------
Total long-term obligations................................. $ 23,761
---------
---------
</TABLE>
The aggregate maturities of long-term obligations are as follows as of
September 30, 1996 (amounts in thousands):
<TABLE>
<S> <C>
Twelve months ending September 30,
1997............................................................ $ 3,018
1998............................................................ 3,182
1999............................................................ 12,505
2000............................................................ 2,720
2001............................................................ 3,303
2002 and thereafter............................................. 7,000
---------
Total aggregate maturities.................................... 31,728
Less unamortized debt discounts............................... (1,594)
---------
Total long-term obligations................................. $ 30,134
---------
---------
</TABLE>
F-21
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 11--INCOME TAXES
Loss before income taxes, cumulative effect of change in accounting
principle and extraordinary item was taxed under the following jurisdictions
(amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1993 1994 1995
--------- --------- ------------
<S> <C> <C> <C>
Domestic................................................... $ (332) $ (1,605) $ (2,534)
Foreign.................................................... 316 (211) 166
--------- --------- ------------
Total.................................................... $ (16) $ (1,816) $ (2,368)
--------- --------- ------------
--------- --------- ------------
</TABLE>
The provisions for income taxes are as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Current
U.S. federal................................................. $ 28 $ 10 $ 60
State and local.............................................. 47 42 24
Foreign...................................................... 5 40 127
--------- --------- ---------
Total current.............................................. 80 92 211
--------- --------- ---------
Deferred
U.S. federal................................................. 466 456 751
State and local.............................................. 141 137 226
Foreign...................................................... (67) (72) (110)
--------- --------- ---------
Total deferred............................................. 540 521 867
--------- --------- ---------
Total provision
U.S. federal................................................. 494 466 811
State and local.............................................. 188 179 250
Foreign...................................................... (62) (32) 17
--------- --------- ---------
Total provision............................................ $ 620 $ 613 $ 1,078
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-22
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 11--INCOME TAXES (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following (amounts in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross deferred tax liabilities
Tax effect on earnings of subsidiary not consolidated for
income tax purposes..................................... $ 861 $ 1,454 $ 2,431
Depreciable assets........................................ 753 1,072 781
Other..................................................... 200 298 367
--------- --------- ---------
Gross deferred tax liabilities.......................... 1,814 2,824 3,579
--------- --------- ---------
Gross deferred tax (assets)
Loss carryforwards........................................ (413) (1,226) (1,391)
Inventory................................................. (506) (959) (1,376)
Accrued expenses.......................................... (215) (145) (220)
Allowance for doubtful accounts........................... (43) (39) (41)
Other..................................................... (33) (51) (122)
--------- --------- ---------
Gross deferred tax (assets)............................. (1,210) (2,420) (3,150)
--------- --------- ---------
Deferred tax assets valuation allowance..................... 984 1,771 2,681
--------- --------- ---------
Net deferred tax liability................................ $ 1,588 $ 2,175 $ 3,110
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal rate to the loss
before income taxes, change in accounting principle and extraordinary item as a
result of the following differences (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Income tax (benefit) at U.S. statutory rates................... $ (5) $ (617) $ (805)
Increase (decrease) resulting from
Tax on earnings of subsidiary not consolidated for tax
purposes................................................... 607 593 977
Book benefit (provided) not provided for net operating loss
carryforwards.............................................. (40) 530 773
Amortization of assets not deductible for income tax
purposes................................................... 83 68 45
State income taxes, net of federal benefit................... 31 27 16
Lower tax rates on earnings of foreign subsidiaries.......... (86) (2) (11)
Other, net................................................... 30 14 83
--------- --------- ---------
Income tax at effective rates.............................. $ 620 $ 613 $ 1,078
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-23
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 11--INCOME TAXES (CONTINUED)
Approximately $4,100,000 and $2,000,000 of the Company's loss carryforwards
remained at December 31, 1995 for federal and state income tax purposes,
respectively. The carryforwards expire in varying amounts through 2010. No
benefit for the remaining loss carryforwards has been recognized in the
consolidated financial statements. The amount of loss carryforwards that may be
utilized in the future are subject to potential limitations upon the occurrence
of a change in control of the Company, as defined in the Internal Revenue Code.
A change in control may have occurred during 1996 as a result of certain equity
transactions and/or may occur upon the Offering.
Undistributed earnings of foreign subsidiaries are not material to the
consolidated financial statements. As such, foreign taxes that may be due, net
of U.S. foreign tax credits, have not been provided.
NOTE 12--DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not use derivative financial instruments for trading
purposes but only to manage well defined interest and foreign exchange rate
risks.
INTEREST RATE RISK MANAGEMENT
In January 1995, the Company entered into an interest rate cap agreement to
reduce the potential impact of increases in interest rates on the Company's
floating-rate senior term notes. The agreement, with one of the Senior Lenders
(Note 21), provides for a three month LIBOR interest rate cap of 9.375% during
the period December 29, 1995 through December 31, 1998 and entitles the Company
to receive from the Senior Lender on a quarterly basis the amounts, if any, by
which interest payments on its senior term debt, computed using the actual three
month LIBOR rate, exceed the interest payment that would be due if the rate were
fixed at 9.375%. Unamortized premiums were $141,000 as of December 31, 1995
($99,000 as of September 30, 1996) and are classified as other current and
long-term assets in the consolidated financial statements.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into Swiss franc ("CHF") forward exchange contracts to
purchase Swiss francs as a general hedge against foreign inventory procurement
and manufacturing costs. At December 31, 1995, the Company had entered into two
forward exchange contracts aggregating $180,000 (CHF 206,000) at rates of 1.147
and 1.148 CHF per U.S. dollar. Settlement of both contracts occurred on January
3, 1996 at the contractual rates recorded as of December 31, 1995.
On March 15, 1996, the Company entered into nine forward exchange contracts,
with one of its Senior Lenders (Note 21), to purchase a total of CHF 5,265,000
for $4,525,000 at rates ranging between 1.1495 and 1.1826 CHF per U.S. dollar.
Settlement of the contracts is to occur in nine equal monthly amounts of CHF
585,000 from April 15, 1996 through December 15, 1996.
CREDIT RISK
The Company believes exposure to derivative credit losses is minimal in the
event of nonperformance by the Senior Lenders because any amounts due, but not
paid, to the Company by the Senior Lenders could be offset against the Company's
principal and interest payments to the Senior Lenders.
F-24
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 13--FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes the recorded amounts of financial assets and
liabilities approximates fair values as of December 31, 1994 and 1995, except as
described below (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------- ----------------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Financial assets
Other current and long-term assets (interest
rate cap, Note 12)......................... $ -- $ -- $ 141 $ 20
Financial liabilities
Long-term obligations........................ 23,039 22,987 23,761 24,176
</TABLE>
The fair value of the interest rate cap is estimated by obtaining current
quotes as of the balance sheet date for a cap agreement of similar terms. The
fair values of financial liabilities are estimated by discounting future cash
flows at rates currently available to the Company for debt with the same
remaining maturities, as advised by the Company's investment bankers.
The recorded amounts shown in the table are included in the consolidated
financial statements under the indicated captions.
F-25
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS
Mandatorily redeemable common stock warrants (the "Redeemable Warrants")
were issued in conjunction with various debt and equity transactions during the
three years ended December 31, 1995 and the nine months ended September 30, 1996
and are summarized in the table below (amounts in thousands):
<TABLE>
<CAPTION>
VALUE OF REDEEMABLE WARRANTS ISSUED IN CONJUNCTION WITH
-------------------------------------------------------------------------------------
SENIOR TOTAL
SENIOR DEBT SENIOR FORMER CONVERTIBLE SERIES D SERIES E REDEEM-
TERM AMEND- SUBORDINATED LENDER SUBORDINATED PREFERRED PREFERRED ABLE
NOTES MENT NOTES DEBT NOTES STOCK STOCK WARRANTS
--------- --------- ----------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992.... $ -- $ -- $ -- $ 543 $ -- $ -- $ -- $ 543
Adjustment to redemption
value....................... -- -- -- 107 -- -- -- 107
--------- --------- ----------- --------- ----- --------- --------- ---------
Balance, December 31, 1993.... -- -- -- 650 -- -- -- 650
Redeemable Warrants issued
pursuant to anti-dilution
provisions upon the sale of
Preferred Stock............. -- -- -- 33 -- -- -- 33
Redeemable Warrants issued in
conjunction with debt
refinancing................. 442 -- 1,393 -- -- -- -- 1,835
Adjustment to redemption
value....................... -- -- -- (189) -- -- -- (189)
--------- --------- ----------- --------- ----- --------- --------- ---------
Balance, December 31, 1994.... 442 -- 1,393 494 -- -- -- 2,329
Adjustment to redemption
value....................... (132) -- (416) (148) -- -- -- (696)
--------- --------- ----------- --------- ----- --------- --------- ---------
Balance, December 31, 1995.... 310 -- 977 346 -- -- -- 1,633
Redeemable Warrants issued in
conjunction with sale of
Convertible Notes and
Preferred Stock............. -- -- -- -- 124 492 124 740
Redeemable Warrants issued
pursuant to anti-dilution
provisions upon the sale of
Preferred Stock............. -- -- -- 7 -- -- -- 7
Redeemable Warrants issued in
conjunction with Senior Debt
agreement amendment......... -- 179 -- -- -- -- -- 179
Adjustment to redemption
value....................... (96) -- (302) (107) -- -- -- (505)
--------- --------- ----------- --------- ----- --------- --------- ---------
Balance, September 30, 1996
(Unaudited)................. $ 214 $ 179 $ 675 $ 246 $ 124 $ 492 $ 124 $ 2,054
--------- --------- ----------- --------- ----- --------- --------- ---------
--------- --------- ----------- --------- ----- --------- --------- ---------
</TABLE>
F-26
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
All Redeemable Warrants are subject to adjustment for anti-dilution, have
certain demand registration rights and, in certain instances, are cancellable
upon the occurrence of certain defined events. The table below summarizes the
number of the Company's common shares subject to Redeemable Warrants, the number
of Redeemable Warrants subject to cancellation, Redeemable Warrants exercisable
and other information as of December 31, 1994 and 1995 and September 30, 1996:
<TABLE>
<CAPTION>
REDEEMABLE WARRANTS ISSUED IN CONJUNCTION WITH
-----------------------------------------------------------------------------------------
SENIOR
SENIOR DEBT SENIOR FORMER CONVERTIBLE SERIES D SERIES E
TERM AMEND- SUBORDINATED LENDER SUBORDINATED PREFERRED PREFERRED
NOTES MENT NOTES DEBT NOTES STOCK STOCK
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total number of the Company's
common shares subject to
Redeemable Warrants at
December 31, 1994......... 84,748 -- 266,990 94,558 -- -- --
December 31, 1995......... 84,748 -- 266,990 94,558 -- -- --
September 30, 1996 84,748 70,893 266,990 97,426 49,079 194,618 49,079
(Unaudited).............
Redeemable Warrants subject to
cancellation at
December 31, 1995......... -- -- 124,595 -- -- -- --
September 30, 1996 -- -- 124,595 -- 49,079 194,618 --
(Unaudited).............
Redeemable Warrants not
subject to cancellation and
exercisable at
December 31, 1995......... 84,748 -- 142,395 94,558 -- -- --
September 30, 1996 84,748 70,893 142,395 97,426 -- -- 49,079
(Unaudited).............
Other information
Exercise price per share.. $ .035 $ 14.11 $ .035 $ .0004 $ .035 $ .035 $ .035
Expiration date........... Nov. 2, Sep. 18, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2006 2004 2004 2006 2003 2006
<CAPTION>
TOTAL
REDEEM-
ABLE
WARRANTS
-----------
<S> <C>
Total number of the Company's
common shares subject to
Redeemable Warrants at
December 31, 1994......... 446,296
December 31, 1995......... 446,296
September 30, 1996 812,833
(Unaudited).............
Redeemable Warrants subject to
cancellation at
December 31, 1995......... 124,595
September 30, 1996 368,292
(Unaudited).............
Redeemable Warrants not
subject to cancellation and
exercisable at
December 31, 1995......... 321,701
September 30, 1996 444,541
(Unaudited).............
Other information
Exercise price per share..
Expiration date...........
</TABLE>
The warrant holders have the right ("Put Option"), after various dates and
contingent upon certain events, to require the Company to redeem the warrants
and, in certain instances, to purchase the common stock issued upon exercise of
the warrants. In all instances, the redemption or purchase price, shall be equal
to the greater of either fair market value, book value or, a value based upon a
defined formula which includes, in part, an earnings multiple. During the years
ended December 31, 1993, 1994 and 1995 and the nine months ended September 30,
1996, the Company increased (decreased) by $107,000, $(189,000), $(696,000) and
$(505,000), respectively, the amount ascribed to the Redeemable Warrants to
reflect estimated redemption value. The increase (decrease) was charged
(credited) to stockholders' accumulated deficit.
F-27
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
Each warrants' terms and provisions and related Put Options are described
below.
SENIOR TERM NOTE WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
All of the Senior Term Note warrants are held by the Senior Lenders. All of
the warrants issued and outstanding are exercisable as of December 31, 1995 and
September 30, 1996 and are not subject to cancellation. The warrant holders are
entitled to receive any common stock dividends, when and if declared, which
would have been paid upon the exercise in full of the warrants immediately prior
to the record date for such dividend. The warrants do not have voting rights.
PUT OPTION
The Senior Lenders have the right, if certain "Senior Term Note Put Events",
as defined below, occur prior to November 2, 1999 to require the Company to
redeem all (but not less than all), of the warrants or the stock issued upon
exercise of the warrants. After November 2, 1999, the Senior Lenders have the
unrestricted right to require the Company to redeem all (but not less than all),
of the warrants or the shares issued upon exercise of the warrants.
DEFINITIONS
The following terms are defined in the warrant agreements:
SENIOR TERM NOTE PUT EVENTS--Defined as the occurrence of any of the
following: 1) a defined change in control of the Company; 2) certain
consolidations or mergers or the sale of substantially all of the assets of the
Company; 3) repayment in full of all Senior Debt; or 4) the filing of a
registration statement which relates to a "Qualified Public Offering."
QUALIFIED PUBLIC OFFERING--Defined as a public offering of common stock with
net proceeds of at least $25,000,000 and valuing the total common stock equity
of the Company at $55,000,000 or more at closing.
SENIOR DEBT AMENDMENT WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
All of the Senior Debt Amendment warrants are held by the Senior Lenders.
All of the warrants issued and outstanding are exercisable as of September 30,
1996 and, under certain circumstances, the number issued may be reduced. The
warrant holders are entitled to receive any common stock dividends, when and if
declared, which would have been paid upon the exercise in full of the warrants
immediately prior to the record date for such dividend. The warrants do not have
voting rights.
PUT OPTION
The Senior Lenders have the right, if certain put events occur prior to
September 18, 2001 to require the Company to redeem all (but not less than all),
of the warrants or the stock issued upon exercise of the
F-28
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
warrants. The put events are the same as the Senior Term Notes Put Events
described above. After September 18, 2001, the Senior Lenders have the
unrestricted right to require the Company to redeem all (but not less than all)
of the warrants or the stock issued upon exercise of the warrants.
SENIOR SUBORDINATED NOTE WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
All of the Senior Subordinated Note warrants are held by the Senior
Subordinated Lenders and were issued in several series. The following table
summarizes the warrants issued and outstanding as of December 31, 1995 and
September 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES
SUBJECT TO DATE WARRANTS
WARRANTS BECOME EXERCISABLE
----------- -----------------------
<S> <C> <C>
Series of Redeemable Warrants
Series 1.............................................. 142,395 November 2, 1994
Series 2.............................................. 35,599 December 31, 1996
Series 3.............................................. 35,599 December 31, 1997
Series 4.............................................. 53,397 December 31, 1998
-----------
Total issued and outstanding........................ 266,990
-----------
-----------
</TABLE>
The Series 2, Series 3 and Series 4 Redeemable Warrants are cancellable if
certain "Triggering Events", as defined below, occur prior to the warrants
becoming exercisable. The Series 1 Redeemable Warrants to purchase 142,395
common shares are not cancellable and are exercisable at December 31, 1995 and
September 30, 1996.
The warrant holders are not entitled to receive any common stock cash
dividends. When and if cash dividends are declared, the number of common shares
subject to warrants and the per share exercise price is subject to adjustment.
The warrants have voting rights unless cancelled in accordance with the terms of
the warrant agreements.
PUT OPTION
Until December 31, 2000, the Senior Subordinated Lenders have the right, if
a Triggering Event occurs and if the warrants are then exercisable, to require
the Company to redeem all (or any portion) of the warrants issued and
outstanding. If a Triggering Event does not occur, the Senior Subordinated
Lenders have the right, only if the Senior Lenders elect (and are able) to
exercise their respective Put Options, to require the Company to redeem all (or
any portion) of their warrants as are issued and outstanding. After December 31,
2000, the Senior Subordinated Lenders have the unrestricted right to require the
Company to redeem all (or any portion) of the warrants issued and outstanding.
F-29
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
DEFINITIONS
The following terms are defined in the warrant agreements:
TRIGGERING EVENTS--Defined as payment in full of the Senior Subordinated
Debt and either of the following: 1) the sale of all or substantially all of the
Company's assets or stock for cash in an amount equivalent to a common
stockholder equity valuation of $30,000,000 or more; or 2) an "Initial Public
Offering."
INITIAL PUBLIC OFFERING--Defined as a public offering of common stock with
net proceeds of at least $25,000,000 and valuing the total common stock equity
of the Company at $55,000,000 or more at closing.
FORMER LENDER DEBT WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
In 1991, warrants were issued to a former senior subordinated lender (the
"Former Lender") to purchase 18% of a subsidiary's common stock. The warrants
were exchangeable at the option of the Former Lender for warrants to purchase
that number of the Company's common shares which have an equivalent fair market
value on the exchange date to the number of the subsidiary's common shares
subject to the original warrants (subject to adjustment for anti-dilution). The
warrants were recorded at $380,000, the estimated fair market value on the date
of issuance.
On November 2, 1994, the Former Lender exchanged its warrants for Redeemable
Warrants to purchase 88,339 shares of the Company's common stock. In conjunction
with the sales of Preferred Stock during 1994 and 1996 discussed in Note 15, the
Former Lender was issued an additional 6,219 and 2,868 Redeemable Warrants,
respectively, pursuant to the warrant agreement anti-dilution provisions.
The Redeemable Warrants were exercisable as of their respective issuance
dates and are not subject to cancellation. The Former Lender is entitled to
receive common stock dividends, if declared, except such dividends are payable
only upon exercise of the warrants and only with respect to number of shares
exercised. The warrants do not have voting rights.
PUT OPTION
Until December 30, 2000, the Former Lender has the right, only if the Senior
or Senior Subordinated Lenders or Series D Investors elect (and are able) to
exercise their respective Put Options or if a Qualified Public Offering (as
defined in the Senior Lenders' warrant agreements) has occurred, to require the
Company to redeem all (or any portion) of the warrants or the shares issued upon
exercise of the warrants. On December 31, 2000 and thereafter, the Former Lender
has the unrestricted right to require the Company to redeem all (or any portion)
of the warrants or the shares issued upon exercise of the warrants issued and
outstanding.
F-30
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
CONVERTIBLE SUBORDINATED NOTE WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
The Convertible Subordinated Note warrants to purchase 49,079 common shares
are held by the Series D Investors and one of the Senior Subordinated Lenders
(67% and 33%, respectively, and collectively referred to as Convertible Note
Warrant Holders). The warrants were issued on September 18, 1996 in conjunction
with the Company's sale of Convertible Notes and become exercisable on June 30,
1997 provided a "Convertible Notes IPO" (as defined below) shall not have
occurred or the Convertible Notes shall not have been repaid in full. None were
exercisable as of September 30, 1996. The warrants are cancelled upon repayment
of the Convertible Notes with the proceeds from a "Registered Public Offering"
(as defined below) or expire on December 31, 2006. The Convertible Note Warrant
Holders are not entitled to receive any common stock cash dividends. When and if
cash dividends are declared, the number of common shares subject to warrants and
the per share exercise price is subject to adjustment. The warrants have voting
rights unless cancelled in accordance with the terms of the warrant agreements.
The warrant agreements provide for an increase in the number of common
shares subject to the warrants if: 1) certain "Private Financing" (as defined
below) or Registered Public Offering transactions, occur after June 30, 1997 but
prior to the exercise date; or 2) interest on the Convertible Notes is deferred.
The amount of the increase is a formula determined value based on the per share
price of the financing transactions. No increase in the number of common shares
is required provided the financing transactions result in a price in excess of
$14.32 per share.
PUT OPTION
Until December 31, 2000, the Convertible Note Warrant Holders have the
right, if a Registered Public Offering occurs and if the warrants are then
exercisable, to require the Company to redeem all (or any portion) of the
warrants issued and outstanding. If a Registered Public Offering does not occur,
the warrant holders have the right, only if the Senior Lenders elect (and are
able) to exercise their respective Put Options, to require the Company to redeem
all (or any portion) of their warrants as are issued and outstanding. After
December 31, 2000, warrant holders have the unrestricted right to require the
Company to redeem all (or any portion) of the warrants issued and outstanding.
DEFINITIONS
The following terms are defined in the warrant agreements:
CONVERTIBLE NOTES IPO--Defined as receipt by the Company from an
underwriter, on or prior to June 30, 1997, of a firm commitment to underwrite a
public offering for shares of the Company's common stock, which underwritten
public offering shall close on or before July 11, 1997.
PRIVATE FINANCING--Defined as any disposition by the Company or any selling
stockholder of any equity security or convertible security of the Company other
than pursuant to a Registered Public Offering.
F-31
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
REGISTERED PUBLIC OFFERING--Defined as the closing of an underwritten public
offering for the common stock of the Company.
SERIES D PREFERRED STOCK WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
All of the Series D preferred stock warrants are held by the Series D
Investors. The warrants were issued in several series on February 20, 1996 in
conjunction with the Company's sale of Series D preferred shares. The following
table summarizes the warrants issued and outstanding as of September 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES
SUBJECT TO DATE WARRANTS
WARRANTS BECOME EXERCISABLE
----------- -----------------------
<S> <C> <C>
Series of Redeemable Warrants
Series 1.............................................. 55,605 December 31, 1997
Series 2.............................................. 55,605 December 31, 1998
Series 3.............................................. 83,408 December 31, 1999
-----------
Total issued and outstanding........................ 194,618
-----------
-----------
</TABLE>
All series of Redeemable Warrants are cancellable if certain "Triggering
Events", as defined below, occur prior to the warrants becoming exercisable. In
addition, a portion of the Series 1 warrants are cancellable if one or more
"Registered Public Offerings", as defined below, occurs prior to December 31,
1997 as summarized in the table below.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES
SUBJECT TO WARRANTS
-------------------------
CANCELLABLE REMAINING
------------ -----------
<S> <C> <C>
Provided that before December 31, 1997 no Triggering Events occur and:
No Registered Public Offerings occur................................................. -- 55,605
A Registered Public Offering occurs with a fully diluted common stock equity value of
(amounts subject to adjustment in certain circumstances)
Greater than or equal to $60,000,000 but less than $65,000,000................... 13,901 41,704
Greater than or equal to $65,000,000 but less than $70,000,000................... 27,802 27,803
Greater than or equal to $70,000,000............................................. 41,704 13,901
</TABLE>
The number of common shares subject to warrants is subject to further
reduction when, and if, any portion of the Senior Subordinated Note warrants is
cancelled pursuant to the terms of those warrant agreements. The warrant holders
are not entitled to receive any common stock cash dividends. When and if cash
dividends are declared, the number of common shares subject to warrants and the
per share exercise price is subject to adjustment. The warrants have voting
rights unless cancelled in accordance with the terms of the warrant agreements.
F-32
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
PUT OPTION
Until December 31, 2000, the Series D Investors have the right, only if any
of the other Redeemable Warrant holders elect (and are able) to exercise their
respective Put Options, to require the Company to redeem all (or any portion) of
the warrants issued and outstanding. After December 31, 2000, the Series D
Investors have the unrestricted right to require the Company to redeem all (or
any portion) of the warrants issued and outstanding.
DEFINITIONS
The following terms are defined in the warrant agreements:
TRIGGERING EVENTS--Defined as either of the following: 1) the sale of all or
substantially all of the Company's assets or stock for cash in an amount
equivalent to a common stockholder equity valuation of $60,000,000 or more; or
2) a Qualified (Series D Investors) Public Offering.
REGISTERED PUBLIC OFFERINGS--Defined as the closing of underwritten public
offerings with gross proceeds of at least $25,000,000 and valuing the fully
diluted total common stock equity at an amount greater than or equal to
$60,000,000 but less than $75,000,000.
QUALIFIED (SERIES D INVESTORS) PUBLIC OFFERING--Defined as the closing of
underwritten public offerings with gross proceeds of at least $25,000,000 and
valuing the fully diluted total common stock equity at an amount equal to or
greater than the "Minimum Equity Market Value", as defined below.
MINIMUM EQUITY MARKET VALUE--Defined as: 1) for the period from February 20,
1996 through December 30, 1997--$75,000,000; 2) for the period from December 31,
1997 through December 30, 1998--$95,000,000; 3) for the period from December 31,
1998 through December 30, 1999-- $120,000,000. Antidilution provisions set forth
in the warrant agreements require adjustment of the foregoing amounts. Through
December 30, 1997, the adjusted Minimum Equity Market Value is approximately
$86,000,000 to $93,000,000, depending on the impact of certain transactions.
SERIES E PREFERRED STOCK WARRANTS
DESCRIPTION OF REDEEMABLE WARRANTS
The Series E Preferred Stock warrants to purchase 49,079 common shares are
held by the Series D Investors and one of the Senior Subordinated Lenders (67%
and 33%, respectively, and collectively referred to as Series E Warrant
Holders). The warrants were issued on September 18, 1996 in conjunction with the
Company's sale of Series E Preferred Stock and are exercisable as of September
30, 1996. The Series E Warrant Holders are not entitled to receive any common
stock cash dividends. When and if cash dividends are declared, the number of
common shares subject to warrants and the per share exercise price is subject to
adjustment. The warrants have voting rights.
The warrant agreements provide for an increase in the number of common
shares subject to the warrants if certain "Private Financing" or "Registered
Public Offering" transactions, as defined below, occur prior to the exercise
date. The amount of the increase is a formula determined value based on the
F-33
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 14--MANDATORILY REDEEMABLE COMMON STOCK WARRANTS (CONTINUED)
per share price of the financing transactions. No increase in the number of
common shares is required provided the financing transactions result in a price
in excess of $14.32 per share.
PUT OPTION
Until December 31, 2000, the Series E Warrant Holders have the right, if a
Registered Public Offering occurs and if the warrants are then exercisable, to
require the Company to redeem all (or any portion) of the warrants issued and
outstanding. If a Registered Public Offering does not occur, the warrant holders
have the right, only if the Senior Lenders elect (and are able) to exercise
their respective Put Options, to require the Company to redeem all (or any
portion) of their warrants as are issued and outstanding. After December 31,
2000, warrant holders have the unrestricted right to require the Company to
redeem all (or any portion) of the warrants issued and outstanding.
DEFINITIONS
The following terms are defined in the warrant agreements:
PRIVATE FINANCING--Defined as any disposition by the Company or any selling
stockholder of any equity security or convertible security of the Company other
than pursuant to a Registered Public Offering.
REGISTERED PUBLIC OFFERING--Defined as the closing of an underwritten public
offering for the common stock of the Company.
NOTE 15--CUMULATIVE CONVERTIBLE PREFERRED STOCK
At December 31, 1993, the Company's preferred shares were mandatorily
redeemable at the option of the holders. In conjunction with the 1994 debt
refinancing the Company's Articles of Incorporation were amended and the
preferred stockholders' mandatory redemption rights were terminated. As a
result, the Company's mandatorily redeemable preferred shares were reclassified
in the consolidated financial statements to stockholders' equity (deficit).
As of December 31, 1995, the number of preferred shares authorized to be
issued included 167,702 Series A shares, 1,636,316 Series B shares, and
3,000,000 Series C shares. On January 31, 1996 and September 15, 1996, the
Company's Articles of Incorporation were further amended to authorize the
issuance of 2,000,000 Series D shares and 1,500,000 Series E shares,
respectively. All preferred shares are without par value and each share is
entitled to one vote for each common share which would be issuable upon
conversion.
F-34
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 15--CUMULATIVE CONVERTIBLE PREFERRED STOCK (CONTINUED)
The table below summarizes preferred stock issued during the three year
period ended December 31, 1995 and the nine month period ended September 30,
1996 (amounts in thousands):
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E TOTAL
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 and December 31,
1993....................................... $ 168 $ 2,000 $ 3,000 $ -- $ -- $ 5,168
Issuance of 271,471 Series C preferred shares
at $1.50 per share, net of issuance costs
of $26,000................................. -- -- 381 -- -- 381
----- ----------- ----------- ----------- ----------- ---------
Balance, December 31, 1994 and December 31,
1995....................................... 168 2,000 3,381 -- -- 5,549
Issuance of 75,000 Series C preferred shares
at $1.50 per share......................... -- -- 112 -- -- 112
Issuance of 2,000,000 Series D preferred
shares as described below, net of issuance
costs of $558,000.......................... -- -- -- 5,450 -- 5,450
Issuance of 750,000 Series E preferred shares
as described below, net of issuance costs
of $137,000................................ -- -- -- -- 2,739 2,739
----- ----------- ----------- ----------- ----------- ---------
Balance, September 30, 1996 (Unaudited)...... $ 168 $ 2,000 $ 3,493 $ 5,450 $ 2,739 $ 13,850
----- ----------- ----------- ----------- ----------- ---------
----- ----------- ----------- ----------- ----------- ---------
</TABLE>
The following table summarizes the number of preferred shares outstanding as
of the dates indicated:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E TOTAL
--------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Number of shares outstanding as of
December 31, 1992....................... 167,702 1,583,532 2,000,000 -- -- 3,751,234
December 31, 1993....................... 167,702 1,583,532 2,000,000 -- -- 3,751,234
December 31, 1994....................... 167,702 1,583,532 2,271,471 -- -- 4,022,705
December 31, 1995....................... 167,702 1,583,532 2,271,471 -- -- 4,022,705
September 30, 1996 (Unaudited).......... 167,702 1,583,532 2,346,471 2,000,000 750,000 6,847,705
</TABLE>
Concurrent with the 1994 debt refinancing, 271,471 Series C preferred shares
were issued to related parties consisting of 138,995 shares issued to certain
common stockholders ("Investors") and 132,476 shares issued to the Senior
Subordinated Debt Lenders.
On February 9, 1996, certain members of Company management purchased for
$112,000 an aggregate of 75,000 Series C preferred shares. On February 20, 1996,
the Company sold 2,000,000 Series D preferred shares at $3.25 per share and
issued Redeemable Warrants to purchase 194,618 common shares to the Series D
Investors. Proceeds from the sale aggregating $492,000 were ascribed to the
Redeemable Warrants to reflect their estimated fair market value on the issuance
date. The proceeds from the sale were used to fund the Minority Interest
Acquisition.
F-35
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 15--CUMULATIVE CONVERTIBLE PREFERRED STOCK (CONTINUED)
On September 18, 1996, the Company sold 750,000 Series E preferred shares at
$4.00 per share and issued Redeemable Warrants to purchase 49,079 common shares
to the Series D Investors and the Senior Subordinated Lenders. Proceeds from the
sale aggregating $124,000 were ascribed to the Redeemable Warrants to reflect
their estimated fair market value on the issuance date. The proceeds from the
sale were used to fund the ADS Acquisition.
Dividends are payable quarterly to the holders of preferred stock, when and
if declared by the Board of Directors. Cash dividends at the annual rate of
$.10, $.1263, $.15, $.325 and $.40 per share related to the Series A, Series B,
Series C, Series D and Series E shares, respectively, accumulate from July 1,
1993 for the Series A and Series B shares, from July 1, 1994 for the Series C
shares, from February 15, 1996 for the Series D shares and from September 15,
1996 for the Series E shares. All cumulative, unpaid dividends on the stock are
to be cancelled and eliminated if the Company's common stock becomes registered
in a public offering of common stock with gross proceeds of at least $10,000,000
at a per share price of not less than $15.87 on or before December 31, 1996. In
January 1997, the holders of the preferred stock agreed to extend the
cancellation date to May 5, 1997 and further, agreed to waive their right to
receive all cumulative unpaid dividends, contingent on the consummation of the
Offering. The Senior and Senior Subordinated Debt agreements prohibit the
Company from paying dividends and, as a result, no dividend payments have been
declared since issuance. Series A, Series B and Series C accumulated dividends
in arrears aggregate $42,000 ($.249 per share), $499,000 ($.315 per share) and
$511,000 ($.225 per share), respectively, as of December 31, 1995. Series A,
Series B, Series C, Series D and Series E accumulated dividends in arrears
aggregate $54,000 ($.324 per share), $648,000 ($.41 per share), $774,000 ($.341
per share), $407,000 ($.203 per share) and $12,000 ($.017 per share),
respectively, as of September 30, 1996.
Each share of preferred stock is convertible into .28357 of a share of
common stock, subject to adjustment in certain circumstances. All cumulative
unpaid dividends, if any, are payable upon conversion. Liquidation preference is
equal to $1.00, $1.263, $1.50, $3.25 and $4.00 per share for the Series A,
Series B, Series C, Series D and Series E shares, respectively, plus declared
but unpaid dividends. The aggregate liquidation preference for all preferred
stock, excluding accumulated dividends in arrears, is $5,575,000 and $15,187,000
as of December 31, 1995 and September 30, 1996, respectively. Payment of the
Series D and Series E preferred stock per share liquidation preference, plus
declared but unpaid dividends, is senior to the Series A, Series B and Series C
preferred stock. Payment of the Series A, Series B and Series C preferred stock
per share liquidation preference is pari passu to the Series A, Series B and
Series C stockholders as a group; payment of declared but unpaid dividends are
pro rata based on the relative proportion of the amounts accumulated but unpaid.
Payment of the Series D and Series E preferred stock per share liquidation
preference, plus declared but unpaid dividends, is pari passu to the Series D
and Series E stockholders as a group.
At December 31, 1995 and September 30, 1996, the Company had warrants
outstanding to purchase a total of 52,784 Series B shares at an exercise price
of $1.263 per share. The warrants were issued in 1990 and expire on April 15,
2001. At December 31, 1995 and September 30, 1996, a total of 52,787 authorized
and unissued Series B shares were reserved for issuance upon exercise of the
warrants.
F-36
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 16--COMMON STOCK
At December 31, 1994 and 1995, the Company was authorized to issue 2,268,560
common shares without par value (4,253,550 common shares at September 30, 1996).
As of December 31, 1995, a total of 1,854,924 common shares were reserved for
issuance upon exercise of all warrants and stock options and the conversion of
the preferred stock (3,291,938 common shares at September 30, 1996, including
common shares reserved for the conversion of Convertible Notes).
At December 31, 1995 and September 30, 1996, in addition to the Redeemable
Warrants, the Company had issued non-redeemable warrants to purchase a total of
9,355 common shares at an exercise price of $4.454 per share expiring on
February 20, 2001.
During 1993, the Company adopted a qualified stock option plan for key
employees under which options to purchase 213,386 common shares may be granted.
The plan permits the granting of incentive stock options, as defined by Section
422 of the Internal Revenue Code, non-qualified stock options, restricted stock
options and stock appreciation rights. The plan expires in 2003. Options
generally vest in equal installments over five years from the date of grant and
remain exercisable until December 31, 2002.
The following table summarizes stock option plan activity from inception of
the plan through September 30, 1996 (the grant date and per share exercise price
is parenthetically noted):
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
------------------------
AVAILABLE
FOR GRANT OUTSTANDING
---------- ------------
<S> <C> <C>
Inception of plan...................................................................... 213,386 --
Granted (March 1993 at $.529 per share)................................................ (76,847) 76,847
Expired or cancelled................................................................... 8,932 (8,932)
---------- ------------
Options available for grant and outstanding, December 31, 1993......................... 145,471 67,915
Granted (February and November 1994 at $.529 per share)................................ (123,211) 123,211
Exercised.............................................................................. -- (2,269)
Expired or cancelled................................................................... 3,828 (3,828)
---------- ------------
Options available for grant and outstanding, December 31, 1994......................... 26,088 185,029
Increase in number of shares authorized................................................ 32,469 --
Granted (February and March 1995 at $.529 per share)................................... (37,573) 37,573
Expired or cancelled................................................................... 14,179 (14,179)
---------- ------------
Options available for grant and outstanding, December 31, 1995......................... 35,163 208,423
Increase in number of shares authorized................................................ 141,785 --
Granted (4,254 shares in February 1996 at $.529 per share and 87,198 and 14,887 shares
in September 1996 at $1.234 and $7.053 per share, respectively)...................... (106,339) 106,339
---------- ------------
Options available for grant and outstanding, September 30, 1996 (Unaudited)............ 70,609 314,762
---------- ------------
---------- ------------
</TABLE>
Options for 85,581 and 136,258 shares were exercisable as of December 31,
1995 and September 30, 1996, respectively.
F-37
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 16--COMMON STOCK (CONTINUED)
The Company believes the per share exercise price of options granted prior
to September 1996 approximated the fair market value of the underlying common
stock on the grant date. The exercise price of options granted in September 1996
was deemed to be below the fair market value of the underlying common stock on
the grant date and such difference is being recognized as additional
compensation expense in the consolidated financial statements on a straight line
basis over the vesting period of the underlying options. Compensation expense
recognized was $4,000 for the nine months ended September 30, 1996. The options
vest each year on December 31st as follows: 1996--14,025 shares; 1997--15,954
shares; 1998--18,846 shares; 1999--18,988 shares; 2000--31,720 shares;
2001--2,552 shares.
NOTE 17--COMMITMENTS AND CONTINGENCIES
FORMER OWNER OF ACQUIRED BUSINESSES
In October 1991, a subsidiary of the Company acquired, in a purchase
transaction, the net assets and stock of several companies under common control
for $13,192,000 in cash, including five year covenants not to compete entered
into with the former owner (the "Former Owner"). The purchase agreements also
provided for purchase price adjustments based on changes in working capital, a
consulting services agreement and $15,000,000 of contingent consideration
payable to the Former Owner based upon the acquired businesses' future
attainment of defined performance criteria.
Amounts due to (from) the Former Owner as of December 31, 1994 and 1995
included the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Accrued consulting services due to the Former Owner........................ $ 650 $ 1,138
Receivables collected on behalf of the Former Owner........................ 777 783
Former Owner advances to an acquired business, prior to acquisition........ 135 153
Working capital adjustment................................................. (856) (856)
Claims for breaches of representations and warranties...................... (976) (976)
--------- ---------
Due (from) to Former Owner, net.......................................... $ (270) $ 242
--------- ---------
--------- ---------
</TABLE>
The net amount due (from) to Former Owner is classified in the consolidated
balance sheets as an other asset (non-current) as of December 31, 1994 and as an
accrued liability as of December 31, 1995.
Pursuant to the terms of the purchase agreements, the purchase price was
subject to adjustment based on the change in working capital, as defined, from
June 30, 1991 through October 15, 1991. As of December 31, 1994 and 1995, the
Company had recorded $856,000 as receivable from the Former Owner pursuant to
such working capital adjustment provisions.
During the year ended December 31, 1993, the Company asserted claims
aggregating $185,000 against the Former Owner for breach of representation and
warranty provisions set forth in the purchase agreements. The Former Owner did
not contest the claims and, as specified in the purchase agreements, the
Company's claims were deemed accepted. The Company also reduced the amount due
to
F-38
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 17--COMMITMENTS AND CONTINGENCIES (CONTINUED)
the Former Owner by $791,000 representing additional claims for breaches of
representations and warranties of which $677,000 related to excess and obsolete
inventory on hand at the date of acquisition. The purchase agreements provided
that the Company may offset its contingent consideration payable, if any, and
consulting services payments against amounts receivable from the Former Owner
for working capital adjustments and claims under the purchase agreements for
breach of the representation and warranty provisions.
The purchase agreements provided for a maximum of $15,000,000 in contingent
consideration to be paid to the Former Owner by the Company based on future
attainment of defined performance criteria over a five year period ending
December 31, 1996. For each of the years in the four year period ended December
31, 1995, the Company did not meet the performance criteria and, as a result, no
additional consideration was due the Former Owner under this provision of the
agreement. The remaining maximum amount of contingent consideration payable was
$4,500,000 as of December 31, 1995.
The Former Owner's consulting services agreement provided for advisory and
consulting services, on an as needed basis, for a period of five years at an
annual cost of $260,000. During the period from October 15, 1991 (acquisition
date) through December 31, 1991, the Company paid $54,000 under the agreement.
During the year ended December 31, 1992, the Company paid $130,000 to the Former
Owner and withheld payment of the remaining $130,000 payable under the
consulting agreement for 1992 and the entire amount payable for 1993, 1994 and
1995. Amounts so withheld are recorded as a reduction of amounts receivable from
the Former Owner discussed above. As of December 31, 1995, the Company accrued
the remaining $228,000 payable to the Former Owner under the agreement as no
significant future services were anticipated and the Company did not believe it
would derive any significant future benefit from the advisory and consulting
services.
In December 1994, the Company commenced two actions against the Former
Owner. The first pertained to the Company's claims for breach of representation
and warranty provisions of the purchase agreements. With this claim, the Company
commenced arbitration proceedings, as provided for in the purchase agreements,
seeking recovery of approximately $3,000,000 for breaches of various
representations and warranty provisions. The Former Owner counterclaimed in the
arbitration for an unspecified amount of damages for alleged breaches of the
purchase agreements by the Company. Pursuant to the purchase agreements, the
arbitration was to be conducted before a three-arbitrator panel. The panel had
been selected and a hearing was scheduled for the second quarter of 1996.
The second action, in which the Company filed a California Superior Court
lawsuit, sought both damages and injunctive relief from the Former Owner related
to violation of various covenants contained in the purchase agreements
pertaining to non-compete and disclosure of confidential information. A hearing
on the injunctive relief portion of this matter was scheduled for the second
quarter of 1996. The damages portion of this matter was referred to the same
arbitration panel hearing the representations and warranty claims.
On June 25, 1996, the Company and the Former Owner settled substantially all
claims which were the subject of the above pending arbitration and litigation.
Under the terms of the settlement, the Former Owner paid $190,000 to the Company
as consideration for both parties agreeing to release each other from all
monetary claims and terminating all agreements and pending arbitration and
litigation proceedings. The consolidated results of operations for the nine
months ended September 30, 1996 include a
F-39
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 17--COMMITMENTS AND CONTINGENCIES (CONTINUED)
net gain of $157,000 recorded pursuant to the settlement agreement. The net gain
reflects the write off of the net amount due to the Former Owner of $242,000 and
the $190,000 received in cash, reduced by the write off of the remaining
unamortized balances of non-compete agreements, which were terminated, and a
litigation claim.
Both parties also agreed that the Company's claim for injunctive relief from
the Former Owner's alleged violation of various covenants contained in the
purchase agreements related to non-compete and disclosure of confidential
information would be decided by binding arbitration before a single arbitrator.
The arbitrator is empowered to decide only the matter of injunctive relief;
monetary claims for damages were resolved pursuant to the aforementioned
settlement agreement. Management believes the ultimate disposition of the
arbitration will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
MINORITY STOCKHOLDER
In connection with the Company's 1991 acquisition of a subsidiary, put
option and stock purchase agreements (collectively, the "Put Option Agreement")
were entered into between the Company and the acquired company's 25% minority
stockholder granting the Minority Stockholder the option of requiring the
Company to purchase all minority shares. The Put Option Agreement expired
unexercised on June 1, 1994.
In December 1993, the Minority Stockholder filed a stockholders' derivative
suit against the Company, certain wholly owned subsidiaries of the Company, a
75% owned subsidiary of the Company (the "Majority Owned Subsidiary") and
certain current and former officers and directors of the wholly owned and
Majority Owned subsidiaries. The derivative suit was dismissed in conjunction
with the Company's acquisition of the Minority Stockholder's 25% interest on
February 20, 1996 (Note 2).
OTHER LITIGATION
The Company and its subsidiaries are also involved in other routine legal
and administrative proceedings incident to the normal conduct of business.
Management believes the ultimate disposition of these matters will not have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.
LEASE COMMITMENTS
The Company leases certain facilities and equipment under various capital
and operating leases. Certain leases require payment of property taxes and
include escalation clauses. Future minimum
F-40
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 17--COMMITMENTS AND CONTINGENCIES (CONTINUED)
capital and operating lease commitments under non-cancelable leases are as
follows as of December 31, 1995 (amounts in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
Year ending December 31,
1996.................................................................. $ 181 $ 1,254
1997.................................................................. 181 1,192
1998.................................................................. 136 1,142
1999.................................................................. 20 1,085
2000.................................................................. -- 1,030
2001 and thereafter................................................... -- 2,927
----- -----------
Total minimum payments required....................................... 518 $ 8,630
-----------
-----------
Less: Amount representing future interest cost........................ (72)
-----
Recorded obligation under capital leases............................ $ 446
-----
-----
</TABLE>
Total rental expense charged to operations for the years ended December 31,
1993, 1994 and 1995 was $1,357,000, $1,373,000 and $1,531,000, respectively.
During the nine months ended September 30, 1996, the Company leased
additional equipment under capital and operating leases and assumed operating
leases for facilities and equipment in conjunction with the ADS Acquisition. The
lease terms range from one to five years and future minimum capital and
operating lease commitments aggregate $264,000 and $880,000, respectively, over
the lease terms.
NOTE 18--CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS INFORMATION
During the periods presented, the Company paid the following amounts in cash
(amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest.................................. $ 2,477 $ 3,049 $ 3,275 $ 2,082 $ 1,840
Income taxes (refunded ) paid............. (64) 33 33 28 47
</TABLE>
F-41
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 18--CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INFORMATION ON NONCASH INVESTING AND FINANCING ACTIVITIES
Certain noncash investing and financing transactions occurred during the
periods presented, as follows (amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- --------- ----- ----- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Debt incurred for the acquisition of machinery and
equipment......................................... $ 494 $ 276 $ 33 $ 33 $ 484
Financing provided by sellers in connection with
acquisitions...................................... -- -- -- -- 2,242
Liabilities assumed in ADS Acquisition.............. -- -- -- -- 750
</TABLE>
F-42
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 19--FOREIGN OPERATIONS AND EXPORT REVENUES
FOREIGN OPERATIONS
The Company operates in one business segment--avionics components
manufacturing and integration services. Domestic and foreign operations consist
of (amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Gross revenues
United States...................................... $ 47,230 $ 46,207 $ 54,394 $ 41,299 $ 41,972
Western Europe..................................... 6,909 7,309 9,388 6,445 7,914
--------- --------- --------- --------- ---------
Total gross revenues............................. 54,139 53,516 63,782 47,744 49,886
--------- --------- --------- --------- ---------
Less interarea transfers
United States...................................... (1,032) (721) (814) (671) (752)
Western Europe..................................... (4,910) (5,703) (7,129) (4,799) (6,075)
--------- --------- --------- --------- ---------
Total interarea transfers........................ (5,942) (6,424) (7,943) (5,470) (6,827)
--------- --------- --------- --------- ---------
Net revenues
United States...................................... 46,198 45,486 53,580 40,628 41,220
Western Europe..................................... 1,999 1,606 2,259 1,646 1,839
--------- --------- --------- --------- ---------
Total net revenues............................... $ 48,197 $ 47,092 $ 55,839 $ 42,274 $ 43,059
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income from operations
United States........................................ $ 2,497 $ 1,494 $ 1,354 $ 1,894 $ 1,555
Western Europe....................................... 256 266 501 336 700
Interarea eliminations............................... 23 -- (20) -- (83)
--------- --------- --------- --------- ---------
Total income from operations....................... $ 2,776 $ 1,760 $ 1,835 $ 2,230 $ 2,172
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Consolidated assets
United States........................................ $ 33,221 $ 36,008 $ 34,449 $ 35,184 $ 52,727
Western Europe....................................... 5,741 5,713 6,490 6,529 5,641
Interarea eliminations............................... (4,309) (4,036) (4,610) (4,636) (4,140)
--------- --------- --------- --------- ---------
Total consolidated assets.......................... $ 34,653 $ 37,685 $ 36,329 $ 37,077 $ 54,228
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Interarea sales are accounted for at prices which the Company believes would
be equivalent to unaffiliated customer sales. Interarea transfers and
eliminations reflect the shipment of raw component parts between areas.
Operating income excludes net interest expense, other income (expense) and
minority interests which are directly attributable to the related operations.
Corporate assets are included with United States assets.
F-43
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 19--FOREIGN OPERATIONS AND EXPORT REVENUES (CONTINUED)
EXPORT REVENUES
Consolidated revenues include export revenues of $7,655,000, $2,890,000 and
$5,161,000 for the years ended December 31, 1993, 1994 and 1995, respectively,
and $3,425,000 and $4,373,000 for the nine months ended September 30, 1995 and
1996, respectively. Export revenues are primarily derived from sales to
customers located in Western Europe, the Far East and Canada.
NOTE 20--EMPLOYEE BENEFIT PLANS
The Company's Swiss subsidiary sponsors a defined contribution pension plan
covering substantially all of its employees as required by Swiss law.
Contributions and costs, which are shared equally by the Company and the
employees, are determined as a percentage of each covered employees' salary.
Company contributions and costs associated with the plan were $105,000, $100,000
and $148,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
Substantially all of the Company's domestic employees are eligible to
participate in a 401(k) defined contribution plan (the "Plan"). Participation in
the Plan is at the discretion of each individual employee who is eligible to
participate. Each participating employee is permitted to make a contribution up
to a maximum amount defined in the Plan. The Company and its subsidiaries may
make periodic discretionary matching contributions to the Plan. No matching
contributions were made to the plan during the years ended December 31, 1993,
1994 and 1995. The costs associated with administering the plan were not
significant for any period presented.
F-44
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 21--RELATED PARTY TRANSACTIONS
The Company's transactions with related parties included in the consolidated
financial statements are summarized in the table below (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INVESTORS
14% demand notes
Interest earned during the period................................. $ 135 $ 113 $ -- $ -- $ --
Amount repaid, including accrued interest, with proceeds from the
1994 debt refinancing........................................... -- 1,281 -- -- --
Purchase of 39,415 shares of Series C preferred stock at $5.29 per
share............................................................. -- 208 -- -- --
SENIOR SUBORDINATED LENDERS
Interest and advisory fees
Earned during the period.......................................... -- 165 949 749 792
Accrued and payable as of period end.............................. -- 137 -- 210 210
Purchase of Convertible Notes, Series E preferred stock and
Redeemable Warrants in conjunction with the ADS Acquisition....... -- -- -- -- 2,000
Fees and expenses earned --
Capitalized as deferred financing costs........................... -- 140 -- -- 18
Recorded as a reduction of gross proceeds from the sale of
preferred shares................................................ -- -- -- -- 18
SERIES D INVESTORS
Purchases of debt and equity securities
Series D preferred stock and Redeemable Warrants in conjunction
with Minority Interest Acquisition.............................. -- -- -- -- 6,500
Convertible Notes, Series E preferred stock and Redeemable
Warrants in conjunction with the ADS Acquisition................ -- -- -- -- 4,000
Fees and expenses earned --
Capitalized as deferred financing costs........................... -- -- -- -- 37
Recorded as a reduction of gross proceeds from the sale of
preferred shares................................................ -- -- -- -- 37
Convertible Notes interest earned................................... -- -- -- -- 16
</TABLE>
F-45
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED.)
NOTE 21--RELATED PARTY TRANSACTIONS (CONTINUED)
Each related party is described below and their fully diluted equity
securities ownership percentage of the Company, as of December 31, 1995 and
September 30, 1996, respectively, is computed based upon the issued and
outstanding Convertible Notes (Note 8), Redeemable Warrants (Note 14), preferred
stock and warrants (Note 15) and common stock and warrants (Note 16):
INVESTORS--Own 58.4% and 32.2% of the Company's issued and outstanding
equity securities at the respective dates and are represented on the
Company's Board of Directors (Notes 14, 15 and 16).
SENIOR SUBORDINATED LENDERS--Own 27.0% and 20.6% of the Company's issued and
outstanding equity securities (including 8.1% acquired from an Investor in a
private transaction in 1994) at the respective dates, are represented on the
Company's Board of Directors, and provide a portion of the Company's
Convertible Notes financing and the Subordinated Debt (Notes 8, 10, 14, 15
and 16).
SERIES D INVESTORS--Own 0% and 36.1% of the Company's issued and outstanding
equity securities at the respective dates, are represented on the Company's
Board of Directors, and provide a portion of the Company's Convertible Notes
financing (Notes 8, 14, 15 and 16).
F-46
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Allard Industries, Inc.
In our opinion, the accompanying balance sheets and the related statements
of income and changes in owner's net investment and of cash flows present
fairly, in all material respects, the financial position of Aerospace Display
Systems, a division of Allard Industries, Inc., at December 31, 1994 and 1995
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
August 2, 1996
F-47
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER
1994 1995 18, 1996
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 1 $ 1 $ 1
Accounts receivable, net.................................. 1,347 1,339 1,292
Inventories............................................... 2,520 2,961 3,273
Prepaid expenses.......................................... 15 27 47
---------- ----------- -----------
Total current assets.................................... 3,883 4,328 4,613
Property and equipment, net................................. 221 328 319
Other assets................................................ 27 45 40
---------- ----------- -----------
Total assets............................................ $ 4,131 $ 4,701 $ 4,972
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND OWNER'S NET INVESTMENT
Current liabilities
Accounts payable.......................................... $ 409 $ 597 $ 405
Accrued expenses.......................................... 278 281 246
---------- ----------- -----------
Total current liabilities............................... 687 878 651
Commitments and contingencies (Note 9)
Owner's net investment...................................... 3,444 3,823 4,321
---------- ----------- -----------
Total liabilities and owner's net investment............ $ 4,131 $ 4,701 $ 4,972
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-48
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED NINE MONTHS JANUARY 1
DECEMBER 31, ENDED TO
------------------------------- SEPTEMBER 30, SEPTEMBER 18,
1993 1994 1995 1995 1996
--------- --------- --------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 8,859 $ 8,259 $ 9,952 $ 7,649 $ 7,706
Cost of sales.................................... 6,483 6,192 6,594 5,154 4,855
--------- --------- --------- ------- -------
Gross profit................................... 2,376 2,067 3,358 2,495 2,851
Selling, general and administrative expenses..... 1,642 1,516 1,991 1,454 1,286
--------- --------- --------- ------- -------
Income from operations......................... 734 551 1,367 1,041 1,565
Interest expense................................. 209 204 150 122 52
--------- --------- --------- ------- -------
Income before provision for income taxes....... 525 347 1,217 919 1,513
Provision for income taxes....................... 207 141 495 374 615
--------- --------- --------- ------- -------
Net income..................................... $ 318 $ 206 $ 722 $ 545 $ 898
--------- --------- --------- ------- -------
--------- --------- --------- ------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-49
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
STATEMENTS OF CHANGES IN OWNER'S NET INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1
------------------------------- TO
1993 1994 1995 SEPTEMBER 18,
--------- --------- --------- 1996
---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Owner's net investment at beginning of period..................... $ 3,438 $ 3,189 $ 3,444 $ 3,823
Net income........................................................ 318 206 722 898
Net change in interdivision payables and other borrowings......... (567) 49 (343) (400)
--------- --------- --------- -------
Owner's net investment at end of period........................... $ 3,189 $ 3,444 $ 3,823 $ 4,321
--------- --------- --------- -------
--------- --------- --------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-50
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED NINE MONTHS JANUARY 1
DECEMBER 31, ENDED TO
------------------------------- SEPTEMBER 30, SEPTEMBER 18,
1993 1994 1995 1995 1996
--------- --------- --------- ----------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income......................................... $ 318 $ 206 $ 722 $ 545 $ 898
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation..................................... 16 33 49 35 51
Changes in assets and liabilities
Accounts receivable............................ 277 (71) 8 (177) 47
Inventories.................................... 200 (201) (441) (86) (312)
Prepaid expenses............................... 7 16 (12) (12) (20)
Other assets................................... 15 -- (18) (4) 5
Accounts payable and accrued expenses.......... (193) 86 191 111 (227)
--------- --------- --------- --- ------
Net cash provided by operating activities.... 640 69 499 412 442
--------- --------- --------- --- ------
Cash flows from investing activities
Capital expenditures............................... (72) (118) (156) (115) (42)
--------- --------- --------- --- ------
Net cash used in investing activities........ (72) (118) (156) (115) (42)
--------- --------- --------- --- ------
Cash flows from financing activities
(Decrease) increase in interdivision payables and
other borrowings................................... (567) 49 (343) (297) (400)
--------- --------- --------- --- ------
Net cash (used in) provided by financing
activities................................. (567) 49 (343) (297) (400)
--------- --------- --------- --- ------
Net increase in cash and cash equivalents............ 1 -- -- -- --
Cash and cash equivalents at beginning of the
period............................................. -- 1 1 1 1
--------- --------- --------- --- ------
Cash and cash equivalents at end of period........... $ 1 $ 1 $ 1 $ 1 $ 1
--------- --------- --------- --- ------
--------- --------- --------- --- ------
Supplemental disclosure of cash flow information--
Cash paid during the period for interest........... $ 209 $ 199 $ 157 $ 127 $ 60
--------- --------- --------- --- ------
--------- --------- --------- --- ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-51
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
Aerospace Display Systems ("ADS" or the "Division") located in Hatfield,
Pennsylvania is a division of Allard Industries, Inc. ("Allard") and was
acquired from the BF Goodrich Company ("BF Goodrich") in a purchase transaction
in December 1992. ADS designs and manufactures dichroic liquid crystal displays
("LCDs") and modules for both military and commercial aerospace applications for
the domestic and foreign aircraft industry, principally in North America and
Europe.
On July 26, 1996 Allard entered into an agreement to sell certain assets and
the business of the Division to a subsidiary of DeCrane Aircraft Holdings, Inc.
(Note 10).
BASIS OF PRESENTATION
Preparation of these financial statements in conformity with generally
accepted accounting principles requires the Division to make estimates and
assumptions that affect the reported amounts on the balance sheets, at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
The statements of income and changes in owner's net investment includes all
charges applicable to the Division. Allard provides certain services to, and
incurs costs on behalf of, the Division. All of the allocations and estimates in
the financial statements are based on assumptions that the Division and Allard
believe are reasonable.
The financial information as of September 18, 1996 and for the nine months
ended September 30, 1995 and for the period from January 1 to September 18, 1996
is unaudited. In the opinion of the Division, the unaudited financial
information is presented on a basis consistent with the audited financial
statements and contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for such interim
periods presented. The results of operations for interim periods are not
necessarily indicative of results of operations for the full year.
INVENTORIES
Inventories are stated principally at the lower of cost or market, as
determined under the last-in, first-out ("LIFO") method. Costs include
materials, labor and manufacturing overhead.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using
straight-line and accelerated methods over their estimated useful lives, ranging
from four to fifteen years. Leasehold improvements are amortized using the
straight-line method over their estimated useful lives or remaining lease term,
whichever is less. Expenditures for maintenance and repairs are expensed as
incurred. The cost of improvements are capitalized. Upon retirement or disposal,
the cost and accumulated depreciation of property and equipment are reduced and
any gain or loss is recorded in income or expense.
F-52
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The taxable income of the Division is included in the consolidated tax
return of Allard. As such, separate income tax returns were not prepared or
filed by the Division. The provision for income taxes included in these
financial statements has been calculated as if the Division was a tax paying
entity, using Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). Under the liability method specified in SFAS
109, a deferred tax asset or liability is determined based on the difference
between the financial statement and tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. Deferred tax expense is the result of changes in the liability for
deferred taxes.
REVENUE RECOGNITION
Revenues from the sale of manufactured products are recorded when products
are shipped.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, cash equivalents include
short-term, highly liquid investments with original maturities of three months
or less.
ACCOUNTS RECEIVABLE
Accounts receivable is net of an allowance for doubtful accounts of $28,000
at December 31, 1994 and 1995 (none at September 18, 1996).
NOTE 2--INVENTORIES
Inventories are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- SEPTEMBER 18,
1994 1995 1996
------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Raw material................................. $ 832 $ 977 $ 1,260
Work-in process.............................. 655 533 560
Finished goods............................... 1,033 1,451 1,453
------------ ------- -------
Total inventories.......................... $ 2,520 $ 2,961 $ 3,273
------------ ------- -------
------------ ------- -------
</TABLE>
The division uses the last-in, first-out method ("LIFO") for valuing its
inventory. If the first-in, first-out ("FIFO") method had been used, inventories
would have been higher than reported by $33,000, $29,000 and $29,000 at December
31, 1994 and 1995 and September 18, 1996, respectively.
F-53
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment includes the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 18,
1994 1995 1996
--------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment...................................... $ 214 $ 354 $ 380
Computer equipment, furniture and fixtures................... 45 45 61
Leasehold improvements....................................... 12 26 26
--------- --------- ------
Total cost................................................. 271 425 467
Accumulated depreciation................................... (50) (97) (148)
--------- --------- ------
Net property and equipment............................... $ 221 $ 328 $ 319
--------- --------- ------
--------- --------- ------
</TABLE>
The acquisition of the Division in December 1992 from BF Goodrich was a
bargain purchase transaction and as a result, all property and equipment was
recorded at $0 at the date of the acquisition. Depreciation expense related to
capital expenditures subsequent to the purchase transaction amounted to $16,000,
$33,000 and $49,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $35,000 and $51,000 for the nine months ended September 30,
1995 and the period from January 1 to September 18, 1996, respectively.
NOTE 4--RELATED PARTY TRANSACTIONS
NOTES PAYABLE
The Division's cash requirements were met by funds generated from
operations, supplemented as necessary by advances or borrowings from Allard.
Borrowings from Allard were made pursuant to unwritten, informal arrangements.
Interest was charged to the Division as the Division's share of Allard interest
expense based on the Division's proportionate share of total Allard borrowings.
Interest expense was $209,000, $204,000 and $150,000 for the years ended
December 31, 1993, 1994 and 1995, respectively, and $122,000 and $52,000 for the
nine months ended September 30, 1995 and the period from January 1 to September
18, 1996, respectively. Amounts payable to Allard are classified with owner's
net investment in the accompanying balance sheets.
CORPORATE EXPENSES
The results of operations include significant transactions with Allard
business units that are outside of the Division's operations. These transactions
involve functions and services (such as executive management, cash management,
tax administration and strategic planning) that were provided to the Division by
these other Allard units. The payroll cost of these functions and services has
been allocated to the Division based on Allard management's estimated
proportionate level of effort in servicing the Division. Other costs of these
functions and services have been allocated to the Division based on its revenues
in proportion to other Allard divisions. Allard and the Division's management
believe this allocation methodology is reasonable. Corporate charges were
$345,000, $264,000 and $360,000 for the years ended December 31, 1993, 1994, and
1995, respectively, and $240,000 and $301,000 for the
F-54
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 4--RELATED PARTY TRANSACTIONS (CONTINUED)
nine months ended September 30, 1995 and the period from January 1 to September
18, 1996, respectively.
PURCHASES
Purchases by the Division from other divisions of Allard were $347,000,
$468,000 and $440,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $307,000 and $227,000 for the nine months ended September 30,
1995 and the period from January 1 to September 18, 1996, respectively.
NOTE 5--PENSION PLAN
Allard has a defined contribution 401(k) plan in which substantially all
employees of the Division may participate. Under this plan, employees may make
voluntary contributions of their compensation. The Division may make periodic
discretionary matching contributions to the plan. No matching contributions were
made to the plan during the years ended December 31, 1993, 1994 and 1995.
NOTE 6--CONCENTRATION OF CREDIT RISK AND OTHER INFORMATION
The Division's sales are made principally to commercial OEM customers,
airlines and U.S. government subcontractors. Sales to U.S. government
subcontractors amounted to approximately $4,291,000, $3,869,000 and $3,454,000
for the years ended December 31, 1993, 1994 and 1995, respectively, and
$2,962,000 and $2,917,000 for the nine months ended September 30, 1995 and the
period from January 1 to September 18, 1996, respectively.
The Division is potentially subject to concentrations of credit risk as the
Division relies heavily on customers operating in the domestic and foreign
commercial aircraft industry. Generally, the Division does not require
collateral or other security to support accounts receivable subject to credit
risk. Under certain circumstances, deposits or cash on delivery terms are
required. The Division maintains reserves for potential credit losses.
Certain customers each accounted for more than 10% of the Division's
revenues, as follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED NINE MONTHS JANUARY 1
DECEMBER 31, ENDED TO
------------------------------------- SEPTEMBER 30, SEPTEMBER 18,
1993 1994 1995 1995 1996
----- ----- ----- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Customer A........................... 16% 12% 10% 11% 7%
Customer B........................... 13% 10% 8% 9% 9%
Customer C........................... 18% 3% 10% 10% 13%
Customer D........................... 6% 10% 9% 9% 6%
-- -- -- -- --
Total.............................. 53% 35% 37% 39% 35%
-- -- -- -- --
-- -- -- -- --
</TABLE>
F-55
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 6--CONCENTRATION OF CREDIT RISK AND OTHER INFORMATION (CONTINUED)
Complete loss of any of these customers could have an adverse impact on the
future results of operations.
Revenues include export revenues, principally to Western Europe, of
$1,030,000, $1,930,000 and $1,623,000 for the years ended December 31, 1993,
1994 and 1995, respectively, and $1,513,000 and $1,289,000 for the nine months
ended September 30, 1995 and the period from January 1 to September 18, 1996,
respectively.
NOTE 7--ACCRUED EXPENSES
Accrued expenses are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 18,
1994 1995 1996
--------- --------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and compensated absences and payroll related
taxes...................................................... $ 113 $ 116 $ 171
Commissions.................................................. 43 40 34
Warranty..................................................... 70 82 15
Other accrued expenses....................................... 52 43 26
--------- --------- -----
Total accrued expenses..................................... $ 278 $ 281 $ 246
--------- --------- -----
--------- --------- -----
</TABLE>
NOTE 8--INCOME TAXES
The provisions for income taxes are as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Current
U.S. federal....................................................... $ 119 $ 16 $ 355
State.............................................................. 31 5 116
--------- --------- ---------
Total current.................................................... 150 21 471
--------- --------- ---------
Deferred
U.S. federal....................................................... 43 90 18
State.............................................................. 14 30 6
--------- --------- ---------
Total deferred................................................... 57 120 24
--------- --------- ---------
Total provision................................................ $ 207 $ 141 $ 495
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-56
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 8--INCOME TAXES (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following (amounts in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross deferred tax liabilities
Inventory........................................................ $ 341 $ 341 $ 341
Other............................................................ 18 18 18
--------- --------- ---------
Gross deferred tax liabilities................................. 359 359 359
--------- --------- ---------
Gross deferred tax (assets)
Fixed assets..................................................... (233) (127) (59)
Accrued expenses................................................. (63) (55) (59)
Other............................................................ (22) (16) (56)
--------- --------- ---------
Gross deferred tax (assets).................................... (318) (198) (174)
--------- --------- ---------
Net deferred tax liability................................... $ 41 $ 161 $ 185
--------- --------- ---------
--------- --------- ---------
</TABLE>
The net deferred tax liability has been included in owner's net investment
in each period. Income taxes currently payable, and deemed remitted by the
Division to Allard, amounted to $150,000, $22,000 and $471,000 for the years
ended December 31, 1993, 1994 and 1995, respectively.
The provision for income tax differs from the amount of income tax
determined by applying the applicable U.S. statutory federal rate to the income
before income taxes as a result of the following differences (amounts in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income tax at U.S. statutory rates................................... $ 179 $ 118 $ 414
State income taxes, net of federal benefit........................... 28 23 80
Other, net........................................................... -- -- 1
--------- --------- ---------
Income tax at effective rates...................................... $ 207 $ 141 $ 495
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-57
<PAGE>
AEROSPACE DISPLAY SYSTEMS
(A DIVISION OF ALLARD INDUSTRIES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 18, 1996, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND
FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 18, 1996 IS UNAUDITED.)
NOTE 9--COMMITMENTS AND CONTINGENCIES
The Division has entered into certain operating leases which require minimum
annual payments as follows: 1996--$193,000; 1997--$194,000; 1998--$184,000;
1999--$139,000, and 2000--$15,000. The total rental expense for all operating
leases was $238,000, $166,000 and $181,000 for the years ended December 31,
1993, 1994 and 1995, respectively.
The Division is also subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
material adverse effect on the financial position, results of operations or cash
flows of the Division.
NOTE 10--EVENT SUBSEQUENT TO REPORT OF INDEPENDENT ACCOUNTANTS (UNAUDITED)
On September 18, 1996, a subsidiary of DeCrane Aircraft Holdings, Inc.
consummated the purchase from Allard of the assets, subject to the liabilities,
of the Division.
F-58
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING. IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF
THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS FURNISHED OR THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Recent Developments....................................................... 12
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Dilution.................................................................. 16
Selected Consolidated Financial Data...................................... 17
Unaudited Pro Forma Consolidated Financial Data........................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 29
Management................................................................ 45
Principal Stockholders.................................................... 51
Certain Transactions...................................................... 52
Description of Capital Stock.............................................. 53
Shares Eligible for Future Sale........................................... 58
Underwriting.............................................................. 59
Legal Matters............................................................. 60
Experts................................................................... 60
Additional Information.................................................... 60
Index to Financial Statements............................................. F-1
</TABLE>
--------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE HEREOF), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH THIS RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
[LOGO]
DECRANE AIRCRAFT HOLDINGS, INC.
COMMON STOCK
SCHRODER WERTHEIM & CO.
DEAN WITTER REYNOLDS INC.
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
<TABLE>
<CAPTION>
ITEM AMOUNT
- --------------------------------------------------------------------------------- -----------
<S> <C>
SEC Registration Fee............................................................. $ 13,068
NASD Filing Fee..................................................................
Nasdaq National Marketing Listing Fee............................................
Blue Sky Filing Fees and Expenses................................................
Printing and Engraving Costs.....................................................
Transfer Agent Fees..............................................................
Legal Fees and Expenses..........................................................
Accounting Fees and Expenses.....................................................
Miscellaneous....................................................................
-----------
Total........................................................................ $
-----------
-----------
</TABLE>
- ------------------------
* To be filed by amendment.
All amounts are estimated except for the SEC Registration Fee, the NASD
Filing Fee and the NASDAQ National Market Listing Fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation contains a provision eliminating
or limiting director liability to the Company and its stockholders for monetary
damages arising from acts or omissions in the director's capacity as a director.
The provision does not, however, eliminate or limit the personal liability of a
director (i) for any breach of such director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provision making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
the Company protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above). As a result of this
provision, the ability of the Company or a stockholder thereof to successfully
prosecute an action against a director for breach of his duty of care is
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or recision based upon a director's breach of his
duty of care. The Commission has taken the position that the provision will have
no effect on claims arising under the Federal securities laws.
In addition, the Certificate of Incorporation and the Company's Bylaws
provide for mandatory indemnification rights, subject to limited exceptions, to
any director or executive officer of the Company who by reason of the fact that
he or she is a director or officer of the Company, is involved in a legal
proceeding of any nature. Such indemnification rights include reimbursement for
expenses incurred by such director or officer in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
GCLSD. The Company may from time to time agree to provide similar
indemnifications to certain employees and other agents.
The Company also maintains directors' and officers' liability insurance.
II-1
<PAGE>
In addition, the Underwriting Agreement provides for indemnification by the
Underwriters of the Registrant, its directors and officers against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(1) Pursuant to a Securities Purchase Agreement dated November 2, 1994 and
Electra Investment Trust P.L.C. and Electra Associates, Inc (collectively,
"Electra") and DSV Partners, the Company sold 271,471 shares of Series C
preferred stock for a purchase price of $1.50 per share. The sale of these
securities was exempt from registration pursuant to Section 4(2) of the Act.
(2) Pursuant to an Amended and Restated Credit Agreement dated as of
November 2, 1994 among the Company, Provident Bank ("Provident") and
Internationale Nederlanden (U.S.) Capital Corporation ("ING), the Company issued
warrants to purchase an aggregate of 84,748 shares of Common Stock in connection
with the amendment and restatement of the Company's credit agreement. Also in
connection with the Amended and Restated Credit Agreement the Company issued
warrants to purchase an aggregate of 94,558 shares of Common Stock to a former
lender to the Company. The issuance of these securities was exempt from
registration pursuant to Section 4(2) of the Act.
(3) Pursuant to a Securities Purchase Agreement dated as of November 2,
1994 among the Company and Electra, the Company issued for a purchase price of
$7.0 million (i) 12% Senior Subordinated Notes due December 31, 2001 having an
aggregate principal amount of $7.0 million, and (ii) warrants to purchase
266,990 shares of Common Stock. The issuance of these securities was exempt from
registration pursuant to Section 4(2) of the Act.
(4) Pursuant to a Securities Purchase Agreement dated as of February 20,
1996 among the Company, Nassau Capital Partners, L.P. and NAS Partners I,
L.L.C., the Company issued an aggregate purchase price of $6.5 million (i)
2,000,000 shares of Series D Preferred Stock, and (ii) warrants to purchase
194,618 shares of Common Stock. The issuance of these securities was exempt from
registration pursuant to Section 4(2) of the Act.
(5) On January , 1994 the Company sold 2,269 shares of Common Stock for
$.53 per share to John Schnepf. Such securities were sold pursuant to the
exercise of stock options.
(6) Pursuant to a Securities Purchase Agreement dated February 9, 1996
among the Company, R.G. MacDonald, Charles Becker, Robert Rankin and John Hinson
the Company sold 75,000 shares of Series C preferred stock for a purchase price
of $1.50 per share. The sale of these securities was exempt from registration
pursuant to Section 4(2) of the Act.
(7) Pursuant to a Securities Purchase Agreement dated September 18, 1996
among the Company, Nassau the Company sold (i) $2.0 million aggregate principal
amount of 15% convertible Notes and 49,079 warrants to purchase Common Stock for
a purchase price of $3.0 million, and (ii) 750,000 shares of Series E Preferred
Stock and 49,079 warrants to purchase Common Stock for a purchase price of $3.0
million. The issuance of such securities was exempt from registration under
Section 4(2) of the Act.
(8) Pursuant to an Amended and Restated Credit Agreement dated as of
September 18, 1996 among the Company, Provident and Internationale Nederlanden
(U.S.) Capital Corporation., ING and Provident Bank, the Company issued 70,892
warrants to purchase Common Stock as additional consideration for amendments to
documents governing certain indebtedness of the Company. The issuance of these
securities was exempt from registration pursuant to Section 4(2) of the Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement Among Underwriters*
3.1 Certificate of Incorporation of Registrant*
3.2 Bylaws of Registrant*
4.1 Specimen Certificate*
5.1 Opinion of Spolin & Silverman (re legality)*
10.1 1993 Share Incentive Plan
10.2 Tax Sharing Agreement dated March 15, 1993 between the Company TSH and Hollingsead
International, Inc.
10.3 Employment Agreement dated September 1, 1994 between the Company and R. Jack DeCrane
10.4 Employment Agreement dated June 28, 1993 between the Company and R. G. MacDonald
10.5 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the
Allard Children's Trust f/b/o John R. Allard
10.6 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the
Allard Children's Trust f/b/o Michael E. Allard
10.7 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Younes
Nazarian
10.8 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and David
and Angela Nazarian, Trustees of the Nazarian Family Trust
10.9 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Gerald
R. Allard, Trustee of the Gerald R. Allard Revocable Trust of 1994
10.10 Registration Rights Agreement dated January , 1997 among the Company, Banc One
Capital Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane,
DSV Parnters, IV, Electra Investment Trust, P.L.C., Internationale Nederlanden
(U.S.) Capital Corporation, Electra Associates, Inc., The Provident Bank, Nassau
Capital Partners L.P., NAS Partner I L.L.C.*
10.11 Shareholders Agreement dated January , 1997 among the Company, Banc One Capital
Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV
Partners, IV, Electra Investment Trust, P.L.C., Internationale Nederlanden (U.S.)
Capital Corporation, Electra Associates, Inc., The Provident Bank, Nassau Capital
Partners L.P., NAS Partner I L.L.C.*
10.12 Lease dated September 1989 as amended on December 15, 1993 among Continental
Development Corporation, Tri-Star Electronics, Inc., and Cory Components, Inc. for
real property in El Segundo, CA
10.13 Amended and Restated Credit Agreement, dated September 18, 1996, among the Comapny,
ADS Acquisition, Inc., Tri-Star Holdings, Inc., Tri-Star Electronics
International, Inc., Tri-Star Technologies, Inc., Tri-Star Technologies, Tri-Star
Electronics Europe S.A., Mezzovico, Cory Holdings, Inc., Cory Components, Inc.,
Hollingsead International, Inc., Hollingsead International Limited, The Provident
Bank, and Internationale Nederlanden (U.S.) Capital Corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.14 General Terms Agreement dated July 5, 1995 between the Boeing Company and Cory
Components, Number 6-5752-0002
10.15 Special Business Provisions dated November 30, 1995 between the Boeing Company and
Cory Components, Number 6-5752-0004
10.16 Purchase Agreement 9423JC4548 between Boeing Defense & Space-Irving Co. and Cory
Components, January 1, 1995 through December 31, 1999
10.17 Electrical Contact Procurement Contract Letter of Agreement, dated June 28, 1993
between Boeing Commercial Airplane Group and Tri-Star Electronics International
10.18 Asset Purchase and Sale Agreement by and among Allard Industries, Inc., Gerald R.
Allard, Trustee of the Gerald R. Allard Revocable Trust of 1994, The Allard
Children's Trust f/b/o John Allard, The Allard Children's Trust f/b/o Michael E.
Allard, Younes Nazarian and David and Angela Nazarian, Trustees of the Nazarian
Family Trust, the principal shareholders of Allard, the Company and ADS
Acquisition, Inc.
10.19 Assets Purchase and Sale Agreement dated December 4, 1996 among the Company, EE
Acquisition, Inc., William Lyon, and Elsinore LP
10.20 Asset Purchase and Sale Agreement dated November 25, 1996 among AMP, Incorporated,
the Whitaker Corporation and DeCrane Aircraft Holdings, Inc.
10.21 Stock Purchase Agreement, dated January 1, 1995, among the Company and Cory
Components, Inc.
10.22 Securities Purchase Agreement, dated September 18, 1996 among the Company, Nassau
Capital Partners L.P., NAS Partners I L.L.C., and Electra Investment Trust P.L.C.
10.23 Securities Purchase Agreement, dated February 20, 1996 among the Company, Nassau
Capital Partners L.P. and NAS Partners I L.L.C.
10.24 Securities Purchase Agreement dated November 2, 1994, as amended on February 20,
1996, among the Company, Electra Investment Trust P.L.C. and Electra Associates,
Inc.
10.25 Letter Agreement dated November 24, 1994 between the Company and Charles Becker
10.26 Warrant Agreement dated November 2, 1994 between the Company and Internationale
Nederlanden (U.S.) Capital Corporation
10.27 Form of Warrant Agreement relating to the Company's Series E Warrants
10.28 Form of Warrant Agreement relating to the Company's Series F Warrants
10.29 Form of Warrant Agreement relating to the Company's Series G Warrants
10.30 Form of Warrant Agreement relating to the Company's Series H Warrants
10.31 Share Purchase Agreement dated February 9, 1996 among the Company, R.G. MacDonald,
Charles Becker, Robert Rankin
11.1 Statement regarding computation of per share earnings of the Company
21.1 List of Subsidiaries of Registrant
23.1 Consent of Price Waterhouse, LLP
23.2 Consent of Spolin & Silverman (included in Exhibit 5.1)*
24.1 Power of Attorney (appears on signature page)
27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
II-4
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE:
Schedule II--Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the Closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
This Registration Statement and Power of Attorney, pursuant to the
requirements of the Securities Act of 1933, as amended, have been signed on its
behalf by the undersigned, thereunto duly authorized, in the State of
California, on this 16th day of January, 1997.
DECRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. JACK DECRANE
------------------------------------------
Name: R. Jack DeCrane
Title:Chairman of the Board and
Chief Executive
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints R. Jack
DeCrane, R.G. MacDonald and Robert A. Rankin, and each of them, his true and
lawful attorneys-in-fact and agents, with the full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and to take such actions in, and file with the appropriate
authorities in, whatever states said attorneys-in-fact and agents, and each of
them, shall determine, such applications, statements, consents and other
documents as may be necessary or expedient to register securities of the Company
for sale, granting unto said attorneys-in-fact and agents full power and
authority to do so and perform each and ever act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agents or any of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof and the
registrant hereby confers like authority on its behalf. This Registration
Statement and Power of Attorney, pursuant to the requirement of the Securities
Act of 1933, as amended, have been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------- ------------------------- --------------------
<C> <S> <C>
/s/ R. JACK DECRANE Chairman of the Board,
- ----------------------------------- Chief Executive Officer January 16, 1997
R. Jack DeCrane and Director
/s/ R. G. MACDONALD Vice Chairman of the
- ----------------------------------- Board and Director January 16, 1997
R. G. MacDonald
Chief Financial Officer
/s/ ROBERT A. RANKIN and Secretary
- ----------------------------------- (principal accounting January 16, 1997
Robert A. Rankin officer)
/s/ JAMES R. BERGMAN
- ----------------------------------- Director January 16, 1997
James R. Bergman
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------- ------------------------- --------------------
<C> <S> <C>
/s/ PAUL H. CASCIO
- ----------------------------------- Director January 16, 1997
Paul H. Cascio
/s/ JONATHAN A. SWEEMER
- ----------------------------------- Director January 16, 1997
Jonathan A. Sweemer
</TABLE>
II-7
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COST AND CHARGED TO BALANCE AT
CLASSIFICATIONS PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
- --------------------------------------- ------------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Allowance for Doubtful Accounts........ $ 475,000 -- -- $ 155,000 $ 320,000
Reserve for excess, slow moving and
potentially obsolete material........ $ 466,000 $ 127,000 -- -- $ 593,000
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts........ $ 320,000 $ 51,000 $ 3,000(A) $ 131,000 $ 243,000
Reserve for excess, slow moving and
potentially obsolete material........ $ 593,000 $ 300,000 -- -- $ 893,000
YEAR ENDED DECEMBER 31, 1995
Allowance for Doubtful Accounts........ $ 243,000 $ 66,000 $ 62,000(B) $ 112,000 $ 259,000
Reserve for excess, slow moving and
potentially obsolete material........ $ 893,000 $ 416,000 -- $ 155,000 $ 1,154,000
</TABLE>
- ------------------------
(A) Effect of foreign currency translation.
(B) Comprised of the following:
$ 3,000 Effect of foreign currency translation;
$59,000 Recovery of amounts previously written off.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ -----
<C> <S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement Among Underwriters*
3.1 Certificate of Incorporation of Registrant*
3.2 Bylaws of Registrant*
4.1 Specimen Certificate*
5.1 Opinion of Spolin & Silverman (re legality)*
10.1 1993 Share Incentive Plan
10.2 Tax Sharing Agreement dated March 15, 1993 between the Company TSH and Hollingsead
International, Inc.
10.3 Employment Agreement dated September 1, 1994 between the Company and R. Jack DeCrane
10.4 Employment Agreement dated June 28, 1993 between the Company and R. G. MacDonald
10.5 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the Allard
Children's Trust f/b/o John R. Allard
10.6 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the Allard
Children's Trust f/b/o Michael E. Allard
10.7 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Younes Nazarian
10.8 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and David and Angela
Nazarian, Trustees of the Nazarian Family Trust
10.9 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Gerald R. Allard,
Trustee of the Gerald R. Allard Revocable Trust of 1994
10.10 Registration Rights Agreement dated January , 1997 among the Company, Banc One Capital
Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV Parnters, IV,
Electra Investment Trust, P.L.C., Internationale Nederlanden (U.S.) Capital Corporation,
Electra Associates, Inc., The Provident Bank, Nassau Capital Partners L.P., NAS Partner I
L.L.C.*
10.11 Shareholders Agreement dated January , 1997 among the Company, Banc One Capital Partners
Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV Partners, IV, Electra
Investment Trust, P.L.C., Internationale Nederlanden (U.S.) Capital Corporation, Electra
Associates, Inc., The Provident Bank, Nassau Capital Partners L.P., NAS Partner I L.L.C.*
10.12 Lease dated September 1989 as amended on December 15, 1993 among Continental Development
Corporation, Tri-Star Electronics, Inc., and Cory Components, Inc. for real property in El
Segundo, CA
10.13 Amended and Restated Credit Agreement, dated September 18, 1996, among the Comapny, ADS
Acquisition, Inc., Tri-Star Holdings, Inc., Tri-Star Electronics International, Inc., Tri-Star
Technologies, Inc., Tri-Star Technologies, Tri-Star Electronics Europe S.A., Mezzovico, Cory
Holdings, Inc., Cory Components, Inc., Hollingsead International, Inc., Hollingsead
International Limited, The Provident Bank, and Internationale Nederlanden (U.S.) Capital
Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ -----
<C> <S> <C>
10.14 General Terms Agreement dated July 5, 1995 between the Boeing Company and Cory Components,
Number 6-5752-0002
10.15 Special Business Provisions dated November 30, 1995 between the Boeing Company and Cory
Components, Number 6-5752-0004
10.16 Purchase Agreement 9423JC4548 between Boeing Defense & Space-Irving Co. and Cory Components,
January 1, 1995 through December 31, 1999
10.17 Electrical Contact Procurement Contract Letter of Agreement, dated June 28, 1993 between Boeing
Commercial Airplane Group and Tri-Star Electronics International
10.18 Asset Purchase and Sale Agreement by and among Allard Industries, Inc., Gerald R. Allard,
Trustee of the Gerald R. Allard Revocable Trust of 1994, The Allard Children's Trust f/b/o
John Allard, The Allard Children's Trust f/b/o Michael E. Allard, Younes Nazarian and David
and Angela Nazarian, Trustees of the Nazarian Family Trust, the principal shareholders of
Allard, the Company and ADS Acquisition, Inc.
10.19 Assets Purchase and Sale Agreement dated December 4, 1996 among the Company, EE Acquisition,
Inc., William Lyon, and Elsinore LP
10.20 Asset Purchase and Sale Agreement dated November 25, 1996 among AMP, Incorporated, the Whitaker
Corporation and DeCrane Aircraft Holdings, Inc.
10.21 Stock Purchase Agreement, dated January 1, 1995, among the Company and Cory Components, Inc.
10.22 Securities Purchase Agreement, dated September 18, 1996 among the Company, Nassau Capital
Partners L.P., NAS Partners I L.L.C., and Electra Investment Trust P.L.C.
10.23 Securities Purchase Agreement, dated February 20, 1996 among the Company, Nassau Capital
Partners L.P. and NAS Partners I L.L.C.
10.24 Securities Purchase Agreement dated November 2, 1994, as amended on February 20, 1996, among the
Company, Electra Investment Trust P.L.C. and Electra Associates, Inc.
10.25 Letter Agreement dated November 24, 1994 between the Company and Charles Becker
10.26 Warrant Agreement dated November 2, 1994 between the Company and Internationale Nederlanden
(U.S.) Capital Corporation
10.27 Form of Warrant Agreement relating to the Company's Series E Warrants
10.28 Form of Warrant Agreement relating to the Company's Series F Warrants
10.29 Form of Warrant Agreement relating to the Company's Series G Warrants
10.30 Form of Warrant Agreement relating to the Company's Series H Warrants
10.31 Share Purchase Agreement dated February 9, 1996 among the Company, R.G. MacDonald, Charles
Becker, Robert Rankin
11.1 Statement regarding computation of per share earnings of the Company
21.1 List of Subsidiaries of Registrant
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ -----
<C> <S> <C>
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Spolin & Silverman (included in Exhibit 5.1)*
24.1 Power of Attorney (appears on signature page)
27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
DeCrane Aircraft Holdings, Inc.
_____ Shares
Common Stock
(Par Value $.01)
_______________
UNDERWRITING AGREEMENT
New York, New York
February ___, 1996
SCHRODER WERTHEIM & CO. INCORPORATED
Dean Witter Reynolds Inc.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Schroder Wertheim & Co. Incorporated
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
DeCrane Aircraft Holdings, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and
sell to the Underwriters named in Schedule I hereto (the "Underwriters"), for
whom you (the "Representatives"), are acting as representatives _________
shares of Common Stock, par value $.01 per share (the "Common Stock") of the
Company (said shares to be issued and sold by the Company being hereafter
called the "Firm Securities"). The Company also proposes to grant to the
Underwriters an option to purchase up to an additional 15% of Firm Securities
shares of Common Stock (the "Option Securities"), on the terms and for the
purposes set forth in Section 2 hereof. The Firm Securities and the Option
Securities are herein collectively referred to as the "Securities." Except
as may be expressly set forth below, any reference to you in this Agreement
shall be solely in your capacity as the Representatives.
<PAGE>
1. The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(a) A registration statement on Form S-1 (File No. 33- ),
and as a part thereof a preliminary prospectus, in respect of the
Securities, has been filed with the Securities and Exchange Commission
(the "Commission") in the form heretofore delivered to you and, with the
exception of exhibits to the registration statement, to you for each of
the other Underwriters; if such registration statement has not become
effective, an amendment (the "Final Amendment") to such registration
statement, including a form of final prospectus, necessary to permit
such registration statement to become effective, will promptly be filed
by the Company with the Commission; if such registration statement has
become effective and any post-effective amendment to such registration
statement has been filed with the Commission prior to the execution and
delivery of this Agreement, which amendment or amendments shall be in
form acceptable to you, the most recent such amendment has been declared
effective by the Commission; if such registration statement has become
effective, a final prospectus (the "Rule 430A Prospectus") relating to
the Securities containing information permitted to be omitted at the
time of effectiveness by Rule 430A of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"),
will promptly be filed by the Company pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act (any preliminary
prospectus filed as part of such registration statement being herein
called a "Preliminary Prospectus," such registration statement as
amended at the time that it becomes or became effective, or, if
applicable, as amended at the time the most recent post-effective
amendment to such registration statement filed with the Commission prior
to the execution and delivery of this Agreement became effective (the
"Effective Date"), including all exhibits thereto and all information
deemed to be a part thereof at such time pursuant to Rule 430A of the
rules and regulations of the Commission under the Act, being herein
called the "Registration Statement" and the final prospectus relating to
the Securities in the form first filed pursuant to Rule 424(b)(1) or (4)
of the rules and regulations of the Commission under the Act or, if no
such filing is required, the form of final prospectus included in the
Registration Statement, being herein called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through you expressly for use therein;
-2-
<PAGE>
(c) On the Effective Date and the date the Prospectus is filed
with the Commission, and when any further amendment or supplements
thereto become effective or are filed with the Commission, as the case
may be, the Registration Statement, the Prospectus and such amendment or
supplements did and will conform in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter
through you expressly for use therein;
(d) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and to conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the transaction
of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases property, or conducts any
business, so as to require such qualification (except where the failure
to so qualify would not have a material adverse effect on the condition,
financial or otherwise, or the business affairs or prospects of the
Company and its subsidiaries, taken as a whole); and each of the
Company's subsidiaries (other than Tri-Star Technologies ("TST")) has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, and, in
the case of TST, has been duly formed and is validly existing as a
partnership in good standing under the laws of its jurisdiction of
formation, with power and authority (corporate and other) to own its
properties and to conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation or, in the case of
TST, as a foreign partnership, for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns
or leases property, or conducts any business, so as to require such
qualification (except where the failure to so qualify would not have a
material adverse effect on the condition, financial or otherwise, or the
business affairs or prospects of the Company and its subsidiaries, taken
as a whole);
(e) Except for TST, all the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and, except as otherwise set
forth in the Prospectus, are owned by the Company free and clear of all
liens, pledges, encumbrances, equities, security interests, or claims;
and there are no outstanding options, warrants or other rights calling
for the issuance of, and there are no commitments, plans or arrangements
to issue, any shares of capital stock of any subsidiary or any security
convertible or exchangeable or exercisable for capital stock of any
subsidiary; except for the shares of stock of each subsidiary owned by
the Company, neither the Company nor any subsidiary owns, directly or
indirectly, any shares of capital stock of any corporation or has any
equity interest in any firm, partnership, joint venture, association or
other entity; [Pledge of stock under new credit facility]
-3-
<PAGE>
(f) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement; the execution,
delivery and performance by the Company of its obligations under this
Agreement have been duly and validly authorized by all requisite
corporate action of the Company; and this Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms;
(g) (i) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, which loss or interference is material to the Company
and its subsidiaries, taken as a whole; and, (ii) since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, there has not been, and prior to the Time of Delivery
(as defined in Section 4 hereof); there has been no material adverse
change in the condition (financial or otherwise) or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business; (iii) there have been no transactions entered into
by the Company or by any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries, taken as a whole; (iv) there has been no
dividend or distribution of any kind declared or paid or made by the
Company on any class of its capital stock; and (v) neither the Company
nor any of its subsidiaries has incurred any liabilities or obligations,
direct or contingent, which are material to the Company and its
subsidiaries, taken as a whole;
(h) (i) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described or
contemplated by the Prospectus, or such as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries, and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such real property and buildings by the Company and its subsidiaries,
the interests of the Company or any of its subsidiaries in such leases
are free and clear of all material liens, encumbrances and defects,
except as disclosed in the Prospectus, and the Company and its
subsidiaries are in compliance in all material respects with the terms
and conditions of such leases, and (ii) (A) except for such assets and
facilities as are immaterial in the aggregate to the business of the
Company and its subsidiaries, all tangible assets and facilities of the
Company and its subsidiaries are adequate, in the reasonable opinion of
the Company, for the use to which they are being put or would be put in
the ordinary course of business, (B) the operation and use of such
assets and facilities is in compliance with all municipal, county, state
and federal laws, regulations, ordinances, standards, orders and other
regulations where
-4-
<PAGE>
the failure to comply therewith could have a material adverse effect on
the condition (financial or otherwise) or the earnings, business affairs
or business prospects of the Company and its subsidiaries, taken as a
whole;
(i) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all the
issued shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable, are free of
any preemptive rights, rights of first refusal or similar rights, were
issued and sold in compliance with the applicable Federal and state
securities laws and conform in all material respects to the description
in the Prospectus; except as described in the Prospectus, there are no
outstanding options warrants or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any security convertible or
exchangeable or exercisable for capital stock of the Company; there are
no holders of securities of the Company who, by reasons of the filing of
the Registration Statement have the right (and have not waived such
right) to request the Company to include in the Registration Statement
securities owned by them;
(j) The Securities to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and non-assessable, and will
conform in all material respects to the description thereof in the
Prospectus and will be quoted on the Nasdaq National Market as of the
Effective Date;
(k) The performance of this Agreement, the consummation of the
transactions herein contemplated and the issue and sale of the
Securities and the compliance by the Company with all the provisions of
this Agreement will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge, claim, or
encumbrance upon, any of the property or assets of the Company or any of
its subsidiaries pursuant to, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or the By-laws, in each case as amended [and restated] to
the date hereof, of the Company or any of its subsidiaries or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any court
or governmental agency or body is required for the issue and sale of the
Securities or the consummation of the other transactions contemplated by
this Agreement, except the registration under the Act of the Securities,
and such consents, approvals, authorizations, registrations or
qualifications as may be required under
-5-
<PAGE>
state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(l) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries or any of their respective
officers or directors is a party or of which any property of the Company
or any of its subsidiaries is the subject, other than litigation or
proceedings incident to the business conducted by the Company and its
subsidiaries which will not individually or in the aggregate have a
material adverse effect on the current or future financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened or contemplated by others; and
neither the Company nor any of its subsidiaries is involved in any labor
dispute, nor, to the Company's knowledge, is any labor dispute
threatened;
(m) The Company and its subsidiaries have such certificates,
authorities, licenses, permits and other approvals or authorizations of
and from governmental or regulatory authorities (including, without
limitation, the Federal Aviation Administration (the "FAA")
(collectively, "Permits") as are necessary under applicable law to
conduct their respective businesses in the manner now being conducted
and as described in the Prospectus; neither the Company nor any of its
subsidiaries has received any notice of proceedings or has any reason to
believe proceedings are pending relating to the revocation or
modification of any such Permits; and the Company and its subsidiaries
have fulfilled and performed all of their respective obligations with
respect to such Permits, and no event has occurred which allows, or
after notice or lapse of time or both would allow, revocation or
termination thereof or result in any other material impairment of the
rights of the holder of any such permits;
(n) Price Waterhouse LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and
delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder;
(o) The consolidated financial statements and schedules of the
Company and its subsidiaries included in the Registration Statement and
the Prospectus present fairly the financial condition, the results of
operations and the cash flows of the Company and its subsidiaries as of
the dates and for the periods therein specified in conformity with
generally accepted accounting principles consistently applied throughout
the periods involved, except as otherwise stated therein; and the other
financial and statistical information and data set forth in the
Registration Statement and the Prospectus is accurately presented and,
to the extent such information and data is derived from the financial
statements and books and records of the Company and its subsidiaries, is
prepared on a basis consistent with such financial statements and the
books and records of the Company and its subsidiaries; The pro forma
-6-
<PAGE>
financial information included in the Registration Statement and the
Prospectus have been properly compiled and comply in form in all
material respects with the applicable accounting requirements of Rule
11-02 of Regulation S-X of the Commission; no other financial statements
or schedules are required to be included in the Registration Statement
and the Prospectus;
(p) There are no statutes or governmental regulations, or any
contracts or other documents that are required to be described in or
filed as exhibits to the Registration Statement which are not described
therein or filed as exhibits thereto; and all such contracts to which
the Company or any subsidiary is a party have been duly authorized,
executed and delivered by the Company or such subsidiary, constitute
legal, valid and binding agreements of the Company or such subsidiary
and are enforceable against the Company or subsidiary in accordance with
the terms thereof;
(q) The Company and its subsidiaries own or possess adequate
patent rights or licenses or other rights to use patent rights,
inventions, trademarks, service marks, trade names, copyrights,
technology and know-how necessary to conduct the general business now or
proposed to be operated by them as described in the Prospectus; neither
the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect
to any patent, patent rights, inventions, trademarks, service marks,
trade names, copyrights, technology or know-how which, singly or in the
aggregate, could materially adversely affect the business, operations,
financial condition, income or business prospects of the Company and its
subsidiaries considered as a whole; and, the discoveries, inventions,
products or processes of the Company and its subsidiaries referred to in
the Prospectus do not, to the Company's knowledge, infringe or conflict
with any patent or right of any third party, or any discovery,
invention, product or process which is the subject of a patent
application filed by any third party, known to the Company;
(r) Neither the Company nor any of and its subsidiaries are in
violation of any term or provision of its Certificate of Incorporation,
By-Laws, Certificate of Limited Partnership or Partnership Agreement (or
similar corporate constituent documents), in each case as amended to the
date hereof, or any law, ordinance, administrative or governmental rule
or regulation applicable to the Company or any of its subsidiaries, or
of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries;
(s) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, bank loan or credit agreement, lease
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them or their respective
properties is bound or may be affected in any material adverse respect
-7-
<PAGE>
with regard to the property, business or operations of the Company and
its subsidiaries;
(t) The Company and its subsidiaries have timely filed all
necessary tax returns and notices and have paid all federal, state,
county, local and foreign taxes of any nature whatsoever for all tax
years through December 31, 1996, to the extent such taxes have become
due. The Company has no knowledge, or any reasonable grounds to know,
of any tax deficiencies which would have a material adverse effect on
the Company or any of its subsidiaries; the Company and its subsidiaries
have paid all taxes which have become due, whether pursuant to any
assessments, or otherwise, and there is no further liability (whether or
not disclosed on such returns) or assessments for any such taxes, and no
interest or penalties accrued or accruing with respect thereto, except
as may be set forth or adequately reserved for in the financial
statements included in the Registration Statement; the amounts currently
set up as provisions for taxes or otherwise by the Company and its
subsidiaries on their books and records are sufficient for the payment
of all their unpaid federal, foreign, state, county and local taxes
accrued through the dates as of which they speak, and for which the
Company and its subsidiaries may be liable in their own right, or as a
transferee of the assets of, or as successor to any other corporation,
association, partnership, joint venture or other entity;
(u) The Company will not, during the period of 180 days after the
date hereof except pursuant to this Agreement, offer, sell, contract to
sell or otherwise dispose of any capital stock of the Company (or
securities convertible into, or exchangeable for, capital stock of the
Company), directly or indirectly, without the prior written consent of
Schroder Wertheim & Co. Incorporated, except for grants of stock options
under the Company's Amended and Restated 1993 Share Incentive Plan (the
"1993 Plan") or pursuant to the terms of convertible securities of the
Company outstanding on the date hereof; [WARRANTS]
(v) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences;
(w) None of the Company or its subsidiaries, or its officers,
directors, employees or agents has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity, or made any unlawful payment of funds of
the Company or any subsidiary or received or retained any funds in
violation of any law, rule or regulation;
-8-
<PAGE>
(x) None of the Company or its subsidiaries, or its officers,
directors, employees or agents have taken or will take, directly or
indirectly, any action designed to or which has constituted or that
might be reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities;
(y) (i) The Company and each subsidiary maintains insurance
covering their properties, operations, personnel and business, (ii) such
insurance insures against such losses and risks to an extent which is
adequate in accordance with customary industry practice to protect the
Company and its subsidiaries and their businesses and (iii) all such
insurance is outstanding and duly in force on the date hereof;
(z) The Directors' and Officers' Questionnaires delivered by the
Company to the Underwriters on or prior to the Effective Date are true
and correct in all material respects;
(aa) None of the Company or its subsidiaries is an "investment
company," or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended, or is
subject to regulation under the Public Utility Holding Company Act of
1935, as amended, the Federal Power Act, the Interstate Commerce Act or
to any federal or state statute or regulation limiting its respective
ability to incur indebtedness for borrowed money, except statutes or
regulations applicable generally to business corporations incorporated
or doing business in the various states in which the Company and its
subsidiaries do business.
(ab) (i) Neither the Company nor any of its subsidiaries is
engaged in any unfair labor practice which would have a material adverse
effect on the Company and its subsidiaries, taken as a whole; (ii) there
is (A) no unfair labor practice complaint pending or threatened against
the Company or any of its subsidiaries before the National Labor
Relations Board, and no grievance or arbitration proceeding arising out
of or under collective bargaining agreements is pending or, threatened,
(B) no strike, labor dispute, slowdown or stoppage is pending or
threatened against the Company or any of its subsidiaries and (C) (i) no
union representation question existing with respect to the employees of
the Company or any of its subsidiaries and no union organizing
activities are taking place, and (ii) there has been no violation of any
federal, state or local law relating to discrimination in the hiring,
promotion or pay of employees, of any applicable wage or hour laws, nor
any provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or the rules and regulations promulgated thereunder;
(ac) (i) Each of the Company and its subsidiaries has obtained all
permits, licenses and other authorizations that are required under all
applicable Federal, State, Local and Foreign environmental laws,
including but not limited to the Federal Water Pollution Control Act
(33 U.S.C. Section 1251 ET SEQ.), Resource Conservation & Recovery Act
(42 U.S.C. Section 6901 ET SEQ.), Safe Drinking Water Act (21 U.S.C.
Section 349, 42 U.S.C. Sections 201, 300f), Toxic
-9-
<PAGE>
Substances Control Act (15 U.S.C. Section 2601 ET SEQ.),
Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 ET SEQ.), the appropriate laws of any state in which the
Company or any of its subsidiaries owns or leases real property and any
other laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land), or
otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes or under any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated
or approved thereunder (collectively, the "Environmental Laws"), except as
otherwise set forth in the Prospectus or to the extent failure to have
any such permit, license or authorization, individually, or in the
aggregate, does not have a material adverse effect on the condition
(financial or otherwise) or the earnings, business affairs or business
prospects of the Company and its subsidiaries, taken as a whole;
(ii) except as described in the Prospectus, each of the Company and its
subsidiaries is in compliance with all terms and conditions of any
required permits, licenses and authorizations, and is also in compliance
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws, except to the extent failure to
comply would not have a material adverse effect on the condition
(financial or otherwise) or the earnings, business affairs or business
prospects of the Company and its subsidiaries, taken as a whole; and (iii)
except as disclosed in the Prospectus, the Company and its susidiaries
do not have any material liabilities arising under Environmental Laws;
(ad) (i) There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, or plans
relating to the business as presently being conducted by the Company or
its subsidiaries that interfere with or prevent compliance or continued
compliance with the Environmental Laws, or which would be reasonably
likely to give rise to any legal liability (whether statutory or common
law) or otherwise would be reasonably likely to form the basis of any
claim, action, demand, suit, proceeding, hearing, notice of violation,
study, investigation, remediation or cleanup based on or related to the
generation, manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge,
release into the workplace, the community or the environment of any
pollutant, contaminant, chemical or industrial, toxic, or hazardous
substance or waste, except for any liabilities or any claims, demands or
other actions specified above that will not individually or in the
aggregate have a material adverse effect on the Company and its
subsidiaries, taken as a whole, and (ii) except as previously disclosed
to the Underwriters or their counsel, no asbestos-containing material
and no underground or above-ground storage tanks are located on property
owned or leased by the Company or its subsidiaries and none have been
previously removed or filled by the Company or its subsidiaries or, to
the best of their knowledge, any predecessor of the Company or its
subsidiaries; and
-10-
<PAGE>
(ae) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K promulgated under the Securities
Act.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the several Underwriters an aggregate of
_________ Firm Securities, and each of the Underwriters agrees to purchase
from the Company, at a purchase price of $__________ per share, the
respective aggregate number of Firm Securities determined in the manner set
forth below. The obligation of each Underwriter to the Company shall be to
purchase that portion of the number of shares of Common Stock to be sold by
the Company pursuant to this Agreement as the number of Firm Securities set
forth opposite the name of such Underwriter on Schedule I bears to the total
number of Firm Securities to be purchased by the Underwriters pursuant to
this Agreement, in each case adjusted by you such that no Underwriter shall
be obligated to purchase Firm Securities other than in 100 share amounts. In
making this Agreement, each Underwriter is contracting severally and not
jointly.
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the Underwriters, as required (for the
sole purpose of covering over-allotments in the sale of the Firm Securities),
up to _______ Option Securities at the purchase price per share of the Firm
Securities being sold by the Company as stated in the preceding paragraph.
The right to purchase the Option Securities may be exercised by your giving
48 hours' prior written or telephonic notice (subsequently confirmed in
writing) to the Company of your determination to purchase all or a portion of
the Option Securities. Such notice may be given at any time within a period
of 30 days following the date of this Agreement. Option Securities shall be
purchased severally for the account of each Underwriter in proportion to the
number of Firm Securities set forth opposite the name of such Underwriter in
Schedule I hereto. No Option Securities shall be delivered to or for the
accounts of the Underwriters unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided. The respective purchase obligations of each Underwriter shall be
adjusted by you so that no Underwriter shall be obligated to purchase Option
Securities other than in 100 share amounts. The Underwriters may cancel any
purchase of Option Securities at any time prior to the Option Securities
Delivery Date (as defined in Section 4 hereof) by giving written notice of
such cancellation to the Company.
3. The Underwriters propose to offer the Securities for sale upon the
terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Firm Securities to be
purchased by each Underwriter hereunder shall be delivered by or on behalf of
the Company to you for the account of such Underwriter, against payment by
such Underwriter or on its behalf of the purchase price therefor by certified
or official bank check or checks, payable in New York Clearing House funds,
to the order of the Company, for the purchase price of the Firm Securities
being sold by the Company at the office of Schroder Wertheim & Co.
Incorporated, Equitable Center, 787 Seventh Avenue, New York, New York, at
9:30 A.M.,
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New York City time, on __________ __, 199_, or at such other time, date and
place as you and the Company may agree upon in writing, such time and date
being herein called the "Time of Delivery."
Certificates in definitive form for the Option Securities to be
purchased by each Underwriter hereunder shall be delivered by or on behalf of
the Company to you for the account of such Underwriter, against payment by
such Underwriter or on its behalf of the purchase price thereof by certified
or official bank check or checks, payable in New York Clearing House funds,
to the order of the Company, for the purchase price of the Option Securities,
in New York, New York, at such time and on such date (not earlier than the
Time of Delivery nor later than ten business days after giving of the notice
delivered by you to the Company with reference thereto) and in such
denominations and registered in such names as shall be specified in the
notice delivered by you to the Company with respect to the purchase of such
Option Securities. The date and time of such delivery and payment are herein
sometimes referred to as the "Option Securities Delivery Date." The
obligations of the Underwriters shall be subject, in their discretion, to the
condition that there shall be delivered to the Underwriters on the Option
Securities Delivery Date opinions and certificates, dated such Option
Securities Delivery Date, referring to the Option Securities, instead of the
Firm Securities, but otherwise to the same effect as those required to be
delivered at the Time of Delivery pursuant to Section 7(d), 7(e), 7(f) and
7(i).
Certificates for the Firm Securities and the Option Securities so to be
delivered will be in good delivery form, and in such denominations and
registered in such names as you may request not less than 48 hours prior to
the Time of Delivery and the Option Securities Delivery Date, respectively.
Such certificates will be made available for checking and packaging in New
York, New York, at least 24 hours prior to the Time of Delivery and Option
Securities Delivery Date.
5. The Company covenants and agrees with each of the Underwriters:
(a) If the Registration Statement has not become effective, to
file promptly the Final Amendment with the Commission and use its best
efforts to cause the Registration Statement to become effective; if the
Registration Statement has become effective, to file promptly the Rule
430A Prospectus with the Commission; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you after reasonable notice thereof; to advise you,
promptly after it receives notice thereof of the time when the
Registration Statement, or any amendment thereto, or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed, of the issuance by
the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of
the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for
the amending or supplementing of the Registration Statement or Prospectus
or for additional information; and in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
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Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain withdrawal of
such order;
(b) Promptly from time to time to take such action as you may
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) To furnish each of the Representatives and counsel for the
Underwriters, without charge, signed copies of the registration
statement originally filed with respect to the Securities and each
amendment thereto (in each case including all exhibits thereto) and to
each other Underwriter, without charge, a conformed copy of such
registration statement and each amendment thereto (in each case without
exhibits thereto) and, so long as a prospectus relating to the
Securities is required to be delivered under the Act, as many copies of
each Preliminary Prospectus, the Prospectus and all amendments or
supplements thereto as you may from time to time reasonably request. If
at any time when a prospectus is required to be delivered under the Act
an event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or if for
any other reason it shall be necessary to amend or supplement the
Prospectus in order to comply with the Act, the Company will forthwith
prepare and, subject to the provisions of Section 5(a) hereof, file with
the Commission an appropriate supplement or amendment thereto, and will
furnish to each Underwriter and to any dealer in securities, without
charge, as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance in
accordance with the requirements of Section 10 of the Act;
(d) To make generally available to its stockholders as soon as
practicable, but in any event not later than 45 days after the close of
the period covered thereby, an earnings statement in form complying with
the provisions of Section 11(a) of the Act covering a period of 12
consecutive months beginning not later than the first day of the
Company's fiscal quarter next following the Effective Date;
(e) To file promptly all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") subsequent to the
Effective Date and during any period when the Prospectus is required to
be delivered;
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<PAGE>
(f) For a period of five years from the Effective Date, to furnish
to its stockholders after the end of each fiscal year an annual report
(including a consolidated balance sheet and statements of income, cash
flow and stockholders' equity of the Company and its subsidiaries
certified by independent public accountants) and, as soon as practicable
after the end of each of the first three quarters of each fiscal year
(beginning with the fiscal quarter ending after the Effective Date),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the Effective Date, to
furnish to you copies of all reports or other communications (financial
or other) furnished to its stockholders, and deliver to you (i) as soon
as they are available, copies of any reports and financial statements
furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and
(ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably request
in connection with your obligations hereunder;
(h) To apply the net proceeds from the sale of the Securities in
the manner set forth in the Prospectus under the caption "Use of
Proceeds";
(i) That it will not, and will cause its subsidiaries, officers,
directors, employees, agents and affiliates not to, take, directly or
indirectly, any action designed to cause or result in, or that might
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities;
(j) That prior to the Time of Delivery there will not be any
change in the capital stock or material change in the short-term debt or
long-term debt of the Company or any of its subsidiaries, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company or any of its subsidiaries, otherwise than as
set forth or contemplated in the Prospectus;
(k) That it will not, during the period of 180 days after the date
hereof (other than pursuant to this Agreement), offer, sell, contract to
sell or otherwise dispose of any capital stock of the Company (or
securities convertible into, or exchangeable for, capital stock of the
Company), directly or indirectly, without the prior written consent of
Schroder Wertheim & Co. Incorporated, except for grants of stock options
under the Company's Stock Option Plan [; [WARRANTS]
(l) That it has caused the Securities to be included for quotation
on the Nasdaq National Market as of the Effective Date; and
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<PAGE>
(m) To file with the Commission such reports on Form SR as may
be required pursuant to Rule 463 under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid: i) the fees, disbursements and
expenses of counsel and accountants for the Company, and all other expenses,
in connection with the preparation, printing and filing of the Registration
Statement and the Prospectus and amendments and supplements thereto and the
furnishing of copies thereof, including charges for mailing, air freight and
delivery and counting and packaging thereof and of any Preliminary Prospectus
and related offering documents to the Underwriters and dealers; ii) the cost
of printing this Agreement, the Agreement Among Underwriters, the Selling
Agreement, communications with the Underwriters and selling group and the
Preliminary and Supplemental Blue Sky Memoranda and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
iii) all expenses in connection with the qualification of the Securities for
offering and sale under securities laws as provided in Section 5(b) hereof,
including filing and registration fees and the fees, disbursements and
expenses for counsel for the Underwriters in connection with such
qualification and in connection with Blue Sky surveys or similar advice with
respect to sales; iv) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing
any required review by the National Association of Securities Dealers, Inc.
of the terms of the sale of the Securities; v) all fees and expenses in
connection with quotation of the Securities on the Nasdaq National Market;
and vi) all other costs and expenses incident to the performance of their
obligations hereunder which are not otherwise specifically provided for in
this Section 6, including the fees of the Company's Transfer Agent and
Registrar, the cost of any stock issue or transfer taxes on sale of the
Securities to the Underwriters, the cost of the Company's personnel and other
internal costs, the cost of printing and engraving the certificates
representing the Securities and all expenses and taxes incident to the sale
and delivery of the Securities to be sold by the Company to the Underwriters
hereunder. It is understood, however, that, except as provided in this
Section, Section 8 and Section 11 hereof, the Underwriters will pay all their
own costs and expenses, including the fees of their counsel, stock transfer
taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties
and other statements of the Company herein are, at and as of the Time of
Delivery, true and correct, the condition that the Company shall have
performed all its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Registration Statement shall have become effective, and
you shall have received notice thereof not later than 10:00 P.M., New
York City time, on the date of execution of this Agreement, or at such
other time as you and the Company may agree; if required, the Prospectus
shall have been filed with the Commission in the manner and within the
time period required by Rule 424(b); no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the
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<PAGE>
Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) All corporate proceedings and related legal and other matters
in connection with the organization of the Company and the registration,
authorization, issue, sale and delivery of the Securities shall have
been reasonably satisfactory to Milbank, Tweed, Hadley & McCloy
("Milbank"), counsel to the Underwriters, and Milbank shall have been
timely furnished with such papers and information as they may reasonably
have requested to enable them to pass upon the matters referred to in
this subsection;
(c) You shall not have advised the Company that the Registration
Statement or Prospectus, or any amendment or supplement thereto,
contains an untrue statement of fact or omits to state a fact which in
your judgment is in either case material and, in the case of an
omission, is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(d) Spolin & Silverman, counsel to the Company, shall have
furnished to you their written opinion, dated the Time of Delivery, in
form and substance satisfactory to you, to the effect that:
i) The Company has been duly and validly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Delaware, and is qualified to do business and is in
good standing in each jurisdiction in which its ownership or
leasing of properties requires such qualification or the conduct of
its business requires such qualification (except where the failure
to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business affairs or
prospects of the Company and its subsidiaries, taken as a whole);
and the Company has all necessary corporate power and all material
governmental authorizations, permits and approvals required to own,
lease and operate its properties and conduct its business as
described in the Prospectus;
ii) Each of the Company's subsidiaries (other than TST) has
been duly and validly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of
its incorporation and, in the case of TST, has been duly formed and
is validly existing as a partnership in good standing under the
laws of its jurisdiction of formation, and is qualified to do
business and is in good standing in each jurisdiction in which its
ownership or leasing of properties requires such qualification or
the conduct of its business requires such qualification (except
where the failure to so qualify would not have a material adverse
effect on the condition, financial or otherwise, or the business
affairs or prospects of the Company and its subsidiaries, taken as
a whole); and each of the Company's subsidiaries has all necessary
power (corporate or otherwise) and all material governmental
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<PAGE>
authorizations, permits and approvals required to own, lease and
operate its properties and to conduct its business as described in
the Prospectus;
iii) Except for TST, all the outstanding shares of capital
stock of each of the Company's subsidiaries, and, in the case of
TST, all partnership interests have been duly authorized and are
validly issued and outstanding, are fully paid and non-assessable
and are owned by the Company of record and to the best knowledge of
such counsel, (A) beneficially and (B) free and clear of all liens,
pledges, encumbrances, equities, security interests or claims of
any nature whatsoever; and neither the Company nor any of its
subsidiaries has granted any outstanding options, warrants or
commitments with respect to any shares of its capital stock, or, in
the case of TST, any partnership interests, whether issued or
unissued, except as otherwise described in the Prospectus;
iv) The Company has an authorized capitalization as set forth
in the Registration Statement and all the issued shares of capital
stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; are free of any
preemptive rights, and were issued and sold in compliance with all
applicable Federal and state securities laws; except as described
in the Prospectus, to the knowledge of such counsel, there are no
outstanding options, warrants or other rights calling for the
issuance of, and there are no commitments, plans or arrangements to
issue, any shares of capital stock of the Company; the Securities
being sold by the Company have been duly and validly authorized
and, when duly countersigned by the Company's Transfer Agent and
Registrar and issued, delivered and paid for in accordance with the
provisions of the Registration Statement and this Agreement, will
be duly and validly issued, fully paid and non-assessable; the
Securities conform to the description thereof in the Prospectus;
the Securities have been duly authorized for quotation on the
Nasdaq National Market, as of the Effective Date; and the
certificates for the Securities as are in valid and sufficient
form;
v) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened to which
the Company or any of its subsidiaries or any of their respective
officers or directors is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
resolved against the Company or any of its subsidiaries or any of
their respective officers or directors, individually, or to the
extent involving related claims or issues, in the aggregate, is of
a character required to be disclosed in the Prospectus which has
not been properly disclosed therein;
vi) This Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its terms,
except as enforceability
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<PAGE>
of the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and except as enforceability of those provisions relating to indemnity
may be limited by the Federal securities laws and principles of public
policy;
vii) The Company has full corporate power and authority to
execute, deliver and perform this Agreement, and the execution,
delivery and performance of this Agreement, the consummation of the
transactions herein contemplated and the issue and sale of the
Securities and the compliance by the Company with all the
provisions of this Agreement will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge, claim or encumbrance upon, any of the property or assets of
the Company or any of its subsidiaries pursuant to, the terms of
any indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation, the By-Laws, the
Certificate of Limited Partnership or the Partnership Agreement in
each case as amended [and restated], of the Company or any of its
subsidiaries, or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
viii) No consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or other governmental body is required for the
issue and sale of the Securities or the consummation of the other
transactions contemplated by this Agreement, except such as have
been obtained under the Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the
Under-writers;
ix) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries is currently in violation of
its Certificate of Incorporation, the By-laws, the Certificate of
Limited Partnership or the Partnership Agreement or in default
under, any indenture, mortgage, deed of trust, lease, bank loan or
credit agreement or any other agreement or instrument of which such
counsel has knowledge to which the Company or any of its
subsidiaries is a party or by which any of them or any of their
property may be bound or affected (in any respect that is material
in light of the financial condition of the Company and its
subsidiaries, taken as a whole);
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x) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of,
any Securities pursuant to the Company's Certificate of
Incorporation or By-Laws, in each case as amended to the date
hereof, or any agreement or other instrument known to such counsel;
and no holders of securities of the Company have rights to the
registration thereof under the Registration Statement or, if any
such holders have such rights, such holders have waived such rights;
xi) To the extent summarized therein, all contracts and
agreements summarized in the Registration Statement and the
Prospectus are fairly summarized therein, conform in all material
respects to the descriptions thereof contained therein, and, to the
extent such contracts or agreements or any other material
agreements are required under the Act or the rules and regulations
thereunder to be filed, as exhibits to the Registration Statement,
they are so filed; and such counsel does not know of any contracts
or other documents required to be summarized or disclosed in the
Prospectus or to be so filed as an exhibit to the Registration
Statement, which have not been so summarized or disclosed, or so
filed;
xii) All descriptions in the Prospectus of statutes,
regulations (including, without limitation, those of the FAA) or
legal or governmental proceedings are fair summaries thereof and
fairly present the information required to be shown with respect to
such matters;
xiii) Nothing has come to such counsel's attention to give
such counsel reason to believe that any of the representations and
warranties of the Company contained in this Agreement or in any
certificate or document contemplated under this Agreement to be
delivered are not true or correct or that any of the covenants and
agreements herein contained to be performed on the part of the
Company or any of the conditions herein contained, or set forth in
the Registration Statement and the Prospectus, to be fulfilled or
complied with by the Company have not been or will not be duly and
timely performed, fulfilled or complied with; and
xiv) The Registration Statement has become effective under the
Act, the Prospectus has been filed in accordance with Rule 424(b)
of the rules and regulations of the Commission under the Act,
including the applicable time periods set forth therein, or such
filing is not required and, to the best knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act, and the
Registration Statement, the Prospectus and each amendment or
supplement thereto, as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
it being understood that such counsel need express no
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opinion as to the financial statements and schedules or other
financial data contained in the Registration Statement or the
Prospectus.
Such counsel shall also state that nothing has come to such
counsel's attention that would lead such counsel to believe that
either the Registration Statement or any amendment or supplement
thereto, at the time such Registration Statement or amendment or
supplement became effective and as of the Time of Delivery, or the
Prospectus or any amendment or supplement thereto, as of its date
and as of the Time of Delivery, contains or contained any untrue
statement of material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
In rendering their opinions set forth in Section 7(d) above,
such counsel may rely, to the extent deemed advisable by such
counsel, (a) as to factual matters, upon certificates of public
officials and officers of the Company, and (b) as to the laws of
any jurisdiction other than the United States and jurisdictions in
which they are admitted, on opinions of counsel (provided, however,
that you shall have received a copy of each of such opinions which
shall be dated the Time of Delivery, addressed to you or otherwise
authorizing you to rely thereon, and Spolin & Silverman in its
opinion to you delivered pursuant to this subsection, shall state
that such counsel are satisfactory to them and Spolin & Silverman
has no reason to believe that the Underwriters and they are not
justified to so rely);
(e) Milbank, counsel to the Underwriters, shall have furnished to
you their written opinion or opinions, dated the Time of Delivery, in
form and substance satisfactory to you, with respect to the
incorporation of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as you
may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass
upon such matters;
(f) At the time this Agreement is executed and also at the Time of
Delivery, Price Waterhouse LLP shall have furnished to you a letter or
letters, dated the date of this Agreement and the Time of Delivery, in
form and substance satisfactory to you, to the effect, that:
i) They are independent accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
ii) In their opinion the consolidated financial statements of
the Company and its subsidiaries (including the related schedules
and notes) included in the Registration Statement and Prospectus
and covered by their reports included therein comply as to form in
all material respects with the
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applicable accounting requirements of the Act and the published
rules and regulations thereunder;
iii) On the basis of specified procedures as of a specified
date not more than five days prior to the date of their letter
(which procedures do not constitute an examination made in
accordance with generally accepted auditing standards), consisting
of a reading of the latest available unaudited interim consolidated
financial statements of the Company and its subsidiaries, a reading
of the latest available minutes of any meeting of the Board of
Directors and stockholders of the Company and its subsidiaries
since the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company and its
subsidiaries who have responsibility for financial and accounting
matters, and such other procedures or inquiries as are specified in
such letter, nothing came to their attention that caused them to
believe that:
(A) the unaudited consolidated condensed financial
statements of the Company and its subsidiaries included in the
Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Act and the
rules and regulations promulgated thereunder or are not
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited consolidated financial statements included
in the Registration Statement and the Prospectus;
(B) as of a specified date not more than five days prior
to the date of their letter, there was any change in the
capital stock, or the long-term debt or short-term debt of the
Company and its subsidiaries on a consolidated basis, or any
decrease in total assets, net current assets, net assets or
stockholders' equity or other items specified by the
Representatives, of the Company and its subsidiaries on a
consolidated basis, each as compared with the amounts shown on
the December 31, 1996 balance sheet included in the
Registration Statement and the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or such other changes,
decreases or increases which are described in their letter and
which do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the
purchase and delivery of the Securities as contemplated by the
Registration Statement; and
(C) for the period from January 1, 1997 to a specified
date not more than five days prior to the date of such letter,
there was any decrease, as compared with the corresponding
period of the preceding fiscal year, in the following
consolidated amounts: net sales, income from operations,
income before provision for income taxes, net income
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or net income per share of the Company and its subsidiaries,
except in all instances for decreases which the Registration
Statement discloses have occurred or may occur; or such other
decreases which are described in their letter and which do
not, in the sole judgment of the Representatives, make it
impractical or inadvisable to proceed with the purchase and
delivery of the Securities as contemplated by the Registration
Statement; and
iv) in addition to the examination referred to in their
reports included in the Registration Statement and the Prospectus
and the limited procedures referred to in clause (iii) above, they
have carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived
from the general accounting records of the Company and its
subsidiaries which appear in the Prospectus, or in Part II of, or
in exhibits and schedules to, the Registration Statement, and have
compared such amounts and financial information with the accounting
records of the Company and its subsidiaries and have found them to
be in agreement and have proved the mathematical accuracy of
certain specified percentages.
v) On the basis of a reading of the pro forma consolidated
financial statements included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would
not necessarily reveal matters of significance with respect to the
comments set forth in this clause (v), inquiries of certain
officials of the Company and its consolidated subsidiaries who have
responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the pro forma consolidated financial
statements, nothing came to their attention that caused them to
believe that the pro forma consolidated financial statements do not
comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
(g) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information
is given in the Prospectus, there shall not have been any change in the
capital stock (other than shares issued pursuant to the exercise of
options issued pursuant to the 1993 Plan or pursuant to the terms of
convertible securities of the Company outstanding on the date hereof) or
short-term debt or long-term debt of the Company or any of its
subsidiaries nor any change or any development involving a prospective
change, in or affecting the general affairs, management, financial
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position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case is in your judgment so
material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities on
the terms and in the manner contemplated in the Prospectus;
(h) Between the date hereof and the Time of Delivery there shall
have been no declaration of war by the Government of the United States;
at the Time of Delivery there shall not have occurred any material
adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United
States or any outbreak or material escalation of hostilities or other
calamity or crisis, the effect of which is such as to make it, in the
judgment of the Representatives, impracticable to market the Securities
or to enforce contracts for the resale of Securities and no event shall
have occurred resulting in (i) trading in securities generally on the
New York Stock Exchange or in the Common Stock on the principal
securities exchange or market in which the Common Stock is listed or
quoted being suspended or limited or minimum or maximum prices being
generally established on such exchanges or market, or (ii) additional
material governmental restrictions, not in force on the date of this
Agreement, being imposed upon trading in securities generally by the New
York Stock Exchange or in the Common Stock on the principal securities
exchange or market in which the Common Stock is listed or quoted or by
order of the Commission or any court or other governmental authority, or
(iii) a general banking moratorium being declared by either Federal or
New York authorities;
(i) The Company shall have furnished or caused to be furnished to
you at the Time of Delivery certificates signed by the chief executive
officer and the chief financial officer, on behalf of the Company,
satisfactory to you as to such matters as you may reasonably request and
as to (i) the accuracy of the Company's representations and warranties
herein at and as of the Time of Delivery and (ii) the performance by the
Company of all its obligations hereunder to be performed at or prior to
the Time of Delivery; the Company shall have furnished or caused to be
furnished to you at the Time of Delivery certificates signed by the
chief executive officer and the chief financial officer, on behalf of
the Company, as to (i) the fact that they have carefully examined the
Registration Statement and Prospectus and, (a) as of the Effective Date,
the statements contained in the Registration Statement and the
Prospectus were true and correct and neither the Registration Statement
nor the Prospectus omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (b) since the Effective Date, no event has occurred that
is required by the Act or the rules and regulations of the Commission
thereunder to be set forth in an amendment of, or a supplement to, the
Prospectus that has not been set forth in such an amendment or
supplement; and (ii) the matters set forth in subsection (a) of this
Section 7;
(j) Each director, officer and five percent stockholder of the
Company shall have delivered to you an agreement not to offer, sell,
contract to sell or otherwise
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<PAGE>
dispose of any shares of capital stock of the Company (or securities
convertible into, or exchangeable for, capital stock of the Company),
directly or indirectly, for a period of 180 days after the date of this
Agreement, without the prior written consent of Schroder Wertheim & Co.
Incorporated; and
(k) The Company shall have delivered to you evidence that the
Securities have been authorized for quotation on the Nasdaq National
Market as of the Effective Date.
8. (a) The Company will indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act, from and
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky application or other document executed by the
Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all the Securities under the security laws thereof or filed
with the Commission or any securities association or securities exchange
(each, an "Application"), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements made therein not misleading, or (ii) any untrue statement or
alleged untrue statement made by the Company in Section 1 of this Agreement,
or (iii) the employment by the Company of any device, scheme or artifice to
defraud, or the engaging by the Company in any act, practice or course of
business which operates or would operate as a fraud or deceit, or any
conspiracy with respect thereto, in which the Company shall participate, in
connection with the issuance and sale of any of the Securities, and will
reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating, preparing to
defend, defending or appearing as a third-party witness in connection with
any such action or claim; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission relating to an Underwriter
made in any Preliminary Prospectus, the Registration Statement, the
Prospectus or such amendment or supplement or any Application in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through you expressly for use therein; [and PROVIDED, FURTHER,
that the indemnity agreement contained in this Section 8(a) with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter
(or any persons controlling such Underwriter) on account of any losses,
claims, damages, liabilities or litigation arising from the sale of
Securities to any person, if such Underwriter fails to send or give a copy of
the Prospectus, as the same may be then supplemented or amended, to such
person, within the time required by the Act and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus,
unless such failure is the result of noncompliance by the Company with
Section 5(c) hereof].
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(b) In addition to any obligations of the Company under Section 8(a),
the Company agrees that it shall perform its indemnification obligations
under Section 8(a) (as modified by the last paragraph of this Section 8(b))
with respect to counsel fees and expenses and other expenses reasonably
incurred by making payments within 45 days to the Underwriter in the amount
of the statements of the Underwriter's counsel or other statements which
shall be forwarded by the Underwriter, and that they shall make such payments
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to have
been improper by a court and a court orders return of such payments.
The indemnity agreement in Section 8(a) shall be in addition to any
liability which the Company may otherwise have and shall extend upon the same
terms and conditions to each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act.
(c) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or any Application, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement, the Prospectus or such amendment or supplement or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Underwriter relating to such Underwriter
through you expressly for use therein, and will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim.
The indemnity agreement in this Section 8(c) shall be in addition to any
liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the Company and to each person, if any, who controls the Company within the
meaning of the Act or the Exchange Act.
(d) Promptly after receipt by an indemnified party under Section 8(a)
or 8(c) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party
under Section 8(a) or 8(c) except to the extent it was unaware of such action
and has been prejudiced in any material respect by such failure or from any
liability which it may have to any indemnified party otherwise than under
such Section 8(a) or 8(c). In case any such action shall be brought against
any
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indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If, however,
(i) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party or (ii) an
indemnified party shall have reasonably concluded that representation of such
indemnified party and the indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them and the indemnified
party so notifies the indemnifying party, then the indemnified party shall be
entitled to employ counsel different from counsel for the indemnifying party
at the expense of the indemnifying party and the indemnifying party shall not
have the right to assume the defense of such indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to local counsel) for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same set of allegations or
circumstances. The counsel with respect to which fees and expenses shall be
so reimbursed shall be designated in writing by Schroder Wertheim & Co.
Incorporated in the case of parties indemnified pursuant to Section 8(a) and
by the Company in the case of parties indemnified pursuant to Section 8(c).
If at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 8(b), the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(e) In order to provide for just and equitable contribution under the
Act in any case in which (i) any Underwriter (or any person who controls any
Underwriter within the meaning of the Act or the Exchange Act) makes claim
for indemnification pursuant to Section 8(a) hereof, but is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that Section 8(a) provides for
indemnification in such case or (ii) contribution under the Act may be
required on the part of any Underwriter or any such
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<PAGE>
controlling person in circumstances for which indemnification is provided
under Section 8(c), then, and in each such case, each indemnifying party
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject as an indemnifying party hereunder (after
contribution from others) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Securities purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this Section 8(e) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 8(e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 8(e) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8(e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
Section 8(e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) Promptly after receipt by any party to this Agreement of notice of
the commencement of any action, suit or proceeding, such party will, if a
claim for contribution in respect thereof is to be made against another party
(the "contributing party"), notify the contributing party of the commencement
thereof; but the omission so to notify the
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contributing party will not relieve it from any liability which it may have
to any other party for contribution under the Act except to the extent it was
unaware of such action and has been prejudiced in any material respect by
such failure or from any liability which it may have to any other party other
than for contribution under the Act. In case any such action, suit or
proceeding is brought against any party, and such party notifies a
contributing party of the commencement thereof, the contributing party will
be entitled to participate therein with the notifying party and any other
contributing party similarly notified.
9. (a) If any Underwriter shall default in its obligation to purchase
the Firm Securities which it has agreed to purchase hereunder, you may in
your discretion arrange for you or another party or other parties to purchase
such Firm Securities on the terms contained herein. If the aggregate number
of Firm Securities as to which Underwriters default is more than one-eleventh
of the aggregate number of all the Firm Securities and within 36 hours after
such default by any Underwriter you do not arrange for the purchase of such
Firm Securities, then the Company shall be entitled to a further period of 36
hours within which to procure another party or other parties satisfactory to
you to purchase such Firm Securities on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Firm Securities, or the Company
notifies you that it has so arranged for the purchase of such Firm
Securities, you or the Company shall have the right to postpone the Time of
Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement
or the Prospectus or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Firm Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Firm Securities of such defaulting Underwriter or Underwriters by you or the
Company or both as provided in subsection (a) above, the aggregate number of
such Firm Securities which remain unpurchased does not exceed one-eleventh of
the aggregate number of all the Firm Securities, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number
of the Firm Securities which such Underwriter agreed to purchase hereunder
and, in addition, to require each non-defaulting Underwriter to purchase its
pro rata share (based on the number of Firm Securities which such Underwriter
agreed to purchase hereunder) of the Firm Securities of such defaulting
Underwriter or Underwriters for which such arrangements have not been made;
but nothing shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Firm Securities of a defaulting Underwriter or Underwriters by you or the
Company as provided in subsection (a) above, the aggregate number of such
Firm Securities which remain unpurchased exceeds one-eleventh of the
aggregate number of all the Firm Securities, or if the Company shall not
exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Firm Securities of a defaulting
Underwriter or
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<PAGE>
Underwriters, then this Agreement shall thereupon terminate without liability
on the part of any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity agreement in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or
on behalf of any Underwriter or any controlling person of any Underwriter, or
the Company, or an officer or director or controlling person of the Company,
and shall survive delivery of and payment for the Securities.
11. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon,
New York City time, on the first full business day after the Registration
Statement becomes effective, or at such time after the Registration Statement
becomes effective as you may authorize the sale of the Securities to the
public by Underwriters or other securities dealers, or (b) if the
Registration Statement has heretofore become effective, at the earlier of 24
hours after the filing of the Prospectus with the Commission or at such time
as you may authorize the sale of the Securities to the public by Underwriters
or securities dealers, unless, prior to any such time you shall have received
notice from the Company that it elects that this Agreement shall not become
effective, or you, or through you such of the Underwriters as have agreed to
purchase in the aggregate fifty percent or more of the Firm Securities
hereunder, shall have given notice to the Company that you or such
Underwriters elect that this Agreement shall not become effective; provided,
however, that the provisions of this Section and Section 6 and Section 8
hereof shall at all times be effective.
If this Agreement shall be terminated pursuant to Section 9 hereof, or
if this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company shall not
then be under any liability to any Underwriter except as provided in Section
6 and Section 8 hereof, but if this Agreement becomes effective and is not so
terminated but the Securities are not delivered by or on behalf of the
Company as provided herein because the Company has been unable for any reason
beyond its control and not due to any default by it to comply with the terms
and conditions hereof, the Company will reimburse the Underwriters through
you for all out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Securities,
but the Company shall then be under no further liability to any Underwriter
except as provided in Section 6 and Section 8 hereof.
12. The statements set forth in the last paragraph on the front cover
page of the Prospectus, the paragraph on the inside front cover of the
Prospectus containing stabilization language and the second paragraph under
the caption "Underwriting" in the Prospectus
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constitute the only information furnished by any Underwriter through the
Representatives to the Company for purposes of Sections 1(b), 1(c) and 8
hereof.
13. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by Schroder Wertheim & Co. Incorporated on behalf
of you as the Representatives.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail)
to you as the Representatives in care of Schroder Wertheim & Co.
Incorporated, Equitable Center, 787 Seventh Avenue, New York, New York 10019,
Attention: Syndicate Department; and if to the Company, shall be delivered
or sent by mail, telex or facsimile transmission (subsequently confirmed by
delivery or by letter sent by mail) to the address of the Company set forth
in the Registration Statement, Attention:________________________; PROVIDED,
HOWEVER, that any notice to any Underwriter pursuant to Section 8(d) hereof
shall be delivered or sent by mail, telex or facsimile transmission
(subsequently confirmed by delivery or by letter sent by mail) to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Section 8 and Section 10 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Underwriter shall
be deemed a successor or assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
16. This Agreement shall be construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws
principles thereof.
17. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the
same instrument. If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement among each of the
Underwriters and the Company. It is understood that your acceptance of this
letter on
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behalf of each of the Underwriters is pursuant to the authority set forth in
a form of Agreement Among Underwriters, manually or facsimile executed
counterparts of which, to the extent practicable and upon request, shall be
submitted to the Company for examination, but without warranty on your part
as to the authority of the signers thereof.
Very truly yours,
DeCrane Aircraft Holdings, Inc.
By:__________________________________
R. Jack DeCrane
Chairman and C.E.O.
Accepted as of the date hereof:
SCHRODER WERTHEIM & CO. INCORPORATED
DEAN WITTER REYNOLDS INC.
By: SCHRODER WERTHEIM & CO. INCORPORATED
By:__________________________________
Managing Director
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SCHEDULE I
Underwriter Number of Firm Securities
----------- -------------------------
Schroder Wertheim & Co. Incorporated . . . . . . .
Dean Witter Reynolds Inc.. . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . .
-----------
-----------
-----------
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<PAGE>
AMENDED AND RESTATED DECRANE AIRCRAFT HOLDINGS, INC.
1993 SHARE INCENTIVE PLAN
1. GENERAL. This Amended and Restated Share Incentive Plan (the "Plan")
provides eligible employees of DeCrane Aircraft Holdings, Inc., an Ohio
corporation (the "Company"), and its subsidiaries with the opportunity to
acquire or expand their equity interest in the Company by making available for
award or purchase Common Shares, without par value, of the Company ("Common
Shares"), through the granting of nontransferable options to purchase Common
Shares ("Stock Options"), the granting of Common Shares subject to temporal
restrictions on transfer and substantial risks of forfeiture ("Restricted
Stock"), and the granting of nontransferable options to receive payments based
on the appreciation of Common Shares ("SARs"). Stock Options, Restricted Stock
and SARs shall be collectively referred to herein as "Grants," and an individual
grant of Stock Options. Restricted Stock or SARs shall be individually
referred to herein as a "Grant".
It is intended that key employees may be granted simultaneously or from
time to time, Stock Options that qualify as incentive stock options ("Incentive
Stock Options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or Stock Options that do not so qualify ("Non-qualified
Stock Options"). No provision of the Plan is intended or shall be construed to
grant employees alternative rights in any Incentive Stock Option granted under
the Plan so as to prevent such Option from qualifying under Section 422 of the
Code.
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Exchange Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including, without limitation, Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be administered,
and Stock Options shall be granted and may be exercised, only in such a manner
as to conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Plan and Stock Options granted hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide continuing
incentives to key employees of the Company and of any subsidiary corporation of
the Company , by encouraging such key employees to acquire new or additional
share ownership in the Company, thereby increasing their proprietary interest in
the Company's business and enhancing their personal interest in the Company's
success.
<PAGE>
For purposes of the Plan, a "subsidiary corporation" consists of any
corporation fifty percent (50%) of the stock of which is directly or indirectly
owned or controlled by the Company.
3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective upon its
adoption by the Board of Directors, subject to approval by holders of a majority
of the outstanding shares of voting capital stock of the Company. If the plan
is not so approved within twelve (1) months after the date the Plan is adopted
by the Board of directors, the Plan and any Grants made hereunder shall be null
and void. However, if the Plan is so approved, no further shareholder approval
shall be required with respect to the making of Grants pursuant to the Plan,
except as provided in Section 12 hereof.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee selected by the Board of Directors of the Company (the "Board") by
majority and composed of no fewer than two (2) members of the Board (such
committee, the "Administrator"). No person shall be appointed to the
Administrator who, during the one-year period immediately preceding such
person's appointment to the Administrator, has received any Grants under the
Plan or any similar stock option or stock incentive plan, other than a formula-
based plan, maintained by the Company or any subsidiary corporation. A member
of the Administrator shall not be eligible to participate in the Plan while
serving on the Administrator.
A majority of the members of the Administrator shall constitute a quorum.
The acts of a majority of the members present at any meeting at which a quorum
is present (or acts unanimously approved in writing by the members of the
Administrator) shall constitute binding acts of the Administrator.
Subject to the terms and conditions of the Plan, the Administrator shall be
authorized and empowered:
(a) To select the key employees to whom Grants may be made;
(b) To determine the number of Common Shares to be covered by any Grant;
(c) To prescribe the terms and conditions of any Grants made under the
Plan, and the form(s) and agreement(s) used in connection with such
Grants, which shall include agreements governing the granting of
Restricted Stock, Stock Options and/or SARs, which may provide that
the stock which is the subject of any such Grant shall be subject to
the restrictions on transfer contained in any agreement
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in effect among the Company and one or more of its shareholders;
(d) To determine the time or times when Stock Options and/or SARs will be
granted and when they will terminate in whole or in part;
(e) To determine the time or times when Stock Options and SARs that are
granted may be exercised;
(f) To determine, at the time a Stock Option is granted under the Plan,
whether such Stock Option is an Incentive Stock Option entitled to the
benefits of Section 422 of the Code;
(g) To establish any other Stock Option agreement provisions not
inconsistent with the terms and conditions of the Plan or, where the
Stock Option is an Incentive Stock Option, with the terms and
conditions of Section 422 of the Code; and
(h) To determine whether SARs will be made part of any Grants consisting
of Stock Options, and to approve any SARs made part of any such Grants
pursuant to Section 9 hereof.
5. EMPLOYEES ELIGIBLE FOR GRANTS. Grants may be made from time to time to
those key employees of the Company or a subsidiary corporation who are
designated by the Administrator in its sole and exclusive discretion. Key
employees may include, but shall not necessarily be limited to, members of the
Board of Directors (excluding members of the Administrator) and officers of the
Company and any subsidiary corporation; however, Stock Options intended to
qualify as Incentive Stock Options shall only be granted to key employees while
actually employed by the Company or a subsidiary corporation. The Administrator
may grant more than one Stock Option, with or without SARs, to the same key
employee. No Stock Option shall be granted to any key employee during any
period of time when such key employee is on a leave of absence.
6. SHARES SUBJECT TO THE PLAN. The shares to be issued pursuant to any
Grant made under the Plan shall be Common Shares. Either Common Shares held as
treasury stock or authorized and unissued Common shares, or both, may be so
issued, in such amount or amounts within the maximum limits of the Plan as the
Administrator shall from time to time determine. In the event a SAR is granted
in tandem with a Stock Option pursuant to Section 9 and such SAR is thereafter
exercised in whole or in part, then such Stock Option or the portion thereof to
which the duly exercised SAR relates shall be deemed to have been exercised for
purposes of such
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Stock Option, but may be made available for reoffering under the Plan to any
eligible employee.
Subject to the provisions of the next succeeding paragraph of this Section
6 and the provisions of Section 7(h), the aggregate number of Common Shares that
can be actually issued under the Plan (exclusive of Restricted Stock forfeited
under the Plan before the holder thereof received any benefits of ownership,
such as dividends) shall be eight hundred sixty-seven thousand (867,000) Common
shares.
If, at any time subsequent to the date of adoption of the Plan by the Board
of Directors, the number of Common Shares are increased or decreased, or changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether as a result of a
stock split, stock dividend, combination or exchange of shares, redesignation,
merger, consolidation, recapitalization or otherwise): (1) there shall
automatically be substituted for each Common Share subject to an unexercised
Stock Option or SAR (in whole or in part) granted under the Plan, the number and
kind of shares of stock or other securities into which each outstanding Common
share shall be changed or for which each such Common Share, shall be exchanged;
(ii) the option price per Common share or unit of securities shall be increased
or decreased proportionately so that the aggregate purchase price for the
securities subject to a Stock Option or SAR shall remain the same as
immediately prior to such event; and (iii) any outstanding Restricted Stock that
is converted, exchanged or otherwise changed into a different number or kind of
stock or security shall continue to be subject to any such Restricted Stock. In
addition to the foregoing, the Administrator shall be entitled in the event of
any such increase, decrease or exchange of Common Shares to make other
adjustments to the securities subject to a Stock Option or SAR, the provisions
of the Plan, and to any related Stock Option or SAR agreements (including
adjustments which may provide for the elimination of fractional shares), where
necessary (under Section 422(a) (2) of the code or otherwise) to preserve the
terms and conditions of any Grants hereunder.
7. STOCK OPTION PROVISIONS.
(a). GENERAL. The Administrator may grant to key employees (also referred
to as "Optionees") nontransferable Stock Options that either qualify as
Incentive Stock Options under Section 422 of the Code or do not so qualify.
However, any Stock Option which is an Incentive Stock Option shall only be
granted within 10 years from the earlier of (I) the date this Plan is
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adopted by the Board of directors of the Company and (ii) the date this Plan is
approved by the shareholders of the Company.
(b) STOCK OPTION PRICE. The option price per Common Share which may be
purchased under an Incentive Stock Option under the Plan shall be determined by
the Administrator at the time of Grant, but shall not be less than one hundred
percent (100%) of the fair market value of a Common Share, determined as of the
date such Option is granted; however, if a key employee to whom an Incentive
Stock Option is granted is, at the time of the grant of such Option, an "owner"
as defined in Section 422(b) (6) of the Code (modified as provided in Section
424(d) of the Code) of more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any subsidiary corporation (a
"Substantial Shareholder"), the price per Common Share of such Option, as
determined by the Administrator, shall not be less than one hundred ten percent
(110%) of the market value of a Common share under each Stock Option granted
pursuant to the Plan which is not an Incentive Stock Option shall be determined
by the Administrator at the time of Grant. Except as specifically provided
above, the fair market value of a Common Share shall be determined in accordance
with procedures to be established by the Administrator. The day on which the
Administrator approves the granting of a Stock Option shall be considered the
date on which such Option is granted.
(c) PERIOD OF STOCK OPTION. The Administrator shall determine when each
Stock Option is to expire. However, no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years from the date upon which such
Option is granted. Further, no Incentive Stock Option granted to an employee
who is a Substantial Shareholder at the time of the grant of such Option shall
be exercisable after the expiration of (5) years from the date of grant of such
Option.
(d) LIMITATION ON EXERCISE AND TRANSFER OF STOCK OPTIONS. Only the key
employee to whom a Stock Option is granted may exercise such Option, except
where a guardian or other legal representative has been duly appointed for such
employee, and except as otherwise provided in the case of such employee's
death. No Stock Option granted hereunder shall be transferable by an optionee
other than by will or the laws of descent and distribution. No Stock Option
granted hereunder may be pledged or hypothecated, nor shall any such Option be
subject to execution, attachment or similar process.
(e) EMPLOYMENT, HOLDING PERIOD REQUIREMENTS FOR CERTAIN OPTIONS. The
Administrator may condition any Stock Option granted hereunder upon the
continued employment of the optionee by the Company or by a subsidiary
corporation, and may make any such Stock
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Option immediately exercisable. However, the Administrator will require that,
from and after the date of grant of any Incentive Stock Option granted hereunder
until the day three (3) months prior to the date such Option is exercised, such
optionee must be an employee of the Company or of a subsidiary corporation, but
always subject to the right of the Company or any such subsidiary corporation to
terminate such optionee's employment during such period (except if the
optionee's employment is terminated due to death or permanent and total
disability, in which event such period shall be one year). Each Stock Option
shall be subject to such additional restrictions as to the time and method of
exercise as shall be prescribed by the Administrator. Upon compliance with any
condition or requirement imposed by the Administrator pursuant to the foregoing,
a Stock Option or the appropriate portion thereof may be exercised in whole or
in part from time to time during the option period; however, such exercise
right(s) shall be limited to whole shares.
(f) PAYMENT FOR STOCK OPTION PRICE. A Stock Option shall be exercised by
an optionee giving written notice to the Company of his intention to exercise
the name, accompanied by full payment of the purchase price in cash or by check
or, with the consent of the Administrator, in whole or in part with a surrender
of Common Shares having a fair market value on the date of exercise equal to
that portion of the purchase price for which payment in cash or check is not
made. The Administrator may, in its sole discretion, approve other methods of
exercise for a Stock Option or payment o the option price, provided that no such
method shall cause any option to not qualify under Section 422 of the Code, or
cause any Common Share issued in connection with the exercise of an option not
to be a fully paid and non-assessable Common Share.
(g) CERTAIN REISSUANCES OF STOCK OPTIONS. To the extent Common Shares are
surrendered by an optionee in connection with the exercise of a Stock Option in
accordance with Section 7(f), the Administrator may in its sole discretion grant
new Stock Options to such optionee (to the extent Common Shares remain available
for Grants), subject to the following terms and conditions:
(i) The number of Common shares shall be equal to the number of
Common Shares being surrendered by the optionee;
(ii) The option price per Common Share shall be equal to the fair
market value of Common Shares, determined on the date of exercise
of the Stock Options whose exercise caused such Grant; and
(iii) The terms and conditions of such Stock Options shall in all other
respects replicate such terms
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and conditions of the Stock Options whose exercise caused such
Grant, except to the extent such terms and conditions are
determined to not be wholly consistent with the general
provisions of this Section 7, or in conflict with the remaining
provisions of this Plan.
(h) CANCELLATION AND REPLACEMENT OF STOCK OPTIONS AND RELATED RIGHTS. The
Administrator may at any time or from time to time permit the voluntary
surrender by an optionee who is the holder of any outstanding Stock Options
under the Plan, where such surrender is conditioned upon the granting to such
optionee of new Stock Options for such number of shares as the Administrator
shall determine, or may require such voluntary surrender as a condition
precedent to the grant of new Stock Options. The Administrator shall determine
the terms and conditions of new Stock Options, including the prices at and
periods during which they may be exercised, in accordance with the provisions of
this Plan, all or any of which may differ from the terms and conditions of the
Stock Options surrendered. Any such new Stock Options shall be subject to all
the relevant provisions of this Plan. The Common Shares subject to any Stock
Option so surrendered, and/or any Common Shares subject to any Stock Option that
has lapsed, been forfeited, or been cancelled and extinguished in connection
with the exercise of an SAR, shall no longer be charged against the limitation
provided in Section 6 of this Plan and may again become shares subject to the
Plan. The granting of new Stock Options under this plan shall be considered for
the purposes of the Plan as the granting of new Stock Options and not an
alteration, amendment or modification of the Plan or of the Stock Options being
surrendered.
(i) LIMITATION ON EXERCISABLE INCENTIVE STOCK OPTIONS. The aggregate fair
market value of the Common Shares first becoming subject to exercise as
Incentive Stock Options by a key employee during any given calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate
fair market value shall be determined as of the date such Option is granted,
taking into account, in the order in which granted, any other incentive stock
options granted by the Company, or by a parent or subsidiary thereof.
(j) WITHHOLDING OF TAXES. The Administrator may, in its sole discretion,
require, as a condition to any Grant or to the delivery of certificates for
shares issued hereunder, that the optionee pay to the Company, in cash, any
federal, state or local taxes of any kind required by law to be withheld with
Respect to any Grant or any delivery of Common Shares upon exercise thereof.
The Administrator, in its sole discretion, may permit optionees to pay such
taxes through the withholding of Common Shares otherwise deliverable to such
optionee in connection with such Grant or the
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delivery to the Company of Common Shares otherwise acquired by the optionee.
The fair Market Value of Common Shares withheld by the Company or tendered to
the Company for the satisfaction of tax withholding obligations under this
Section 7 (j) shall be determined on the date such Common Shares are withheld or
tendered. The Company, to the extent permitted or required by law, shall have
the right to deduct from any payment of any kind (including salary, bonus,
severance or insurance proceeds) otherwise due to an optionee any federal, state
or local taxes of any kind required by law to be withheld with respect to any
Grant or to the delivery of Common Shares under the Plan, or to retain or sell
without notice a sufficient number of Common Shares to be issued to such
optionee to cover any such taxes, provided that the Company shall not sell any
such Common Shares if such sale would be considered a sale by such optionee for
purposes of Section 16 of the Exchange Act.
8. RESTRICTED STOCK.
(a) GRANT. The Administrator shall determine the key employees to whom,
and the time or times at which, Grants of Restricted Stock will be made, the
number of shares of Restricted Stock to be granted, the price (if any) to be
paid by such key employees (subject to Section 8 (b)), the time or times within
which such Restricted Stock grants may be subject to forfeiture, and the other
terms and conditions of the grants in addition o those set forth in Section 8
(b). The Administrator may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Administrator may determine in its sole discretion.
(b) TERMS AND CONDITIONS. Restricted Stock granted under the Plan shall
contain any terms and conditions, not inconsistent with the provisions of the
Plan, which are deemed desirable by the Administrator. A key employee who
receives a grant of Restricted Stock shall not have any rights with respect to
such Grant unless and until such key employee has executed an agreement
evidencing such Grant in the form approved from time to time by the
Administrator, has delivered a fully executed copy thereof to the Company, and
has otherwise complied with the applicable terms and conditions of such Grant.
In addition, Restricted Stock granted under the Plan shall be subject to the
following terms and conditions:
(i) The purchase price for Common Shares consisting of Restricted Stock,
if any, will be specified by the Administrator.
(ii) Grants of Restricted stock shall only be accepted by executing a
Restricted Stock agreement and paying, in cash or by check, whatever
price (if any) is required under Section 8 (b) (I).
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(iii) Each key employee granted Restricted Stock shall be issued a
stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of such key
employee and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Grant.
(iv) Any stock certificates evidencing Common Shares consisting of
Restricted Stock shall either (a) be held in custody by the
Company until the employment and other restrictions thereon shall
all have lapsed; or (B) be affixed with a legend, identifying
such Shares as Restricted Stock and expressly prohibiting the
sale, transfer, tender, pledge assignment or encumbrance of such
Shares, as the Administrator shall determine. With respect to
any Restricted Stock held in custody by the Company, the key
employee granted such Restricted Stock shall deliver to the
Company a stock power, endorsed in blank, relating to the Common
Shares represented by such Stock. With respect to any Restricted
Stock held by a key employee under legend, the key employee
granted such Restricted Stock shall deliver to the Company an
acknowledgement that such Stock remains subject to a substantial
risk of forfeiture in the event of termination of employment
under certain circumstances, and that the certificates
representing ownership of such Stock will be surrendered to the
Company immediately upon any such termination of employment.
(v) Subject to the provisions of the Plan and the Restricted Stock
agreement, during a temporal period set by the Administrator and
commencing with the date of such Grant (the "Restriction
Period"), a key employee shall not be permitted to sell,
transfer, tender, pledge, assign or otherwise encumber any
Restricted Stock granted under the Plan. However, the
Administrator, in its sole discretion, may provide for the lapse
of such transfer or other restrictions in installments, or
accelerate or waive such restrictions in whole or in part, based
on service, performance or other factors and criteria selected by
the Administrator.
(vi) Except as provided in this Section 8(b) (vi) and in Section 8(b)
(v), a key employee shall have, with respect to shares of
Restricted Stock granted to him, all of the rights of a
shareholder of the
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Company, including the right to vote such Stock and the right to
receive any dividends thereon. The Administrator, in its sole
discretion and as determined at the time of a Grant of Restricted
Stock, may permit or require cash dividends otherwise due and
payable to be deferred and, if the Administrator so determines,
reinvested either in additional Restricted Stock (to the extent
Common Shares are available), or otherwise. Stock dividends
issued with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock. As Restricted Stock, such
additional Common Shares will be subject to the same
restrictions, terms and conditions applicable to the Restricted
Stock with respect to which such additional Common Shares were
issued.
(vii) No Restricted Stock shall be transferable by a key employee other
than by will or by the laws of descent and distribution.
(viii) In the event Restricted Stock is forfeited by a key employee, the
Company will refund to such key employee any payment(s) made by
such key employee to purchase such Stock, promptly upon such
forfeiture (and any corresponding surrender of stock
certificates).
(c) MINIMUM VALUE PROVISIONS. To ensure that Grants of Restricted Stock
actually reflect the performance of the Company and service of the key employee,
the Administrator my provide, in its sole discretion, for a tandem performance-
based award, or other grant, designed to guarantee a minimum value, payable in
cash or Common Shares, to the recipient of a Restricted Stock Grant, subject to
such performance, future service, deferral and other terms and conditions as may
be specified by the Administrator.
9. STOCK APPRECIATION RIGHTS. A key employee may be granted the right to
receive a payment based on the increase in the value of Common Shares occurring
after the date of such Grant; such rights shall be known as Stock Appreciation
Rights ("SARs"). SARs may (but need not) be granted to a key employee in tandem
with, and exercisable in lieu of exercising, a Grant of Stock Options. SARs
will be specifically granted upon terms and conditions specified by the
Administrator, if the Company is the employer of the key employee, or by a
subsidiary corporation subject to the Administrator's approval, if such
subsidiary corporation is the employer of the key employee. No optionee shall
be entitled to SAR rights solely as a result of the grant of a Stock Option to
him. Any such rights, if granted, may only be exercised by the holder thereof,
either with respect to all, or a portion, of the Stock
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Option to which it applies. When granted in tandem with a Stock Option, an SAR
shall provide that the holder of a Stock Option shall have the right to receive
an amount equal to one hundred percent (100%) of the excess, if any, of the fair
market value of the Common Shares covered by such Option, determined as of the
date of exercise of such SAR by the Administrator (in the same manner as such
value is determined for purposes of the granting of Stock Options), over the
price to be paid for such Common Shares under such Option. Such amount shall be
payable by either the Company or the subsidiary corporation, whichever such
corporation is the employer of the key employee, in one or more of the following
manners, as determined by the Administrator:
(a) cash (or check);
(b) fully paid Common Shares having a fair market value equal to such
amount; or
(c) a combination of cash (or check) and Common Shares.
In no event may any person exercise any SARs granted hereunder unless (I) such
person is then permitted to exercise the Stock Option or the portion thereof
with respect to which such SARs relate, and (ii) the fair market value of the
Common Shares covered by the Stock Option, determined as provided above, exceeds
the option price of such Common Shares. Upon the exercise of any SARs , the
Stock Option, or that portion thereof to which such SARs relate, shall be
canceled and automatically extinguished. A SARs granted in tandem with a Stock
Option hereunder shall be made a part of the Stock Option agreement to which
such SAR relates, in a form approved by the Administrator and not inconsistent
with this Plan. The granting of a Stock Option or SAR shall impose no
obligation upon the optionee to exercise such Stock Option or SAR. The
Company's or a subsidiary corporation's obligation to satisfy SARs shall not be
funded or secured in any manner. No SAR granted hereunder shall be transferable
by the key employee granted such SAR, other than by will or the laws of descent
and distribution.
After the Grant of an SAR, an optionee intending to rely on an exemption
from Section 16(b) of the Exchange Act shall be required to hold such SAR for
six months (6) months from the date the price for such SAR is fixed to the date
of cash settlement. Additionally, in order to remain exempt from Section 16(b)
of the Exchange Act, a SAR must be exercised by an optionee subject to such
Section only during the period beginning on the third business day following the
release of a summary statement of the Company's quarterly or annual sales and
earnings and ending on the twelfth business day following said date.
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10. TERMINATION OF EMPLOYMENT. If a key employee ceases to be an employee
of the Company and every subsidiary corporation, for a reason other than death,
retirement, "permanent and total disability" (as defined below) or such key
employee's employment is terminated "without cause" (as defined below), his
Grants shall, unless extended by the Administrator on or before his date of
termination of employment, terminate on the effective date of such termination
of employment. Neither the key employee nor any other person shall have any
right after much date to exercise all or any part of his Stock Options or SARs,
and all Restricted Stock which is not vested or otherwise subject to restriction
shall thereupon be forfeited, and/or declared void and without value.
If termination of employment is due to death or permanent and total
disability or is without cause, then outstanding Stock Options and SARs may be
exercised within the one (1) year period ending on the anniversary of such
death, permanent and total disability or termination without cause (except that,
with respect to Incentive Stock Options held by key employees whose employment
is terminated without cause, such Incentive Stock Options must be exercised
within three months of the date of such termination). In the case of death,
such outstanding Stock Options and SARs shall be exercised by such key
employee's estate, or the person designated by such key employee by will, or as
otherwise designated by the laws of descent and distribution. Notwithstanding
the foregoing, in no event shall any Stock Option or SAR be exercisable after
the expiration of the option period, and in the case of exercises made after a
key employee's death, not to any greater extent then such key employee would
have been entitled to exercise such option or SAR at the time of his death.
Restricted Stock held by a key corporation terminates by reason of death shall
thereupon vest and all restrictions and risks of forfeiture thereon shall
thereupon lapse.
Subject to the discretion of the Administrator, in the event a key employee
terminates employment with the Company and all subsidiary corporations because
of normal or early retirement under any pension plan or retirement plan
hereafter adopted by the Company, or (in the case of Restricted Stock) permanent
and total disability, (a) any then-outstanding Stock Options and/or SARs held by
such key employee shall
lapse at the end of the term of such Stock Option or SAR, or thirty (3) days
after such retirement, whichever first occurs; and (b) any Restricted Stock held
by such key employee shall thereafter vest and any applicable restrictions shall
lapse, to the extent such Restricted Stock would have become vested or no longer
subject to restriction within one year from the time of termination had the key
employee continued to fulfill all of the conditions of the Restricted Stock
during such period (or on such accelerated basis as the Committee may determine
at or after date of Grant).
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For purposes hereof, "permanent and total disability" means a permanent and
total disability as defined in "without cause" means termination of the
employee's employment by the Company for reasons other than (i) conviction of
the employee for a felony or for any crime or offense lesser than a felony
involving the property of the Company or a subsidiary corporation or affiliate
of the Company; (ii) conduct by the employee that has caused demonstrable and
serious injury to the Company or a subsidiary, monetary or otherwise; or (iii)
substandard performance, or material misconduct or negligence in the
performance, of the employee's duties in the reasonable judgment of the Board.
In the event an employee of the Company or one of its subsidiary
corporations is granted a leave of absence by the Company or such subsidiary
corporation to enter military service or because of sickness, his employment
with the Company or such subsidiary corporation shall not be considered
terminated, and he shall be deemed an employee of the Company or such subsidiary
corporation during such leave of absence or any extension thereof granted by the
Company or such subsidiary corporation.
11. AMENDMENTS TO PLAN. The Administrator is authorized to interpret this
Plan and from time to time adopt any rules and regulations for carrying out this
Plan that it may deem advisable. Subject to the approval of the Board of
Directors of the Company, the Administrator may at any time amend, modify,
suspend or terminate this Plan. In no event, however, without the approval of
shareholders, shall any action of the Administrator or the Board of Directors
result in:
(a) Materially amending, modifying or altering the eligibility
requirements provided in Section 5 hereof;
(b) Materially increasing, except as provided in Section 6 hereof,
the maximum number of Common Shares that may be made subject to
Grants; or
(c) Materially increasing the benefits accruing to participants under
this Plan;
except to conform this Plan and any agreements made hereunder to changes in the
Code or required by governing law.
12. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The Administrator
may, if it deems appropriate, condition its grant of any Stock Option hereunder
upon receipt of the following investment representation from the optionee:
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"I agree that any Common Shares of DeCrane Aircraft Holdings, Inc. which I
may acquire by virtue of this Stock Option shall be acquired for investment
purposes only and not with a view to distribution or resale, and may not be
transferred, sold, assigned, pledged, hypothecated or otherwise disposed of
by me unless (I) a registration statement or post-effective amendment to a
registration statement under the Securities Act, with respect to said
Common Shares has become effective so as to permit the sale or other
disposition of said shares by me; or (ii) there is presented to DeCrane
Aircraft Holdings, Inc. an opinion of counsel satisfactory to DeCrane
Aircraft Holdings, Inc. to the effect that the sale or other proposed
disposition of said Common Shares by me may lawfully be made otherwise than
pursuant to an effective registration statement or post-effective amendment
to a registration statement relating to the said shares under the
Securities Act of 1933, as amended."
The Company shall not be required to issue any certificate or certificates
for Common Shares upon the exercise of any Stock Option or a SAR granted under
this Plan prior to (I) the obtaining of any approval from any governmental
agency which the Administrator shall, in its sole discretion, determine to be
necessary or advisable; (ii) the admission of such shares to listing on any
national securities exchange on which the Common Shares may be listed; (iii) the
completion of any registration or other qualifications of the Common Shares
under any state or federal law or ruling or regulations of any governmental body
which the Administrator shall, in its sole discretion, determine to be necessary
or advisable or the determination by the Administrator, in its sole discretion,
that any registration or other qualification of the Common Shares is not
necessary or advisable; or (iv) the obtaining of an investment representation
from the optionee in the form stated above or in such other form as the
Administrator, in its sole discretion, shall determine to be adequate.
13. GENERAL PROVISIONS. The form and substance of Stock Option Agreements,
Restricted Stock agreements, and SAR agreements made hereunder, whether granted
at the same or different times, need not be identical. Nothing in this Plan or
in any Stock Option, Restricted Stock or SAR agreement shall confer upon any
employee any right to continue in the employ of the Company or any of its
subsidiary corporations or affiliates or to interfere with or limit the right of
the Company or any subsidiary corporation or affiliate to terminate his
employment at any time, with or without cause. Nothing contained in this Plan
or in any Stock Option agreement or SAR shall be construed as entitling any
optionee to any rights of a shareholder as a result of the grant of Stock
Option or an SAR, until such time as Common Shares are actually issued to such
optionee pursuant to the exercise of such option or
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SAR. This Plan may be assumed by the successors and assigns of the Company.
The liability of the Company under this Plan and any sale made hereunder is
limited to the obligations set forth herein with respect to such sale and no
term or provision of this Plan shall be construed to impose any liability on the
Company in favor of any employee (or any other party acting on his behalf or in
his stand) with respect to any loss, cost or expense which such employee or
party may incur in connection with or arising out of any transaction in
connection with this Plan. The cash proceeds received by the Company from the
issuance of Common Shares pursuant to this Plan will be used for general
corporate purposes. The expense of administering this Plan shall be borne by
the Company. The captions and section numbers appearing in this Plan are
inserted only as a matter of convenience. They do not define, limit, construe
or describe the scope or intent of the provisions of this Plan.
14. PROVISIONS APPLICABLE SOLELY TO INSIDERS. The following provisions
shall apply only to persons who are subject to Section 16 of the Exchange Act
with respect to securities of the Company ("Insiders"), and shall apply to
Insiders notwithstanding any provision of the Plan to the contrary:
(a) No Insider shall be permitted to transfer any security of the
company acquired by him, except to the extent permitted by 17 C.F.R. Section
240.16a-2(d) (1), upon the exercise of any Stock Option, until at least six
months and one day after the later of (I) the day on which such security is
granted to the Insider or (ii) the day on which the exercise or conversion
price of such security is fixed.
(b) An Insider may elect to have shares withheld from a Grant or tender
shares to the Company in order to satisfy the tax withholding consequences of
a Grant only during the period beginning on the third business day following
the date on which the Company releases the financial information specified in
17 C.F.R. Section 240.16b-3(e) (1) (ii) and ending on the twelfth business
day following such date. Notwithstanding the foregoing, an Insider may elect
to have shares withheld from a Grant in order to satisfy tax withholding
consequences thereof by providing the Company with a written election to so
withhold at least six months in advance of the withholding of shares
otherwise issuable upon exercise of a Stock Option.
15. TERMINATION OF THIS PLAN. This Plan shall terminate on February 1,
2003, and thereafter no Stock Options, Restricted Stock or SARs shall be granted
hereunder. All Stock Options and SARs outstanding at the time of termination of
this Plan shall continue in full force and effect according to their terms and
the terms and conditions of this Plan.
-15-
<PAGE>
10.2 TAX SHARING AGREEMENT, DATED MARCH 15, 1993, BY AND AMONG D.A.H., INC.,
TSH AND HOLLINGSEAD INTERNATIONAL, INC.
TAX SHARING AGREEMENT
between
DeCRANE AIRCRAFT HOLDINGS, INC.
and
ITS SUBSIDIARY CORPORATIONS
Agreement dated March 15, 1993 by and among D.A.H., Inc. ("Parent") and each of
its undersigned subsidiaries:
WITNESSETH
WHEREAS, the parties hereto are members of an affiliated group ("Affiliated
Group") as defined in Section 1504(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, such Affiliated Group has filed a U.S. consolidated income tax return
for its taxable year ended August 31, 1991 and is required to file consolidated
income tax returns for subsequent years; and
WHEREAS, it is the intent and desire of the parties hereto that a method be
established for allocating the consolidated income tax liability of the
Affiliated Group among its members, for:
- Reimbursing the Parent for payment of such tax liability;
- Establishing payables/receivables among members arising from the
use of one member's losses or tax credits by other member(s) and
defining the circumstances under which cash is to be exchanged,
and;
- Providing for the allocation and payment of any refund arising
from a carryback of losses or tax credits from subsequent taxable
years;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein, the parties hereto agree as follows:
1. CONSENT TO FILE CONSOLIDATED TAX RETURN
A U.S. consolidated income tax return has been filed by the Parent for
the taxable year ended August 31, 1991 and shall be filed for each subsequent
taxable period in respect of which this agreement is in effect and for which the
Affiliated Group is required or permitted to file a consolidated tax return.
Each subsidiary shall execute and file such consent, elections, and other
documents that may be required or appropriate for the proper filing of such
return.
2. RESPONSIBILITY FOR PAYMENT OF CONSOLIDATED TAX LIABILITY
If, in any taxable year, there is a consolidated tax liability, the
Parent shall be responsible for the payment to the Internal Revenue Service of
the consolidated tax liability.
<PAGE>
3. METHOD OF ALLOCATION OF CONSOLIDATED TAX LIABILITY
(a) The Parent and each Subsidiary agree that the consolidated tax
liability for each year shall be apportioned among them in accordance with the
provisions of Regulation Section 1.1552-1(a)(2) for tax return purposes.
Regulation Section 1.1552-1(a)(2) requires the consolidated tax liability of the
group to be allocated among the members of the Affiliated Group on the basis of
the percentage of the total tax which the tax of such member, if computed on a
separate return basis, would bear to the total amount of the tax for all members
computed on a separate return basis.
(b) In addition, for financial statement ("book") purposes, the
Parent and each Subsidiary agree to the immediate allocation of 100% of the tax
benefits utilized to those members who generated the benefits. In determining
the amount of tax benefits utilized, all profitable members will establish a Tax
Payable account in an amount which equals their separate return liability (as
defined under Section 4), and all loss members establish a Tax Receivable
account in a corresponding amount.
In any year in which the total amount of tax benefits utilized by
the profitable members of the Affiliated Group are less than the total amount of
tax benefits available, the losses and credits of each member that has generated
such tax benefits will be deemed to be utilized in the same proportion as such
member's cumulative tax benefits bear to the total cumulative tax benefits of
all members.
(c) Each member of the group shall maintain a record of their tax
liability computed on a separate return basis for each year this agreement is in
effect for purposes of making the calculations under Section 3(a) and (b).
(d) If a member of the affiliated group is:
(1) merged into another member of the affiliated group, or
(2) liquidated into another member of the affiliated group,
then the successor corporation will assume any liability or succeed to any
benefit that the dissolving member would be obligated or entitled to under
Sections 3(a) and (b) if it had not been merged or liquidated.
4. DETERMINATION OF SEPARATE RETURN LIABILITY
(a) The term "separate tax liability" of each member, as it is used
in Section 3(b), means the amount of tax it would owe for each period in which
it is a member of the Affiliated Group, computed as if it had filed a separate
return for each period, adjusted as follows:
- 2 -
<PAGE>
(1) No surtax exemption will be allowed, and
(2) Net operating losses, tax credits (including the alternative
minimum tax credit) and other items which, under the Code,
could have been carried forward or back by a member if it
were filing a separate return shall be included in computing
its tax liability provided such attributes were generated in
a period in which it was a member of the Affiliated Group
and have not been deemed to be utilized by another member
under Section 3(b).
5. PAYMENT AMONG MEMBERS
(a) Each subsidiary shall pay to the Parent its share of tax
liability allocated under Section 3(a) UPON DEMAND FOR such payment from the
Parent.
(b) The only circumstances in which cash will be exchanged between
the subsidiaries with respect to the Tax Receivables/Payables established
pursuant to Section 3(b) are as follows:
(1) A previously non-profitable subsidiary AND the Affiliated
Group become profitable, or
(2) A subsidiary is sold.
Payments to members for benefits surrendered and utilized under Section 3(b),
will be paid UPON MEETING the conditions set forth in either (1) or (2) above.
(c) No interest will either accrue or be paid on the balances due
from one member to another which are attributable to Tax Payables/Receivables
arising under Section 3(b).
6. ESTIMATED TAX PAYMENTS
In the event the Affiliated Group is required to make quarterly
estimated tax payments, each subsidiary shall pay to the Parent its share of
each payment, as determined by the Parent, UPON receiving notice from the
Parent. Any amount paid by a subsidiary will be included in determining the
payments due under Section 5. Any overpayments of estimated tax will be
refunded to the subsidiary.
7. TERMINATION
(a) This agreement shall terminate with respect to any subsidiary on
the happening of any of the following events:
- 3 -
<PAGE>
(1) If the Parent and such subsidiary agree, in writing, to
terminate this agreement, or;
(2) Notwithstanding Section 3(d), if such subsidiary ceases to
be a member of the Affiliated Group.
(b) For purposes of this agreement, any subsidiary which is required
to recognize income or recapture credits as a result of an election made or
deemed to be made under IRC Section 338 shall be treated as if such income or
recaptured credits were generated after such subsidiary ceased being a member of
the affiliated group.
8. SUBSEQUENT ADJUSTMENTS
If the consolidated tax liability is adjusted for any taxable period,
whether by means of an amended return claim for refund or after a tax audit by
the Internal Revenue Service, the liability of each member shall be recomputed
to give effect to such adjustments, and in the case of a refund, the Parent
shall make payment to each member for its share of the refund, determined in the
same manner as in Section 3 above, AS SOON AS THE refund is received by the
Parent. In the case of an increase in tax liability, each member shall pay to
the Parent its allocable share of such increased tax liability under Section
3(a) after receiving notice of such liability from the Parent and recompute any
Tax Receivables/Payables required under Section 3(b) as well as payments
required under Section 5(b) based upon the adjusted separate return liabilities
of the members of the group.
9. NEW MEMBERS OF THE AFFILIATED GROUP
If, during a consolidated return period, the Parent or any subsidiary
acquires or organizes another corporation that is required to be included in the
consolidated return, then such corporation shall join in and be bound by this
agreement.
10. EFFECTIVE DATES
This agreement shall apply to the taxable year ending August 31, 1991
and all subsequent taxable periods unless the Parent and the subsidiaries agree
to terminate the agreement. Notwithstanding such termination, this agreement
shall continue in effect with respect to any payment or refund due for all
taxable periods prior to termination.
11. MISCELLANEOUS PROVISIONS
This agreement shall be binding upon and inure to the benefits of any
successor, whether by statutory merger, acquisition of assets or otherwise, to
any of the parties hereto, to the same extent as if the successor had been an
original party to the agreement.
- 4 -
<PAGE>
For the purposes of this section, the term "successor" shall include
the direct parent corporation of a subsidiary corporation that dissolves without
distributing any net assets to the direct parent.
IN WITNESS THEREOF, the parties hereto have caused this agreement to be executed
by their duly authorized representatives on March 15, 1993.
D.A.H., INC. TRI-STAR HOLDINGS, INC.
/s/ R. Jack DeCrane /s/ Robert Rankin
- ------------------------------ -----------------------------------
HOLLINGSEAD INTERNATIONAL, INC.
/s/ R. Jack DeCrane
-----------------------------------
- 5 -
<PAGE>
EXHIBIT 10.3
Employment Agreement dated September 1, 1994 between the Company and R. Jack
DeCrane.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this 1st
day of September, 1994 by and between DeCrane Aircraft Holdings, Inc. (the
"Company") and R. Jack DeCrane ("Executive") and is effective as of September 1,
1994 (the "Effective Date").
RECITALS
Executive is currently employed by the Company in the capacity of Chief
Executive Officer and is one of the key executives of the Company.
Executive agrees that in order to maintain consistency of management
within the Company, he will perform his duties as Chief Executive Officer.
The Board of Directors of the Company (the "Board") is encouraging
Executive to perform his assigned duties without distraction.
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Executive and the Company hereby
agree as follows:
1. TERM OF AGREEMENT. Except as otherwise provided herein, the Company
and Executive agree that Executive will remain in the employ of the Company
through August 31, 1998. The "Term of Agreement" as used herein shall refer
to the period commencing on the Effective Date and ending on August 31, 1998.
2. DUTIES. Executive agrees to serve the Company during the Term of
Agreement, to devote his full business time to the Company and to promote the
interests of the Company; provided, however, that nothing contained herein
shall prevent Executive from serving as a director or trustee of any other
corporation with the consent of the Company, which shall not be unreasonably
withheld. The Company agrees that it will not assign duties inconsistent
with those attendant to the position of Chief Executive Officer and a
director and will not decrease his responsibilities as currently in effect.
Except as so limited, the powers and duties of Executive are to be more
specifically determined by the Board from time to time.
3. COMPENSATION AND BENEFITS. During the Term of Agreement, Executive
shall receive the following compensation and benefits:
a. SALARY. During the Term of the Agreement, the Company shall pay
Executive, during the first year of the Term of Agreement, an annual salary
of $180,000, payable at least on a semi-monthly basis and during each
subsequent year of the Term of Agreement, an annual salary (payable at
least on a semi-monthly basis) at least equal to Executive's salary for the
<PAGE>
immediately preceding year plus an amount calculated in a manner at least
as favorable to Executive as the manner in which the pay increases for
other executives of the Company are calculated;
b. BONUS. During the Term of Agreement, the Company shall pay
Executive annual bonus payments as a percentage of his annual base salary
then in effect, based upon the Company's achievement of written mutually
agreed performance goals as set forth in the Company's operating plan.
Performance goals shall be established by the Board annually and shall be
based on pre-tax earnings of the Company. Pre-tax earnings ("EBITDA")
shall be calculated to mean the earnings of the Company and its
subsidiaries for the applicable fiscal year before interest and taxes,
before portions of cash expenses paid to prior owners of business acquired
by the Company which are accounted for as deferred consideration with
respect to such acquisitions, before amortization of non-cash expenses such
as noncompetition agreements, personal service contracts, prepaid
consulting, etc., before depreciation, before amortization of organization
costs, as determined in accordance with generally accepted accounting
principles, except that the EBITDA of each subsidiary acquired by the
Company during the fiscal year shall be accounted for as if such subsidiary
had been acquired on the first day of such fiscal year. The amount of
bonus, calculated as a percentage of Executive's salary, payable to
Executive is set forth below:
Level of achievement Bonus
-------------------- -----
EBITDA equals 80% of performance goal 30% of annual base salary
EBITDA equals 90% of performance goal 40% of annual base salary
EBITDA equals 100% of performance goal 50% of annual base salary
EBITDA equals 110% of performance goal 60% of annual base salary
Said bonus shall be deemed earned on a pro rata basis throughout the year.
c. INCENTIVE STOCK OPTIONS.
(i) Pursuant to the DeCrane Aircraft Holdings, Inc. 1993 Share
Incentive Plan (the "Plan"), Executive shall receive options to
purchase shares of the Company's common stock subject to the following
terms:
(1) Upon execution of this Agreement, the Company shall
grant to Executive options to purchase 275,000 shares of the
Company's common stock, such options to become exercisable
according to the schedule set forth on Exhibit A hereto;
2
<PAGE>
(2) All such options shall have an exercise price of
fifteen cents ($.15) per share.
(3) The options shall be exercisable for ten years from the
date of grant.
(4) All such options shall be immediately vested on the
date of grant.
(5) All such options shall be subject to the terms and
conditions of the Plan.
d. BENEFITS. During the Term of Agreement, the Company shall provide
and maintain in full force and effect through existing plans at least the
types and amounts of group insurance (including conversion features) and
benefits, including life (in an amount at least equal to $1,000,000),
health, disability and hospitalization insurance, and other health care
benefits, including medical, hospital and surgical benefits and health care
benefits for Executive, his spouse and eligible dependents (collectively
"Health Care Benefits") to which Executive was entitled in the immediately
preceding year or Health Care Benefits provided by the Company to other
senior executives (whichever would result in greater Health Care Benefits
to Executive); provided, however, that in no event will the Health Care
Benefits (but not including life insurance) be substantially different or
more expensive than those provided by the Company to other senior
executives;
e. PROFIT SHARING PLAN. The Company agrees that Executive will be a
participant on the same basis as all other employees in any profit sharing
plan that may be implemented during the Term of Agreement;
f. TRAVEL. During the Term of Agreement, the Company shall reimburse
all business-related travel, entertainment and other expenses;
g. VACATION. During the Term of Agreement, the Company shall provide
Executive with four weeks paid vacation time, annually; and
4. TERMINATION.
a. FOR CAUSE. The Company may terminate this Agreement for "Cause"
if: (i) Executive commits any material act of dishonesty constituting a
felony which results or is intended to result directly or indirectly in
substantial gain or personal enrichment to Executive at the expense of the
Company, or (ii) Executive willfully and continually fails to substantially
perform his duties with the Company (other than any such failure resulting
from incapacity due to
3
<PAGE>
mental or physical illness) after a written demand for substantial
performance is delivered to Executive by the Board which demand
specifically identifies the manner in which the Board believes that
Executive has not substantially performed his duties, and such failure
results in demonstrable material injury to the Company. This Agreement
shall in no event be considered terminated by the Company for Cause if such
termination was a result of (i) Executive's bad judgment or negligence, or
(ii) any act or omission without intent of gaining therefrom directly or
indirectly a profit to which Executive was not legally entitled, or (iii)
any act or omission by Executive believed in good faith to have been or not
opposed to the best interests of the Company, or (iv) any act or omission
by Executive with respect to which a determination shall have been made
that Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement of payment of expenses under the
regulations of the Company or the laws of the State of Ohio as in effect at
the time of such act or omission. This Agreement shall in no event be
considered terminated by the Company for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of two-thirds of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to Executive
and an opportunity for him, together with his counsel, to be heard before
the Board), finding that in the good faith opinion of the Board, Executive
was guilty of conduct set forth above in clauses (i) and (ii) of the first
sentence of this paragraph and specifying the particulars thereof in
detail.
b. WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. In the event the
Company terminates this Agreement without Cause or Executive terminates
this Agreement for Good Reason, the Company shall pay to Executive for one
year the following:
(i) base salary plus bonus in amount equal to the amount earned
in the immediately preceding year, payable at least on a semi-monthly
basis. Executive's right to receive compensation from the Company
pursuant hereto shall not be affected by Executive's receipt of
compensation in connection with any subsequent employment by any other
corporation or entity;
(ii) Health Care Benefits commensurate with those provided by
the Company to other senior executives for Executive, his spouse and
eligible dependents; provided, however, that in no event will the
Health Care Benefits (but not including life insurance) be
substantially different or more expensive than those provided by the
Company to other senior executives;
4
<PAGE>
(iii) the cost of relocation of Executive's belongings from
California to Copley, Ohio in an amount not to exceed $50,000; and
(iv) one-half of the cost of any outplacement services incurred
by Executive; provided that the amount payable by the Company shall
not exceed $20,000.
For purposes of this Agreement, "Good Reason" shall exist if (i) the
Company fails to honor its obligations hereunder, or (ii) the Company
requests Executive's resignation or retirement.
c. DEATH. In the event of Executive's death, the Company shall pay
to Executive's personal representative (i) base salary for one year,
payable at least on a semi-monthly basis, and (ii) Executive's bonus
through year-end. The Company shall also provide Health Care Benefits
commensurate with those provided by the Company to other senior executives
for Executive's spouse and eligible dependents for one year.
d. DISABILITY. In the event Executive becomes Disabled (as
hereinafter defined), the Company shall pay to Executive (i) base salary
for one year, payable at least on a semi-monthly basis, which year shall be
deemed to have commenced on the first day of the 180 day disability period
described below, and (ii) Executive's bonus through year-end. The Company
shall also provide Health Care Benefits commensurate with those provided to
other senior executives for Executive, his spouse and eligible dependents
for one year. For purposes of this Agreement, Executive shall be
considered "Disabled" only if, as a result of his incapacity due to mental
or physical illness, he shall have been absent from his duties with the
Company on a full-time basis for a period of 180 consecutive days, and (i)
a physician selected by him and approved by the Board is of the opinion
that he is suffering from total disability, and (ii) the Company has given
Executive 30 days written notice of potential termination, and within said
30 day period thereafter, Executive has not returned to the full-time
performance of his duties. During any period that Executive fails to
perform his duties hereunder due to mental or physical illness prior to
termination hereunder, Executive shall receive his full base salary at the
rate then in effect.
e. WITHOUT GOOD REASON. Executive may terminate the Agreement
without Good Reason upon 90 days written notice to the Company. In the
event Executive terminates the Agreement pursuant hereto, the Company
shall, at its option, (i) pay to Executive, at least on a semi-monthly
basis, an amount equal to his base salary for a period of one year or (ii)
release Executive from the non-competition provision contained in paragraph
5 hereof.
5
<PAGE>
5. NON-COMPETITION. Upon termination of this Agreement for any reason,
except in the event this Agreement is terminated by Executive pursuant to
paragraph 4(e) hereof and the Company makes an election under clause (ii)
thereof, Executive agrees that (a) for a period of 12 months from the date of
such termination, he will not, directly or indirectly, own, manage, control or
participate in the ownership, management or control of, or be employed or
engaged by or otherwise affiliated or associated as a consultant, independent
contractor or otherwise with, any corporation, partnership, proprietorship, firm
or association or other business entity, or otherwise engage in any business
which is engaged in, or competes with the business of the Company or any of its
subsidiaries (as conducted on the date of such termination), and (b) for a
period of 12 months from the date of such termination, he will not, directly or
indirectly, employ or otherwise associate in business with any officer or
employee of the Company or any of its subsidiaries, induce any officer or
employee of the Company or any of its subsidiaries to terminate his or her
relationship with the Company or induce any officer or employee to solicit
business or have any interest in the ownership, management or control of any
concern which does solicit business from any customer of record of the Company
or any of its subsidiaries, which, to Executive's knowledge, was such at the
time of termination of this Agreement. In the event of any breach by Executive
of the restrictions in this paragraph, the Company shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or future breach. Nothing in this paragraph shall be deemed to
limited the Company's remedies at law or in equity for any breach by Executive
hereof.
6. REGISTRATION RIGHTS AND SHAREHOLDER AGREEMENT. The Company covenants
that it will use its best efforts to cause the Registration Rights Agreement
and the Shareholder Agreement entered into by and among the Company, Executive
and certain shareholders of the Company to be amended to provide that the
incentive stock options granted pursuant to paragraph 3(c) of this Agreement
and the common shares of the Company to be received upon exercise thereof shall
be entitled to the same rights accorded to other shares owned by Executive
pursuant to those agreements. If Company is unable to cause the amendment of
said agreements, this Agreement shall be amended accordingly.
7. ASSIGNMENT. The rights of Executive under this Agreement are not
transferable by assignment or otherwise, shall not by subject to commutation or
encumbrance and shall not be subject to claims of Executive's creditors.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Executive and his heirs, and the Company and any successor thereto,
including any organization which shall succeed to substantially all of the
business and property of the Company, whether by means of merge, consolidation,
acquisition of substantially all of the assets of the Company or otherwise,
including by operation of law (a "Successor Organization"). The Company shall
not merge, reorganize,
6
<PAGE>
consolidate, sell all or substantially all of its assets, combine by operation
of law or otherwise with or to any Successor Organization unless, as a
condition to such transaction, the Successor Organization assumes the
obligations of the Company under this Agreement. For purposes of this
Agreement, the "Company" shall include any Successor Organization.
9. MISCELLANEOUS. This Agreement supersedes and makes void any prior
agreement between the parties and sets forth the entire agreement and
understanding of the parties hereto with respect to the matters covered hereby
and may not be amended or modified except by further written agreement of the
parties. This Agreement shall be governed and construed by the laws of the
State of Ohio. The invalidity of any term of this Agreement shall not
invalidate or otherwise affect any other term.
IN WITNESS WHEREOF, the parties have set hereunto their hands as of the
date first above written.
DECRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
----------------------------
Its:
---------------------------
/s/ R. Jack DeCrane
------------------------------
R. Jack DeCrane
7
<PAGE>
EXHIBIT A
Options granted to Executive pursuant to Section 3(c)(i) of the Agreement
shall become exercisable as follows:
Level of Achievement Number of Shares
-------------------- ----------------
Upon execution of the Agreement 50,000
45,000
45,000
45,000
45,000
45,000
<PAGE>
EXHIBIT 10.4
[LETTERHEAD]
Employment Agreement dated June 28, 1993
between Registrant and
Richard G. MacDonald
June 28, 1993
Mr. Richard G. MacDonald
4 El Paseo
Irvine, CA. 92175
Dear Dick,
This will confirm our previous discussions concerning the terms under
which you have accepted the position of President and Chief Operating Officer
of D.A.H. Inc.
Your base compensation will be at the rate of $150,000 per year with an
initial base salary adjustment review occurring in the first quarter of 1994.
Your benefit package will include the standard benefit program offered to all
employees at Tri-Star with the addition of an executive term life insurance
policy in the amount of $200,000.
You will be subject to an incentive program that will allow you the
opportunity to earn a annual cash incentive as follows:
% of Plan Bonus as a % of
Attainment Base Salary
---------- ---------------
80% 20%
90% 30%
100% 40%
110% 50%
You have already received an option program for 200,000 shares of D.A.H.
stock. This stock will have an equal five year vesting program and has a
nominal exercise price of $.15 per share.
We have agreed that you feel it is important to relocate you and your
wife from your existing home to a location closer to the operating companies.
You anticipate that the costs to move will be in the range of $25,000.
D.A.H. agrees to reimburse you for these costs, but not until sometime in
1994, when the company has repaid the existing bridge loan and has adequate
working capital availability.
In the event of a termination for other than cause, your then base salary
will be continued for a period of six months.
I look forward to working together with you in making D.A.H. a highly
profitable, growth oriented and successful company.
/s/ R. Jack DeCrane
R. Jack DeCrane
<PAGE>
EXHIBIT 10.5
RESTRICTIVE COVENANT AGREEMENT AMONG REGISTRANT ADS ACQUISITION, INC. AND THE
ALLARD CHILDREN'S TRUST F/B/O JOHN ALLARD.
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement ("Covenant") is among DeCrane Aircraft
Holdings, Inc. ("Buyer"), ADS Acquisition, Inc. ("Acquisition", collectively
with Buyer "Buyers") and The Allard Children's Trust f/b/o John R. Allard
("Seller");
A. Seller acknowledges that the consideration received from Buyers by
Seller for these Covenants is adequate.
B. Seller has owned and controlled ADS and has knowledge of the business,
prospects, customers, needs of the customers, product specifications, key
employees, future development of the business of ADS, each of which (if not
otherwise known to the public or other persons) Seller acknowledges that ADS
has advised Seller is either a trade secret ("Trade Secret") or confidential
information ("Confidential Information") of ADS; and that to the extent that
such Trade Secret or Confidential Information is a secret or is confidential,
it is owned by and belongs to ADS.
C. If Seller were to compete with the business of ADS, Seller's
competition is likely cause material harm to ADS and diminish the value of the
assets of ADS being sold by Seller to Buyers pursuant to the Agreement.
D. The Business of ADS is worldwide; ADS's sales occur throughout the
United States and in many foreign countries. If this Covenant were limited to
the Commonwealth of Pennsylvania, its scope would not be sufficient to protect
the interest of ADS.
Based on the foregoing facts, Seller and Buyers agree as follows:
1. TERM OF THIS COVENANT AND CONSIDERATION.
1.1. As used in this Covenant, the "Term of this Covenant" shall
mean a period commencing upon the Closing of the Agreement and expiring on
September 17, 2000. Notwithstanding the foregoing, in the event that prior to
the expiration hereof (i) ADS ceases business operations and there is no
successor in interest to ADS's business (and ADS or the corporate entity of
which it is a part is not a Debtor operating a business pursuant to any
bankruptcy law), this Covenant shall terminate concurrent with such a cessation
of business operations of ADS (ii) or within 10 days after notice from Seller
to Buyers, any payment required pursuant to Section 1.2 is not made the
restriction set forth in Section 2 shall terminate (Buyers shall nonetheless be
liable for the payments pursuant to Section 1.2).
<PAGE>
1.2 Buyers will pay to Sellers the aggregate sum of $636,363.64 which
Seller is entitled to receive which amount shall be paid in 36 equal monthly
installments commencing on the Closing Date. In the event that Buyers fail to
make any payment pursuant to this Section 1.2 and such failure continues for a
more than 10 days following notice from Seller to Buyers of such failure and
demanding payment, Seller shall have the right to accelerate the full amount
which is owing and unpaid pursuant to this Section 1.2 by giving notice to
Buyers. Notwithstanding the foregoing sentence, Seller acknowledges that
pursuant to an agreement with a senior lender, Buyers are prevented from making
any payment pursuant to this Covenant at any time during which Buyers are in
payment default to such senior lender.
2. COVENANT NOT TO COMPETE.
For the Term of this Covenant, Seller shall not directly or indirectly
engage in the design, engineering, manufacture or sale of dichroic liquid
crystal displays ("LCDs") or dichroic LCD modules, or active matrix displays or
otherwise engage in any business which competes with the business of ADS.
"Directly or indirectly" means that Seller will not participate as an officer,
director, shareholder, partner, member or consultant. The business of ADS is
the design, engineering, manufacture and sale of dichroic LCDs, dichroic LCD
modules and components incidental thereto to the Aircraft Industry. The
"Aircraft Industry" means the manufacture, repair or assembly of airframes or
component parts for commercial and military aircraft and aerospace
applications. Notwithstanding the provisions of this Section 2, nothing shall
prevent Seller from making a passive investment in up to 5% of the securities
of any company whose common stock is traded on any national securities exchange
or on NASDAQ.
3. COVENANT AGAINST HIRING. Seller understands that it is essential to
the successful operation of the business to be acquired hereunder that Buyer
retain substantially unimpaired ADS's operating organization. Seller agrees
that neither he nor it shall purposefully take any action which would induce
any employee or representative of Allard not to become or continue as an
employee or representative of Buyer. Without limiting the generality of the
foregoing, Seller shall not, whether directly or indirectly through any
subsidiary or affiliate, for a three (3) year period from the Closing Date
solicit to employ (whether as an employee, officer, director, agent, consultant
or independent contractor), or enter into any partnership, joint venture or
other business association with, any person who was at any time during the 12
months preceding the Closing Date an employee, partner, representative, or
manager of ADS. Provided, however, if the Buyer and Robert G. Martin sign a
three (3) year employment agreement and thereafter Buyer terminates Robert G.
Martin other than "for cause" and does not compensate him for the
-2-
<PAGE>
three (3) year period from the Closing, then Allard and the Principal
Shareholders shall have the right, after such termination, to employ Robert G.
Martin.
4. COVENANT NOT TO USE TRADE SECRETS. Seller agrees not to (a) disclose
to any person, association, firm, corporation or other entity (other than Buyer
or those designated in writing by Buyer) in any manner, directly or indirectly,
any information or data relevant to the business of ADS, or whether of a
technical or commercial nature, or (b) by use, or permit or assist, by
acquiescence or otherwise, any person, association, firm corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use, in
any manner directly or indirectly, any such information or data, excepting only
use of such data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.
5. RECITALS.
The recitals are a part of this Covenant and shall be used in construing and
interpreting it.
6. IRREPARABLE INJURY.
Seller acknowledges that (i) the violation by Seller of any of the
provisions of Sections 2, 3 and of this Covenant will result in irreparable
injury to Buyers and that Buyers, shall be entitled to (i) the issuance of a
temporary restraining order, (ii) a preliminary injunction and (iii) a
permanent injunction to prohibit either the continuation or another breach of
Sections 2, 3 or 4 of this Covenant.
7. MONETARY DAMAGES.
Notwithstanding any provision of this Covenant, Buyers may seek and obtain
monetary damages according to proof for any breach of this Covenant by Seller.
8. JURISDICTION.
Seller and Buyers hereby consent to the jurisdiction and venue of the state
and federal courts in the Commonwealth of Pennsylvania.
-3-
<PAGE>
9. NOTICES.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and, except as otherwise specifically provided in
this Covenant, shall be given by commercial courier service providing proof of
delivery to the parties at the following addresses (all such notices shall be
effective upon receipt):
If to Buyers: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R. Jack DeCrane
Fax Number: (310) 536-0257
with a copy to: DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
and a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephan A. Silverman, Esq.
Fax Number: (310) 576-4844
If to Seller: John R. Allard
96 Riverview Park
Manchester, NH 03102
with a copy to: William V.A. Zorn, Esq.
McLane, Graf, Raulerson & Middleton
900 Elm Street
Manchester, NH 03105-0326
Fax No. (603) 625-5650
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined above.
-4-
<PAGE>
10. GOVERNING LAW.
This Agreement shall in all respects be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
11. HEADINGS.
The paragraph headings contained in this Covenant are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
12. ASSIGNMENT.
This Covenant may be assigned to any successor of Buyers; provided,
however, Buyers shall remain primarily liable for the payments in Section 1.2.
13. COUNTERPARTS.
This Covenant may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
"Buyers"
DeCrane Aircraft Holdings, Inc.
/s/ R. Jack DeCrane,
--------------------------------
By: R. Jack DeCrane
Chief Executive Officer
ADS Acquisition, Inc.
/s/ R. Jack DeCrane,
--------------------------------
By: R. Jack DeCrane
Chief Executive Officer
/s/ John R. Allard
-------------------------------
Seller
-5-
<PAGE>
10.6 RESTRICTIVE COVENANT AGREEMENT AMONG REGISTRANT, ADS ACQUISITION, INC.
AND THE ALLARD CHILDREN'S TRUST F/B/O MICHAEL E. ALLARD
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement ("Covenant") is among DeCrane Aircraft
Holdings, Inc. ("Buyer"), ADS Acquisition, Inc. ("Acquisition", collectively
with Buyer "Buyers") and The Allard Children's Trust f/b/o Michael E. Allard
("Seller");
A. Seller acknowledges that the consideration received from Buyers by
Seller for these Covenants is adequate.
B. Seller has owned and controlled ADS and has knowledge of the business,
prospects, customers, needs of the customers, product specifications, key
employees, future development of the business of ADS, each of which (if not
otherwise known to the public or other persons) Seller acknowledges that ADS has
advised Seller is either a trade secret ("Trade Secret") or confidential
information ("Confidential Information") of ADS; and that to the extent that
such Trade Secret or Confidential Information is a secret or is confidential, it
is owned by and belongs to ADS.
C. If Seller were to compete with the business of ADS, Seller's
competition is likely cause material harm to ADS and diminish the value of the
assets of ADS being sold by Seller to Buyers pursuant to the Agreement.
D. The Business of ADS is worldwide; ADS's sales occur throughout the
United States and in many foreign countries. If this Covenant were limited to
the Commonwealth of Pennsylvania, its scope would not be sufficient to protect
the interest of ADS.
Based on the foregoing facts, Seller and Buyers agree as follows:
1. TERM OF THIS COVENANT AND CONSIDERATION.
1.1. As used in this Covenant, the "Term of this Covenant" shall
mean a period commencing upon the Closing of the Agreement and expiring on
September 17, 2000 Notwithstanding the foregoing, in the event that prior to
the expiration hereof (i) ADS ceases business operations and there is no
successor in interest to ADS's business (and ADS or the corporate entity of
which it is a part is not a Debtor operating a business pursuant to any
bankruptcy law), this Covenant shall terminate concurrent with such a cessation
of business operations of ADS (ii) or within 10 days after notice from Seller to
Buyers, any payment required pursuant to Section 1.2 is not made the restriction
set forth in Section 2 shall terminate (Buyers shall nonetheless be liable for
the payments pursuant to Section 1.2).
<PAGE>
1.2 Buyers will pay to Sellers the aggregate sum of $636,363.64 which
Seller is entitled to receive which amount shall be paid in 36 equal monthly
installments commencing on the Closing Date. In the event that Buyers fail to
make any payment pursuant to this Section 1.2 and such failure continues for a
more than 10 days following notice from Seller to Buyers of such failure and
demanding payment, Seller shall have the right to accelerate the full amount
which is owing and unpaid pursuant to this Section 1.2 by giving notice to
Buyers. Notwithstanding the foregoing sentence, Seller acknowledges that
pursuant to an agreement with a senior lender, Buyers are prevented from making
any payment pursuant to this Covenant at any time during which Buyers are in
payment default to such senior lender.
2. COVENANT NOT TO COMPETE.
For the Term of this Covenant, Seller shall not directly or indirectly
engage in the design, engineering, manufacture or sale of dichroic liquid
crystal displays ("LCDs") or dichroic LCD modules, or active matrix displays or
otherwise engage in any business which competes with the business of ADS.
"Directly or indirectly" means that Seller will not participate as an officer,
director, shareholder, partner, member or consultant. The business of ADS is
the design, engineering, manufacture and sale of dichroic LCDs, dichroic LCD
modules and components incidental thereto to the Aircraft Industry. The
"Aircraft Industry" means the manufacture, repair or assembly of airframes or
component parts for commercial and military aircraft and aerospace applications.
Notwithstanding the provisions of this Section 2, nothing shall prevent Seller
from making a passive investment in up to 5% of the securities of any company
whose common stock is traded on any national securities exchange or on NASDAQ.
3. COVENANT AGAINST HIRING. Seller understands that it is essential to
the successful operation of the business to be acquired hereunder that Buyer
retain substantially unimpaired ADS's operating organization. Seller agrees
that neither he nor it shall purposefully take any action which would induce
any employee or representative of Allard not to become or continue as an
employee or representative of Buyer. Without limiting the generality of the
foregoing, Seller shall not, whether directly or indirectly through any
subsidiary or affiliate, for a three (3) year period from the Closing Date
solicit to employ (whether as an employee, officer, director, agent,
consultant or independent contractor), or enter into any partnership, joint
venture or other business association with, any person who was at any time
during the 12 months preceding the Closing Date an employee, partner,
representative, or manager of ADS. Provided, however, if the Buyer rand
Robert G. Martin sign a three (3) year employment agreement and thereafter
Buyer terminates Robert G. Martin other than "for cause" and does not
compensate him for the
-2-
<PAGE>
three (3) year period from the Closing, then Allard and the Principal
Shareholders shall have the right, after such termination, to employ Robert G.
Martin.
4. COVENANT NOT TO USE TRADE SECRETS. Seller agrees not to (a) disclose
to any person, association, firm, corporation or other entity (other than Buyer
or those designated in writing by Buyer) in any manner, directly or indirectly
any information or data relevant to the business of ADS, or whether of a
technical or commercial nature, or (b) by use, or permit or assist, by
acquiescence or otherwise, any person, association, firm corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use, in any
manner, directly or indirectly, any such information or data, excepting only use
of such data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.
5. RECITALS.
The recitals are a part of this Covenant and shall be used in construing and
interpreting it.
6. IRREPARABLE INJURY.
Seller acknowledges that (i) the violation by Seller of any of the
provisions of Sections 2, 3 and of this Covenant will result in irreparable
injury to Buyers and that Buyers, shall be entitled to (i) the issuance of a
temporary restraining order, (ii) a preliminary injunction and (iii) a permanent
injunction to prohibit either the continuation or another breach of Sections 2,
3 or 4 of this Covenant.
7. MONETARY DAMAGES.
Notwithstanding any provision of this Covenant, Buyers may seek and obtain
monetary damages according to proof for any breach of this Covenant by Seller.
8. JURISDICTION.
Seller and Buyers hereby consent to the jurisdiction and venue of the state
and federal courts in the Commonwealth of Pennsylvania.
-3-
<PAGE>
9. NOTICES.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and, except as otherwise specifically provided in
this Covenant, shall be given by commercial courier service providing proof of
delivery to the parties at the following addresses (all such notices shall be
effective upon receipt):
If to Buyers: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R. Jack DeCrane
Fax Number: (310) 536-0257
with a copy to; DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
and a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman, Esq.
Fax Number: (310) 576-4844
If to Seller: Michael E. Allard
96 Riverview Park
Manchester, NH 03102
with a copy to: William V.A. Zorn, Esq.
McLane, Graf, Raulerson & Middleton
900 Elm Street
Manchester, NH 03105-0326
Fax No. (603) 625-5650
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined above.
-4-
<PAGE>
10. GOVERNING LAW.
This Agreement shall in all respects be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
11. HEADINGS.
The paragraph headings contained in this Covenant are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
12. ASSIGNMENT.
This Covenant may be assigned to any successor of Buyers; provided,
however, Buyers shall remain primarily liable for the payments in Section 1.2.
13. COUNTERPARTS.
This Covenant may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
"Buyers"
DeCrane Aircraft Holdings, Inc.
/s/ R. Jack DeCrane
- --------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
ADS Acquisition, Inc.
/s/ R. Jack DeCrane
- --------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
/s/ Michael E. Allard
- -------------------------------
Seller
-5-
<PAGE>
10.7 RESTRICTIVE COVENANT AGREEMENT AMONG REGISTRANT, ADS ACQUISITION, INC.
AND YOUNES NAZARIAN
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement ("Covenant") is among DeCrane
Aircraft Holdings, Inc. ("Buyer"), ADS Acquisition, Inc. ("Acquisition",
collectively with Buyer "Buyers") and Younes Nazarian ("Seller");
A. Seller acknowledges that the consideration received from Buyers by
Seller for these Covenants is adequate.
B. Seller has owned and controlled ADS and has knowledge of the
business, prospects, customers, needs of the customers, product
specifications, key employees, future development of the business of ADS,
each of which (if not otherwise known to the public or other persons) Seller
acknowledges that ADS has advised Seller is either a trade secret ("Trade
Secret") or confidential information ("Confidential Information") of ADS; and
that to the extent that such Trade Secret or Confidential Information is a
secret or is confidential, it is owned by and belongs to ADS.
C. If Seller were to compete with the business of ADS, Seller's
competition is likely cause material harm to ADS and diminish the value of
the assets of ADS being sold by Seller to Buyers pursuant to the Agreement.
D. The Business of ADS is worldwide; ADS's sales occur throughout the
United States and in many foreign countries. If this Covenant were limited to
the Commonwealth of Pennsylvania, its scope would not be sufficient to
protect the interest of ADS.
Based on the foregoing facts, Seller and Buyers agree as follows:
1. TERM OF COVENANT AND CONSIDERATION.
1.1. As used in this Covenant, the "Term of this Covenant" shall
mean a period commencing upon the Closing of the Agreement and expiring on
September 17, 2000. Notwithstanding the foregoing, in the event that prior
to the expiration hereof (i) ADS ceases business operations and there is no
successor in interest to ADS's business (and ADS or the corporate entity of
which it is a part is not a Debtor operating a business pursuant to any
bankruptcy law), this Covenant shall terminate concurrent with such a
cessation of business operations of ADS (ii) or within 10 days after notice
from Seller to Buyers, any payment required pursuant to Section 1.2 is not
made the restriction set forth in Section 2 shall terminate (Buyers shall
nonetheless be liable for the payments pursuant to Section, 1.2).
<PAGE>
1.2. Buyers will pay to Sellers the aggregate sum of $181,818.18
which Seller is entitled to receive which amount shall be paid in 36 equal
monthly installments commencing on the Closing Date. In the event that
Buyers fail to make any payment pursuant to this Section 1.2 and such failure
continues for a more than 10 days following notice from Seller to Buyers of
such failure and demanding payment, Seller shall have the right to accelerate
the full amount which is owing and unpaid pursuant to this Section 1.2 by
giving notice to Buyers. Notwithstanding the foregoing sentence, Seller
acknowledges that pursuant to an agreement with a senior lender, Buyers are
prevented from making any payment pursuant to this Covenant at any time
during which Buyers are in payment default to such senior lender.
2. COVENANT NOT TO COMPETE.
For the Term of this Covenant, Seller shall not directly or indirectly
engage in the design, engineering, manufacture or sale of dichroic liquid
crystal displays ("LCDs") or dichroic LCD modules, or active matrix displays or
otherwise engage in any business which competes with the business of ADS.
"Directly or indirectly" means that Seller will not participate as an officer,
director, shareholder, partner, member or consultant. The business of ADS is
the design, engineering, manufacture and sale of dichroic LCDs, dichroic LCD
modules and components incidental thereto to the Aircraft Industry. The
"Aircraft Industry" means the manufacture, repair or assembly of airframes or
component parts for commercial and military aircraft and aerospace applications.
Notwithstanding the provisions of this Section 2, nothing shall prevent Seller
from making a passive investment in up to 5% of the securities of any company
whose common stock is traded on any national securities exchange or on NASDAQ.
3. COVENANT AGAINST HIRING. Seller understands that it is essential
to the successful operation of the business to be acquired hereunder that Buyer
retain substantially unimpaired ADS's operating organization. Seller agrees that
neither he nor it shall purposefully take any action which would induce any
employee or representative of Allard not to become or continue as an employee or
representative of Buyer. Without limiting the generality of the foregoing,
Seller shall not, whether directly or indirectly through any subsidiary or
affiliate, for a three (3) year period from the Closing Date solicit to employ
(whether as an employee, officer, director, agent, consultant or independent
contractor), or enter into any partnership, joint venture or other business
association with, any person who was at any time using the 12 months preceding
the Closing Date an employee, partner, representative, or manager of ADS.
Provided, however, if the Buyer and Robert G. Martin sign a three (3) year
employment agreement and thereafter Buyer terminates Robert G. Martin other than
"for cause" and does not compensate him for the
- 2 -
<PAGE>
three (3) year period from the Closing, then Allard and the Principal
Shareholders shall have the right, after such termination, to employ Robert G.
Martin.
4. COVENANT NOT TO USE TRADE SECRETS. Seller agrees not to (a) disclose
to any person, association, firm, corporation or other entity (other than Buyer
or those designated in writing by Buyer) in any manner, directly or indirectly,
any information or data relevant to the business of ADS, or whether of a
technical or commercial nature, or (b) by use, or permit or assist, by
acquiescence or otherwise, any person, association, firm corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use in any
manner, directly or indirectly, any such information or data, excepting only use
of such data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.
5. RECITALS.
The recitals are a part of this Covenant and shall be used in construing
and interpreting it.
6. IRREPARABLE INJURY.
Seller acknowledges that (i) the violation by Seller of any of the
provisions of Sections 2, 3 and of this Covenant will result in irreparable
injury to Buyers and that Buyers, shall be entitled to (i) the issuance of a
temporary restraining order, (ii) a preliminary injunction and (iii) a permanent
injunction to prohibit either the continuation or another breach of Sections 2,
3 or 4 of this Covenant.
7. MONETARY DAMAGES.
Notwithstanding any provision of this Covenant, Buyers may seek and obtain
monetary damages according to proof for any breach of this Covenant by Seller.
8. JURISDICTION.
Seller and Buyers hereby consent to the jurisdiction and venue of the state
and federal courts in the Commonwealth of Pennsylvania.
- 3 -
<PAGE>
9. NOTICES.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and, except as otherwise specifically provided in
this Covenant, shall be given by commercial courier service providing proof of
delivery to the parties at the following addresses (all such notices shall be
effective upon receipt):
If to Buyers: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R. Jack DeCrane
Fax Number: (310) 536-0257
with a copy to: DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
and a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman, Esq.
Fax Number: (310) 576-4844
If to seller: Younes Nazarian
9300 Wilshire Blvd. #600
Beverly Hills, CA 90212
With a copy to: William V.A. Zorn, Esq.
McLane, Graf, Raulerson & Middleton
900 Elm Street
Manchester, NH 03105-0326
Fax No. (603) 625-5650
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined above.
- 4 -
<PAGE>
10. GOVERNING LAW.
This Agreement shall in all respects be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
11. HEADINGS.
The paragraph headings contained in this Covenant are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
12. ASSIGNMENT.
This Covenant may be assigned to any successor of Buyers; provided,
however, Buyers shall remain primarily liable for the payments in Section 1.2.
13. COUNTERPARTS.
This Covenant may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
"Buyers"
DeCrane Aircraft Holdings, Inc.
/s/ R. Jack DeCrane
- ----------------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
ADS Acquisition, Inc.
/s/ R. Jack DeCrane
- ----------------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
/s/ illegible
- ----------------------------------------
Seller
- 5 -
<PAGE>
10.8 RESTRICTIVE COVENANT AGREEMENT AMONG REGISTRANT, ADS ACQUISITION, INC.
AND DAVID AND ANGELA NAZARIAN, TRUSTEES OF THE NAZARIAN FAMILY TRUST
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement ("Covenant") is among DeCrane Aircraft
Holdings, Inc. ("Buyer"), ADS Acquisition, Inc. ("Acquisition", collectively
with Buyer "Buyers") and David and Angela Nazarian, Trustees of The Nazarian
Family Trust ("Seller");
A. Seller acknowledges that the consideration received from Buyers by
Seller for these Covenants is adequate.
B. Seller has owned and controlled ADS and has knowledge of the
business, prospects, customers, needs of the customers, product
specifications, key employees, future development of the business of ADS,
each of which (if not otherwise known to the public or other persons) Seller
acknowledges that ADS has advised Seller is either a trade secret ("Trade
Secret") or confidential information ("Confidential Information") of ADS; and
that to the extent that such Trade Secret or Confidential Information is a
secret or is confidential, it is owned by and belongs to ADS.
C. If Seller were to compete with the business of ADS, Seller's
competition is likely cause material harm to ADS and diminish the value of
the assets of ADS being sold by Seller to Buyers pursuant to the Agreement.
D. The Business of ADS is worldwide; ADS's sales occur throughout the
United States and in many foreign countries. If this Covenant were limited to
the Commonwealth of Pennsylvania, its scope would not be sufficient to
protect the interest of ADS.
Based on the foregoing facts, Seller and Buyers agree as follows:
1. TERM OF THIS COVENANT AND CONSIDERATION.
1.1. As used, in this Covenant, the "Term of this Covenant" shall
mean a period commencing upon the Closing of the Agreement and expiring on
September 17, 2000. Notwithstanding the foregoing, in the event that prior
to the expiration hereof (i) ADS ceases business operations and there is no
successor in interest to ADS's business (and ADS or the corporate entity of
which it is a part is not a Debtor operating a business pursuant to any
bankruptcy law), this Covenant shall terminate concurrent with such a
cessation of business operations of ADS (ii) or within 10 days after notice
from Seller to Buyers, any payment required pursuant to Section 1.2 is not
made the restriction set forth in Section 2 shall terminate (Buyers shall
nonetheless be liable for the payments pursuant to Section 1.2).
<PAGE>
1.2. Buyers will pay to Sellers the aggregate sum of $636,363.64
which Seller is entitled to receive which amount shall be paid in 36 equal
monthly installments commencing on the Closing Date. In the event that
Buyers fail to make any payment pursuant to this Section 1.2 and such failure
continues for a more than 10 days following notice from Seller to Buyers of
such failure and demanding payment, Seller shall have the right to accelerate
the full amount which is owing and unpaid pursuant to this Section 1.2 by
giving notice to Buyers. Notwithstanding the foregoing sentence, Seller
acknowledges that pursuant to an agreement with a senior lender, Buyers are
prevented from making any payment pursuant to this Covenant at any time
during which Buyers are in payment default to such senior lender.
2. COVENANT NOT TO COMPETE.
For the Term of this Covenant, Seller shall not directly or indirectlY engage
in the design, engineering, manufacture or sale of dichroic liquid crystal
displays ("LCDs") or dichroic LCD modules, or active matrix displays or
otherwise engage in any business which competes with the business of ADS.
"Directly or indirectly" means that Seller will not participate as an
officer, director, shareholder, partner, member or consultant. The business
of ADS is the design, engineering, manufacture and sale of dichroic LCDs,
dichroic LCD modules and components incidental thereto to the Aircraft
Industry. The "Aircraft Industry" means the manufacture, repair or assembly
of airframes or component parts for commercial and military aircraft and
aerospace applications. Notwithstanding the provisions of this Section 2,
nothing shall prevent Seller from making a passive investment in up to 5% of
the securities of any company whose common stock is traded on any national
securities exchange or on NASDAQ.
3. COVENANT AGAINST HIRING. Seller understands that it is essential to
the successful operation of the business to be acquired hereunder that Buyer
retain substantially unimpaired ADS's operating organization. Seller agrees
that neither he nor it shall purposefully take any action which would induce
any employee or representative of Allard not to become or continue as an
employee or representative of Buyer. Without limiting the generality of the
foregoing, Seller shall not, whether directly or indirectly through any
subsidiary or affiliate, for a three (3) year period from the Closing Date
solicit to employ {whether as an employee, officer, director, agent,
consultant or independent contractor), or enter into any partnership, joint
venture or other business association with, any person who was at any time
using the 12 months preceding the Closing Date an employee, partner,
representative, or manager of ADS. Provided, however, if the Buyer and Robert
G. Martin sign a three (3) year employment agreement and thereafter Buyer
terminates Robert G. Martin other than "for cause" and does not compensate
him for the
-2-
<PAGE>
three (3) year period from the Closing, then Allard and the Principal
Shareholders shall have the right, after such termination, to employ Robert
G. Martin.
4. COVENANT NOT TO USE TRADE SECRETS. Seller agrees not to (a)
disclose to any person, association, firm, corporation or other entity (other
than Buyer or those designated in writing by Buyer) in any manner, directly
or indirectly, any information or data relevant to the business of ADS, or
whether of a technical or commercial nature, or (b) by use, or permit or
assist, by acquiescence or otherwise, any person; association, firm
corporation or other entity (other than Buyer or those designated in writing
by Buyer) to use, in any manner, directly or indirectly, any such information
or data, excepting only use of such data or information as is at the time
generally known to the public other than by any breach of any provision of
this Section 4.
5. RECITALS.
The recitals are a part of this Covenant and shall be used in construing
and interpreting it.
6. IRREPARABLE INJURY.
Seller acknowledges that (i) the violation by Seller of any of the
provisions of Sections 2, 3 and of this Covenant will result in irreparable
injury to Buyers and that Buyers, shall be entitled to (i) the issuance of a
temporary restraining order, (ii) a preliminary injunction and (iii) a
permanent injunction to prohibit either the continuation or another breach of
Sections 2, 3 or 4 of this Covenant.
7. MONETARY DAMAGES.
Notwithstanding any provision of this Covenant, Buyers may seek and
obtain monetary damages according to proof for any breach of this Covenant by
Seller.
8. JURISDICTION.
Seller and Buyers hereby consent to the jurisdiction and venue of the
state and federal courts in the Commonwealth of Pennsylvania.
-3-
<PAGE>
9. NOTICES.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and, except as otherwise specifically provided
in this Covenant, shall be given by commercial courier service providing
proof of delivery to the parties at the following addresses (all such notices
shall be effective upon receipt):
If to Buyers: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R. Jack DeCrane
Fax Number: (310) 536-0257
with a copy to: DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
and a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman, Esq.
Fax Number: (310) 576-4844
If to seller: David Nazarian
9300 Wilshire Blvd. #600
Beverly Hills, CA 90212
With a copy to: William V.A. Zorn, Esq.
McLane, Graf, Raulerson & Middleton
900 Elm Street
Manchester, NH 03105-0326
Fax No. (603) 625-5650
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined
above.
-4-
<PAGE>
10. GOVERNING LAW.
This Agreement Shall in all respects be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
11. HEADINGS.
The paragraph headings contained in this Covenant are for convenience
only and shall not control or affect the meaning or construction of any of
the provisions of this Agreement.
12. ASSIGNMENT.
This Covenant may be assigned to any successor of Buyers; provided,
however, Buyers shall remain primarily liable for the payments in Section 1.2.
13. COUNTERPARTS.
This Covenant may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
"Buyers"
DeCrane Aircraft Holdings, Inc.
/s/ R. Jack DeCrane
- --------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
ADS Acquisition, Inc.
/s/ R. Jack DeCrane
- --------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
/s/ D. Nazarian
- --------------------------------
Seller
-5-
<PAGE>
10.9 RESTRICTIVE COVENANT AGREEMENT AMONG REGISTRANT, ADS ACQUISITION, INC.
AND GERALD R. ALLARD, TRUSTEE OF THE GERALD R. ALLARD REVOCABLE TRUST OF 1994
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement ("Covenant") is among DeCrane
Aircraft Holdings, Inc. ("Buyer"), ADS Acquisition, Inc. ("Acquisition",
collectively with Buyer "Buyers") and Gerald R. Allard, Trustee of The
Gerald R. Allard Revocable Trust of 1994 ("Seller");
A. Seller acknowledges that the consideration received from Buyers by
Seller for these Covenants is adequate.
B. Seller has owned and controlled ADS and has knowledge of the
business, prospects, customers, needs of the customers, product
specifications, key employees, future development of the business of
ADS, each of which (if not otherwise known to the public or other
persons) Seller acknowledges that ADS has advised Seller is either a
trade secret ("Trade Secret") or confidential information ("Confidential
Information") of ADS; and that to the extent that such Trade Secret or
Confidential Information is a secret or is confidential, it is owned by
and belongs to ADS.
C. If Seller were to compete with the business of ADS, Seller's
competition is likely cause material harm to ADS and diminish the value
of the assets of ADS being sold by Seller to Buyers pursuant to the
Agreement.
D. The Business of ADS is worldwide; ADS's sales occur throughout
the United States and in many foreign countries. If this Covenant were
limited to the Commonwealth of Pennsylvania, its scope would not be
sufficient to protect the interest of ADS.
Based on the foregoing facts, Seller and Buyers agree as follows:
1. TERM OF THIS COVENANT AND CONSIDERATION.
1.1. As used, in this Covenant, the "Term" of this Covenant
shall mean a period commencing upon the Closing of the Agreement and
expiring on September 17, 2000. Notwithstanding the foregoing, in the
event that prior to the expiration hereof (i) ADS ceases business
operations and there is no successor in interest to ADS's business (and
ADS or the corporate entity of which it is a part is not a Debtor
operating a business pursuant to any bankruptcy law), this Covenant
shall terminate concurrent with such a cessation of business operations
of ADS (ii) or within 10 days after notice from Seller to Buyers, any
payment required pursuant to Section 1.2 is not made the restriction set
forth in Section 2 shall terminate (Buyers shall nonetheless be liable
for the payments pursuant to Section 1.2).
<PAGE>
1.2. Buyers will pay to Sellers the aggregate sum of $1 which
Seller is entitled to receive which amount shall be paid in 36 equal
monthly installments commencing on the Closing Date. In the event that
Buyers fail to make any payment pursuant to this Section 1.2 and such
failure continues for a more than 10 days following notice from Seller
to Buyers of such failure and demanding payment, Seller shall have the
right to accelerate the full amount which is owing and unpaid pursuant
to this Section 1.2 by giving notice to Buyers. Notwithstanding the
foregoing sentence, Seller acknowledges that pursuant to an agreement
with a senior lender, Buyers are prevented from making any payment
pursuant to this Covenant at any time during which Buyers are in payment
default to such senior lender.
2. COVENANT NOT TO COMPETE.
For the Term of this Covenant, Seller shall not directly or
indirectly engage in the design, engineering, manufacture or sale of
dichroic liquid crystal displays ("LCDs") or dichroic LCD modules, or
active matrix displays or otherwise engage in any business which
competes with the business of ADS. "Directly or indirectly" means that
Seller will not participate as an officer, director, shareholder,
partner, member or consultant. The business of ADS is the design,
engineering, manufacture and sale of dichroic LCDs, dichroic LCD modules
and components incidental thereto to the Aircraft Industry. The
"Aircraft Industry" means the manufacture, repair or assembly of
airframes or component parts for commercial and military aircraft and
aerospace applications. Notwithstanding the provisions of this Section
2, nothing shall prevent Seller from making a passive investment in up
to 5% of the securities of any company whose common stock is traded on
any national securities exchange or on NASDAQ.
3. COVENANT AGAINST HIRING. Seller understands that it is
essential to the successful operation of the business to be acquired
hereunder that Buyer retain substantially unimpaired ADS's operating
organization. Seller agrees that neither he nor it shall purposefully
take any action which would induce any employee or representative of
Allard not to become or continue as an employee or representative of
Buyer. Without limiting the generality of the foregoing, Seller shall
not, whether directly or indirectly through any subsidiary or affiliate,
for a three (3) year period from the Closing Date solicit to employ
(whether as an employee, officer, director, agent, consultant or
independent contractor), or enter into any partnership, joint venture or
other business association with, any person who was at any time using
the 12 months preceding the Closing Date an employee, partner,
representative, or manager of ADS. Provided, however, if the Buyer and
Robert G. Martin sign a three (3) year employment agreement and
thereafter Buyer terminates Robert G. Martin other than "for cause" and
does not compensate him for the
- 2 -
<PAGE>
three (3) year period from the Closing, then Allard and the Principal
Shareholders shall have the right, after such termination, to employ Robert G.
Martin.
4. COVENANT NOT TO USE TRADE SECRETS. Seller agrees not to (a)
disclose to any person, association, firm, corporation or other entity
(other than Buyer or those designated in writing by Buyer) in any
manner, directly or indirectly, any information or data relevant to the
business of ADS, or whether of a technical or commercial nature, or (b)
by use, or permit or assist, by acquiescence or otherwise, any person,
association, firm corporation or other entity (other than Buyer or those
designated in writing by Buyer) to use in any manner, directly or
indirectly, any such information or data, excepting only use of such
data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.
5. RECITALS.
The recitals are a part of this Covenant and shall be used in construing
and interpreting it.
6. IRREPARABLE INJURY.
Seller acknowledges that (i) the violation by Seller of any of the
provisions of Sections 2, 3 and of this Covenant will result in
irreparable injury to Buyers and that Buyers, shall be entitled to (i)
the issuance of a temporary restraining order, (ii) a preliminary
injunction and (iii) a permanent injunction to prohibit either the
continuation or another breach of Sections 2, 3 or 4 of this Covenant.
7. MONETARY DAMAGES.
Notwithstanding any provision of this Covenant, Buyers may seek and obtain
monetary damages according to proof for any breach of this Covenant by Seller.
8. JURISDICTION.
Seller and Buyers hereby consent to the jurisdiction and venue of the state
and federal courts in the Commonwealth of Pennsylvania.
- 3 -
<PAGE>
9. NOTICES.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and, except as otherwise specifically provided in
this Covenant, shall be given by commercial courier service providing proof of
delivery to the parties at the following addresses (all such notices shall be
effective upon receipt):
If to Buyers: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
EL Segundo, California 90245
Attention: R. Jack DeCrane
Fax Number: (310) 536-0257
with a copy to: DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
and a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman, Esq.
Fax Number: (310) 576-4844
If to seller: Gerald R. Allard
520 S. Collier Blvd.
Apt. 301
Marco Island. FL 34145
With a copy to: William V.A. Zorn, Esq.
McLane, Graf, Raulerson & Middleton
900 Elm Street
Manchester, NH 03105-0326
Fax No. (603) 625-5650
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined above.
- 4 -
<PAGE>
10. GOVERNING LAW.
This Agreement shall in all respects be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
11. HEADINGS.
The paragraph headings contained in this Covenant are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
12. ASSIGNMENT.
This Covenant may be assigned to any successor of Buyers; provided,
however, Buyers shall remain primarily liable for the payments in
Section 1.2.
13. COUNTERPARTS.
This Covenant may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
"Buyers"
DeCrane Aircraft Holdings, Inc.
/s/ R. Jack DeCrane
- ------------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
ADS Acquisition, Inc.
/s/ R. Jack DeCrane
- ------------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
/s/ Gerald R. Allard
- ------------------------------------
Seller
- 5 -
<PAGE>
SECOND AMENDMENT TO OFFICE LEASE
THIS AGREEMENT made this 15th day of December, 1993, by and between
CONTINENTAL DEVELOPMENT CORPORATION, a California corporation, hereinafter
referred to as ("Lessor"), and TRI STAR ELECTRONICS INTERNATIONAL, INC., an
Ohio corporation, and CORY COMPONENTS, INC., a California corporation,
hereinafter referred to collectively as ("Lessee").
W I T N E S S E T H
WHEREAS, Lessor and Lessee entered into that certain Office Lease
("Lease"), dated September 15, 1989, whereby Lessor leased to Lessee and Lessee
hired from Lessor a certain office building, commonly known as 2201 Rosecrans
Avenue, El Segundo, California, together with all improvements therein and
appurtenances thereto; and,
WHEREAS, Lessee is the successor in interest of such Lease by assignment
from the original Lessee, Tri Star Electronics, Inc., by assignment dated
September 30, 1991; and,
WHEREAS, Lessor and Lessee are desirous of amending said Lease by this
Second Amendment to Office Lease in the manner set forth below.
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions contained herein, and of other good and valuable consideration, it is
agreed as follows:
1. LATE CHARGES
Paragraph 13.4 Late Charges is amended by deleting "ten (10) days" in
line 5 of such paragraph and adding in its place "one (1) day".
2. EFFECTIVE DATE
This amendment shall take effect as of May 1, 1994, and shall continue
in effect for the duration of the Lease.
3. GENERAL TERMS
All of the terms, covenants, conditions, provisions, and agreements of
the Lease, except as amended herein, shall remain in full force and effect and
shall apply to the premises described in Paragraph 1 of this Amendment.
LESSOR: LESSEE:
CONTINENTAL DEVELOPMENT TRI STAR ELECTRONICS,
CORPORATION, INTERNATIONAL, INC.,
a California corporation an Ohio corporation
By: /s/ Richard C. Lundquist By: /s/ R G MacDonald
------------------------------- -------------------------------
Richard C. Lundquist Its: President
President ------------------------------
By: /s/ Leonard E. Blakesley, Jr. By: /s/ Robert Rank
------------------------------- -------------------------------
Leonard E. Blakesley, Jr. Its: CFO
Secretary -------------------------------
CORY COMPONENTS, INC.
a California corporation
By: /s/ R G MacDonald
-------------------------------
Its: C.E.O.
------------------------------
By:
-------------------------------
Its:
------------------------------
<PAGE>
STANDARD INDUSTRIAL LEASE - NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. PARTIES. This Lease, dated, for reference purposes only, September 15,
1989, is made by and between Continental Development Corporation, a California
corporation (herein called "Lessor") and Tri-Star Electronics, Inc., a
California corporation and Cory Components Incorporated, a California
corporation (herein called "Lessee").
2. PREMISES. Lessor hereby leases to Lessee and Lessee lease from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
that certain real property situated in the County of Los Angeles State of
California commonly known as 2201 Rosecrans Avenue, El Segundo and as
described in the Legal Description attached as Exhibit A. Said real property
including the land and all improvements therein, is herein called "the
Premises".
3. TERM.
3.1 TERM. The term of this lease shall be for ten years commencing on
March 1, 1990 and ending on February 29, 2000 unless sooner terminated pursuant
to any provision hereof.
3.2 DELAY IN POSSESSION. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof, but in such case, Lessee shall not be
obligated to pay rent until possession of the Premises is tendered to Lessee.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay
rent for such period at the initial monthly rates set forth below.
4. RENT. Lessee shall pay to Lessor as rent for the Premises, monthly
payments of $58,536, in advance, on the 1 day of each month of the term
hereof. Lessee shall pay Lessor upon the execution hereof $58,536 as rent
for the first month of occupancy. At the commencement of the 31st, 61st and
91st months of the lease, the base rent shall be adjusted as provided in
Section 53 of the Addendum. Rent for any period during the term hereof which
is for less than one month shall be a pro rata portion of the monthly
installment. Rent shall be payable in lawful money of the United States to
Lessor at the address stated herein or to such other persons or at such other
places as Lessor may designate in writing.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof $60,000 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provisions of this
Lease, Lessor may use, apply or retain all or any portion of said deposit for
the payment of any rent or other charge in default or for the payment of any
other sum to which Lessor may become obligated by reason of Lessee's default,
or to compensate Lessor for any loss or damage which Lessor may suffer
thereby. If Lessor so uses or applies all or any portion of said deposit,
Lessee shall within ten (10) days after written demand therefor deposit cash
with Lessor in a amount sufficient to restore said deposit to the full amount
herein above stated and Lessee's failure to do so shall be a material breach
of this Lease. If the monthly rent shall, from time to time, increase during
the term of this Lease, Lessee shall thereupon deposit with Lessor additional
security deposit so that the amount of security deposit held by Lessor shall
at all times bear the same proportion to current rent as the original
security deposit bears to the original monthly rent set forth in paragraph 4
hereof. Lessor shall not be required to keep said deposit separate from its
general accounts. If Lessee performs all of Lessee's obligations hereunder,
said deposit, or so much thereof as has not theretofore been applied by
Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein
between Lessor and Lessee with respect to said Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for light
manufacturing and assembly of electronic components and offices incidental to
this use or any other use which is reasonably comparable and for no other
purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in its state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will use the Premises, does not violate any covenants or
restrictions of record, or any applicable building code, regulation or
ordinance in effect on such Lease term commencement date. In the event it is
determined that this warranty has been violated, then it shall be the
obligation of the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation. In the event
Lessee does not give to Lessor written notice of the violation of this
warranty within six months from the date that the Lease term commences, the
correction of same shall be the obligation of the Lessee at Lessee's sole
cost. The warranty contained in this paragraph 6.2 (a) shall be of no force
or effect if, prior to the date of this Lease, Lessee was the owner or
occupant of the Premises, and in such event, Lessee shall correct any such
violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at
Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall not use nor
permit the use of the Premises in any manner that will tend to create waste
or a nuisance or, if there shall be there more than one tenant in the
building containing the Premises, shall tend to disturb such other tenants.
6.3 CONDITIONS OF PREMISES. Lessor warrants for a period of one (1) year
all construction performed pursuant to the [COPY RAN OFF PAGE]
(a) Lessor shall deliver the Premises to Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in possession) and
Lessor further warrants to Lessee that the plumbing, lighting, air conditioning,
heating, and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
or the violation, to promptly, at Lessor's sole cost, rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Premises in their condition existing as of the Lease commencement date or
the date that Lessee takes possession of the Premises, whichever is earlier,
subject to all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use of the Premises, and any
covenants or restrictions of record, and accepts this Lease subject thereto and
to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS. Lessee shall keep in good order, condition and
repair the Premises and every part thereof, structural and non structural,
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises) including,
without limiting the generality of the foregoing, all plumbing, heating, air
conditioning, (Lessee shall procure and maintain, at Lessee's expense, an air
conditioning system maintenance contract) ventilating, electrical, lighting
facilities and equipment within the Premises, fixtures, walls (interior and
exterior), foundations, ceilings, roofs (interior and exterior), floors,
windows, doors, plate glass and skylights located within the Premises, and all
landscaping, driveways, parking lots, fences and signs located on the Premises
and sidewalks and parkways adjacent to the Premises. See Addendum paragraph 49
for additional terms.
7.2 SURRENDER. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as when received, ordinary wear and tear excepted, clean and free of
debris. Lessee shall repair any damage to the Premises occasioned
Initials: [illegible]
-----------
NET [illegible]
-----------
<PAGE>
by the installation or removal of Lessee's trade fixtures, furnishings and
equipment. Notwithstanding anything to the contrary otherwise stated in this
Lease, Lessee shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning, plumbing and
fencing on the premises in good operating condition.
7.3 LESSOR'S RIGHTS. If Lessee fails to perform Lessee's obligations
under this Paragraph 7, or under any other paragraph of this Lease, Lessor
may at its option (but shall not be required to) enter upon the Premises
after ten (10) days prior written notice to Lessee (except in the case of an
emergency, in which case no notice shall be required), perform such
obligations on Lessee's behalf and put the same in good order, condition and
repair, and the cost thereof together with interest thereon at the maximum
rate then allowable by law shall become due and payable as additional rental
to Lessor together with Lessee's next rental installment.
7.4 LESSOR'S OBLIGATIONS. Except for the obligations of Lessor under
Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty), Paragraph 9
(relating to destruction of the Premises) and under Paragraph 14 (relating to
condemnation of the Premises), it is intended by the parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain
the Premises nor the building located thereon nor the equipment therein,
whether structural or non structural, all of which obligations are intended
to be that of the Lessee under Paragraph 7.1 hereof. Lessee expressly waives
the benefit of any statute now or hereinafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate
this Lease because of Lessor's failure to keep the premises in good,
condition and repair.
7.5 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make
any alterations, improvements, additions, or Utility Installations in, on or
about the Premises, except for nonstructural alterations not exceeding
$10,000 in cumulative costs during the term of this Lease. In any event,
whether or not in excess of $10,000 in cumulative cost, Lessee shall make no
change or alteration to the exterior of the Premises nor the exterior of the
building(s) on the Premises without Lessor's prior written consent. As used
in this Paragraph 7.5 the term "Utility Installation" shall mean carpeting,
window coverings, air lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing, and fencing.
Lessor may require that Lessee remove any or all of said alterations,
improvements, additions or Utility Installations at the expiration of the
term, and restore the Premises to their prior condition. Lessor may require
Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such improvements, to insure Lessor against any liability for
mechanic's and materialmen's liens and to insure completion of the work.
Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility Installations
in, or about the Premises that Lessee shall desire to make and which requires
the consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of
any work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee
shall, in good faith, contest the validity of any such lien, claim or demand,
then Lessee shall, at its sole expense defend itself and Lessor against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises,
upon the condition that if Lessor shall require, Lessee shall furnish to
Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys fees and costs
in participating in such action if Lessor shall decide it is to its best
interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph
7.5(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of
Lessee), which may be made on the Premises, shall become the property of
Lessor and remain upon and be surrendered with the Premises at the expiration
of the term. Notwithstanding the provisions of this Paragraph 7.5(d).
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the
Premises, shall remain the property of Lessee and may be removed by Lessee
subject to the provisions of Paragraph 7.2.
8. INSURANCE INDEMNITY.
8.1 INSURING PARTY. As used in this Paragraph 8, the term "insuring
party" shall mean the party who has the obligation to obtain the Property
Insurance required hereunder. The insuring party shall be designated in
Paragraph 46 hereof. In the event Lessor is the insuring party, Lessor shall
also maintain the liability insurance described in paragraph 8.2 hereof, in
addition to, and not in lieu of, the insurance required to be maintained by
Lessee under said paragraph 8.2, but Lessor shall not be required to name
Lessee as an additional insured on such policy. Whether the insuring party
is the Lessor or the Lessee, Lessee shall, as additional rent for the
Premises, pay the cost of all insurance required hereunder. If Lessor is the
insuring party Lessee shall, within ten (10) days following demand by Lessor,
reimburse Lessor for the cost of the insurance so obtained.
8.2 LIABILITY INSURANCE. Lessee shall, at Lessee's expense obtain and
keep in force during the term of this Lease a policy of Combined Single Limit,
Bodily Injury and Property Damage insurance insuring Lessor and Lessee against
any liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than $1,000,000 per occurrence. The
policy shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not, however, limit the
liability of Lessee hereunder.
8.3 PROPERTY INSURANCE.
(a) The insuring party shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage
to the Premises, in the amount of the full replacement value thereof, as the
same may exist from time to time, which replacement value is now $6,000,000,
but in no event less than the total amount required by lenders having liens
on the Premises, against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, flood (in the event
same is required by a lender having a lien on the Premises), and special
extended perils ("all risk" as such term is used in the insurance industry).
Said insurance shall provide for payment of loss thereunder to Lessor or to
the holders of mortgages or deeds of trust on the Premises. The insuring
party shall, in addition, obtain and keep in force during the term of this
Lease a policy of rental value insurance covering a period of one year, with
loss payable to Lessor, which insurance shall also cover all real estate
taxes and insurance costs for said period. A stipulated value or agreed
amount endorsement deleting the coinsurance provision of the policy shall be
procured with said insurance as well as an automatic increase in insurance
endorsement causing the increase in annual property insurance coverage by 2%
per quarter. If the insuring party shall fail to procure and maintain said
insurance the other party may, but shall not be required to, procure and
maintain the same, but at the expense of Lessee. If such insurance coverage
has a deductible clause, the deductible amount shall not exceed $1,000 per
occurrence, and Lessee shall be liable for such deductible amount.
(b) If the Premises are part of a larger building, or if the
Premises are part of a group of buildings owned by Lessor which are adjacent
to the Premises, then Lessee shall pay for any increase in the property
insurance of such other building or buildings if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
(c) If the Lessor is the insuring party the Lessor will not insure
Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7 hereof. But
if Lessee is the insuring party the Lessee shall insure its fixtures, equipment
and tenant improvements.
8.4 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide". The insuring
party shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Lessor. If Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor
may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3. If Lessee does or permits to be done anything which shall
increase the cost of the insurance policies referred to in Paragraph 8.3, then
Lessee shall forthwith upon Lessor's demand reimburse Lessor for any additional
premiums attributable to any act or omission or operation of Lessee causing such
increase in the cost of insurance if Lessor is the insuring party, and if the
insurance policies maintained hereunder cover other improvements in addition to
the Premises, Lessor shall deliver to Lessee a written statement setting forth
the amount of any such insurance cost increase and showing in reasonable detail
the manner in which it has been computed.
8.5 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about Premises, whether due
to the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. Lessee and Lessor shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or
carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.6 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any negligence of the Lessee, or any of Lessee's agents,
contractors, or employees, and from and against all costs, attorney's fees,
expenses and liabilities incurred in the defense of any such claim or any
action or proceeding brought thereon; and in case any action or proceeding be
brought against Lessor by reason of any such claim, Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel satisfactory to
Lessor. Lessee, as a material part of the consideration to Lessor, hereby
assumes all risk of damage to property or injury to persons, in, upon or
about the Premises arising from any cause and Lessee hereby waives all claims
in respect thereof against Lessor.
8.7 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises, nor shall Lessor be liable for injury to the
person of Lessee, Lessee's employees, agents or contractors, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Premises or upon other portions of the
building of which the Premises are a part, or from other sources or places
and regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessee. Lessor shall not be liable for
any damages arising from any act or neglect of any other tenant, if any, of
the building in which the Premises are located.
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9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less
than 50% of the then replacement cost of the Premises. "Premises Building
Partial Damage" shall herein mean damage or destruction to the building of
which the Premises are a part to the extent that the cost of repair is less
than 50% of the then replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or
more of the then replacement cost of the Premises. "Premises Building Total
Destruction" shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more
of the then replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8.
9.2 PARTIAL DAMAGE - INSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease
there is damage which is an Insured Loss and which falls into the
classification of Premises Partial Damage or Premises Building Partial
Damage, then Lessor shall, at Lessor's expense, repair such damage, but not
Lessee's fixtures, equipment or tenant improvements unless the same have
become a part of the Premises pursuant to Paragraph 7.5 hereof as soon as
reasonably possible and this Lease shall continue in full force and effect.
Notwithstanding the above, if the Lessee is the insuring party, and if the
insurance proceeds received by Lessor are not sufficient to effect such
repair, Lessor shall give notice to Lessee of the amount required in addition
to the insurance proceeds to effect such repair. Lessee shall contribute the
required amount to Lessor within ten days after Lessee has received notice
from Lessor of the shortage in the insurance. When Lessee shall contribute
such amount to Lessor, Lessor shall make such repairs as soon as reasonably
possible and this Lease shall continue in full force and effect. Lessee
shall in no event have any right to reimbursement for any such amounts so
contributed.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease
there is damage which is not an Insured Loss and which falls within the
classification of Premises Partial Damage or Premises Building Partial
Damage, unless caused by a negligent or willful act of Lessee (in which event
Lessee shall make the repairs at Lessee's expense), Lessor may at Lessor's
option either (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) give written notice to Lessee within thirty (30) days after
the date of the occurrence of such damage of Lessor's intention to cancel and
terminate this Lease, as of the date of the occurrence of such damage. In the
event Lessor elects to give such notice of Lessor's intention to cancel and
terminate this Lease, Lessee shall have the right within ten (10) days after
the receipt of such notice to give written notice to Lessor of Lessee's
intention to repair such damage at Lessee's expense, without reimbursement
from Lessor, in which event this Lease shall continue in full force and
effect, and Lessee shall proceed to make such repairs as soon as reasonably
possible. If Lessee does not give such notice within such 10-day period this
Lease shall be canceled and terminated as of the date of the occurrence of
such damage.
9.4 TOTAL DESTRUCTION. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss, (including destruction
required by any authorized public authority), which falls into the
classification of Premises Total Destruction or Premises Building Total
Destruction, this Lease shall automatically terminate as of the date of such
total destruction.
9.5 DAMAGE NEAR END OF TERM.
(a) If at any time during the last one (1) year of the term of this
Lease there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than 20 days after the
occurrence of an Insured Loss falling within the classification of Premises
Partial Damage during the last six months of the term of this Lease. If
Lessee duly exercises such option during said 20 day period, then Lessor may
at Lessor's option terminate and cancel this Lease as of the expiration of
said 20 day period, then Lessor may at Lessor's option terminate and cancel
this Lease as of the expiration of said 20 day period by giving written
notice to Lessee of Lessor's election to do so within 10 days after the
expiration of said 20 day period, notwithstanding any term or provision in
the grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in paragraphs 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provisions of
this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of rent, if any, Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair
or restoration within 90 days after such obligations shall accure, Lessee may
at Lessee's option cancel and terminate this Lease by giving Lessor written
notice of Lessee's election to do so at any time prior to the commencement of
such repair or restoration. In such event this Lease shall terminate as of
the date of such notice.
9.7 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.8 WAIVER. Lessor and Lessee waive the provisions of any statutes which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessee shall pay to Lessor the real property tax,
as defined in paragraph 10.2, applicable to the Premises during the term of this
Lease. All such payments shall be made at least ten (10) days prior to the
delinquency date of such payment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes paid by
Lessee shall cover any period of time prior to or after the expiration of the
term hereof, Lessee's share of such taxes shall be equitably prorated by
Lessor, to cover only the period of time within the tax fiscal year during which
this Lease shall be in effect, and Lessor shall reimburse Lessee to the extent
required. If Lessee shall fail to pay any such taxes, Lessor shall have the
right to pay the same, in which case Lessee shall repay such amount to Lessor
with Lessee's next rent installment together with interest at the maximum rate
then allowable by law.
10.2 DEFINITION OF "REAL PROPERTY TAX" . As used herein, the term "real
property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Premises by any authority
having the direct or indirect power to tax, including any city, state or
federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Premises. The
term "real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax," or (ii) the nature of which was hereinbefore included within
the definition of "real property tax," or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously
charged, has been increased since June 1, 1978, or (iv) which is imposed as a
result of a transfer, either partial or total, of Lessor's interest in the
Premises or which is added to a tax or charge hereinbefore included within
the definition of real property tax by reason of such transfer, or (v) which
is imposed by reason of this transaction, any modifications or changes
hereto, or any transfers hereof.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property
taxes for all of the land and improvements included within the tax parcel
assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information
as may be reasonably available. Lessor's reasonable determination thereof, in
good faith, shall be conclusive.
10.4 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor
of all charges jointly metered with other premises.
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13. DEFAULT; REMEDIES.
13.1 DEFAULTS. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than described in paragraph (b) above, where such failure
shall continue for a period of 30 days after written notice thereof from
Lessor to Lessee; provided, however, that if the nature of Lessee's default
is such that more than 30 days are reasonably required for its cure, then
Lessee shall not be deemed to be in default if Lessee commenced such cure
within said 30-day period and thereafter diligently prosecutes such cure to
completion.
(d) (i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. Section 101 any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this paragraph 13.1 (d)
is contrary to any applicable law, such provision shall be of no force or
effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, was materially false.
13.2 REMEDIES. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand
and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's
fees, and any real estate commission actually paid; the worth at the time of
award by the court having jurisdiction thereof of the amount by which the
unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Lessee proves could
be reasonably avoided; that portion of the leasing commission paid by Lessor
pursuant to Paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due
at the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to
Lessee in writing, specifying wherein Lessor has failed to perform such
obligation; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are required for performance then Lessor
shall not be in default if Lessor commences performance within such 30-day
period and thereafter diligently prosecutes the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a late charge equal to 4.5% of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder. In the event that a
late charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding paragraph 4
or any other provision of this Lease to the contrary.
13.5 IMPOUNDS. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay
to Lessor, if Lessor shall so request, in addition to any other payments
required under this Lease, a monthly advance installment, payable at the same
time as the monthly rent, as estimated by Lessor, for real property tax and
insurance expenses on the Premises which are payable by Lessee under the
terms of this Lease. Such fund shall be established to insure payment when
due, before delinquency, of any or all such real property taxes and insurance
premiums. If the amounts paid to Lessor by Lessee under the provisions of
this paragraph are insufficient to discharge the obligations of Lessee to pay
such real property taxes and insurance premiums as the same become due,
Lessee shall pay to Lessor, upon Lessor's demand, such additional sums
necessary to pay such obligations. All moneys paid to Lessor under this
paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a default in the obligations of Lessee to perform
under this Lease, then any balance remaining from funds paid to Lessor under
the provisions of this paragraph may, at the option of Lessor, be applied to
the payment of any monetary default of Lessee in lieu of being applied to the
payment of real property tax and insurance premiums.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than 10% of the
floor area of the building on the Premises, or more than 25% of the land area
of the Premises which is not occupied by any building, is taken by
condemnation, Lessee may, at Lessee's option, to be exercised in writing only
within twenty (20) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days after
the condemning authority shall have taken possession) terminate this Lease as
of the date the condemning authority takes such possession. If Lessee does
not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the floor area
of the building taken bears to the total floor area of the building situated
on the Premises. No reduction of rent shall occur if the only area taken is
that which does not have a building located thereon. Any award for the taking
of all or any part of the Premises under the power of eminent domain or any
payment made under threat of the exercise of such power shall be the property
of Lessor, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any award for loss of or
damage to Lessee's trade fixtures and removable personal property. In the
event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of severance damages received by Lessor in
connection with such condemnation, repair any damage to the Premises caused
by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess
of such severance damages required to complete such repair.
15. BROKER'S FEE.
(a) Upon execution of this Lease by both parties, Lessor shall pay
to Leonard & Ohren Licensed real estate broker(s), a fee as set forth in a
separate agreement between Lessor and said broker(s), or in the event there
is no separate agreement between Lessor and said broker(s), the sum of
$219,931.20, for brokerage services rendered by said broker(s) to Lessor in
this transaction.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other entity having
an ownership interest in said real property or any part thereof, when such fee
is due hereunder. Any transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Said broker shall be a
third party beneficiary of the provisions of this Paragraph 15.
16. ESTOPPEL CERTIFICATE
(a) Either party hereto shall at any time upon not less than twenty
(20) days' prior written notice from the other party execute, acknowledge and
deliver to the requesting party a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to such
party's knowledge, any uncured defaults on the part of the other party
hereunder, or specifying such defaults if any are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser or encumbrancer of
the Premises.
(b) At either party's option, the failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
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conclusive upon such party (i) that this Lease is in full force and effect,
without modification except as may be represented by the party, (ii) that there
are no uncured defaults in the other party's performance, and (iii) that not
more than one month's rent has been paid in advance or such failure may be
considered a default under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners at the time in question of the fee title or a lessee's
interest in a ground lease of the Premises, and except as expressly provided
in Paragraph 15, in the event of any transfer of such title or interest,
Lessor herein named (and in case of any subsequent transfers then the
grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then grantor at the
time of such transfer, in which Lessee has an interest, shall be delivered to
the grantee. The obligations contained in this Lease to be performed by
Lessor shall, subject as aforesaid, be binding on Lessor's successors and
assigns, only during their respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence.
21. ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof nor any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable
laws and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed
to Lessee or to Lessor at the address noted below the signature of the
respective parties, as the case may be. Either party may by notice to the
other specify a different address for notice purposes except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice purposes. A copy of all notices required or
permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. WAIVERS. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all options and rights of
first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, whenever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof restricting
assignment of subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. SUBORDINATION.
(a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation or security
now or hereafter placed upon the real property of which the Premises are a
part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms.
If any mortgagee, trustee or ground lessor shall elect to have this Lease
prior to the lien of its mortgage, deed of trust or ground lease, and shall
give written notice thereof to Lessee, this Lease shall be deemed prior to
such mortgage, deed of trust, or ground lease, whether this Lease is dated
prior or subsequent to the date of said mortgage, deed or trust of ground
lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate
an attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's
failure to execute such documents within twenty (20) days after written
demand shall constitute a material default by Lessee hereunder, or, at
Lessor's option, Lessor shall execute such documents on behalf of Lessee as
Lessee's attorney-in-fact. Lessee does hereby make, constitute and
irrevocably appoint Lessor as Lessee's attorney-in-fact and in Lessee's name,
place and stead, to execute such documents in accordance with this paragraph
30(b).
31. ATTORNEY'S FEES. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the court.
The provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times and with reasonable notice for the
purpose of inspecting the same, showing the same to prospective purchasers,
lenders, or lessees, and making such alterations, repairs, improvements or
additions to the Premises or to the building of which they are a part as
Lessor may deem necessary or desirable. Lessor may at any time place on or
about the Premises any ordinary "For Sale" signs and Lessor may at any time
during the last 120 days of the term hereof place on or about the Premises
any ordinary "For Lease" signs, all without rebate of rent or liability to
Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to
the contrary in this Lease, Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises without
Lessor's prior written consent.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent
shall not be unreasonably withheld.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of
first refusal to lease other property of Lessor or the right of first offer
to lease other property of Lessor; (3) the right or option to purchase the
Premises, or the right of first refusal to purchase the Premises, or the
right of first offer to purchase the Premises or the right or option to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor or the right of first offer to purchase other
property of Lessor.
Initials: [illegible]
-----------
-5- LEB
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<PAGE>
39.2 OPTIONS PERSONAL. The Options herein granted to Lessee are not
assignable separate and apart from this Lease.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the
default alleged in said notice of default is cured, or (ii) during the period
of time commencing on the day after a monetary obligation to Lessor is due
from Lessee and unpaid (without any necessity for notice thereof to Lessee)
continuing until the obligation is paid, or (iii) at any time after an event
of default described in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any
necessity of Lessor to give notice of such default to Lessee), or (iv) in the
event that Lessor has given to Lessee three or more notices of default under
paragraph 13.1(b), where a late charge has become payable under paragraph
13.4 for each of such defaults, or paragraph 13.1(c), whether or not the
defaults are cured, during the 12 month period prior to the time that Lessee
intends to exercise the subject Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise
an Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due
and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation
of Lessee for a period of 30 days after such obligation becomes due (without
any necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee
fails to commence to cure a default specified in paragraph 13.1(c) within 30
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion , or
(iii) Lessee commits a default described in paragraph 13.1(a), 13.1(d) or
13.1(e) (without any necessity of Lessor to give notice of such default to
Lessee), or (iv) Lessor gives to Lessee three or more notices of default
under paragraph 13.1(b), where a late charge becomes payable under paragraph
13.4 for each such default, or paragraph 13.1(c), whether or not the defaults
are cured.
40. MULTIPLE TENANT BUILDING. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care, and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
42. EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure
to do so shall constitute a material breach of this Lease.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution
of this Lease, deliver to Lessor evidence of such authority satisfactory to
Lessor.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. INSURING PARTY. The insuring party under this lease shall be the Lessor.
47. ADDENDUM. Attached hereto is an addendum or addenda containing
paragraphs 48 through 54 which constitutes a part of this Lease.
See attached Exhibit A - Legal Description
Exhibit B - Building Floor Plan
Exhibit C - Work Letter
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING
THERETO. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE ON THE DATES SPECIFIED
IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.
Executed at El Segundo, California Continental Development Corporation
------------------------------- -------------------------------------
on By /s/ Richard C. Lundquist
--------------------------------- ------------------------------------
Richard C. Lundquist, President
Address 2041 Rosecrans Avenue, Suite 265 By /s/ Leonard E. Blakesley, Jr.
-------------------------------- ------------------------------------
Leonard E. Blakesley, Jr., Secretary
- --------------------------------------- "LESSOR" (Corporate Seal)
Executed at El Segundo, California Tri-Star Electronics, Inc. and
---------------------------- Cory Components Incorporated
-------------------------------------
on By /s/ Neal J. Castleman
------------------------------------- ----------------------------------
Neal J. Castleman,
President of Tri-Star Electronics
Address 2201 Rosecrans Avenue By /s/ Neal J. Castleman
-------------------------------- ----------------------------------
Neal J. Castleman,
Chairman of Cory Components
- ---------------------------------------- "LESSEE" (Corporate seal)
For these forms write or call the American Industrial Real Estate Association,
345 South Figueroa St., M-1, Los Angeles, CA 90071 (213)687-8777
- -C- 1980--By American Industrial Real Estate Association. All rights
reserved. No part of these words may be reproduced in any form without
permission in writing.
<PAGE>
PARCEL A:
The surface and all rights above the subsurface and that portion of the
subsurface lying above a depth of 500.00 feet measured vertically from the
surface of that portion of Parcel 2, in the city of El Segundo, in the county of
Los Angeles, state of California, as shown on a record of survey filed in Book
77 pages 51 and 52 of Record of Surveys, in the office of the County Recorder of
said county, described as follows:
Beginning at the intersection of the westerly line of said Parcel 2, with a
line that is parallel with and distant northerly 30.00 feet measured at right
angles from the most southerly line of said Parcel 2; thence along said
parallel line, South 89DEG.57'34" East 250.00 feet to the easterly line of
said Parcel 2; thence along said easterly line, North 0DEG.00'04" West 405.00
feet to the westerly terminus of that certain course in the southerly
boundary of said Parcel 2, shown on the map of said Record of Survey as
having a bearing and length of North 89DEG.57'34" West 400.00 feet; thence
along the westerly prolongation of said last-mentioned certain course, North
89DEG57'34" West 250.00 feet to the westerly line of said Parcel 2; thence
along said westerly line South 0DEG.00'04" East 405.00 feet to the point of
beginning.
Except from the southerly 13.5 feet of said land, all oil, gas, asphaltum and
other hydrocarbons and other minerals that may be produced from said land,
provided, however, that the surface of said property shall never be used for
the exploration, development, extraction, removal or storage of said oil,
gas, asphaltum or other hydrocarbons and other minerals and provided further
that the exercise of such excepted and reserved rights shall be conducted in
such a manner as not to interfere with or endanger the use of the surface of
said property, as reserved by Standard Oil Company of California, a
corporation, in deed recorded April 22, 1939, in Book D-441 Page 942,
Official Records.
Lessor reserves unto itself, its successors, assigns and designated lessees, a
non-exclusive right of vehicular and pedestrian access to, upon and over the
westerly 22.00 feet of the above described land.
PARCEL B:
A non-exclusive easement appurtenant to said Parcel A for vehicular and
pedestrian access to and from said Parcel A in, to, upon and over those portions
of Parcels 1, 2 and 3, in the city of El Segundo, Count of Los Angeles, state of
California, as shown on Parcel Map No. 8721 filed in Book 107, Page 2 of Parcel
Maps in the office of the County Recorder of said county, TOGETHER with that
portion of the southeast quarter of Section 18, T. 3 S., R. 14W., in said city,
county and state, as shown on map of subdivision of part of the Sausal Redondo
Rancho, filed in Superior Court Case No. 11629 of the state of California in and
for the county of Los Angeles, included within a strip of land 38.00 feet wide,
lying 16.00 feet westerly and 22.00 feet easterly of the easterly line of said
Parcels 1, 2 and 3; excepting therefrom that portion of said 38.00-foot-wide
strip of land lying within said Parcel A. Said Parcel B lies within, and is a
portion of, the private street known as Continental Way.
EXHIBIT "A"
<PAGE>
[MAP/BLUEPRINT]
PARKING STRUCTURE
-----------------
2201 ROSECRANS AVE.
TWO FLOORS
81,300 sq. ft.
SEPT. 19, 1989
EXHIBIT B
<PAGE>
WORK LETTER TO STANDARD OFFICE LEASE
Dated: September 19, 1989
By and between: Continental Development Corporation, Lessor, and Tri-Star
Electronics, Inc., Lessee
Except for the work to be performed according to Lessee's plans and
specifications (Specs), the tenant improvements in the Premises shall be
constructed in accordance with Lessor's building standard improvements using
building standard materials at Lessor's cost. All work to be performed in
accordance with Lessee's Specs shall be performed by Lessors at Lessee's
expense. In addition to the cost of Lessee's work performed in accordance
with Lessee's Specs, Lessee shall pay Lessor 10% of the total cost of such
work as administrative overhead and an additional 5% of the sum of such work
and administrative overhead as a reasonable profit.
1. Partitions
All existing partitions except bathrooms, stairwells and air chambers to be
removed. All new partitions installed in accordance with the Specs shall be
at the sole cost of the Lessee.
2. Wall Surfaces
All bathrooms, stairwells, air chambers and perimeter walls to be painted
with Zolatone paint of Lessee's choice. Patch as necessary.
3. Wall Coverings
N/A
4. Carpeting & Flooring
Lessor shall install: (1) 7,000 square feet of Stonehard Composition
flooring in a location to be specified by Lessee in the Specs; (2) 10,000
square feet of carpet, the cost of which shall not exceed $20/yard installed
(inclusive of padding and other materials necessary to install) on the 2nd
floor of the Premises; Lessee shall specify location; (3) building standard
vinyl tile with graphic motif using uncut tiles throughout balance of the 1st
and 2nd floors of the Premises; (4) building standard vinyl cove baseboard
on perimeter, bathroom, stairwell and air chamber walls by Lessor. All other
vinyl cove baseboard at expense of Lessee.
5. Doors
Remove all doors coincidental with the demolition of interior partitions
described above in item 1. All existing doors that are not removed (bathrooms,
janitor closets, stairwells, entrance and exit doors) to be refurbished. All new
doors installed in new partitions according to Lessee's Specs shall be at
Lessee's expense.
6. Electrical and Telephone Outlets
All existing perimeter wall outlets shall remain as is. Any additional such
outlets shall be installed per Code. All outlets in all removed partitions
shall be disconnected at the junction box by Lessor. Any and all new outlets
and all electrical power required by Lessee for the installation of Lessees
pre-fab type office systems, and industrial equipment shall be constructed by
Lessor in a "roughed-out" condition ready for final hook-up to said office
systems and industrial equipment at Lessee's expense.
7. Ceiling
To be removed and replaced with new 2'x2' acoustic tile building standard
ceiling throughout. Drywall ceilings shall be repainted. Any reconfiguration
required by Lessee's Specs shall be at Lessee's expense (including diagonal
orientation). As Lessee does not require a ceiling for the 1st floor, Lessor's
savings therefrom shall be applied against Lessee's cost to adequately ventilate
and light the 1st floor area and against Lessee's remodel of all the building
restrooms.
8. Lighting
Furnish and install new fixtures and lenses throughout to achieve a building
standard open area reflected ceiling plan which shall be one 2'x2' fixture per
code requirement. Any additional fixtures or fixtures of a grade higher than
building standard required by Lessee's Specs shall be at Lessee's expense, and
Lessee shall receive a credit for the standard fixtures not used.
9. Heating and Air Conditioning Ducts
Registers and grills to be refurbished to like-new condition or replaced with
new. Reinstall to pattern per building standard open area reflected ceiling
plan. Any additional ducting or zoning required by Lessee's Specs shall be at
Lessee's expense.
10. Miscellaneous
Lessor shall construct or install as may be required by the Specs a lunch room
lineup with required utility connections and mechanical work; a nitrogen tank
(all above ground); a tank enclosure (approximately 8'x10') installed in the
parking structure for the building all at the sole expense of Lessee. Lessor to
provide watertight roof and new visual block screen at roof; repaint entry
loading ramp and entrance; furnish and install a roll-up utility door in
exterior wall approximately 9' wide x 10' high.
11. Plumbing
Detail type cleaning throughout all bathrooms. Convert one men's facility to
a women's facility, changing urinals to water closets, and bring bathrooms
into compliance with Title 24 Accessibility Requirements, (handicapped)
including changing fixtures as necessary for compliance. Replacement of all
faucets, knobs and any cracked or damaged fixtures and tile. Repaint all
metal partitions. Add one executive building standard bathroom including
shower stall. The existing fire sprinkler system shall be modified to comply
with the applicable Building and Fire Safety Codes. Any reconfiguration
required by Lessee's Specs shall at Lessee's expense.
Initials: [illegible]
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FULL SERVICE - GROSS [illegible]
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EXHIBIT C
PAGE 1 OF 2 PAGES
<PAGE>
12. Entrance Doors
N/A
13. Completion of Improvements
At the Lessee's expense, Lessor shall construct and complete the
improvements to the Premises in accordance with the Specs provided to
Lessor by Lessee. Said Specs are to be provided to Lessor by November 1,
1989, in order to permit Lessor sufficient time to complete such
improvements by March 1, 1990. These improvements shall be of building
standard type materials readily available in the area in which the
Premises are located and shall require no unreasonable lead times for
procurement. Notwithstanding the provisions of paragraph 3.2 of the
Lease, if Lessee fails to provide said Specs by such date and such
failure results in the Lessor's inability to complete said improvements
by March 1, 1990 without extraordinary efforts, such events shall not
cause a delay in the commencement of the Lease nor a delay in the
commencement of the accrual of rent.
16. Completion
16.1 Lessor shall obtain a building permit to construct the improvements
as soon as possible.
16.2 Lessor shall complete the construction of the improvements as soon as
reasonably possible after the obtaining of necessary building permits.
16.3 The term "Completion," as used in this Work Letter, is hereby
defined to mean the date the building department of the municipality having
jurisdiction of the Premises shall have made a final inspection of the
improvements and authorized a final release of restrictions on the use of
public utilities in connection therewith and the same are in a broom-clean
condition.
16.4 Lessor shall use its best efforts to achieve Completion of the
Improvements on or before the Commencement Date set forth in paragraph 1.5 of
the Basic Lease Provisions or within one hundred eighty (180) days after Lessor
obtains the building permit from the applicable building department, whichever
is later.
16.5 In the event that the improvements or any portion thereof have not
reached Completion by the Commencement Date, this Lease shall not be invalid,
but rather Lessor shall complete the same as soon thereafter as is possible and
Lessor shall not be liable to Lessee for damages in any respect whatsoever.
16.6 If Lessor shall be delayed at any time in the progress of the
construction of the improvements or any portion thereof by extra work, changes
in construction ordered by Lessee, or by strikes, lockouts, fire, delay in
transportation, unavoidable casualties, rain or weather conditions,
governmental procedures or delay, or by any other cause beyond Lessor's control,
then the Commercial Date established in paragraph 1.5 of the Lease shall be
extended by the period of such delay.
17. Term
Upon Completion of the improvements as defined in paragraph 16.3, above,
Lessor and Lessee shall execute an amendment to the Lease setting forth the
date of Tender of Possession as defined in paragraph 3.2.1 or the Lease or of
actual taking of possession, whichever first occurs, as the Commencement Date
of this Lease.
18. Work Done by Lessee
Any work done by Lessee shall be done only with Lessor's prior written
consent and in conformity with a valid building permit and all applicable
rules, regulations, laws and ordinances, and be done in a good and
workmanlike manner with good and sufficient materials. All work shall be done
only with union labor and only by contractors approved by Lessor, it being
understood that all plumbing, mechanical, electrical wiring and ceiling work
are to be done only by contractors designated by Lessor.
19. Taking of Possession of Premises
Lessor shall notify Lessee of the Estimated Completion Date at least ten
(10) days before said date. Lessee shall thereafter have the right to enter the
Premises to commence construction of any improvements Lessee is to construct and
to equip and fixturize the Premises, as long as such entry does not interfere
with Lessor's work. Lessee shall take possession of the Premises upon the
tender thereof as provided in paragraph 3.2.1 of the Lease to which this Work
Letter is attached. Any entry by Lessee of the Premises under this paragraph
shall be under all of the terms and provisions of the Lease to which this Work
Letter is attached.
20. Acceptance of Premises
Lessee shall notify Lessor in writing of any items that Lessee deems
incomplete or incorrect in order for the Premises to be acceptable to Lessee
within ten (10) days following Tender of Possession as set forth in paragraph
3.2.1 of the Lease to which this Work Letter is attached. Lessee shall be
deemed to have accepted the Premises and approved construction if Lessee does
not deliver such a list to Lessor within said number of days.
21. Payment
Lessee shall pay Lessor for work done hereunder on a monthly basis, within
10 days of the presentation of the invoice. Failure to pay within said period
shall result in a cessation of work by Lessor but shall not alter the
commencement date of the Lease or the accrual of rent.
Initials:
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FULL SERVICE - GROSS [illegible]
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EXHIBIT C
PAGE 2 OF 2 PAGES
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LEASE ADDENDUM
This Addendum is dated this 15th day of September 1989 and shall be operative as
of this date unless otherwise stated herein. It is intended to supplement that
certain lease by and between Continental Development Corporation (Lessor) and
Tri-Star Electronics, Inc., a California corporation, and Cory Components,
Incorporated, a California corporation, (Lessee) dated the 15th day of
September 1989 (the Lease). Lessor and Lessee hereby agree to the matters
hereinafter set forth. This Addendum shall be attached to the Lease and shall
incorporate all relevant terms of the Lease as if set forth verbatim. If there
are any conflicts between this Addendum and any provisions of the Lease, the
Addendum shall be controlling as to matters specifically set forth herein. As
to matters not specifically set forth herein, the Lease shall be controlling.
The following paragraphs are hereby added to the Lease as if set forth therein:
48. HAZARDOUS SUBSTANCES
48.1 Definitions.
The term "Hazardous Substances," as used in this Lease, shall include,
without limitation, flammables, explosives, radioactive materials, asbestos,
polychlorinated biphenyls (PCBs), chemicals known to cause cancer or
reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic
substances or related materials, petroleum and petroleum products, and any
material or substance which is (i) defined as a "hazardous waste," "extremely
hazardous waste" or "restricted hazardous waste" under Sections 25115, 25117 or
15122.7, or listed pursuant to Section 25140, of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii)
defined as a "hazardous substance" under Section 25316 of the California Health
and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
Substance Account Act), (iii) defined as a "hazardous material," "hazardous
substance," or "hazardous waste" under Section 25501 of the California Health
and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response
Plans and Inventory), (iv) defined as a "hazardous substance" under Section
25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substance), (v) petroleum, (vi) asbestos,
(vii) listed under Article 9 or defined as hazardous or extremely hazardous
pursuant to Article 11 of Title 22 of the California Administrative Code,
Division 4, Chapter 20, (viii) designated as a "hazardous substance" pursuant to
Section 311 of the Federal Water Pollution Control Act 33 U.S.C. 1317, (ix)
defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq. 42 U.S.C. 6903, or (x)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
and substances declared to be hazardous or toxic under any law or regulations
now or hereafter enacted or promulgated by any governmental authority.
48.2 Lessee's Restrictions.
Lessee shall not cause or permit to occur:
(a) Any violation of any federal, state, or local law, ordinance, or
regulations now or hereafter enacted, related to environmental conditions on,
under, or about the Premises, or arising from Lessee's use or occupancy of the
Premises, including, but not limited to, soil and ground water conditions; or
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(b) In the event Lessee proposes to alter in any manner its current use,
generation, release. manufacture, refining, production, processing, storage, or
disposal of any Hazardous Substance on, under, or about the Premises, or the
transportation to or from the Premises of any Hazardous Substance, Lessee shall
first obtain written consent of Lessor. Lessee shall remove all Hazardous
Substances generated by Lessee's activities on the Premises in a manner which
complies with all Laws.
48.3 Environmental Clean-up.
(a) Lessee shall, at Lessee's own expense, comply with all laws regulating
the use, generation, storage, transportation, or disposal of Hazardous
Substances (Laws).
(b) Lessee shall, at Lessee's own expense, make all submissions to,
provide all information required by, and comply with all requirements of all
governmental authorities (the "Authorities") under the Laws.
(c) Lessee shall provide Lessor, at least annually, with copies of all
required licenses, permits, or other forms of compliance with all Laws as are
required by Authorities.
(d) Should any Authority or any third party demand that a cleanup plan be
prepared and that a clean-up be undertaken because of any deposit, spill,
discharge, or other release of Hazardous Substances that occurs during the term
of this Lease, at or from the Premises, or which arises at any time from
Lessee's use or occupancy of the Premises, then Lessee shall, at Lessee's own
expense, prepare and submit the required plans and all related bonds and other
financial assurances; and Lessee shall carry out all such cleanup plans.
(e) Lessee shall promptly provide all information regarding the use,
generation, storage, transportation, or disposal of Hazardous Substances that is
reasonably requested by Owner. If Lessee fails to fulfill any duty imposed
under this paragraph within a reasonable time, Lessor may do so; and in such
case, Lessee shall cooperate with Lessor in order to prepare all documents
Lessor deems necessary or appropriate to determine the applicability of the Laws
to the Premises and Lessee's use thereof, and for compliance therewith, and
Lessee shall execute all documents promptly upon Lessor's request. No such
action by Lessor and no attempt made by Lessor to mitigate damages under any Law
shall constitute a waiver of any of Lessee's obligations under this Paragraph.
(f) Lessee shall pay the full cost of any clean-up work performed on or
about the Premises as required by any such governmental authority in order to
remove, neutralize or otherwise treat materials of any type whatsoever directly
or indirectly placed by Lessee or its agents, employees or contractors on or
about the Premises or the land under or about the Premises.
(g) At the end of the Lease term or any extension, Lessee shall surrender
the Premises in a good and clean condition, normal wear and tear excepted, ready
for occupancy by any subsequent tenant. Should Lessee fail to so surrender at
the end of such term then and in that event Lessee shall be deemed a Holdover
pursuant to the terms and conditions of Paragraph 26 of the Lease.
(h) Lessee's obligations and liabilities under this Paragraph shall
survive the expiration of this Lease.
48.4 Disclosure of Violations.
Lessee shall, within five (5) days of the occurrence thereof, notify Lessor
in writing of any violation, citation, report, notice, or any other form of
communication from any
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governmental authority regarding non-compliance with any and all Laws.
Furthermore, as a condition precedent to the effectiveness of this Lease, Lessee
shall provide to Lessor, at least five (5) days prior to the commencement
hereof, a written certification, signed by an authorized officer of Lessee,
setting forth, in detail, Lessee's record with regard to compliance with all
Laws.
48.5 Lessee's Indemnity.
(a) Lessee shall release, indemnify, defend, protect and hold harmless
Lessor, the manager of the property, and their respective officers, directors,
beneficiaries, shareholders, partners, agents, and employees from all fines,
suits, procedures, claims, and actions of every kind from or by any third party
or governmental authority, and all costs associated therewith (including
attorneys' and consultants' fees and expenses) arising out of or in any way
connected with any residue, deposit, spill, discharge, or other release of
Hazardous Substances that occurs during the term of this Lease, at or from the
Premises, or from Lessee's failure to provide all information, make all
submissions, and take all steps required by all Authorities under the Laws and
all other environmental laws.
(b) Lessee's obligations and liabilities under this Paragraph shall
survive the expiration of this Lease.
49. MAINTENANCE AND REPAIRS
49.1 The Lessor shall contract for and manage the maintenance and repair
of the building's HVAC System, the roof, the parking structure, the exterior
lighting of the building, and all landscaping or hard surface areas of the
Premises (Maintenance and Management Services).
The Lessee shall pay monthly, as additional rent, an estimate of the cost
of such Maintenance and Management Services. At the end of each calendar year
the actual cost of the Maintenance and Management Services for the preceding
year shall be calculated. If the actual maintenance costs exceed the estimated
payment, Lessee shall pay to Lessor the full amount of such shortfall in
addition to the monthly rental due. If the estimated payment is in excess of the
actual costs, Lessor shall credit such overpayment to Lessee's next occurring
rental obligation. The estimated payment for the then current calendar year
shall be adjusted to approximate the average monthly cost for the previous
year's expenses.
The monthly costs of Maintenance and Management Services for the calendar
year 1990 shall be based on the following estimates:
Building Insurance 200
Parking structure sweeping service 300
HVAC maintenance service contract 522
HVAC repair estimate 500
Landscape 393
Building exterior/parking structure lights/fixtures 267
Maintenance department allocation (2% of total allocation) 500
Property management allocation (2% of total allocation) 360
-----
TOTAL monthly estimate $3042
49.2 The buildings in Continental Park are painted every five years. The
Premises are scheduled to be painted in years three (3) and Eight (8) during
the lease term.
50. OPTIONS TO EXTEND.
50.1 Lessee shall have one (1) five-year option to extend the term of this
Lease (Extension Option). Lessee shall be required to give Lessor written
notice of its election to
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exercise the Extension Option at least one (1) year prior to the commencement of
the term of the Extension Option.
50.2 In the Event Lessee elects to exercise the Extension Option, the Base
Rent during the Option term shall be Ninety-Five Percent (95%) of the then fair
market Base Rent (New Base Rent) for comparable vacant space in Continental Park
(Park), taking into account the Commencement Date of the Option term, the terms
and conditions of the lease form that Lessor is then using in the Park,
including periodic automatic increases in Base Rent, if any, but not less than
the Base Rent payable during the last month of the term preceding the term of
the Extension Option in question. Should there be no comparable vacant space in
the Park. The term fair market Base Rent shall mean the Base Rent for that
space which would be paid by a willing Lessee to a willing Lessor, neither of
whom is compelled to rent, for a term of five years, disregarding such
inducements as free rent, free parking, over-standard lessee improvements, and
Lessor's assumption of existing leases.
51. ASSIGNMENT AND SUBLETTING
51.1 Consent Required
(a) Lessee shall not assign or transfer this Lease, or any interest
therein, and shall not sublet the Premises or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person (the invitees, agents
and servants of Lessee excepted ) to occupy or use the Premises, or any portion
thereof, or agree to any of the foregoing, without in each case first obtaining
the written consent of Lessor, in accordance with subsection (a), below.
Neither this Lease nor any interest therein shall be assignable as to the
interest of Lessee by operation of law, without the written consent of Lessor.
Lessee shall not pledge, hypothecate or encumber this Lease, or any interest
therein, without in each case first obtaining the written consent of Lessor,
which consent shall not unreasonably be withheld. Any such assignment,
transfer, pledge, hypothecation, encumbrance sublease or occupation of, or the
use of the Premises by any other person without such consent, shall be void and
shall make this Lease voidable at the option of Lessor. Any consent to any
assignment, transfer, pledge, hypothecation, encumbrance, sublease or occupation
or use of the Premises by any other person which may be given by Lessor shall
not constitute a waiver by Lessor of the provisions of this Section or a
release of Lessee from the full performance by it of the covenants herein
contained.
(b) If Lessee desires at any time to assign this Lease or sublet all or
any portion of the Premises, Lessee shall first notify Lessor at least sixty
(60) days prior to the proposed effective date of the assignment or sublease, in
writing, of its desire to do so and shall submit in writing to Lessor (1) the
name of the proposed sub-tenant or assignee, (2) the nature of the proposed
sub-tenant's or assignee's business to be carried on in the Premises, (3) the
terms and conditions of the proposed sublease or assignment and (4) financial
statements for the two most recent completed fiscal years of the proposed
sub-tenant or assignee, and a bank reference. Thereafter, Lessee shall furnish
such supplemental information as Lessor may reasonably request concerning the
proposed sub-tenant or assignee. At any time within (15) days after Lessor's
receipt of the information specified above, Lessor may by written notice to
Lessee elect to (1) consent to the sublease or assignment, or (2) reasonably
disapprove of the sublease or assignment, setting forth in writing Lessor's
grounds for doing so. Such grounds may include, without limitation, a material
increase in the impact upon the Building Services and common areas of the
Building or the parking facilities, a material increase in the demands upon
utilities and services supplied by Lessor, a possible material adverse effect
upon the reputation of the Building from the nature of the business to be
conducted, or a reputation for financial reliability on the
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part of the proposed sub-tenant or assignee which is unsatisfactory in the
reasonable judgment of Lessor. If Lessor consents to the sublease or assignment
within the fifteen (15) day period, Lessee may thereafter enter into such
assignment or sublease of the Premises, or a portion thereof, upon the terms and
conditions and as of the effective date set forth in the information furnished
by Lessee to Lessor.
51.2 Applicable Terms and Conditions
(a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligations hereunder or alter the primary liability
of Lessee to pay the rent and other sums due Lessor hereunder including Lessee's
Share of Operating Expense Increase, and to perform all other obligations to be
performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such assignment or
subletting, nor the acceptance of rent, shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for the breach of any of the terms or
conditions of this paragraph 51 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease and Lessor's consent thereto shall
not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent
and such action shall not relieve such persons from liability under this Lease
or said sublease; however, such persons shall not be responsible to the extent
any such amendment or modification enlarges or increases the obligations of the
Lessee or sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of a material fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was false
shall, at Lessor's election, render Lessor's said consent null and void.
51.3 Additional Applicable Terms and Conditions
Regardless of Lessor's consent, the following terms and conditions shall
apply to any subletting by Lessee of all or any part of the Premises and shall
be deemed included in all subleases under this Lease whether or not expressly
incorporated therein:
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(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all rentals and income arising from any sublease heretofore or hereafter made
by Lessee, and Lessor may collect such rent and income and apply same toward
Lessee's obligations under this Lease; provided, however, that until a default
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may receive, collect and enjoy the rents accruing under such sublease. Lessor
shall not, by reason of this or any other assignment of such sublease to Lessor
nor by reason of the collection of the rents from a sublessee be deemed liable
to the sublessee for any failure of Lessee to perform and comply with any of
Lessee's obligations to such sublessee under such sublease. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a default exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents due and to become due
under the sublease. Lessee agrees that such sublessee shall have the right to
rely upon any such statement and request from Lessor, and that such sublessee
shall pay such rents to Lessor without any obligation or right to inquire as to
whether such default exists and notwithstanding any notice from or claim from
Lessee to the contrary. Lessee shall have no right or claim against said
sublessee or Lessor for any such rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and until
it has been approved in writing by Lessor. Any sublease shall, by reason of
entering into a sublease under this Lease, be deemed, for the benefit of Lessor,
to have assumed and agreed to conform and comply with each and every obligation
herein to be performed by Lessee other than such obligations as are contrary to
or inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) Each permitted assignee, transferee or sublessee, other than Lessor,
shall assume and be deemed to have assumed this Lease and shall be and remain
liable jointly and severally with Lessee for the payment of the rent and for the
due performance or satisfaction of all of the provisions, covenants, conditions
and agreements herein contained on Lessee's part to be performed or satisfied.
No permitted assignment shall be binding on Lessor unless such assignee or
Lessee shall deliver to Lessor a counterpart of such assignment which contains a
covenant of assumption by the assignee, but the failure or refusal of the
assignee to execute such instrument of assumption shall not release or discharge
the assignee from its liability as set forth above.
(f) If Lessee is a partnership, a transfer of any interest of a general
partner, a withdrawal of any general partner from the partnership, or the
dissolution of the partnership, shall be deemed to be an assignment of this
Lease.
(g) If Lessee is a corporation, unless Lessee is a public corporation,
viz, whose stock is regularly traded on a national stock exchange, or is
regularly traded in the over-the-counter market and quoted on NASDAQ, any
dissolution, merger,
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consolidation or other reorganization of Lessee or sale or other transfer of a
percentage of capital stock of Lessee which results in a change of controlling
persons, or the sale or other transfer of substantially all of the assets of
Lessee, shall be deemed to be an assignment of this Lease. Understanding the
foregoing, Lessee shall be permitted to assign this Lease without Lessor's prior
written consent (or the payment of any fee) to AVX Corporation so long as
Lessee gives Lessor written notice ten (10) days after such assignment has
occurred.
(h) Any notice by Lessee to Lessor pursuant to Section 51.1(b) of a
proposed assignment or subletting shall be accompanied by a payment of One
Thousand Dollars ($1000) as a fee for Lessor's time and the processing of
Lessee's request for Lessor's consent. Should Lessor approve any such assignment
or sublease, said $1000 shall be non-refundable. If Lessor disapproves any such
assignment or sublease, Lessor shall refund only that portion of the $1000 which
is not used to cover Lessor's General and Administrative costs and other
expenses attributable to processing Lessee's proposal of assignment or sublease.
51.4. Involuntary Assignment and Bankruptcy
(a) In the event this Lease is assigned to any person or entity pursuant
to provisions of the Bankruptcy Code, 11 USC S101, et seq., (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Lessor, shall remain the exclusive property of Lessor, and shall not constitute
property of Lessee or of the estate of Lessee within the meaning of the
Bankruptcy Code. Any and all monies or other consideration constituting
Lessor's property under the preceding sentence not paid or delivered to Lessor
shall be held in trust for the benefit of Lessor and be promptly paid to or
turned over to Lessor.
(b) If Lessee, pursuant to this Lease, proposed to assign the same
pursuant to the provisions of the Bankruptcy Code, to any person or entity who
shall have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to Lessee, then notice of the proposed assignment setting forth (i)
the name and address of such person, (ii) all of the terms and conditions of
such offer, and (iii) the assurances referred to in Section 365(b)(3) of the
Bankruptcy Code, shall be given to the Lessor by the Lessee no later than twenty
(20) days after receipt of such offer by the Lessee, but in any event no later
than ten (10) days prior to the date that Lessee shall make application to a
court of competent jurisdiction for authority and approval to enter into such
assignment and assumption, to be exercised by notice to the Lessee given at any
time prior to the effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
such person for the assignment of this Lease.
(c) Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on or after the
date of such assignment. Any such assignee shall, upon demand, execute and
deliver to Lessor an instrument confirming such assumption.
(d) Lessor may consider the adequacy of a security deposit and the net
worth and other financial elements of the proposed assignee in determining
whether or not the proposed assignee has furnished Lessor with adequate
assurances of its ability to perform the obligations of this Lease.
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(e) In the event Lessor rejects the proposed assignee, the rights and
obligations of the parties hereto shall continue to be governed by the terms of
this Lease, and Lessee shall have all the rights of a tenant under applicable
California law.
52. PARKING
52.1 Lessee shall have the right to park 250 cars in the parking structure
which is attached to the Premises. The 250 spaces will be assigned to the
several levels of the parking structure as follows: 13 spaces shall be on the
first (lower) level against the south (or Building) wall, 35 spaces shall be on
the second level adjacent to the Building entrance, the remaining spaces shall
be located on the third level (98 spaces) and the fourth level (104 spaces).
52.2 Unless specifically stated otherwise, any and all parking rights
and/or privileges granted to Lessee hereby shall only be enforceable by Lessee
or Lessor for Lessee's benefit during Lessee's regular hours of business if
specified. If not so specified, regular business hours are deemed to be 7:00
a.m. until 5:00 p.m. During the period from 5:01 p.m. to 6:59 a.m. Lessor has
the right to permit others to use any and all vacant parking spaces to which
this lease applies, as Lessor sees fit.
53. RENT INCREASE
53.1 At the times set forth in Section 4. (Rent) of the Basic Lease
Provisions, the monthly Rent payable under Section 4 of this Lease shall be
adjusted by the Increase, if any, in the Consumer Price Index of the Bureau of
Labor Statistics of the Department of Labor for All Urban Consumers (1982-84 =
100), "All Items," for Los Angeles-Anaheim-Riverside (CPI) since the date of
this Lease.
53.2 The monthly Rent payable pursuant to Section 4 shall be calculated as
follows; the Rent payable for the first month of the term of this Lease shall
be multiplied by a fraction the numerator of which shall be the CPI of the
calendar month during which the adjustment is to take effect, and the
denominator of which shall be the CPI for the calendar month in which the
original Lease term commences. The sum so calculated shall constitute the new
monthly Rent hereunder, but, in no event, shall such new monthly Rent be less
than the Rent payable for the month immediately preceding the date for the rent
adjustment.
53.3 In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall
be discontinued, then the index most nearly the same as the CPI shall be used
to make such calculations. In the event that Lessor and Lessee cannot agree on
such alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in the County in which the Premises are
located, in accordance with the then rules of said association and the decision
of the arbitrators shall be binding upon the parties, notwithstanding one party
failing to appear after due notice of the proceeding. The cost of said
Arbitrators shall be paid equally by Lessor and Lessee.
53.4 Lessee shall continue to pay the rent at the rate previously in
effect until the increase, if any, is determined. Within five (5) days following
the date on which the increase is determined, Lessee shall make such payment to
Lessor as will bring the increased rental current, commencing with the effective
date of such increase through the date of any rental installments then due.
Thereafter the rental shall be paid at the increased rate.
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54. LENDER MODIFICATION
Lessee agrees to make such reasonable modifications to this Lease as may be
reasonably required by an institutional lender in connection with the obtaining
of normal financing or refinancing of the Office Building Project.
55. PARKING OR PLAYGROUND EASEMENT
Notwithstanding the description of the Premises contained in Paragraph 2
and Exhibit A of this lease, Lessee acknowledges that the portion of the
described Parcel easterly of the building and parking structure is subject to
the following uses and hereby consents thereto so long as such use does not
materially interfere with Lessee's business operation:
(a) The lessees and their invitees of 2221 Rosecrans have the exclusive
right to park in designated parking areas so long as Lessee shall have
reasonable and unfettered access to the loading dock of the Premises to make
deliveries and shipments as may be necessary to Lessee' business operations. In
addition lessor may modify the access to the loading dock and eliminate any
parking on the east side of the building for the purpose of constructing a child
care facility play area.
56. CHILD CARE FACILITY
Lessee acknowledges that Lessor is contemplating the development,
construction and/or operation of a child care facility which is to be located
within Continental Park of which these Premises comprise one portion. Lessee
agrees that since such a facility would confer a benefit on Lessee, as well as
other Lessees of Continental Park, Lessee will make all reasonable efforts to
cooperate with Lessor to accommodate the development and construction of such
facility. These efforts shall include but are not limited to the taking of
reasonable steps to comply with all local state and federal laws and other
regulations which apply to Lessees operation of its business with regard to the
placement of a child care facility in close proximity to the Premises or to
reasonably modify Lessee's operations so as not to prohibit such placement so
long as such action does not materially interfere with Lessee's business
operation.
LESSOR LESSEE
CONTINENTAL DEVELOPMENT TRI-STAR ELECTRONICS, INC.
CORPORATION
Date 9/15/89 Date
------------------------------ ----------------------------
By /s/ Richard C. Lundquist By /s/ Neal J. Castleman
-------------------------------- --------------------------------
Richard C. Lundquist Neal J. Castleman
Its President Its President
By /s/ Leonard E. Blakesley, Jr. CORY COMPONENTS INCORPORATED
--------------------------------
Leonard E. Blakesley, Jr.
Its Secretary
By /s/ Neal J. Castleman
--------------------------------
Neal J. Castleman
Its Chairman
9
<PAGE>
EXHIBIT 10.13
Amended and Restated Credit Agreement, dated September 18, 1996,
among Registrant, ADS Acquisition, Inc., Tri-Star Holdings, Inc.,
Tri-Star Electronics International, Inc., Tri-Star Technologies,
inc., Tri-Star Technologies, Tri-Star Electronics Europe S.A.,
Mezzovico, Cory Holdings, Inc., Cory Components, Inc., Hollinsead
International, Inc., Hollingsead International Limited, The
Provident Bank, and Internationale Nederlanden (U.S.) Capital
Corporation.
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[EXECUTION COPY]
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DeCRANE AIRCRAFT HOLDINGS, INC.
and
SUBSIDIARY GUARANTORS
______________________________
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 18, 1996
_______________________________
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION,
as Agent
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<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . 29
1.03 Classes and Types of Loans . . . . . . . . . . . . . . . . . 30
Section 2. Commitments, Loans, Notes and Prepayments . . . . . . . . . 30
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.02 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.03 Letters of Credit . . . . . . . . . . . . . . . . . . . . . 33
2.04 Changes of Commitments . . . . . . . . . . . . . . . . . . . 38
2.05 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . 38
2.06 Lending Offices . . . . . . . . . . . . . . . . . . . . . . 39
2.07 Several Obligations; Remedies Independent . . . . . . . . . 39
2.08 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.09 Optional Prepayments and Conversions or Continuations
of Loans . . . . . . . . . . . . . . . . . . . . . . . . 40
2.10 Mandatory Prepayments and Reductions of Commitments . . . . 40
2.11 Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . 43
Section 3. Payments of Principal and Interest . . . . . . . . . . . . 43
3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . 43
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . 45
4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . 46
4.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . 47
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . 47
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . 47
4.06 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . 48
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . 49
Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . 51
5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . 51
5.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . 54
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . 55
5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 55
5.06 Additional Costs in Respect of Letters of Credit . . . . . . 56
5.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(i)
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Page
----
Section 6. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.01 The Guarantee . . . . . . . . . . . . . . . . . . . . . . . 58
6.02 Obligations Unconditional . . . . . . . . . . . . . . . . . 58
6.03 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . 59
6.04 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 60
6.05 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.06 Instrument for the Payment of Money . . . . . . . . . . . . 60
6.07 Continuing Guarantee . . . . . . . . . . . . . . . . . . . . 60
6.08 Rights of Contribution . . . . . . . . . . . . . . . . . . . 61
6.09 General Limitation on Guarantee Obligations . . . . . . . . 62
6.10 Limitation on Kerner's Liability . . . . . . . . . . . . . . 62
6.11 Limitation on Gutermann's Liability . . . . . . . . . . . . 62
Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . 62
7.01 Effectiveness of Amendment and Restatement . . . . . . . . . 62
7.02 Initial and Subsequent Extensions of Credit . . . . . . . . 66
Section 8. Representations and Warranties . . . . . . . . . . . . . . . 66
8.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . 66
8.02 Financial Condition . . . . . . . . . . . . . . . . . . . . 67
8.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.05 Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . 68
8.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.10 Investment Company Act . . . . . . . . . . . . . . . . . . . 69
8.11 Public Utility Holding Company Act . . . . . . . . . . . . . 69
8.12 Material Agreements and Liens . . . . . . . . . . . . . . . 69
8.13 Environmental Matters . . . . . . . . . . . . . . . . . . . 70
8.14 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 72
8.15 Subsidiaries, Etc. . . . . . . . . . . . . . . . . . . . . . 72
8.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . 73
8.17 True and Complete Disclosure . . . . . . . . . . . . . . . . 73
8.18 Legal Form . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9. Covenants of the Company . . . . . . . . . . . . . . . . . . 74
9.01 Financial Statements, Etc. . . . . . . . . . . . . . . . . . 74
9.02 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.03 Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . 79
9.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.05 Prohibition of Fundamental Changes . . . . . . . . . . . . . 83
9.06 Limitation on Liens . . . . . . . . . . . . . . . . . . . . 83
9.07 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 85
9.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . 85
9.09 Dividend Payments . . . . . . . . . . . . . . . . . . . . . 86
9.10 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 86
9.11 EBITDA Ratio . . . . . . . . . . . . . . . . . . . . . . . . 87
(ii)
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Page
----
9.12 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . 87
9.13 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . 87
9.14 Fixed Charges Ratio . . . . . . . . . . . . . . . . . . . . 88
9.15 Capital Expenditures . . . . . . . . . . . . . . . . . . . . 88
9.16 Interest Coverage Ratio; Selling, General and
Administrative Expense Ratio . . . . . . . . . . . . . . . 89
9.17 Accounts Payable Ratio . . . . . . . . . . . . . . . . . . . 89
9.18 Interest Rate and Commodity Price Protection Agreements . . 90
9.19 Subordinated Indebtedness; Allard Non-Compete . . . . . . . 90
9.20 Lines of Business . . . . . . . . . . . . . . . . . . . . . 90
9.21 Transactions with Affiliates . . . . . . . . . . . . . . . . 90
9.22 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 91
9.23 Certain Obligations Respecting Subsidiaries. . . . . . . . . 91
9.24 Modifications of Certain Documents . . . . . . . . . . . . . 92
9.25 Vendor Payables . . . . . . . . . . . . . . . . . . . . . . 92
9.26 Governmental Approvals . . . . . . . . . . . . . . . . . . . 92
9.27 Swiss Receivables . . . . . . . . . . . . . . . . . . . . . 92
9.28 Intercompany Note . . . . . . . . . . . . . . . . . . . . . 92
9.29 ADS Financial Statements . . . . . . . . . . . . . . . . . . 93
9.30 Deal Costs . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . 93
Section 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . 98
11.01 Appointment, Powers and Immunities . . . . . . . . . . . . . 98
11.02 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . 99
11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . 99
11.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . 100
11.06 Non-Reliance on Agent and Other Lenders. . . . . . . . . . . 100
11.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . 101
11.08 Resignation or Removal of Agent. . . . . . . . . . . . . . . 101
11.09 Agency Fee; Cash Management Fee. . . . . . . . . . . . . . . 101
11.10 Consents under Other Basic Documents . . . . . . . . . . . . 102
11.11 Collateral Sub-Agents. . . . . . . . . . . . . . . . . . . . 102
11.12 Resignation of Cash Collateral Agent; Etc. . . . . . . . . . 103
Section 12. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 103
12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . 104
12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . 105
12.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . 106
12.06 Assignments and Participations . . . . . . . . . . . . . . . 106
12.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 108
12.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 108
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 108
12.10 Governing Law; Submission to Jurisdiction . . . . . . . . . 108
(iii)
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Page
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12.11 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . 109
12.12 Treatment of Certain Information;
Confidentiality . . . . . . . . . . . . . . . . . . . . . 109
12.13 Judgment Currency . . . . . . . . . . . . . . . . . . . . . 110
SCHEDULE I - Litigation
SCHEDULE II - Material Agreements and Liens
SCHEDULE III - Environmental Matters
SCHEDULE IV - Subsidiaries and Investments
SCHEDULE V - Capitalization
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Term Loan Note
EXHIBIT B - Form of Borrowing Base
Certificate
EXHIBIT C-1 - Form of Security Agreement
EXHIBIT C-2 - Form of Security Agreement Amendment
EXHIBIT D - Form of Cash Management Agreement
EXHIBIT E - Form of Opinion of Counsel to the Obligors
EXHIBIT F - Form of Opinion of Special
Swiss Counsel to the Obligors
EXHIBIT G - Form of Opinion of Special U.K. Counsel to
the Obligors
EXHIBIT H-1 - Form of Annual Budget of the Company and its
Subsidiaries
EXHIBIT H-2 - Form of Monthly Report of the Company and its
Subsidiaries
EXHIBIT H-3 - Form of Compliance Certificate
EXHIBIT I - Form of Confidentiality Agreement
(iv)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 18, 1996,
between: DeCRANE AIRCRAFT HOLDINGS, INC., a corporation duly organized and
validly existing under the laws of the State of Ohio (the "COMPANY"); each of
the Subsidiaries of the Company identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereto (individually, a "SUBSIDIARY
GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and, together with
the Company, the "OBLIGORS"); each of the lenders that is a signatory hereto
identified under the caption "LENDERS" on the signature pages hereto or that,
pursuant to Section 12.06(b) hereof, shall become a "Lender" hereunder
(individually, a "LENDER" and, collectively, the "LENDERS"); THE PROVIDENT
BANK, an Ohio banking corporation, as Cash Management Agent (in such
capacity, together with its successors in such capacity, the "CASH MANAGEMENT
ACCENT"); and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation, as agent for the Lenders (in such capacity, together
with its successors in such capacity, the "AGENT").
The Company, the Subsidiary Guarantors, the Lenders, the Cash Management
Agent and the Agent are parties to a Credit Agreement, dated as of November
2, 1994 (as amended heretofore, the "ORIGINAL CREDIT AGREEMENT"), and the
parties to the Original Credit Agreement wish to amend and restate the terms
of the Original Credit Agreement for the purpose of providing additional
credit to the Company to finance certain capital expenditures and the
operations of the Company and for other purposes. Accordingly, the Company,
the Subsidiary Guarantors, the Lenders, the Cash Management Agent and the
Agent agree that, subject to the terms and conditions of this Agreement, the
Original Credit Agreement is hereby amended and restated in its entirety to
read as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and VICE VERSA):
"ACCOUNTS PAYABLE" shall mean, as at any date, the sum for the Obligors
(determined on a consolidated basis without duplication in accordance with
GAAP) of all amounts that should be classified as accounts payable on a
balance sheet.
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"ACCOUNTS PAYABLE RATIO" shall mean, as at any date, the ratio of:
(a) the product of (i) Accounts Payable on such date TIMES (ii) 360, TO
(b) for any date occurring:
(i) on or after December 31, 1996, Cost of Goods Sold for the period
of four consecutive fiscal quarters ending on, or most recently ended
prior to, such date, and
(ii) prior to December 31, 1996, the product of (x) Cost of
Goods Sold for the period commencing on January 1, 1996 and ending on
the last day of the fiscal quarter ending on, or most recently ended
prior to, such date, times (y) the Applicable Annualization Factor.
"ADS" shall mean the Aerospace Display Systems Division of Allard.
"ADS PURCHASE" shall mean the purchase by the Company of substantially
all of the assets of ADS pursuant to the ADS Purchase Agreement.
"ADS PURCHASE AGREEMENT" shall mean the Asset Purchase and Sale
Agreement, dated July 23, 1996, by and among Allard, ADS Acquisition, Inc.,
the Company and the other parties named therein.
"ADS SUBSIDIARY" shall mean ADS Acquisition, Inc.
"AFFILIATE" shall mean any Person that directly or indirectly controls,
or is under common control with, or is controlled by, the Company and, if
such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "CONTROL" (including, with its
correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise).
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely
by reason of his or her being a director, officer or employee of the Company
or any of its Subsidiaries, (b) none of the Wholly Owned Subsidiaries of the
- 2 -
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Company shall be Affiliates and (c) neither the Agent nor any Lender shall be
an Affiliate.
"APPLICABLE ANNUALIZATION FACTOR" shall mean:
(a) for the fiscal quarter ending on March 31, 1996, 4.0;
(b) for the fiscal quarter ending on June 30, 1996, 2.0; and
(c) for the fiscal quarter ending on September 30, 1996, 1.33.
"ALLARD" shall mean Allard Industries, Inc.
"ALLARD NON-COMPLETE DOCUMENTATION" shall mean the covenant not to
compete referred to in Section 5.2.8 of the ADS Purchase Agreement.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other office of such Lender (or of an affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the Company as the
office by which its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean:
(a) with respect to Term Loans that are Base
Rate Loans, 3-1/2% per annum;
(b) with respect to Term Loans that are
Eurodollar Loans, 5% per annum;
(c) with respect to Revolving Credit Loans
that are Base Rate Loans and with
respect to Swingline Loans, 3-1/4% per
annum; and
(d) with respect to Revolving Credit Loans
that are Eurodollar Loans, 4-1/2% per
annum.
"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"BASE RATE" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day
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<PAGE>
plus 1/2 of 1% and (b) the Prime Rate for such day. Each change in any
interest rate provided for herein based upon the Base Rate resulting from a
change in the Base Rate shall take effect at the time of such change in the
Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BASIC DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the Cash Management Agreement, the Letter of Credit Documents, the
Intercompany Note, the Security Documents and any agreement evidencing any
Interest Rate Protection Agreement entered into between any Obligor and any
Lender.
"BOEING" shall mean The Boeing Company, a corporation organized under
the laws of the State of Delaware.
"BORROWING BASE" shall mean, as at any date, the sum of (a) 85% of the
aggregate amount of Eligible Receivables at said date (other than Eligible
Foreign Receivables) PLUS (b) 65% of Eligible Foreign Receivables at said
date PLUS (c) 50% of the Eligible Inventory (other than Eligible Foreign
Inventory) at said date PLUS (d) 35% of Eligible Foreign Inventory at said
date. The "VALUE" of Eligible Inventory shall be determined at the lower of
cost or market in accordance with GAAP, except that cost shall be determined
on a first-in-first-out basis.
"BORROWING BASE CERTIFICATE" shall mean a certificate of the chief
financial officer of the Company, substantially in the form of Exhibit B
hereto and appropriately completed.
"BUSINESS DAY "shall mean (a) any day on which commercial banks are not
authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, any day on which dealings in
Dollar deposits are carried out in the London interbank market.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.
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<PAGE>
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) Property to the extent such obligations
are required to be classified and accounted for as a capital lease on a
balance sheet of such Person under GAAP, and, for purposes of this Agreement,
the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"CASH FLOW" shall mean, for any period, the sum, for the Obligors
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (a) EBITDA for such period MINUS (b) cash taxes
based on or measured by income that are paid during such period (including
penalties with respect thereto and interest thereon) MINUS (c) Capital
Expenditures made during such period to the extent permitted by Section 9.15
hereof.
"CASH MANAGEMENT AGREEMENT" shall mean a Lock Box Service Contract
between the Company and Provident, substantially in the form of Exhibit D
hereto, as the same shall be modified and supplemented and in effect from
time to time.
"CASUALTY EVENT" shall mean, with respect to any Property of any Person,
any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"CLAIRCOM" shall mean AT&T Wireless Services.
"CLASS" shall have the meaning assigned to such term in Section 1.03
hereof.
"CLOSING DATE" shall mean the date, no later than September 23, 1996, on
which the conditions precedent specified in Section 7 hereof shall have been
satisfied and on which the initial extensions of credit hereunder are made.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL ACCOUNT" shall have the meaning assigned to such term in
Section 4.1 of the Security Agreement.
"COLLATERAL AUDITOR" shall mean Provident.
"COMMITMENTS" shall mean the Revolving Credit Commitments, the Term Loan
Commitments and the Swingline Commitment.
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<PAGE>
"COMMODITY PRICE PROTECTION AGREEMENT" shall mean, for any Person, an
exchange-traded or over-the-counter commodity (including, without limitation,
foreign exchange) forward, future, option, swap, swaption, cap, collar, floor
or similar arrangement to which such Person is a party, providing for the
transfer or mitigation of commodity (including foreign exchange) risks either
generally or under specific contingencies.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans --into another Type of
Loans, which may be accompanied by the transfer by a Lender (at its sole
discretion) of a Loan from one Applicable Lending Office to another.
"CONVERTIBLE SUBORDINATED NOTES" shall mean, collectively, the Nassau
Note and the Electra Note, as those terms are defined in the 1996 (September)
Securities Purchase Agreement.
"CONVERTIBLE SUBORDINATED NOTE DOCUMENTATION" shall mean all documents
and agreements executed and delivered in connection with the original
issuance of the Convertible Subordinated Notes, including the Convertible
Subordinated Notes and the 1996 (September) Securities Purchase Agreement.
"CORY" shall mean Cory Components, Inc., a corporation organized under
the laws of the State of California.
"CORY HOLDINGS" shall mean Cory Holdings, Inc., a corporation organized
under the laws of the State of Ohio.
"CORY PURCHASE AGREEMENT" shall mean the Stock purchase Agreement, dated
January 1, 1995, between the Company, Cory and Gamberg.
"CORY REPURCHASE" shall mean the purchase by the Company from Gamberg of
25% of the outstanding capital stock of Cory pursuant to Cory Purchase
Agreement.
"COST OF GOODS SOLD" shall mean, for any period, the sum for the
Obligors (determined on a consolidated basis without duplication in
accordance with GAAP) of all costs, excluding depreciation and amortization,
that should be classified as cost of goods sold on an income statement.
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<PAGE>
"COVERED TAXES" shall mean all present and future income, stamp,
registration and other taxes and levies, imposts, deductions, charges,
compulsory loans and withholdings whatsoever, and all interest, penalties and
similar amounts with respect thereto, now or hereafter imposed, assessed,
levied or collected by any authority of or in any jurisdiction (other than
Switzerland or the United Kingdom) from or through which payments to or for
the account of the Lenders hereunder are made as a result or consequence of
such payments (excluding, however, income or franchise taxes imposed on a
Lender by a jurisdiction as a result of such Lender being organized under the
laws of such jurisdiction or of its Applicable Lending Office being located
in such jurisdiction).
"DEAL COSTS" shall mean all costs and expenses incurred by the Company
in connection with the ADS Purchase, the 1996 (September) Securities Purchase
Agreement, and the other transactions contemplated by this Agreement to occur
on the Closing Date, including (without limitation) the following: (a) fees
and expenses paid to the Lenders, the Lenders' counsel, the Agent and the
Agent's counsel, (b) fees and expenses paid to Nassau and its counsel, (c)
fees and expenses paid to Electra and its counsel, (d) fees and expenses paid
to environmental, aerospace industry and other consultants and (e) all other
fees, commissions and expenses relating to any of the foregoing (including,
without limitation, investment banking, independent accountants, depository,
brokerage, publicity, legal, arrangement and commitment fees, commissions and
expenses).
"DEBT SERVICE" shall mean, for any period, the sum, for the Obligors
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all payments of principal of Indebtedness
(including, without limitation, the principal component of any payments in
respect of Capital Lease Obligations) scheduled to be made during such period
PLUS (b) all Interest Expense that is payable in cash for such period.
"DEFAULT" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any other Person excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of
in the ordinary course of business and on ordinary business terms.
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"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom
stock" payments, where the amount thereof is calculated with reference to the
fair market or equity value of the Company or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Company.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of the following for the
Obligors (determined without duplication in accordance with GAAP):
(a) net income for such period, PLUS
(b) the aggregate amount of depreciation, amortization
(including, without limitation, amortization of
intangibles), taxes based on or measured by income and
Interest Expense for such period, PLUS
(c) any accretion expense with respect to the Warrants
(or any other Equity Rights with respect to any Obligor) for
such period, PLUS
(d) any non-cash expense related to any minority
interests, PLUS
(e) any non-cash expense related to foreign currency
translation.
"EBITDA RATIO" shall mean, as of any date, the ratio of:
(a) all Indebtedness of the Obligors at such date, TO
(b) for any date occurring:
(i) on or after December 31, 1996, EBITDA for the
period of four consecutive fiscal quarters ended
on, or most recently ended prior to, such date,
and
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(ii) prior to December 31, 1996, the product of
(x) EBITDA for the period commencing on January 1,
1996 and ending on the last day of the fiscal
quarter ending on, or most recently ended prior
to, such date, and (y) the Applicable
Annualization Factor.
"ELECTRA" shall mean Electra Investment Trust P.L.C., a
corporation organized under the laws of England, and Electra
Associates, Inc., a corporation organized under the laws of the
State of Delaware.
"ELIGIBLE FOREIGN INVENTORY" shall mean Eligible Inventory
that is located in the United Kingdom.
"ELIGIBLE INVENTORY" shall mean, as at any date, all Inventory
(i) that is owned by an Obligor and, as at such date, is in the
possession or under the control of an Obligor, (ii) that is located
in a jurisdiction in any of the United States of America or the
United Kingdom, (iii) as to which appropriate Uniform Commercial
Code financing statements have been filed naming such Obligor as
"debtor" and the Agent as "secured party" (or, with respect to
inventory located in the United Kingdom, as to which the Lenders'
security interest therein shall have been duly perfected by the
filing of the Security Agreement pursuant to the Companies Act
1985), (iv) that is in good condition, (v) that meets all standards
imposed by any governmental agency or department or division
thereof having regulatory authority over such Inventory, its use or
sale and (vi) that is either currently usable or currently saleable
in the normal course of such Obligor's business without any notice
to, or consent of, any governmental agency or department or
division thereof, PROVIDED THAT (x) in no event shall Inventory
that the Company or any Subsidiary Guarantor characterizes as
obsolete or unsalable be "Eligible Inventory" and (y) the Majority
Lenders (through the Agent) may at any time exclude from Eligible
Inventory any type of Inventory that the Majority Lenders (in their
sole discretion) determine to be unmarketable.
"ELIGIBLE FOREIGN RECEIVABLES" shall mean Eligible Receivables
owing from an account debtor whose principal place of business is
located outside of the United States of America.
"ELIGIBLE RECEIVABLES" shall mean, as at any date, the
aggregate amount of all Receivables at such date payable to an
Obligor other than the following (determined without duplication):
(a) any Receivable not payable in Dollars or the
lawful currencies of any of Japan, the United Kingdom,
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Switzerland, the Republic of France, The Kingdom of The
Netherlands or the Federal Republic of Germany,
(b) any Receivable owing from a Subsidiary or
Affiliate of such Obligor or by an officer, director or
employee of any Obligor,
(c) any Receivable owing from an account debtor (other
than Matsushita) whose principal place of business is
located outside of a country that is a member of the
Organization for Economic Cooperation and Development,
(d) any Receivable owing from an account debtor that
the Majority Lenders (through the Agent) have notified the
Company does not have a satisfactory credit standing (as
determined in the sole discretion of the Majority Lenders),
(e) any Receivable that, at the date of issuance of
the invoice therefor, is payable more than 90 days after
shipment of the related Inventory,
(f) any Receivable that remains unpaid for more than
90 days after the date of the issuance of the original
invoice therefor or is more than 60 days past due,
(g) all Receivables of any account debtor if more than
25% of the aggregate amount of the Receivables owing from
such account debtor shall at the time have remained unpaid
for more than 90 days after the date of the issuance of the
original invoices therefor or are more than 60 days past
due,
(h) Receivables owing from any account debtor (other
than Boeing, Claircom, Honeywell, IFT or Matsushita) to the
extent that the Receivables owing from such account debtor
and its Affiliates exceed 15% of all Receivables then
payable to the Obligors,
(i) any Receivable as to which there is any unresolved
dispute with the respective account debtor (but only to the
extent of the amount thereof in dispute),
(j) any Receivable owed by an account debtor to the
extent of any amounts owed by any Obligor to such account
debtor,
(k) any Receivable evidenced by an Instrument (as
defined in the Security Agreement) not pledged to and in the
possession of the Agent,
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<PAGE>
(l) any Receivable as to which the Agent does not have
a first priority perfected security interest for the benefit
of the Lenders, and
(m) any Receivable representing an obligation for
goods sold on consignment, approval or a sale-or-return
basis or subject to any other repurchase or return
arrangement (other than any Receivable subject to repurchase
pursuant to a distributor's exchange program PROVIDED THAT
such Receivables may not exceed 10% of the aggregate
Receivables attributable to any account debtor per annum).
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person,
any written or oral notice, claim, demand or other communication
(collectively, a "CLAIM") by any other Person alleging or asserting
such Person's liability for investigatory costs, cleanup costs,
governmental response costs, damages to natural resources or other
Property, personal injuries, fines or penalties arising out of,
based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or
not owned by such Person, or (ii) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law.
The term "Environmental Claim" shall include, without limitation,
any claim by any governmental authority for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to
any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and
any orders or decrees, in each case as now or hereafter in effect,
relating to the regulation or protection of human health, safety or
the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes.
"EQUITY ISSUANCE" shall mean (a) any issuance or sale by any
Obligor after the Original Closing Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital
stock (other than any warrants or options issued to directors,
officers or employees of such Obligor pursuant to
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employee benefit plans established in the ordinary course of
business and any capital stock issued upon the exercise of such
warrants or options) or (iii) any other security or instrument
representing an equity interest (or the right to obtain any equity
interest) in the issuing or selling Person or (b) the receipt by
the Obligor after the Original Closing Date of any capital
contribution (whether or not evidenced by any equity security
issued by the recipient of such contribution); PROVIDED that Equity
Issuance shall not include (A) any such issuance or sale by any
Subsidiary of the Company to the Company or any Wholly Owned
Subsidiary of the Company, (B) any capital contribution by the
Company or any Wholly Owned Subsidiary of the Company to any
Subsidiary of the Company, (C) any warrants, options or other
equity rights issued to directors, officers or employees of any
Obligor and any capital stock of the Company issued upon the
exercise of such warrants, or (D) the issuance of the Warrants or
any capital stock, options or equity rights of the Company issued
upon the exercise of the Warrants.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any
stockholders' or voting trust agreements) for the issuance, sale,
registration or voting of, or securities convertible into, any
additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or
business that is a member of any group of organizations (i)
described in Section 414(b) or (c) of the Code of which the Company
is a member and (ii) solely for purposes of potential liability
under Section 302(c)(11) of ERISA and Section 412(c)(11) of the
Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code
of which the Company is a member.
"EURODOLLAR LOANS" shall mean Loans that bear interest at
rates based on rates referred to in the definition of "Eurodollar
Rate" in this Section 1.01.
"EURODOLLAR RATE" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) reported, at
11:00 a.m. (London time) on the date two Business Days prior to the
first day of such Interest Period, on Telerate Access Service Page
3750 (British Bankers Association Settlement
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<PAGE>
Rate) as the London Interbank Offered Rate for Dollar deposits having a term
comparable to such Interest Period and in an amount equal to or greater than
$1,000,000.
"EVENT OF DEFAULT" shall have the meaning assigned to such
term in Section 10 hereof.
"EXCESS CASH FLOW" shall mean, for any period, the excess of:
(a) the sum of the following (without duplication):
Cash Flow for such period, PLUS proceeds of business
interruption or similar insurance during such period, plus
decreases, to the extent occurring in the ordinary course of
business, in Working Capital of the Obligors for such
period, PLUS all tax refunds received by Obligors in cash
during such period, MINUS
(b) the sum of the following (without duplication):
Debt Service for such period, PLUS increases, to the extent
occurring in the ordinary course of business, in Working
Capital of the Obligors for such period.
For purposes of this definition of "Excess Cash Flow", "WORKING CAPITAL"
shall have the meaning given to that term by GAAP, PROVIDED that Working
Capital shall not include any Revolving Credit Loans, Swingline Loans or the
Convertible Subordinated Notes.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next
succeeding such day, PROVIDED that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding
Business Day and (b) if such rate is not so published for any
Business Day, the average of quotations for such day on such
transactions received by the Agent (or any of its Affiliates) from
three federal funds brokers of recognized standing selected by it.
"FEE LETTER" shall mean that certain fee letter, dated
September 18, 1996, from ING to the Company.
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<PAGE>
"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of:
(a) for any date occurring:
(i) on or after December 31, 1996, Cash Flow for
the period of four consecutive fiscal quarters ending
on, or most recently ended prior to, such date, and
(ii) prior to December 31, 1996, the product of
(x) Cash Flow for the period commencing on January 1,
1996 and ending on the last day of the fiscal quarter
ending on, or most recently ended prior to, such date,
times (y) the Applicable Annualization Factor, TO
(b) Debt Service for such period.
"FOREIGN TAXES" shall mean all present and future income,
stamp, registration and other taxes and levies, imposts,
deductions, charges, compulsory loans and withholdings whatsoever,
and all interest, penalties or similar amounts with respect
thereto, now or hereafter imposed, assessed, levied or collected by
the United Kingdom or Switzerland or any political subdivision or
taxing authority thereof or therein, or by any federation or
association of or with which the United Kingdom or Switzerland may
be a member or associated, on or in respect of this Agreement, the
Loans, the Notes, the Letters of Credit, the Reimbursement
Obligations or the other Basic Documents, the recording,
registration, notarization or other formalization of any thereof,
the enforcement thereof or the introduction thereof in any judicial
proceedings, on or in respect of any payments of principal,
interest, premiums, charges, fees or other amounts made on, under
or in respect of any thereof.
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with those that, in accordance with
the last sentence of Section 1.02(a) hereof, are to be used in
making the calculations for purposes of determining compliance with
this Agreement.
"GAMBERG" shall mean Brian Gamberg.
"GAMBERG DOCUMENTS" shall mean that certain Employment
Agreement, between Cory and Gamberg, dated as of October 2, 1991,
that certain Put Option Agreement, dated as of October 2, 1991,
between Cory Holdings and Gamberg, and that certain Guaranty, dated
October 2, 1991, by the Company in favor of Gamberg.
"GUARANTEE" shall mean a guarantee, an endorsement, a
contingent agreement to purchase or to furnish funds for the
payment or maintenance of, or otherwise to be or become
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<PAGE>
contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or
an agreement to purchase, sell or lease (as lessee or lessor)
Property, products, materials, supplies or services primarily for
the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial
institution to issue a letter of credit or other similar instrument
for the benefit of another Person, but excluding endorsements for
collection or deposit in the ordinary course of business. The
terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any
petroleum or petroleum products, flammable materials, explosives,
radioactive materials, asbestos, urea formaldehyde foam insulation,
and transformers or other equipment that contain polychlorinated
biphenyls ("PCB'S"), (b) any chemicals or other materials or
substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants", "pollutants" or words of similar import under any
Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law.
"HOLLINGSEAD" shall mean Hollingsead International Limited, a
company organized under the laws of England.
"HOLLINGSEAD INTERNATIONAL" shall mean Hollingsead
International, Inc., a corporation organized under the laws of
California.
"HONEYWELL" shall mean Honeywell Inc.
"IFT" shall mean International Flight Technologies, Inc., a
Delaware corporation, or any successor thereto.
"IMPERMISSIBLE QUALIFICATION" shall mean any qualification,
exception or other statement in any opinion or certification of any
independent public accountants which either (a) is of a "going
concern" or similar nature; or (b) relates to the limited scope of
examination of matters relevant to the financial statements
referred to in such opinion or certificate.
"INDEBTEDNESS" shall mean, for any Person (which shall be
calculated for any Person without duplication): (a)
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<PAGE>
obligations created, issued or incurred by such Person for borrowed
money (whether by loan, the issuance and sale of debt securities or
the sale of Property to another Person subject to an understanding
or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services,
other than trade accounts payable (other than for borrowed money)
arising, and accrued expanses incurred, in the ordinary course of
business so long as such trade accounts payable are payable within
90 days of the date the respective goods are delivered or the
respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not
the respective indebtedness so secured has been assumed by such
Person; (d) obligations of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital
Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person; PROVIDED that "Indebtedness" shall not
include any of the Company's obligations in respect of the Warrants.
"ING" shall mean Internationale Nederlanden (U.S.) Capital
Corporation.
"INTERCOMPANY NOTE" shall mean a promissory note of Cory to
the Company, in an aggregate principal amount not to exceed
$1,500,000, evidencing a loan made by the Company (with the
proceeds of Loans) to Cory solely to permit Cory to repay existing
Indebtedness of Cory identified in Part A of Schedule II hereto,
which promissory note shall contain such terms and provisions as
shall be acceptable to the Lenders.
"INTEREST COVERAGE RATIO" shall mean, as of any date, the
ratio of:
(a) for any date occurring:
(i) on or after December 31, 1996, Cash Flow for
the period of four consecutive fiscal quarters ending
on, or most recently ended prior to, such date, and
(ii) prior to December 31, 1996, the product of
(x) Cash Flow for the period commencing on January 1,
1996 and ending on the last day of the fiscal quarter
ending on, or most recently ended prior to, such date,
times (y) the Applicable Annualization Factor, to
(b) Interest Expense that is payable in cash for such
period.
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<PAGE>
"INTEREST EXPENSE" shall mean, for any period, all interest
expense less interest income for such period for the Obligors
(determined on a consolidated basis without duplication in
accordance with GAAP), including (without limitation) the
following: (a) all interest in respect of Indebtedness (including,
without limitation, the interest component of any payments in
respect of Capital Lease Obligations) accrued or capitalized during
such period (whether or not actually paid during such period), (b)
the aggregate amount payable by the Company pursuant to Section
11.09 hereof (whether or not actually paid) during such period, and
(c) the net amounts payable (or MINUS the net amount receivable)
under Interest Rate and/or Commodity Price Protection Agreements
during such period (whether or not actually paid or received during
such period).
"INTEREST PERIOD" shall mean, with respect to any Eurodollar
Loan, each period commencing on the date such Eurodollar Loan is
made or Converted from a Base Rate Loan or the last day of the next
preceding Interest Period for such Loan and ending on the
numerically corresponding day in the first, second, third or sixth
calendar month thereafter, as the Company may select as provided in
Section 4.05 hereof (or such longer period as may be agreed to by
all of the Lenders), except that each Interest Period that
commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any
Revolving Credit Loan would otherwise end after the Revolving
Credit Commitment Termination Date such Interest Period shall end
on the Revolving Credit Commitment Termination Date; (ii) no
Interest Period for any Term Loan may commence before and end after
any Principal Payment Date unless, after giving effect thereto, the
aggregate principal amount of the Term Loans having Interest
Periods that end after such Principal Payment Date shall be equal
to or less than the aggregate principal amount of the Term Loans
scheduled to be outstanding after giving effect to the payments of
principal required to be made on such Principal Payment Date; (iii)
each Interest Period that would otherwise end on a day that is not
a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); and (iv)
notwithstanding clauses (i) and (ii) and (iii) above, no Interest
Period for any Loan shall have a duration of less than one month
and, if the Interest Period for any Eurodollar Loan would otherwise
be a shorter period, such Loan shall not be available hereunder for
such period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any
Person, an interest rate swap, cap or collar agreement or
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<PAGE>
similar arrangement between such Person and one or more financial
institutions providing for the transfer or mitigation of interest
risks either generally or under specific contingencies.
"INVENTORY" shall mean readily marketable materials, including
raw materials, of a type manufactured or consumed by an Obligor in
the ordinary course of business as presently conducted before any
deduction by the Obligors for purposes of percentage of completion
accounting (but excluding, in any event, all work-in-process EXCEPT
for work-in-process inventory of Hollingsead International or the
ADS Subsidiary).
"INVESTMENT" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of any other Person or any
agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a
time when such securities are not owned by the Person entering into
such sale); (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such
Property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days
representing the purchase price of inventory or supplies sold by
such Person in the ordinary course of business); (c) the entering
into of any Guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability of any other Person and
(without duplication) any amount committed to be advanced, lent or
extended to such Person; or (d) the entering into of any Interest
Rate Protection Agreement or any Commodity Price Protection
Agreement.
"ISSUING BANK" shall mean Provident, as the issuer of Letters
of Credit under Section 2.03 hereof, together with its successors
and assigns in such capacity.
"KERNER EMPLOYMENT AGREEMENT" shall mean the Employment
Agreement dated January 24, 1985 between Tri-Star Electronics, Inc.
and Alex Kerner, as amended by a letter agreement dated October 1,
1991 between Alex Kerner and the Company.
"LETTER OF CREDIT" shall have the meaning assigned to such
term in Section 2.03 hereof.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any
Letter of Credit, collectively, any application therefor and any
other agreements, instruments, guarantees or other documents
(whether general in application or applicable only to such Letter
of Credit) governing or providing for (a) the rights
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<PAGE>
and obligations of the parties concerned or at risk with respect to
such Letter of Credit or (b) any collateral security for any of
such obligations, each as the same may be modified and supplemented
and in effect from time to time.
"LETTER OF CREDIT INTEREST" shall mean, for each Lender, such
Lender's participation interest (or, in the case of the Issuing
Bank, the Issuing Bank's retained interest) in the Issuing Bank's
liability under Letters of Credit and such Lender's rights and
interests in Reimbursement Obligations and fees, interest and other
amounts payable in connection with Letters of Credit and
Reimbursement Obligations.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication,
at any time and in respect of any Letter of Credit, the sum of (a)
the undrawn face amount of such Letter of Credit PLUS (b) the
aggregate unpaid principal amount of all Reimbursement Obligations
of the Company at such time due and payable in respect of all
drawings made under such Letter of Credit. For purposes of this
Agreement, a Lender (other than the Issuing Bank) shall be deemed
to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under
Section 2.03 hereof, and the Issuing Bank shall be deemed to hold a
Letter of Credit Liability in an amount equal to its retained
interest in the related Letter of Credit after giving effect to the
acquisition by the Lenders other than the Issuing Bank of their
participation interests under said Section 2.03.
"LEVERAGE RATIO" shall mean, at any time, the ratio of Total
Liabilities to Net Worth of the Company at such time.
"LIEN" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind
in respect of such Property. For purposes of this Agreement and
the other Basic Documents, a Person shall be deemed to own subject
to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other
than an operating lease) relating to such Property.
"LOANS" shall mean the Revolving Credit Loans, the Term Loans
and the Swingline Loans.
"MAJORITY LENDERS" shall mean Lenders holding at least 66 2/3%
of the sum of (a) the aggregate unpaid principal amount of the
Loans PLUS (b) the aggregate amount of all Letter of Credit
Liabilities OR, if no Loans or Letter of Credit Liabilities are
outstanding, Lenders having at least 66 2/3% of the aggregate
amount of the Commitments; PROVIDED THAT, at all
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times during which there are two or fewer Lenders, "Majority
Lenders" shall mean all Lenders.
"MARGIN STOCK" shall mean "margin stock" within the
meaning of Regulations G, U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on (a) the Property, business, operations, customer
relations, competitive position, financial condition, prospects,
liabilities or capitalization of the Obligors taken as a whole,
(b) the ability of any Obligor to perform its obligations under
any of the Basic Documents to which it is a party, (c) the
validity or enforceability of any of the Basic Documents, (d) the
rights and remedies of the Lenders and the Agent under any of the
Basic Documents or (e) the timely payment of the principal of or
interest on the Loans or the Reimbursement Obligations or other
amounts payable in connection therewith.
"MATSUSHITA" shall mean, collectively, Matsushita
Electric Industrial Company Limited, a Japanese corporation,
Matsushita Electric Corporation of America, a Delaware
corporation, Matsushita Avionics Systems Corporation, a Delaware
corporation, and M.A.D.C., Inc., a Delaware corporation.
"MONTHLY DATE" shall mean the last Business Day of each
calendar month.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan
defined as such in Section 3(37) of ERISA to which contributions
have been made by the Company or any ERISA Affiliate and that is
covered by Title IV of ERISA.
"NASSAU" shall mean Nassau Capital Partners L.P., a
Delaware limited partnership, and NAS Partners I L.L.C., a
Delaware limited liability company.
"NASSAU EQUITY INFUSION" shall mean the purchase by
Nassau for cash, on or about the date of Amendment No. 3 hereto,
of shares of preferred stock of the Company and 1996 (February)
Warrants for a purchase price equal to $6,500,000 pursuant to the
1996 (February) Securities Purchase Agreement.
"NET AVAILABLE PROCEEDS" shall mean:
(i) in the case of any Disposition, the amount of Net
Cash Payments received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate
amount of proceeds of insurance, condemnation awards and
other compensation received by any Obligor in respect of
such Casualty Event net of (A) reasonable expenses incurred
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by the Obligors in connection therewith and (B)
contractually required repayments of Indebtedness to the
extent secured by a Lien on such Property and any income
and transfer taxes payable by any Obligor in respect of
such Casualty Event; and
(iii) in the case of any Equity Issuance, the aggregate
amount of all cash received by the Obligors in respect of
such Equity Issuance net of reasonable expenses incurred
by the Company and its Subsidiaries in connection
therewith.
"NET CASH PAYMENTS" shall mean, with respect to any
Disposition, the aggregate amount of all cash payments, and the
fair market value of any non-cash consideration, received by any
Obligor directly or indirectly in connection with such
Disposition (other than Property that is intended to replace the
Property that was the subject of the Disposition (which
replacement Property must be subject to a purchase contract or
other commitment to purchase within three months of the relevant
Disposition)); PROVIDED that (a) Net Cash Payments shall be net
of (i) the amount of any legal, title and recording tax expenses,
commissions and other fees and expenses paid by any Obligor in
connection with such Disposition and (ii) any Federal, state and
local income or other taxes estimated to be payable by any
Obligor as a result of such Disposition (but only to the extent
that such estimated taxes are in fact paid to the relevant
Federal, state or local governmental authority within six months
of the date of such Disposition) and (b) Net Cash Payments shall
be net of any repayments by any Obligor of Indebtedness to the
extent that (i) such Indebtedness is secured by a Lien on the
Property that is the subject of such Disposition and (ii) the
transferee of (or holder of a Lien on) such Property requires
that such Indebtedness be repaid as a condition to the purchase
of such Property.
"NET SALES" shall mean, for any period, the sum for the
Obligors (determined on a consolidated basis without duplication
in accordance with GAAP) of all revenues that should be
classified as net sales on an income statement.
"NET WORTH" shall mean, as at any date for any Person,
the sum for such Person and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of the following:
(a) the amount of paid-in capital (both in respect
of common equity and preferred equity), PLUS
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(b) the amount of surplus and retained earnings
(or, in the case of a surplus or retained earnings
deficit, MINUS the amount of such deficit), MINUS
(c) the cost of treasury shares; PLUS
(d) the value ascribed to the Warrants and the
cumulative effect of any change in the valuation of the
Warrants.
PROVIDED that the following shall be disregarded in calculating
"Net Worth":
(i) any predecessor basis adjustment required under
GAAP; and
(ii) any foreign currency translation adjustments
permitted under GAAP.
"1996 (FEBRUARY) WARRANTS" shall mean the warrants
acquired by Nassau, pursuant to the terms of the 1996 (February)
Securities Purchase Agreement.
"1996 (SEPTEMBER) WARRANTS" shall mean the warrants to
be acquired by Nassau and Electra, pursuant to the terms of the
1996 (September) Securities Purchase Agreement.
"1994 SECURITIES PURCHASE AGREEMENT" shall mean the
Securities Purchase Agreement, dated November 2, 1994, among the
Company and Electra.
"1996 (FEBRUARY) SECURITIES PURCHASE AGREEMENT" shall
mean the Securities Purchase Agreement, dated as of February 20,
1996, among the Company and Nassau.
"1996 (SEPTEMBER) SECURITIES PURCHASE AGREEMENT" shall
mean the Securities Purchase Agreement, dated as of September 18,
1996, among the Company, Nassau and Electra.
"NOTES" shall mean the Revolving Credit Notes and the
Term Loan Notes.
"ORIGINAL CLOSING DATE" shall mean the date of the
Original Credit Agreement.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
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<PAGE>
"PERMITTED INVESTMENTS" shall mean: (a) Dollars;
(b) direct obligations of the United States of America, or of any
agency thereof, or obligations guaranteed as to principal and
interest by the United States of America, or of any agency
thereof, in either case maturing not more than six months from
the date of acquisition thereof; (c) certificates of deposit or
bankers' acceptances maturing not more than six months from the
date of acquisition thereof and overnight bank deposits, in each
case with any Lender or any bank or trust company organized under
the laws of the United States of America or any state thereof and
having capital, surplus and undivided profits of at least
$500,000,000; (d) repurchase obligations with a term of not more
than seven days for underlying obligations of the types described
in clauses (b) and (c) above and entered into with any financial
institution meeting the qualifications described in clause (c)
above; and (d) commercial paper of any Lender or that is rated
A-1 or better or P-1 by Standard & Poor's Corporation or Moody's
Investors Services, Inc., respectively, maturing not more than
six months from the date of acquisition thereof.
"PERSON" shall mean any individual, corporation,
company, voluntary association, partnership, joint venture,
trust, unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).
"PLAN" shall mean an employee benefit or other plan
established or maintained by the Company or any ERISA Affiliate
and that is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"POST-DEFAULT RATE" shall mean, during any period
during which any Event of Default shall be continuing, and in
respect of any principal of any Loan, any Reimbursement
Obligation or any other amount payable under this Agreement, any
Note or any other Basic Document, a rate per annum equal to 2%
PLUS the Applicable Margin for Base Rate Loans PLUS the Base Rate
as in effect from time to time (PROVIDED that, with respect to
principal of a Eurodollar Loan, the "Post-Default Rate" for such
principal shall be, during the period to but excluding the last
day of the then current Interest Period therefor, 2% PLUS the
interest rate for such Loan as provided in Section 3.02 hereof
and, thereafter, the rate provided for above in this definition).
"PRIME RATE" shall mean the arithmetic average of the
rates of interest publicly announced by The Chase Manhattan Bank,
Citibank, N.A. and Morgan Guaranty Trust Company of New York (or
their respective successors) as their respective prime commercial
lending rates (or, as to any such bank that does not announce
such a rate, such bank's "base" or other rate determined by the
Agent to be the equivalent rate announced by such bank), EXCEPT
THAT, if any such bank shall, for any period, cease to announce
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publicly its prime commercial lending (or equivalent) rate, the
Agent shall, during such period, determine the "Prime Rate" based
upon the prime commercial lending (or equivalent) rates announced
publicly by the other such banks.
"PRINCIPAL PAYMENT DATES" shall mean the Quarterly
Dates, commencing with September 30, 1995 through and including
September 30, 2001.
"PROCESS AGENT" shall have the meaning specified in
Section 12.10(b) hereof.
"PROPERTY" shall mean any right or interest in or to
property of any kind whatsoever, whether real, personal or mixed
and whether tangible or intangible.
"PROVIDENT" shall mean The Provident Bank, a banking
corporation organized under the laws of the State of Ohio.
"QUALIFIED PUBLIC OFFERING" shall mean an underwritten
public offering of the common stock of the Company registered
under the Securities Act of 1933, as amended.
"QUARTERLY DATES" shall mean the last Business Day of
March, June, September and December in each year, the first of
which shall be the first such day after the date of this
Agreement.
"RECEIVABLES" shall mean, as at any date, the unpaid
portion of the obligation, as stated on the respective invoice,
of a customer of any Obligor in respect of Inventory or services
sold and shipped by such Obligor to such customer, net of any
credits, rebates or offsets owed to such customer (and for
purposes hereof, a credit or rebate paid by check or draft of the
Obligor shall be deemed to be outstanding until such check or
draft shall have been debited to the account of such Obligor on
which such check or draft was drawn).
"REGULATIONS A, D, G, U AND X" shall mean,
respectively, Regulations A, D, G, U and X of the Board of
Governors of the Federal Reserve System (or any successor), as
the same may be modified and supplemented and in effect from time
to time.
"REGULATORY CHANGE" shall mean, with respect to any
Lender, any change after the date of this Agreement in Federal,
state or foreign law or regulations (including, without
limitation, Regulation D) or the adoption or making after such
date of any interpretation, directive or request applying to a
class of financial institutions including such Lender of or under
any Federal, state or foreign law or regulations (whether or not
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having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or
monetary authority charged with the interpretation or
administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time,
the obligations of the Company then outstanding, or that may
thereafter arise in respect of all Letters of Credit then
outstanding, to reimburse amounts paid by the Issuing Bank in
respect of any drawings under a Letter of Credit.
"RELEASE" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment, including, without limitation, the movement of
Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"REVOLVING CREDIT COMMITMENT" shall mean, for each
Lender, the obligation of such Lender to make Revolving Credit
Loans in an aggregate principal amount at any one time
outstanding up to but not exceeding (a) in the case of a Lender
that is a party to this Agreement on the date hereof, the amount
set opposite the name of such Lender on the signature pages
hereof under the caption "Revolving Credit Commitment" and (b) in
the case of any other Lender, the aggregate amount of Revolving
Credit Commitments of other Lenders acquired by it pursuant to
Section 12.06(b) hereof (in each case, as the same may be reduced
from time to time pursuant to Section 2.04 hereof). The
aggregate principal amount of the Revolving Credit Commitments as
of the date hereof is $12,500,000.
"REVOLVING CREDIT COMMITMENT PERCENTAGE" shall mean,
with respect to any Lender, the ratio of (a) the amount of the
Revolving Credit Commitment of such Lender to (b) the aggregate
amount of the Revolving Credit Commitments of all of the Lenders.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE" shall
mean the third anniversary of the date hereof.
"REVOLVING CREDIT LOANS" shall mean the loans provided
for by Section 2.01(a) hereof, which may be Base Rate Loans
and/or Eurodollar Loans.
"REVOLVING CREDIT NOTES" shall mean the promissory
notes provided for by Section 2.08(a) hereof and all promissory
notes delivered in substitution or exchange therefor, in each
case as the same shall be modified and supplemented and in effect
from time to time.
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"SECURITY AGREEMENT" shall mean a Security Agreement
substantially in the form of Exhibit C-1 hereto between each
Obligor and the Agent, as the same shall be modified and
supplemented and in effect from time to time.
"SECURITY AGREEMENT AMENDMENT" shall mean a Security
Agreement Amendment substantially in the form of Exhibit C-2
hereto between each Obligor and the Agent.
"SECURITY DOCUMENTS" shall mean, collectively, the
Security Agreement, the Security Agreement Amendment and all
Uniform Commercial Code financing statements required by this
Agreement or the Security Agreement to be filed with respect to
the security interests in personal Property and fixtures created
pursuant to the Security Agreement.
"SELLING, GENERAL AND ADMINISTRATIVE EXPENSES" shall
mean, for any period, the sum for the Obligors (determined on a
consolidated basis without duplication in accordance with GAAP)
of all expenses (excluding depreciation and amortization) that
should be classified as selling, general and administrative
expenses on an income statement.
"SELLING, GENERAL AND ADMINISTRATIVE EXPENSES RATIO"
shall mean, as at any date, the ratio of:
(a) for any date occurring:
(i) on or after December 31, 1996, Selling,
General and Administrative Expenses for the period of
four consecutive fiscal quarters ending on, or most
recently ended prior to, such date, and
(ii) prior to December 31, 1996, the product of
(x) Selling, General and Administrative Expenses for
the period commencing on January 1, 1996 and ending on
the last day of the fiscal quarter ending on, or most
recently ended prior to, such date, times (y) the
Applicable Annualization Factor, TO
(b) Net Sales for such period.
"SENIOR SUBORDINATED DEBT" shall mean the Indebtedness
of the Company in respect of the 12% Senior Subordinated Notes of
the Company due December 31, 2001 issued pursuant to the 1994
Securities Purchase Agreement.
"SENIOR SUBORDINATED DEBT AMENDMENTS" shall mean (i)
Amendment No. 1, dated as of February 20, 1996, to the 1994
Securities Purchase Agreement and (ii) Amendment No. 1, dated as
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of February 20, 1996, to the Advisory Agreement among the Company
and Electra Inc.
"SENIOR SUBORDINATED DEBT DOCUMENTS" shall mean all
documents and agreements executed and delivered in connection
with the original issuance of the Senior Subordinated Debt,
including the 1994 Securities Purchase Agreement, the promissory
notes evidencing Indebtedness thereunder and the Related
Agreements referred to in the 1994 Securities Purchase Agreement,
in each case, as the same shall, subject to Section 9.24 hereof,
be modified and supplemented and in effect from time to time.
"SERIES E PREFERRED STOCK" shall mean the preferred
stock of the Company issued on September 18, 1996, and designated
as Series E Preferred.
"SERIES E PREFERRED STOCK DOCUMENTATION" shall mean
all documents and agreements executed and delivered in connection
with the original issuance of the Series E Preferred Stock,
including the shares of Series E Preferred Stock and the 1996
(September) Securities Purchase Agreement.
"SUBSIDIARY" shall mean, with respect to any Person,
any corporation, partnership or other entity of which at least a
majority of the securities or other ownership interests having by
the terms thereof ordinary voting power to elect a majority of
the board of directors or other persons performing similar
functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have
voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by such
Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"SWINGLINE COMMITMENT" shall mean the obligation of the
Cash Management Agent to make Swingline Loans in an aggregate
principal amount at any one time outstanding up to the lesser of
$1,000,000 and the aggregate amount of the Revolving Credit
Commitments as then in effect.
"SWINGLINE LOANS" shall have the meaning given to that
term in Section 2.01(c) hereof.
"SWITZERLAND" shall mean the Swiss Confederation.
"TERM LOAN COMMITMENT" shall mean, for each Lender, the
obligation of such Lender to make a Term Loan in an aggregate
amount up to but not exceeding the amount set opposite the name
of such Lender on the signature page hereof under the caption
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"Term Loan Commitment". The aggregate principal amount of the
Term Loan Commitments is $15,000,000.
"TERM LOAN NOTES" shall mean the promissory notes
provided for by Section 2.08(b) hereof and all promissory notes
delivered in substitution or exchange therefor, in each case as
the same shall be modified and supplemented and in effect from
time to time.
"TERM LOANS" shall mean the loans provided for by
Section 2.01(b) hereof, which may be Base Rate Loans and/or
Eurodollar Loans.
"TOTAL LIABILITIES" shall mean, as at any date, the
sum, for the Obligors (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all
Indebtedness and (b) all other liabilities that should be
classified as liabilities on a balance sheet, including, without
limitation, all reserves (other than general contingency
reserves) and all deferred taxes and other deferred items.
"TRI-STAR TECHNOLOGIES" shall mean Tri-Star
Technologies, a general partnership organized under the laws of
the State of California.
"TST PARTNERSHIP AGREEMENT" shall mean the General
Partnership Agreement dated June 18, 1994 among Tri-Star
Electronics, Inc., Alex Kerner and Andrei Grombchevsky, as
amended by that certain agreement dated December 3, 1987 between
Tri-Star Electronics, Inc. and Andrei Grombchevsky, and as
further amended by a letter agreement dated October 1, 1991
between Alex Kerner and the Company.
"TYPE" shall have the meaning assigned to such term in
Section 1.03 hereof.
"UNIDEC" shall mean Tri-Star Electronics Europe S.A.,
Mezzovico (formerly Unidec, S.A. Mezzovico), a corporation
organized under the laws of Switzerland.
"WARRANTS" shall mean the following:
(a) the warrants described in Schedule V hereto,
(b) the warrants issued under the Senior Subordinated
Loan and Warrant Purchase Agreement, dated October 15, 1991 among
Banc One Capital Partners Corporation, the Company and certain
Obligors,
(c) the 1994 Warrants,
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(d) the warrants issued under the Senior Lender Warrant
Agreement, dated as of November 2, 1994 among the Company, ING
and Provident,
(e) the 1996 (February) Warrants,
(f) the 1996 (September) Warrants, and
(g) the warrants issued under the Senior Lender Warrant
Agreement, dated as of September 18, 1996 among the Company, ING
and Provident.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to
any Person, any corporation, partnership or other entity of which
all of the equity securities or other ownership interests (other
than, in the case of a corporation, directors' qualifying shares)
are directly or indirectly owned or controlled by such Person or
one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
"ZERO BALANCE ACCOUNT" shall mean an account of the
Company at the Cash Management Agent designated by the Cash
Management Agent as the "Zero Balance Account."
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial
matters required to be delivered to the Lenders hereunder shall
(unless otherwise disclosed to the Lenders in writing at the time
of delivery thereof in the manner described in subsection (b)
below) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those
used in the preparation of the latest financial statements
furnished to the Lenders hereunder (which, prior to the delivery
of the first financial statements under Section 9.01 hereof,
shall mean the audited financial statements as at December 31,
1993 referred to in Section 8.02 hereof). All calculations made
for the purposes of determining compliance with this Agreement
shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied
on a basis consistent with those used in the preparation of the
latest annual or monthly financial statements furnished to the
Lenders pursuant to Section 9.01 hereof (or, prior to the
delivery of the first financial statements under Section 9.01
hereof, used in the preparation of the audited financial
statements as at December 31, 1993 referred to in Section 8.02
hereof) unless (i) the Company shall have objected to determining
such compliance on such basis at the time of delivery of such
financial statements or (ii) the Majority Lenders shall so object
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in writing within 30 days after delivery of such financial
statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of
the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the
first financial statements delivered under Section 9.01 hereof,
shall mean the audited financial statements referred to in
Section 8.02 hereof).
(b) The Company shall deliver to the Lenders at the
same time as the delivery of any annual or monthly financial
statement under Section 9.01 hereof (i) a description in
reasonable detail of any material variation between the
application of accounting principles employed in the preparation
of such statement and the application of accounting principles
employed in the preparation of the next preceding annual or
monthly financial statements as to which no objection has been
made in accordance with the last sentence of subsection (a) above
and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination
of compliance with the covenants set forth in Section 9 hereof,
the Company will not change the last day of its fiscal year from
December 31 of each year, or the last days of the first three
fiscal quarters in each of its fiscal years from March 31,
June 30 and September 30 of each year, respectively.
1.03 CLASSES AND TYPES OF LOANS. Loans hereunder are
distinguished by "Class" and by "Type". The "Class" of a Loan
(or of a Commitment to make a Loan) refers to whether such Loan
is a Revolving Credit Loan or a Term Loan, each of which
constitutes a Class. The "Type" of a Loan refers to whether such
Loan is a Base Rate Loan or a Eurodollar Loan, each of which
constitutes a Type. Loans may be identified by both Class and
Type.
Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 LOANS.
(a) REVOLVING CREDIT LOANS. Each Lender severally
agrees, on the terms and conditions of this Agreement, to make
loans to the Company in Dollars during the period from and
including the Original Closing Date to but not including the
Revolving Credit Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not
exceeding the amount of the Revolving Credit Commitment of such
Lender as in effect from time to time, PROVIDED that in no event
shall the aggregate principal amount of all Revolving Credit
Loans, together with the aggregate amount of all Letter of Credit
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Liabilities and the aggregate amount of all Swingline Loans,
exceed the aggregate amount of the Revolving Credit Commitments
as in effect from time to time. Subject to the terms and
conditions of this Agreement, during such period the Company may
borrow, repay and reborrow the amount of the Revolving Credit
Commitments by means of Base Rate Loans and Eurodollar Loans and
may Convert Revolving Credit Loans of one Type into Revolving
Credit Loans of the other Type (as provided in Section 2.09
hereof) or Continue Revolving Credit Loans that are Eurodollar
Loans (as provided in Section 2.09 hereof).
(b) TERM LOANS. Each Lender severally agrees, on the
terms and conditions of this Agreement, to make a term loan to
the Company in Dollars on the Original Closing Date in an
aggregate principal amount up to but not exceeding the amount of
the Term Loan Commitment of such Lender. Thereafter the Company
may Convert Term Loans of one Type into Term Loans of the other
Type (as provided in Section 2.09 hereof) or Continue Term Loans
that are Eurodollar Loans (as provided in Section 2.09 hereof).
(c) SWINGLINE LOANS.
(i) The Cash Management Agent hereby agrees, on the
terms and conditions of this Agreement, to make loans
("SWINGLINE LOANS") to the Company in Dollars during the
period from and including the Original Closing Date to
but excluding the Revolving Credit Termination Date in an
aggregate principal amount at any one time outstanding up
to but not exceeding the amount of the Swingline
Commitment, PROVIDED that the aggregate unpaid principal
amount of all Swingline Loans, all Letter of Credit
Liabilities and all Revolving Credit Loans at any one
time outstanding may not exceed the aggregate amount of
the Revolving Credit Commitments. Subject to the terms
of this Agreement, the Company may borrow, repay and
reborrow the amount of the Swingline Commitment by means
of Base Rate Loans.
(ii) The Obligors shall at all times maintain with
the Cash Management Agent one or more lockboxes
(collectively, the "LOCKBOXES") pursuant to the Cash
Management Agreement and, except to the extent otherwise
required under the Security Agreement, shall instruct all
account debtors on all of the accounts of the Obligors to
remit payments to be made by checks or other drafts to
the Lockboxes and to remit all payments to be made by
wire transfer to the Zero Balance Account. Except as
otherwise required under the Security Agreement, all
amounts received by the Obligors from any account debtor,
in addition to all cash received from any other source
(including but not limited to proceeds from the sale of
collateral for the Loans and judgments) shall be
deposited in the Zero Balance Account upon receipt by an
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Obligor. All receipts received in the Lockboxes shall be
deposited on the day of receipt by the Cash Management
Agent to the Zero Balance Account. As a matter of
administrative convenience, the Cash Management Agent
shall transmit all funds received in the Lockboxes twice
each Business Day to the Zero Balance Account prior to
10:00 a.m., New York time, and 4:00 p.m., New York time,
and any funds will be automatically applied at the end of
each day to reduce the outstanding principal amount of
Swingline Loans.
(d) LIMIT ON EURODOLLAR LOANS. No more than five
separate Interest Periods in respect of Eurodollar Loans from
each Lender may be outstanding at any one time.
2.02 BORROWINGS.
(a) The Company shall give the Agent notice of each
borrowing of Loans (other than Swingline Loans) hereunder as
provided in Section 4.05 hereof. Not later than 1:00 p.m. New
York time on the date specified for each borrowing of such Loans
hereunder, each Lender shall make available the amount of the
Loan or Loans to be made by it on such date to (a) in the case of
the borrowing of the Term Loans, the Agent, at account number
930-1-035763 (ABA No. 0210-000-21) maintained by the Agent with
The Chase Manhattan Bank, and (b) in the case of borrowings of
Revolving Credit Loans, the Cash Management Agent, at an account
at Provident designated by the Cash Management Agent, in each
case, in immediately available funds, for account of the Company.
The amount so received by the Agent or the Cash Management Agent
(as the case may be) shall, subject to the terms and conditions
of this Agreement, be made available to the Company by depositing
the same, in immediately available funds, in an account of the
Company (designated by the Company) at the Cash Management Agent.
(b) Swingline Loans shall be borrowed by the Company
by means of writing checks drawn on the Cash Management Agent.
(c) In the event that the Company does not repay any
Swingline Loan by 11:00 a.m. (Cincinnati time) on the last
Business Day of the week in which such Swingline Loan was made,
at any time thereafter until the unpaid principal amount of such
Swingline Loan shall have been paid in full, the Cash Management
Agent may, and the Company hereby irrevocably authorizes and
empowers (which power is coupled with an interest) the Cash
Management Agent to, deliver, on behalf of the Company, to the
Agent under Section 2.02(a) hereof a notice of borrowing of
Revolving Credit Loans in an amount equal to the then unpaid
principal amount of such Swingline Loan. Each Lender shall, not
later than 2:00 p.m. (New York time), make available the amount
of the Revolving Credit Loan to be made by it to the Cash
Management Agent at the account specified in Section 2.02(a)
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hereof and the amount so received by the Cash Management
Agent shall be applied to such Swingline Loan.
2.03 LETTERS OF CREDIT. Subject to the terms and
conditions of this Agreement, the Revolving Credit Commitments
may be utilized, upon the request of the Company, in addition to
the Revolving Credit Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Bank of letters of credit
(collectively, "LETTERS OF CREDIT") for account of the Company or
any of its Subsidiaries (as specified by the Company), PROVIDED
that in no event shall (i) the aggregate amount of all Letter of
Credit Liabilities, together with the aggregate principal amount
of the Revolving Credit Loans, exceed the aggregate amount of the
Revolving Credit Commitments as in effect from time to time, and
(ii) the expiration date of any Letter of Credit extend beyond
the earlier of the Revolving Credit Commitment Termination Date
and the date 12 months following the issuance of such Letter of
Credit. The following additional provisions shall apply to
Letters of Credit:
(a) The Company shall give the Agent at least three
Business Days' irrevocable prior notice (effective upon
receipt) specifying the Business Day (which shall be no
later than 30 days preceding the Revolving Credit Commitment
Termination Date) each Letter of Credit is to be issued and
the account party or parties therefor and describing in
reasonable detail the proposed terms of such Letter of
Credit (including the beneficiary thereof) and the nature of
the transactions or obligations proposed to be supported
thereby (including whether such Letter of Credit is to be a
commercial letter of credit or a standby letter of credit).
Upon receipt of any such notice, the Agent shall advise the
Issuing Bank of the contents thereof.
(b) On each day during the period commencing with the
issuance by the Issuing Bank of any Letter of Credit and
until such Letter of Credit shall have expired or been
terminated, the Revolving Credit Commitment of each Lender
shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to such Lender's Revolving
Credit Commitment Percentage of the then undrawn face amount
of such Letter of Credit. Each Lender (other than the
Issuing Bank) agrees that, upon the issuance of any Letter
of Credit hereunder, it shall automatically acquire a
participation in the Issuing Bank's liability under such
Letter of Credit in an amount equal to such Lender's
Revolving Credit Commitment Percentage of such liability,
and each Lender (other than the Issuing Bank) thereby shall
absolutely, unconditionally and irrevocably assume, as
primary obligor and not as surety, and shall be
unconditionally obligated to the Issuing Bank to pay and
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discharge when due, its Revolving Credit Commitment
Percentage of the Issuing Bank's liability under such Letter
of Credit.
(c) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment under such Letter of
Credit, the Issuing Bank shall promptly notify the Company
(through the Agent) of the amount to be paid by the Issuing
Bank as a result of such demand and the date on which
payment is to be made by the Issuing Bank to such
beneficiary in respect of such demand. Notwithstanding the
identity of the account party of any Letter of Credit, the
Company hereby unconditionally agrees to pay and reimburse
the Agent for account of the Issuing Bank for the amount of
each demand for payment under such Letter of Credit at or
prior to the date on which payment is to be made by the
Issuing Bank to the beneficiary thereunder, without
presentment, demand, protest or other formalities of any
kind.
(d) Forthwith upon its receipt of a notice referred to
in clause (c) of this Section 2.03, the Company shall advise
the Agent whether or not the Company intends to borrow
hereunder to finance its obligation to reimburse the Issuing
Bank for the amount of the related demand for payment and,
if it does, submit a notice of such borrowing as provided in
Section 4.05 hereof. In the event that the Company fails to
so advise the Agent, or if the Company fails to reimburse
the Issuing Bank for a payment under a Letter of Credit by
the date of such payment, the Agent shall give each Lender
prompt notice of the amount of the demand for payment,
specifying such Lender's Revolving Credit Commitment
Percentage of the amount of the related demand for payment.
(e) Each Lender (other than the Issuing Bank) shall
pay to the Agent for account of the Issuing Bank at account
number 930-1-035763 (ABA No. 0210-000-21) maintained by the
Agent with The Chase Manhattan Bank, in Dollars and in
immediately available funds, the amount of such Lender's
Revolving Credit Commitment Percentage of any payment under
a Letter of Credit upon notice by the Issuing Bank (through
the Agent) to such Lender requesting such payment and
specifying such amount. Each such Lender's obligation to
make such payment to the Agent for account of the Issuing
Bank under this clause (e), and the Issuing Bank's right to
receive the same, shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other
Lender to make its payment under this clause (e), the
financial condition of the Company (or any other account
party), the existence of any Default or the termination of
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the Commitments. Each such payment to the Issuing Bank shall be made without
any offset, abatement, withholding or reduction whatsoever. If any Lender
shall default in its obligation to make any such payment to the Agent for
account of the Issuing Bank, for so long as such default shall continue the
Agent may at the request of the Issuing Bank withhold from any payments
received by the Agent under this Agreement or any Note for account of such
Lender the amount so in default and, to the extent so withheld, pay the same
to the Issuing Bank in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Lender to the Issuing Bank
pursuant to clause (e) above in respect of any Letter of Credit, such Lender
shall, automatically and without any further action on the part of the Agent,
the Issuing Bank or such Lender, acquire (i) a participation in an amount
equal to such payment in the Reimbursement Obligation owing to the Issuing
Bank by the Company hereunder and under the Letter of Credit Documents
relating to such Letter of Credit and (ii) a participation in a percentage
equal to such Lender's Revolving Credit Commitment Percentage in any interest
or other amounts payable by the Company hereunder and under such Letter of
Credit Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Bank pursuant
to clause (g) of this Section 2.03). Upon receipt by the Issuing Bank from
or for account of the Company of any payment in respect of any Reimbursement
Obligation or any such interest or other amount (including by way of setoff
or application of proceeds of any collateral security) the Issuing Bank shall
promptly pay to the Agent for account of each Lender entitled thereto, such
Lender's Revolving Credit Commitment Percentage of such payment, each such
payment by the Issuing Bank to be made in the same money and funds in which
received by the Issuing Bank. In the event any payment received by the
Issuing Bank and so paid to the Lenders hereunder is rescinded or must
otherwise be returned by the Issuing Bank, each Lender shall, upon the
request of the Issuing Bank (through the Agent), repay to the Issuing Bank
(through the Agent) the amount of such payment paid to such Lender, with
interest at the rate specified in clause (j) of this Section 2.03.
(g) The Company shall pay to the Agent for account of each Lender
(ratably in accordance with their respective Commitment Percentages) a letter
of credit fee in respect of each Letter of Credit in an amount equal to
2-1/2% per annum of the daily average undrawn face amount of such Letter of
Credit for the period from and including the date of
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issuance of such Letter of Credit (i) in the case of a Letter of Credit that
expires in accordance with its terms, to and including such expiration date
and (ii) in the case of a Letter of Credit that is drawn in full or is
otherwise terminated other than on the stated expiration date of such Letter
of Credit, to but excluding the date such Letter of Credit is drawn in full
or is terminated (such fee to be non-refundable, to be paid in arrears on
each Monthly Date and on the Revolving Credit Commitment Termination Date and
to be calculated for any day after giving effect to any payments made under
such Letter of Credit on such day). In addition, the Company shall pay to
the Agent for account of the Issuing Bank a fronting fee in respect of each
Letter of Credit in an amount equal to 1/4 of 1% per annum of the daily
average undrawn face amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in the case of a
Letter of Credit that expires in accordance with its terms, to and including
such expiration date and (ii) in the case of a Letter of Credit that is drawn
in full or is otherwise terminated other than on the stated expiration date
of such Letter of Credit, to but excluding the date such Letter of Credit is
drawn in full or is terminated (such fee to be refundable to the extent such
Letter of Credit is not outstanding for the entire period for which such fee
was paid or the face amount of such Letter of Credit is reduced during such
period, to be paid in advance on each Monthly Date and to be calculated for
any day after giving effect to any payments made under such Letter of Credit
on such day) plus all charges, costs and expenses in the amounts customarily
charged by the Issuing Bank from time to time in like circumstances with
respect to the issuance of each Letter of Credit (including, without
limitation, with respect to each Letter of Credit, an origination fee in an
amount equal to the greater of (x) 1/4 of 1% of the face amount of such
Letter of Credit and (y) $500, payable on the date of issuance thereof) and
drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing Bank
shall deliver (through the Agent) to each Lender and the Company a notice
describing the aggregate amount of all Letters of Credit outstanding at the
end of such month. Upon the request of any Lender from time to time, the
Issuing Bank shall deliver any other information reasonably requested by such
Lender with respect to each Letter of Credit then outstanding.
(i) The issuance by the Issuing Bank of each Letter of Credit shall, in
addition to the conditions precedent set forth in Section 7 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such
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<PAGE>
form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Bank consistent with its then current practices
and procedures with respect to letters of credit of the same type, (ii) the
Company shall have executed and delivered such applications, agreements and
other instruments relating to such Letter of Credit as the Issuing Bank shall
have reasonably requested consistent with its then current practices and
procedures with respect to letters of credit of the same type, PROVIDED that
in the event of any conflict between any such application, agreement or other
instrument and the provisions of this Agreement or any Security Document, the
provisions of this Agreement and the Security Documents shall control, and
(iii) no Event of Default shall have occurred and be continuing (and the
Issuing Bank shall not issue any Letter of Credit after it has received
notification from the Agent or any Lender that any Event of Default is
continuing); PROVIDED THAT the Agent, upon the request of the Majority
Lenders, may instruct the Issuing Bank to issue a Letter of Credit
notwithstanding the occurrence and continuation of an Event of Default.
(j) To the extent that any Lender shall fail to pay any amount required
to be paid pursuant to clause (e) or (f) of this Section 2.03 on the due date
therefor, such Lender shall pay interest to the Issuing Bank (through the
Agent) on such amount from and including such due date to but excluding the
date such payment is made (i) during the period from and including such due
date to but excluding the date three Business Days thereafter, at a rate per
annum equal to the Federal Funds Rate (as in effect from time to time) and
(ii) thereafter, at a rate per annum equal to the Base Rate (as in effect
from time to time) plus 2%.
(k) The issuance by the Issuing Bank of any modification or supplement
to any Letter of Credit hereunder shall be subject to the same conditions
applicable under this Section 2.03 to the issuance of new Letters of Credit,
and no such modification or supplement shall be issued hereunder unless
either (i) the respective Letter of Credit affected thereby would have
complied with such conditions had it originally been issued hereunder in such
modified or supplemented form or (ii) each Lender shall have consented
thereto.
The Company hereby indemnifies and holds harmless each Lender and the Agent
from and against any and all claims and damages, losses, liabilities, costs
or expenses that such Lender or the Agent may incur (or that may be claimed
against such Lender or the Agent by any Person whatsoever) by reason of or in
connection with the execution and delivery or transfer of or payment or
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refusal to pay by the Issuing Bank under any Letter of Credit; PROVIDED that
the Company shall not be required to indemnify any Lender or the Agent for
any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (x) the willful misconduct or negligence of
the Issuing Bank in determining whether a request presented under any Letter
of Credit complied with the terms of such Letter of Credit or (y) in the case
of the Issuing Bank, the Issuing Bank's failure to pay under any Letter of
Credit after the presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit. Nothing in this Section 2.03
is intended to limit the other obligations of the Company, any Lender or the
Agent under this Agreement.
2.04 CHANGES OF COMMITMENTS.
(a) The aggregate amount of the Revolving Credit Commitments shall
be automatically reduced to zero on the Revolving Credit Commitment
Termination Date.
(b) The Company shall have the right at any time or from time to
time (i) so long as no Revolving Credit Loans, Swingline Loans or Letter of
Credit Liabilities are outstanding, to terminate the Revolving Credit
Commitments and (ii) to reduce the aggregate unused amount of the Revolving
Credit Commitments (for which purpose use of the Revolving Credit Commitments
shall be deemed to include the aggregate amount of Letter of Credit
Liabilities and Swingline Loans); PROVIDED that (x) the Company shall give
notice of each such termination or reduction as provided in Section 4.05
hereof, (y) each partial reduction shall be in an aggregate amount at least
equal to $100,000 (or a larger multiple of $100,000) and, (z) the same shall
not result in a breach of any provision of the Senior Subordinated Debt
Documents.
(c) Any portion of the Term Loan Commitments not used on the
Original Closing Date shall be automatically terminated.
(d) The Commitments once terminated or reduced may not be
reinstated.
2.05 COMMITMENT FEE. The Company shall pay to the Agent for
account of each Lender a commitment fee on the daily average unused amount of
such Lender's Revolving Credit Commitment (for which purpose the aggregate
amount of any Letter of Credit Liabilities and any Swingline Loans shall be
deemed to be a pro rata (based on the Revolving Credit Commitments) use of
each Lender's Revolving Credit Commitment), for the period from and including
the Original Closing Date to but not including the earlier of the date such
Revolving Credit Commitment is terminated and the Revolving Credit Commitment
Termination Date,
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<PAGE>
at a rate per annum equal to 1/2 of 1%. Accrued commitment fees shall be
payable in arrears on each Monthly Date and on the earlier of the date the
Revolving Credit Commitments are terminated and the Revolving Credit
Commitment Termination Date.
2.06 LENDING OFFICES. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07 SEVERAL OBLIGATIONS: REMEDIES INDEPENDENT. The failure of
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither any Lender nor the Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender,
and no Lender shall have any obligation to the Agent or any other Lender for
the failure by such Lender to make any Loan required to be made by such
Lender. Without prejudice to Section 10 hereof, the amounts payable by the
Company at any time hereunder and under the Notes to each Lender shall be a
separate and independent debt and each Lender shall be entitled to protect
and enforce its rights arising out of this Agreement and the Notes, and it
shall not be necessary for any other Lender or the Agent to consent to, or be
joined as an additional party in, any proceedings for such purposes.
2.08 NOTES.
(a) The Revolving Credit Loans made by each Lender shall be
evidenced by a single promissory note of the Company substantially in the
form of Exhibit A-1 hereto, dated the Original Closing Date, payable to such
Lender in a principal amount equal to the amount of its Revolving Credit
Commitment as originally in effect and otherwise duly completed.
(b) The Term Loans made by each Lender shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit
A-2 hereto, dated the Original Closing Date, payable to such Lender in a
principal amount equal to the amount of its Term Loan Commitment and
otherwise duly completed.
(c) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender to the
Company, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of the Note
evidencing the Loans of such Class held by it, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof; PROVIDED that the
failure of such Lender to make any such recordation or endorsement shall not
affect the obligations
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of the Company to make a payment when due of any amount owing hereunder or
under such Note in respect of the Loans to be evidenced by such Note.
(d) No Lender shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Lender's
relevant Commitment, Loans and Notes pursuant to Section 12.06(b) hereof.
2.09 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF
LOANS. Subject to Section 4.04 hereof, the Company shall have the right to
prepay Loans, or to Convert Loans of one Type into Loans of the other Type or
Continue Eurodollar Loans, at any time or from time to time, PROVIDED that:
(a) the Company shall give the Agent notice of each such prepayment,
Conversion or Continuation as provided in Section 4.05 hereof (and, upon the
date specified in any such notice of prepayment, the amount to be prepaid
shall become due and payable hereunder); (b) prepayments of the Term Loans
shall be applied to the installments of the Term Loans in the inverse order
of their maturities; and (c) Swingline Loans may only be Base Rate Loans.
Notwithstanding the foregoing, and without limiting the rights and remedies
of the Lenders under Section 10 hereof, in the event that any Event of
Default shall have occurred and be continuing, the Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Company to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a
Eurodollar Loan, in which event all Loans shall be Converted (on the last
day(s) of the respective Interest Periods therefor) or Continued, as the case
may be, as Base Rate Loans.
2.10 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) BORROWING BASE. Until the Revolving Credit Commitment
Termination Date, the Company shall from time to time prepay the Revolving
Credit Loans (and/or provide cover for Letter of Credit Liabilities as
specified in clause (g) below) in such amounts as shall be necessary so that
at all times the aggregate outstanding amount of the Revolving Credit Loans
together with the outstanding Letter of Credit Liabilities shall not exceed
the Borrowing Base, such amount to be applied, first, to Revolving Credit
Loans outstanding and, second, as cover for Letter of Credit Liabilities
outstanding.
(b) CASUALTY EVENTS. Upon the date 15 days following the receipt
by any Obligor of the proceeds of insurance (other than business interruption
or similar insurance unless (x) at the time of such receipt any amount owing
by any Obligor hereunder or under the Notes shall be due and unpaid and (y)
immediately prior
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<PAGE>
to the Casualty Event giving rise to the receipt of such insurance proceeds,
the Obligors were not in compliance with their obligations under Section
9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.16 or 9.17 hereof), condemnation award
or other compensation in respect of any Casualty Event affecting any Property
of any Obligor (or upon such earlier date as such Obligor shall have
determined not to repair or replace the Property affected by such Casualty
Event), the Company shall prepay the Loans (and/or provide cover for Letter
of Credit Liabilities as specified in clause (g) below), and the Revolving
Credit Commitments shall be subject to automatic reduction, in an aggregate
amount, if any, equal to 100% of the Net Available Proceeds of such Casualty
Event not theretofore applied to or designated for the repair or replacement
of such Property, such prepayment and reduction to be effected in each case
in the manner and to the extent specified in clause (f) of this Section 2.10.
Notwithstanding the foregoing, to the extent that Net Available Proceeds of
any Casualty Event have been designated for the repair or replacement of
Property affected by a Casualty Event and a purchase order or other
commitment in respect of purchase or repair of such Property has not been
entered into within 90 days of receipt of the proceeds of insurance, the
amount of Net Available Proceeds designated for such repair or replacement
shall be applied to prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in clause (g) below) and reduce the Revolving
Credit Commitments as specified in clause (f) of this Section 2.10. Nothing
in this clause (b) shall be deemed to limit any obligation of an Obligor
pursuant to any of the Security Documents to remit to a collateral or similar
account (including, without limitation, the Collateral Account) maintained by
the Agent pursuant to any of the Security Documents the proceeds of
insurance, condemnation award or other compensation received in respect of
any Casualty Event.
(c) EQUITY ISSUANCE. Upon any Equity Issuance, the Company shall
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in clause (g) below), and the Revolving Credit Commitments shall be
subject to automatic reduction, in an aggregate amount equal to 100% of the
Net Available Proceeds thereof, such prepayment and reduction to be effected
in each case in the manner and to the extent specified in clause (f) of this
Section 2.10.
(d) EXCESS CASH FLOW. Not later than the date 90 days after the
end of each fiscal year of the Company, beginning with the fiscal year
commencing on January 1, 1995, the Company shall prepay the Loans (and/or
provide cover for Letter of Credit Liabilities as specified in clause (g)
below), and the Revolving Credit Commitments shall be subject to automatic
reduction, in an aggregate amount equal to the excess of (A) 70% of Excess
Cash Flow for such fiscal year over (B) the aggregate amount of
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prepayments of Term Loans made during such fiscal year pursuant to Section
2.09 hereof and, after the payment in full of the Term Loans, the aggregate
amount of voluntary reductions of Revolving Credit Commitments made during
such fiscal year pursuant to Section 2.09 hereof, such prepayment and
reduction to be effected in each case in the manner and to the extent
specified in clause (f) of this Section 2.10.
(e) SALE OF ASSETS. Without limiting the obligation of the
Company to obtain the consent of the Majority Lenders pursuant to Section
9.05 hereof to any Disposition not otherwise permitted hereunder, in the
event that the Net Available Proceeds of any Disposition (a "CURRENT
DISPOSITION"), and of all prior Dispositions on an annual basis as to which a
prepayment has not yet been made under this Section 2.10(e), shall exceed
$250,000 then, no later than five Business Days prior to the occurrence of
such Current Disposition, the Company will deliver to the Lenders a
statement, certified by the chief financial officer of the Company, in form
and detail satisfactory to the Agent, of the amount of the Net Available
Proceeds of the Current Disposition and of all such prior Dispositions and
will prepay the Loans (and/or provide cover for Letter of Credit Liabilities
as specified in clause (g) below), and the Revolving Credit Commitment shall
be subject to automatic reduction, in an aggregate amount equal to 100% of
the Net Available Proceeds of the Current Disposition and such prior
Dispositions, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in clause (f) of this Section 2.10.
(f) APPLICATION. Prepayments and reductions of Commitments
described in the above clauses of this Section 2.10 (other than in clause (a)
above) shall be effected as follows:
(i) first, the amount of the prepayment specified in such clauses
shall be applied to the installments of the Term Loans then outstanding
in the inverse order of the maturity thereof; and
(ii) second, the Revolving Credit Commitments shall be
automatically reduced in an amount equal to any excess over the amount
referred to in the foregoing clause (i) (and to the extent that, after
giving effect to such reduction, the aggregate principal amount of
Revolving Credit Loans, together with the aggregate amount of all Letter
of Credit Liabilities, would exceed the Revolving Credit Commitments,
the Company shall, first, prepay Revolving Credit Loans and, second,
provide cover fox Letter of Credit Liabilities as specified in clause
(g) below, in an aggregate amount equal to such excess).
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(g) COVER FOR LETTER OF CREDIT LIABILITIES. In the event that the
Company shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to
the Agent immediately available funds in an amount equal to the required
amount, which funds shall be retained by the Agent in the Collateral Account
(as provided therein as collateral security in the first instance for Letter
of Credit Liabilities) until such time as all Letters of Credit shall have
been terminated and all of the Letter of Credit Liabilities paid in full.
2.11 PREPAYMENT FEES. The Company agrees to pay the following
prepayment fees:
(a) A prepayment fee of $400,000 shall be due and payable by the
Company to the Agent, for account of the Lenders, upon repayment of all
principal and interest on the Loans and termination of the Commitments
hereunder pursuant to Section 2.09 or Section 2.10 hereof or otherwise
(exclusive, however, of repayment pursuant to paragraphs (a), (b) or (d)
of Section 2.10), if the same shall occur on or prior to February 20, 1997.
(b) A prepayment fee of $200,000 shall be due and payable by the
Company to the Agent, for account of the Lenders, upon repayment of all
principal and interest on the Loans and termination of the Commitments
hereunder pursuant to Section 2.09 or Section 2.10 hereof or otherwise
(exclusive, however, or repayment pursuant to paragraphs (a), (b) or (d) of
Section 2.10), if the same shall occur after February 20, 1997 and on or
prior to February 20, 1998.
Notwithstanding the foregoing, no such prepayment fee shall be
payable upon repayment of all principal and interest on the Loans and
termination of the Commitments hereunder pursuant to Section 2.10(c) hereof
in connection with a Qualified Public Offering.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF LOANS.
(a) The Company hereby promises to pay to the Agent for account of
each Lender the entire outstanding principal amount of such Lender's
Revolving Credit Loans, and each Revolving Credit Loan shall mature, on the
Revolving Credit Commitment Termination Date.
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(b) The Company hereby promises to pay to the Agent for account of
each Lender the principal of such Lender's Term Loans in 26 installments
payable on the Principal Payment Dates as follows:
<TABLE>
<CAPTION>
PRINCIPAL PAYMENT DATE AMOUNT OF INSTALLMENT ($)
---------------------- -------------------------
<C> <S>
September 30, 1995 $ 500,000
December 31, 1995 1,000,000
March 31, 1996
through (and including)
December 31, 1996 375,000
March 31, 1997
through (and including)
December 31, 1997 468,750
March 31, 1998
through (and including)
December 31, 1998 562,500
March 31, 1999
through (and including)
June 30, 2001 656,250
September 30, 2001 1,312,500
</TABLE>
If the Company does not borrow the full amount of the aggregate Term Loan
Commitments on the Original Closing Date, the shortfall shall be applied to
reduce the foregoing installments ratably.
(c) The Company hereby promises to pay to the Cash Management
Agent the principal of each Swingline Loan, and each Swingline Loan shall
mature, on the Revolving Credit Commitment Termination Date.
3.02 INTEREST. The Company hereby promises to pay to the Agent
for account of each Lender interest on the unpaid principal amount of each
Loan made by such Lender for the period from and including the date of such
Loan to but excluding the date such Loan shall be paid in full, at the
following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) PLUS the Applicable Margin;
(b) during such periods as such Loan is a Eurodollar Loan, for
each Interest Period relating thereto, the
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Eurodollar Rate for such Loan for such Interest Period plus the
Applicable Margin.
Notwithstanding the foregoing, during the continuance of any Event of
Default, the Company hereby promises to pay to the Agent for account of each
Lender interest at the applicable Post-Default Rate on any principal of any
Loan made by such Lender, on any Reimbursement Obligation held by such Lender
and on any other amount payable by the Company hereunder or under the Notes
held by such Lender to or for account of such Lender. Accrued interest on
each Loan shall be payable (i) in the case of a Base Rate Loan, monthly on
the Monthly Dates, (ii) in the case of a Eurodollar Loan, on the last day of
each Interest Period therefor and, if such Interest Period is longer than
three months, at three-month intervals following the first day of such
Interest Period, and (iii) in the case of any Loan, upon the payment or
prepayment thereof or the Conversion of such Loan to a Loan of the other Type
(but only on the principal amount so paid, prepaid or Converted), except that
interest payable at the Post-Default Rate shall be payable from time to time
on demand. Promptly after the determination of any interest rate provided for
herein or any change therein, the Agent shall give notice thereof to the
Lenders to which such interest is payable and to the Company.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest, Reimbursement Obligations and other amounts to be
made by the Company under this Agreement and the Notes and the Fee Letter,
and, except to the extent otherwise provided therein, all payments to be made
by the Obligors under any other Basic Document, shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to
the Cash Management Agent at an account maintained at Provident designated by
the Cash Management Agent, not later than 1:00 p.m. New York time on the date
on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made
may (but shall not be obligated to) debit the amount of any such payment that
is not made by such time to any ordinary deposit account of the Company with
such Lender (with notice to the Company and the Agent). The Cash Management
Agent may (but shall not be obligated to) debit the amount of any payment to
be
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<PAGE>
made by the Company hereunder or under any other Basic Document to the Zero
Balance Account (with notice to the Company).
(c) The Company shall, at the time of making each payment under
this Agreement or any Note for account of any Lender, specify to the Agent
(which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Company hereunder
to which such payment is to be applied (and in the event that the Company
fails to so specify, or if an Event of Default has occurred and is
continuing, the Agent may distribute such payment to the Lenders for
application in such manner as it or the Majority Lenders, subject to Section
4.02 hereof, may determine to be appropriate). In no event shall an Event of
Default be designated to have occurred as a result of, nor shall the Company
be liable for any costs resulting from, the failure of the Agent to apply any
payment in the manner specified by the Company.
(d) Except to the extent otherwise provided in the last sentence
of Section 2.03(e) hereof, each payment received by the Agent or the Cash
Management Agent under this Agreement or any Note for account of any Lender
shall be paid by the Agent or the Cash Management Agent (as the case may be)
promptly to such Lender, in immediately available funds, for account of such
Lender's Applicable Lending Office for the Loan or other obligation in
respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date
shall be extended to the next succeeding Business Day, and interest shall be
payable for any principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders
under Section 2.01 hereof shall be made from the Lenders, each payment of
commitment fee under Section 2.05 hereof in respect of the Revolving Credit
Commitments shall be made for account of the Lenders, and each termination or
reduction of the amount of the Revolving Credit Commitments under Section
2.04 hereof shall be applied to the respective Commitments of such Class of
the Lenders, pro rata according to the amounts of their respective
Commitments of such Class; (b) the making, Conversion and Continuation of
Revolving Credit Loans and Term Loans of a particular Type (other than
Conversions provided for by Section 5.04 hereof) shall be made pro rata among
the Lenders according to the amounts of their respective Revolving Credit and
Term Loan Commitments (in the case of making of Loans) or their respective
Revolving Credit and Term Loans (in the case of Conversions and Continuations
of Loans) and the then current Interest Period for each Loan of such
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Type shall be coterminous; (c) each payment or prepayment of principal of
Revolving Credit Loans or Term Loans by the Company shall be made for account
of the Lenders pro rata in accordance with the respective unpaid principal
amounts of the Loans of such Class held by them; and (d) each payment of
interest on Revolving Credit Loans and Term Loans by the Company shall be
made for account of the Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders.
4.03 COMPUTATIONS. Except as otherwise provided herein, interest
on Loans, letter of credit fees and commitment fees shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made
pursuant to Section 2.10 hereof and Conversions or prepayments made pursuant
to Section 5.04 hereof, each borrowing, Conversion and partial prepayment of
principal of Loans shall be in an aggregate amount at least equal to $100,000
or a larger multiple of $50,000 (borrowings, Conversions or prepayments of or
into Loans of different Types or, in the case of Eurodollar Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, Conversions and prepayments for purposes of the foregoing, one
for each Type or Interest Period).
4.05 CERTAIN NOTICES. Notices by the Company to the Agent of
terminations or reductions of the Revolving Credit Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans and
of Classes of Loans, of Types of Loans and of the duration of Interest
Periods shall be irrevocable and shall be effective only if received by the
Agent not later than 12 noon New York time on the number of Business Days
prior to the date of the relevant termination, reduction, borrowing,
Conversion, Continuation or prepayment or the first day of such Interest
Period specified below:
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
BUSINESS
NOTICE DAYS PRIOR
------ ----------
<C> <S>
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans same day
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Revolving Credit Commitments to be terminated or reduced. Each such notice
of borrowing, Conversion, Continuation or optional prepayment shall specify
the Class of Loans to be borrowed, Converted, Continued or prepaid and the
amount (subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each
such notice of the duration of an Interest Period shall specify the Loans to
which such Interest Period is to relate. The Agent shall promptly notify the
Lenders of the contents of each such notice. In the event that the Company
fails to select the Type of Loan, or the duration of any Interest Period for
any Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate
Loan.
4.06 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Lender or the Company (the "PAYOR") prior to the date
on which the Payor is to make payment to the Agent of (in the case of a
Lender) the proceeds of a Loan to be made by such Lender hereunder or (in the
case of the Company) a payment to the Agent for account of one or more of the
Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not intend
to make the Required Payment to the Agent, the Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient(s) on such date; and, if the Payor has not in fact made
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<PAGE>
the Required Payment to the Agent, the recipient(s) of such payment shall, on
demand, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date (the "ADVANCE DATE") such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to
the Federal Funds Rate for such day and, if such recipient(s) shall fail
promptly to make such payment, the Agent shall be entitled to recover such
amount, on demand, from the Payor, together with interest as aforesaid,
PROVIDED that if neither the recipient(s) nor the Payor shall return the
Required Payment to the Agent within three Business Days of the Advance Date,
then, retroactively to the Advance Date, the Payor and the recipient(s) shall
each be obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made
by the Company to the Lenders, the Company and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (and, in case
the recipient(s) shall return the Required Payment to the Agent, without
limiting the obligation of the Company under Section 3.02 hereof to pay
interest to such recipient(s) at the Post-Default Rate in respect of the
Required Payment) and
(ii) if the Required Payment shall represent proceeds of a Loan to
be made by the Lenders to the Company, the Payor and the Company shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the rate of interest provided for
such Required Payment pursuant to Section 3.02 hereof (and, in case the
Company shall return the Required Payment to the Agent, without limiting
any claim the Company may have against the Payor in respect of the
Required Payment).
4.07 SHARING OF PAYMENTS. ETC.
(a) Each Obligor agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender
may otherwise have, each Lender shall be entitled, at its option, to offset
balances held by it for account of such Obligor at any of its offices, in
Dollars or in any other currency, against any principal of or interest on any
of such Lender's Loans, Reimbursement Obligations or any other amount payable
to such Lender hereunder, that is not paid when due (regardless of whether
such balances are then due to such Obligor), in which case it shall promptly
notify such Obligor and the Agent thereof, PROVIDED that such Lender's
failure to give such notice shall not affect the validity thereof.
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<PAGE>
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan or Letter of Credit Liability owing to
it or payment of any other amount under this Agreement or any other Basic
Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Agent as
provided herein), and, as a result of such payment, such Lender shall have
received a greater percentage of the principal of or interest on the Loans or
Letter of Credit Liabilities or such other amounts then due hereunder or
thereunder by such Obligor to such Lender than the percentage received by any
other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans or Letter of Credit Liabilities or such other
amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders
shall share the benefit of such excess payment (net of any expenses that may
be incurred by such Lender in obtaining or preserving such excess payment)
pro rata in accordance with the unpaid principal of and/or interest on the
Loans or Letter of Credit Liabilities or such other amounts, respectively,
owing to each of the Lenders. To such end all the Lenders shall make
appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or
other amounts (as the case may be) owing to such Lender in the amount of such
participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.07 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.07 to share in the benefits of any recovery on such
secured claim.
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<PAGE>
Section 5. YIELD PROTECTION. ETC.
5.01 ADDITIONAL COSTS.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"ADDITIONAL COSTS"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending
Office for any of such Loans) to any tax, duty or other charge in
respect of such Loans or its Notes or changes the basis of taxation of
any amounts payable to such Lender under this Agreement or its Notes in
respect of any of such Loans (excluding changes in the rate of tax on
the overall net income of such Lender or of such Applicable Lending
Office by the jurisdiction in which such Lender has its principal office
or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements (other than, in the case of any Lender for any
period as to which the Company is required to pay any amount under
paragraph (e) below, the reserves against "Eurocurrency Liabilities"
under Regulation D therein referred to) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of,
such Lender (including, without limitation, any of such Loans or any
deposits referred to in the definition of "Eurodollar Rate" in Section
1.01 hereof), or any commitment of such Lender (including, without
limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or
its Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Company under this Section
5.01(a), the Company may, by notice to such Lender (with a copy to the
Agent), suspend the obligation of such Lender thereafter to make or Continue
Loans of the Type with respect to which such compensation is requested, or to
Convert Loans of any other Type into Loans of such Type, until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable),
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<PAGE>
PROVIDED that such suspension shall not affect the right of such Lender to
receive the compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lender that
includes Eurodollar Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets that it may hold, then, if
such Lender so elects by notice to the Company (with a copy to the Agent),
the obligation of such Lender to make or Continue, or to Convert Loans of any
other Type into, Loans of such Type hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.04 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company or foreign bank of which such Lender is a
subsidiary) for any costs that it determines are attributable to the
maintenance by such Lender (or any Applicable Lending Office or such bank
holding company or foreign bank), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory
Change or (ii) implementing any risk-based capital guideline or other
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) heretofore or hereafter issued
by any government or governmental or supervisory authority implementing at
the national level the Basle Accord (including, without limitation, the
Risk-Based Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix
A) and the Risk-Based Capital Guidelines of the Office of the Comptroller of
the Currency (12 C.F.R. Part 3, Appendix A)), of capital in respect of its
Commitments or Loans (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of
such Lender (or any Applicable Lending Office or such bank holding company or
foreign bank) to a level below that which such Lender (or any Applicable
Lending Office or such bank holding company or foreign bank) could have
achieved but for such law,
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<PAGE>
regulation, interpretation, directive or request). For purposes of this
Section 5.01(c) and Section 5.06 hereof, "BASLE ACCORD" shall mean the
risk-based capital framework described by the Base Committee on Banking
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement thereof.
(d) Each Lender shall notify the Company of any event occurring after
the date of this Agreement entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in
any event within 45 days, after such Lender obtains actual knowledge thereof;
PROVIDED that (i) if any Lender fails to give such notice within 45 days
after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 5.01 in respect of
any costs resulting from such event, only be entitled to payment under this
Section 5.01 for costs incurred from and after the date 45 days prior to the
date that such Lender does give such notice and (ii) each Lender will
designate a different Applicable Lending Office for the Loans of such Lender
affected by such event if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole opinion of such
Lender, be disadvantageous to such Lender, except that such Lender shall have
no obligation to designate an Applicable Lending Office located in the United
States of America. Each Lender will furnish to the Company a certificate
setting forth the basis and amount of each request by such Lender for
compensation under paragraph (a) or (c) of this Section 5.01. Determinations
and allocations by any Lender for purposes of this Section 5.01 of the effect
of any Regulatory Change pursuant to paragraph (a) or (b) of this Section
5.01, or of the effect of capital maintained pursuant to paragraph (c) of
this Section 5.01, on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Lender under this Section
5.01, shall be conclusive, PROVIDED that such determinations and allocations
are made on a reasonable basis.
(e) Without limiting the effect of the foregoing, the Company shall pay
to each Lender on the last day of each Interest Period so long as such Lender
is maintaining reserves against "Eurocurrency liabilities" under Regulation D
(or, unless the provisions of paragraph (b) above are applicable, so long as
such Lender is, by reason of any Regulatory Change, maintaining reserves
against any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined as
provided in this Agreement or against any category of extensions of credit or
other assets of such Lender
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<PAGE>
which includes any Eurodollar Loans) an additional amount (determined by such
Lender and notified to the Company through the Agent) equal to the product of
the following for each Eurodollar Loan for each day during such Interest
Period:
(i) the principal amount of such Eurodollar Loan outstanding
on such day; and
(ii) the remainder of (x) a fraction the numerator of
which is the rate (expressed as a decimal) at which interest accrues on
such Eurodollar Loan for such Interest Period as provided in this
Agreement (less the Applicable Margin) and the denominator of which is
one MINUS the effective rate (expressed as a decimal) at which such
reserve requirements are imposed on such Lender on such day MINUS (y)
such numerator; and
(iii) 1/360.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Rate
for any Interest Period:
(a) the Agent determines, which determination shall be
conclusive, that the quotations of interest rates referred to in the
definition of "Eurodollar Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Eurodollar Loans as
provided herein; or
(b) if the Majority Lenders determine which determination
shall be conclusive, and notify the Agent that the relevant rates of
interest referred to in the definition of "Eurodollar Rate" in Section
1.01 hereof upon the basis of which the rate of interest for Eurodollar
Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to such Lenders of making or maintaining
such Type of Loans for such Interest Period;
then the Agent shall give the Company and each Lender prompt notice thereof
and, so long as such condition remains in effect, the Lenders shall be under
no obligation to make additional Loans of such Type, to Continue Loans of
such Type or to Convert Loans of any other Type into Loans of such Type, and
the Company shall, on the last day(s) of the then current Interest Period(s)
for the outstanding Loans of such Type, either prepay such Loans or Convert
such Loans into another Type of Loan in accordance with Section 2.09 hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any
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Lender or its Applicable Lending Office to honor its obligation to make or
maintain Eurodollar Loans hereunder, then such Lender shall promptly notify
the Company thereof (with a copy to the Agent) and such Lender's obligation
to make or Continue, or to Convert Loans of any other Type into, Eurodollar
Loans shall be suspended until such time as such Lender may again make and
maintain Eurodollar Loans (in which case the provisions of Section 5.04
hereof shall be applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make Eurodollar Loans or to Continue, or to Convert Loans of any other Type
into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03
hereof (Loans of such Type being herein called "AFFECTED LOANS"), such
Lender's Affected Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) for Affected Loans
(or, in the case of a Conversion required by Section 5.01(b) or 5.03 hereof,
on such earlier date as such Lender may specify to the Company with a copy to
the Agent) and, unless and until such Lender gives notice as provided below
that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Company with a copy to the Agent that the
circumstances specified in Section 5.01 or 5.03 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 5.04 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Lenders are
outstanding, such Lender's Base Rate Loans shall be automatically Converted,
on the first day(s) of the next succeeding Interest Period(s) for such
outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, Types and Interest
Periods) in accordance with their respective Commitments.
5.05 COMPENSATION. The Company shall pay to the Agent for account of
each Lender, upon the request of such Lender
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<PAGE>
through the Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion
of a Eurodollar Loan made by such Lender for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section 10
hereof) on a date other than the last day of the Interest Period for
such Loan; or
(b) any failure by the Company for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 hereof to be satisfied) to borrow a Eurodollar
Loan from such Lender on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest that otherwise would have accrued on the principal amount so paid,
prepaid, Converted or not borrowed for the period from the date of such
payment, prepayment, Conversion or failure to borrow to the last day of the
then current Interest Period for such Loan (or, in the case of a failure to
borrow, the Interest Period for such Loan that would have commenced on the
date specified for such borrowing) at the applicable rate of interest for
such Loan provided for herein over (ii) the amount of interest that otherwise
would have accrued on such principal amount at a rate per annum equal to the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable
to such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
5.06 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without limiting
the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based
capital guideline or other requirement heretofore or hereafter issued by any
government or governmental or supervisory authority implementing at the
national level the Basle Accord there shall be imposed, modified or deemed
applicable any tax, reserve, special deposit, capital adequacy or similar
requirement against or with respect to or measured by reference to Letters of
Credit issued or to be issued hereunder and the result shall be to increase
the cost to any Lender or Lenders of issuing (or purchasing participations
in) or maintaining its obligation hereunder to issue (or purchase
participations in) any Letter of Credit hereunder or reduce any amount
receivable by any Lender hereunder in respect of any
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<PAGE>
Letter of Credit (which increases in cost, or reductions in amount
receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from
such event), then, upon demand by such Lender or Lenders (through the Agent),
the Company shall pay immediately to the Agent for account of such Lender or
Lenders, from time to time as specified by such Lender or Lenders (through
the Agent), such additional amounts as shall be sufficient to compensate such
Lender or Lenders (through the Agent) for such increased costs or reductions
in amount. A statement as to such increased costs or reductions in amount
incurred by any such Lender or Lenders, submitted by such Lender or Lenders
to the Company shall be conclusive in the absence of manifest error as to the
amount thereof.
5.07 TAXES.
(a) All payments on account of the principal of and interest on
the Loans, the Letters of Credit, Reimbursement Obligations, fees and other
amounts payable hereunder by the Obligors to or for the account of the Agent
or any Lender, including, without limitation, amounts payable under Section
5.07(b) hereof, shall be made free and clear of and without reduction or
liability for Foreign Taxes and Covered Taxes. Each Obligor will pay all
Foreign Taxes and Covered Taxes for their own respective accounts, prior to
the date on which penalties attach thereto, except for any Foreign Taxes
(other than Foreign Taxes imposed on or in respect of any amount payable
hereunder, under the Notes or under any other Basic Document) the payment of
which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained, so long as no claim for such
Foreign Taxes is made on the Agent or any Lender.
(b) Each Obligor shall indemnify the Agent and each Lender
against, and reimburse the Agent and each Lender on demand for, any Foreign
Taxes and any Covered Taxes and any loss, liability, claim or expense,
including interest, penalties and legal fees, which the Agent or such Lender
(as the case may be) may incur at any time arising out of or in connection
with any failure of such Obligor to make any payment of Foreign Taxes or
Covered Taxes when due.
(c) In the event that any Obligor is required by applicable law,
decree or regulation to deduct or withhold Foreign Taxes or Covered Taxes
from any amounts payable on, under or in respect of this Agreement or the
Loans, Letters of Credit or Reimbursement Obligations, such Obligor shall
promptly pay the Person entitled to such amount such additional amounts as
may be required, after the deduction or withholding of Foreign Taxes or
Covered Taxes, to enable such Person to received from such
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Obligor, on the due date thereof, an amount equal to the full amount stated
to be payable to such Person under this Agreement.
(d) Each Obligor shall furnish to the Agent, upon the request of
any Lender (through the Agent), together with certified copies for
distribution to each Lender requesting the same (identifying the Lenders
which have so requested), original official tax receipts in respect of each
payment of Foreign Taxes and Covered Taxes required under this Section 5.07,
within 30 days after the date such payment is made, and each Obligor shall
promptly furnish to the Agent at its request or at the request of any Lender
(through the Agent) any other information, documents and receipts that the
Agent or such Lender may reasonably require to establish to its satisfaction
that full and timely payment has been made of all Foreign Taxes and Covered
Taxes required to be paid under this Section 5.07.
Section 6. GUARANTEE.
6.01 THE GUARANTEE. Subject to the limitation set forth in Section 6.10
hereof, the Subsidiary Guarantors hereby jointly and severally guarantee to
each Lender and the Agent and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the principal of and interest on the Loans made by the
Lenders to, and the Notes held by each Lender of, the Company and all other
amounts from time to time owing to the Lenders or the Agent by the Company
under this Agreement and under the Notes and by any Obligor under any of the
other Basic Documents, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "GUARANTEED
OBLIGATIONS"). The Subsidiary Guarantors hereby further jointly and
severally agree that if the Company shall fail to pay in full when due
(whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same,
without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended
maturity, by acceleration or otherwise) in accordance with the terms of such
extension or renewal.
6.02 OBLIGATIONS UNCONDITIONAL. Subject to the limitation set forth in
Section 6.10 hereof, the obligations of the Subsidiary Guarantors under
Section 6.01 hereof are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Company under this Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or
any substitution, release or exchange of any other guarantee of or security
for any of the Guaranteed Obligations, and, to the
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fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 6.02 that the obligations of the Subsidiary Guarantors hereunder
shall be absolute and unconditional, joint and several, under any and all
circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Subsidiary Guarantors hereunder which
shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment,
demand of payment, protest and all notices whatsoever, and any requirement
that the Agent or any Lender exhaust any right, power or remedy or proceed
against the Company under this Agreement or the Notes or any other agreement
or instrument referred to herein or therein, or against any other Person
under any other guarantee of, or security for, any of the Guaranteed
Obligations.
6.03 REINSTATEMENT. The obligations of the Subsidiary Guarantors under
this Section 6 shall be automatically reinstated if and to the extent that
for any reason any payment by or on behalf of the Company in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of
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the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Subsidiary Guarantors
jointly and severally agree that they will indemnify the Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Agent or such Lender in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6.04 SUBROGATION. Each Subsidiary Guarantor hereby waives all
rights of subrogation or contribution, whether arising by contract or
operation of law (including, without limitation, any such right arising
under the Bankruptcy Code) or otherwise by-reason of any payment by it
pursuant to the provisions of this Section 6 and each Subsidiary
Guarantor further agrees with the Company for the benefit of each of its
creditors (including, without limitation, each Lender and the Agent)
that any such payment by it shall constitute a contribution of capital
by such Subsidiary Guarantor to the Company (or an investment in the
equity capital of the Company by such Subsidiary Guarantor).
6.05 REMEDIES. The Subsidiary Guarantors jointly and severally
agree that, as between the Subsidiary Guarantors and the Lenders, the
obligations of the Company under this Agreement and the Notes may be
declared to be forthwith due and payable as provided in Section 10
hereof (and shall be deemed to have become automatically due and payable
in the circumstances provided in said Section 10) for purposes of
Section 6.01 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from
becoming automatically due and payable) as against the Company and that,
in the event of such declaration (or such obligations being deemed to
have become automatically due and payable), such obligations (whether or
not due and payable by the Company) shall forthwith become due and
payable by the Subsidiary Guarantors for purposes of said Section 6.01.
6.06 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Subsidiary
Guarantor hereby acknowledges that the guarantee in this Section 6
constitutes an instrument for the payment of money, and consents and
agrees that any Lender or the Agent, at its sole option, in the event of
a dispute by such Subsidiary Guarantor in the payment of any moneys due
hereunder, shall have the right to bring motion-action under New York
CPLR Section 3213.
6.07 CONTINUING GUARANTEE. The guarantee in this Section 6 is a
continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
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6.08 RIGHTS OF CONTRIBUTION. The Subsidiary Guarantors hereby agree, as
between themselves, that if any Subsidiary Guarantor shall become an Excess
Funding Guarantor (as defined below) by reason of the payment by such
Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to
the next sentence), pay to such Excess Funding Guarantor an amount equal to
such Subsidiary Guarantor's Pro Rata Share (as defined below and determined,
for this purpose, without reference to the Properties, debts and liabilities
of such Excess Funding Guarantor) of the Excess Payment (as defined below) in
respect of such Guaranteed Obligations. The payment obligation of a
Subsidiary Guarantor to any Excess Funding Guarantor under this Section 6.08
shall be subordinate and subject in right of payment to the prior payment in
full of the obligations of such Subsidiary Guarantor under the other
provisions of this Section 6 and such Excess Funding Guarantor shall not
exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.
For purposes of this Section 6.08, (i) "EXCESS FUNDING GUARANTOR" shall
mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that
has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "EXCESS PAYMENT" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its
Pro Rata Share of such Guaranteed Obligations and (iii) "PRO RATA SHARE"
shall mean, for any Subsidiary Guarantor, the ratio (expressed as a
percentage) of (x) the amount by which the aggregate present fair saleable
value of all Properties of such Subsidiary Guarantor (excluding any shares of
stock of any other Subsidiary Guarantor) exceeds the amount of all the debts
and liabilities of such Subsidiary Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Subsidiary Guarantor hereunder and any obligations of any
other Subsidiary Guarantor that have been Guaranteed by such Subsidiary
Guarantor) to (y) the amount by which the aggregate fair saleable value of
all Properties of the Company and all of the Subsidiary Guarantors exceeds
the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Company and the Subsidiary Guarantors hereunder) of the
Company and all of the Subsidiary Guarantors, all as of the Original Closing
Date. If any Subsidiary becomes a Subsidiary Guarantor hereunder subsequent
to the Original Closing Date, then for purposes of this Section 6.08 such
subsequent Subsidiary Guarantor shall be deemed to have been a Subsidiary
Guarantor as of the Original Closing Date and the aggregate present fair
saleable value of the Properties, and the amount of the debts and
liabilities, of such Subsidiary Guarantor as of the Original Closing Date
shall be deemed to be equal to
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such value and amount on the date such Subsidiary Guarantor becomes a
Subsidiary Guarantor hereunder.
6.09 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 hereof would otherwise, taking into account the provisions of
Section 6.08 hereof, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on
account of the amount of its liability under said Section 6.01, then,
notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by such Subsidiary
Guarantor, any Lender, the Agent or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and
not subordinated to the claims of other creditors as determined in such
action or proceeding.
6.10 LIMITATION ON KERNER'S LIABILITY. It is understood and agreed
that the sole recourse of the Agent and the Lenders in respect of the
obligations of Tri-Star Technologies under this Section 6 shall be to the
assets of Tri-Star Technologies and that nothing contained herein shall
create any obligation of or right to look to Alexander Kerner or his assets
individually for the satisfaction of such obligations.
6.11 LIMITATION ON GUTERMANN'S LIABILITY. It is understood and agreed
that the sole recourse of the Agent and the Lenders in respect of the
obligations of Unidec under this Section 6 shall be to the assets of Unidec
and that nothing contained herein shall create any obligation of or right to
look to Silvia Gutermann or her assets individually for the satisfaction of
such obligations.
Section 7. CONDITIONS PRECEDENT.
7.01 EFFECTIVENESS OF AMENDMENT AND RESTATEMENT. The effectiveness of
the amendment and restatement of the Original Credit Agreement provided for
by this Agreement is subject to the conditions precedent that the Agent shall
have received the following documents, each of which shall be satisfactory to
the Agent (and to the extent specified below, to each Lender) in form and
substance:
(a) CORPORATE DOCUMENTS. Certified copies of the charter and
by-laws (or equivalent documents) of each Obligor and of all corporate
authority for each Obligor (including, without limitation, board of
director resolutions and evidence of the incumbency of officers) with
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respect to the execution, delivery and performance of such of the Basic
Documents to which such Obligor is intended to be a party and each other
document to be delivered by such Obligor from time to time in connection
herewith and the extensions of credit hereunder (and the Agent and each
Lender may conclusively rely on such certificate until it receives notice
in writing from such Obligor to the contrary).
(b) OFFICER'S CERTIFICATE. A certificate of a senior officer of the
Company, dated the Closing Date, to the effect set forth in the first
sentence of Section 7.02 hereof.
(c) BORROWING BASE CERTIFICATE. A Borrowing Base Certificate as of
June 30, 1996.
(d) OPINION OF COUNSEL TO THE OBLIGORS. An opinion, dated the
Closing Date, of Spolin & Silverman, counsel to the Obligors,
substantially in the form of Exhibit E hereto and covering such other
matters as the Agent or any Lender may reasonably request (and each
Obligor hereby instructs such counsel to deliver such opinion to the
Lenders and the Agent).
(e) OPINION OF SWISS COUNSEL TO THE OBLIGORS. An opinion, dated the
Closing Date, of Bolla Bonzanigo & Associates, special Swiss counsel to
the Obligors, substantially in the form of Exhibit F hereto and covering
such other matters as the Agent or any Lender may reasonably request
(and each Obligor hereby instructs such counsel to deliver such opinion
to the Lenders and the Agent).
(f) OPINION OF U.K. COUNSEL TO THE OBLIGORS. An opinion,
dated the Closing Date, of Trethowans Solicitors, special U.K. counsel
to the Obligors, substantially in the form of Exhibit G hereto and
covering such matters as the Agent or any Lender may reasonably request
(and each Obligor hereby instructs such counsel to deliver such opinion
to the Lenders and the Agent).
(g) NOTES. The Notes, duly completed and executed.
(h) AMENDED SECURITY AGREEMENT. The Security Agreement
Amendment, duly executed by the Obligors and the Agent, together with
appropriate Uniform Commercial Code Financing Statements with respect to
the ADS Subsidiary.
(i) INSURANCE. In addition, the Company shall have delivered
a certificate of the chief financial officer of the Company (a) setting
forth the insurance obtained by it
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in accordance with the requirements of Section 9.04 and stating that
such insurance is in full force and effect and (b) stating that such
insurance, insofar as it relates to the ADS Subsidiary, provides
coverage at least as extensive as that described in the "Risk Management
Audit for Aerospace Display Systems," dated July 29, 1996, prepared by
The James B. Oswald Company.
(j) ENVIRONMENTAL SURVEY AND QUESTIONNAIRE. An environmental survey
and assessment prepared by a firm of licensed engineers (familiar with
the identification of toxic and hazardous substances) in form and
substance satisfactory to the Agent, such environmental survey and
assessment to be based upon physical on-site inspections by such firm of
each of the existing sites and facilities of ADS, as well as an
historical review of the uses of such sites and facilities and of the
business and operations of ADS (including any former sub-divisions of
ADS that have been disposed of prior to the date of such survey and
assessment and with respect to which ADS may have retained liability for
Environmental Claims).
(k) FINANCIAL PROJECTIONS. Projections satisfactory to the Lenders
from the chief financial officer of the Company (in form satisfactory to
the Agent) reflecting, on a consolidated and consolidating basis, the
forecasted financial condition, income and expenses of the Obligors, for
the fiscal year ending on December 31, 1996, through and including the
fiscal year ending on December 31, 2000 (which projections shall be
detailed on a monthly basis through the fiscal year ending on December
31, 1996 and thereafter on an annual basis), after giving effect to the
transactions contemplated hereby and the transactions contemplated under
the Senior Subordinated Debt Obligations.
(l) ADVERSE LITIGATION OR PROCEEDING. Certificates of each
Obligor, signed on behalf of each Obligor by a senior officer thereof,
to the effect that (and each Lender shall be satisfied in its good faith
judgment that) no litigation or proceeding shall exist (or, to such
officer's knowledge be threatened) (i) with respect to the transactions
contemplated hereby or the transactions contemplated under the ADS
Purchase Agreement or (ii) with respect to such Obligor that could have
a Material Adverse Effect.
(m) ADS PURCHASE. A certified copy of the ADS Purchase
Agreement (which shall be in form and substance satisfactory to the
Lenders), as executed by the parties thereto, and evidence that all of
the conditions to the ADS Purchase Agreement (any such conditions
requiring the satisfaction of any person or entity other than the Agent
or
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the Lenders to be deemed for this purpose to require the satisfaction of
the Agent) have been met or waived with the concurrence of the Lenders.
(n) LICENSES, PERMITS AND GOVERNMENTAL APPROVALS. Evidence that all
necessary licenses, permits and governmental and third-party approvals in
connection with the ADS Purchase have been obtained and remain in full
force and effect.
(o) DEBT AND EQUITY ISSUANCE AND PROCEEDS. Each of the following:
(i) Evidence that the Company shall have received at least
$3,000,000 in gross cash proceeds from the issuance of its Series E
Preferred Stock;
(ii) Certified copies of the Series E Preferred Stock
Documentation (which shall be in form and substance satisfactory to the
Lenders);
(iii) Evidence that the Company shall have received at least
$3,000,000 in gross cash proceeds from the issuance of its Convertible
Subordinated Notes;
(iv) Certified copies of the Convertible Subordinated Note
Documentation (which shall be in form and substance satisfactory to the
Lenders).
(p) ALLARD NON-COMPETE. Certified copies of the Allard Non-Compete
Documentation (which shall be in form and substance satisfactory to the
Lenders).
(q) BORROWING NOTICE. A notice of borrowing from the Company for an
amount of $6,000,000 to be used by the Company in connection with the ADS
Purchase.
(r) OTHER DOCUMENTS. Such other documents as the Agent or any Lender
or special New York counsel to ING may reasonably request.
The effectiveness of this Agreement is also subject to the payment or delivery
by the Company of such fees and other consideration as the Company shall have
agreed to pay or deliver to any Lender or an affiliate thereof or the Agent in
connection herewith, including, without limitation, the reasonable fees and
expenses of Mayer, Brown & Platt, special New York counsel to ING in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the Notes and the other Basic Documents and the extensions of credit hereunder
(to the extent
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that statements for such fees and expenses have been delivered to the Company).
7.02 INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The obligation of
any Lender to make any Loan (including such Lender's initial Loan) or otherwise
extend any credit to the Company upon the occasion of each borrowing or other
extension of credit hereunder is subject to the further conditions precedent
that, both immediately prior to the making of such Loan or other extension of
credit and also after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing; (b) the representations
and warranties made by the Company in Section 8 hereof, and by each Obligor in
each of the other Basic Documents to which it is a party, shall be true and
complete on and as of the date of the making of such Loan or other extension of
credit with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date); (c) the aggregate principal amount
of the Revolving Credit Loans together with the aggregate amount of all Letter
of Credit Liabilities shall not exceed the Borrowing Base reflected on the most
recent Borrowing Base Certificate delivered pursuant to Section 9.01(c) hereof;
and (d) no event has occurred that could have a Material Adverse Effect and no
event has occurred and is continuing that could be reasonably expected to have
a material adverse effect on the markets or industries in which the Obligors
operate. Each notice of borrowing or request for the issuance of a Letter of
Credit by the Company hereunder shall constitute a certification by the Company
to the effect set forth in the preceding sentence (both as of the date of such
notice or request and, unless the Company otherwise notifies the Agent prior to
the date of such borrowing or issuance, as of the date of such borrowing or
issuance).
Section 8. REPRESENTATIONS AND WARRANTIES. Each Obligor
represents and warrants to the Agent and the Lenders that:
8.01 CORPORATE EXISTENCE. Each Obligor: (a) is a corporation,
partnership or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization; (b) has all
requisite corporate or other power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets
and carry on its business as now being or as proposed to be conducted; and
(c) is qualified to do business and is in good standing in all jurisdictions
in which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify could (either individually or in
the aggregate) have a Material Adverse Effect.
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8.02 FINANCIAL CONDITION. The Company has heretofore furnished
to each of the Lenders consolidated and consolidating balance sheets of the
Company and its Subsidiaries as at December 31, 1993 and the related
consolidated and consolidating statements of income, retained earnings and
cash flow of the Company and its Subsidiaries for the fiscal year ended on
said date, with the opinion thereon (in the case of said consolidated balance
sheet and statements) of Price Waterhouse L.L.P., and the unaudited
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at August 31, 1994 and the related consolidated and
consolidating statements of income, retained earnings and cash flow of the
Company and its Subsidiaries for the eight-month period ended on such date.
All such financial statements are complete and correct and fairly present the
consolidated financial condition of the Company and its Subsidiaries, and (in
the case of said consolidating financial statements) the respective
unconsolidated financial condition of the Company and its Subsidiaries, as at
said dates and the consolidated and unconsolidated results of their
operations for the fiscal year and eight-month period ended on said dates
(subject, in the case of such financial statements as at August 31, 1993, to
normal year-end audit adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent basis. Neither
the Company nor any of its Subsidiaries has on the date hereof any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said
balance sheets as at said dates. Since December 31, 1993, there has been no
material adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of the Company and its Subsidiaries
from that set forth in said financial statements as at said date.
8.03 LITIGATION. Schedule I hereto sets forth a complete and
correct list, as of the date of this Agreement, of all legal, arbitral,
government and regulatory proceedings, as well as pending (to the knowledge
of the Company) or threatened (to the knowledge of the Company) proceedings
against each of the Obligors. There are no legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or
agency, pending or (to the knowledge of the Company) threatened against any
of the Obligors that, if adversely determined could (either individually or
in the aggregate) have a Material Adverse Effect.
8.04 NO BREACH. None of the execution and delivery of this
Agreement and the Notes and the other Basic Documents, the consummation of
the transactions herein and therein contemplated or compliance with the terms
and provisions hereof and thereof will conflict with or result in a breach
of, or require any
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consent under, the charter or by-laws of any Obligor, or any applicable law
or regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which any
Obligor is a party or by which any of them or any of their Property is bound
or to which any of them is subject, or constitute a default under any such
agreement or instrument, or (except for the Liens created pursuant to the
Security Documents) result in the creation or imposition of any Lien upon any
Property of the Obligors pursuant to the terms of any such agreement or
instrument.
8.05 ACTION. Each Obligor has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations
under each of the Basic Documents to which it is a party; the execution,
delivery and performance by each Obligor of each of the Basic Documents to
which it is a party have been duly authorized by all necessary corporate
action on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and
delivered by each Obligor and constitutes, and each of the Notes and the
other Basic Documents to which it is a party when executed and delivered by
such Obligor (in the case of the Notes, for value) will constitute, its
legal, valid and binding obligation, enforceable against each Obligor in
accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors' rights and (b)
the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
8.06 APPROVALS. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery
or performance by any Obligor of the Basic Documents to which it is a party
or for the legality, validity or enforceability hereof or thereof, except for
filings and recordings in respect of the Liens created pursuant to the
Security Documents.
8.07 USE OF CREDIT. No Obligor is engaged principally, or as one
of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying
Margin Stock, and no part of the proceeds of any extension of credit
hereunder will be used to buy or carry any Margin Stock.
8.08 ERISA. Each Plan, and, to the knowledge of the Company,
each Multiemployer Plan, is in compliance in all material respects with, and
has been administered in all material respects in compliance with, the
applicable provisions of ERISA,
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the Code and any other Federal or State law, and no event or condition has
occurred and is continuing as to which the Company would be under an
obligation to furnish a report to the Lenders under Section 9.01(g) hereof.
8.09 TAXES. Except for Tri-Star Technologies, Unidec and
Hollingsead International Limited, the Obligors are members of an affiliated
group of corporations filing consolidated returns for Federal income tax
purposes, of which the Company is the "common parent" (within the meaning of
Section 1504 of the Code) of such group. There is a tax sharing agreement
currently in effect (a true and correct copy of which has heretofore been
furnished to the Agent) providing for the manner in which tax payments owing
by the members of such affiliated group (whether in respect of Federal or
state income or other taxes) are allocated among the members of the group.
The Obligors have filed (either directly, or indirectly through the Company)
all Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid (either directly, or indirectly
through the Company) all taxes due pursuant to such returns or pursuant to
any assessment received by the Company or any other Obligor. The charges,
accruals and reserves on the books of the Obligors in respect of taxes and
other governmental charges are, in the opinion of the Obligors, adequate.
The Company has not given or been requested to give a waiver of the statute
of limitations relating to the payment of Federal, state, local and foreign
taxes or other impositions.
8.10 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
8.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor
any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
8.12 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule II hereto is a complete and correct list,
as of the date of this Agreement, of each material credit agreement, loan
agreement, indenture, purchase agreement, guarantee, letter of credit or
other arrangement providing for or otherwise relating to any Indebtedness or
any extension of credit (or commitment for any extension of credit) to, or
guarantee by, any Obligor, and the aggregate principal or face amount
outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule II.
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(b) Part B of Schedule II hereto is a complete and correct list,
as of the date of this Agreement, of each Lien securing Indebtedness of any
Person and covering any Property of any Obligor, and the aggregate
Indebtedness secured (or that may be secured) by each such Lien and the
Property covered by each such Lien is correctly described in Part B of said
Schedule II.
8.13 ENVIRONMENTAL MATTERS. Each Obligor has obtained all
environmental, health and safety permits, licenses and other authorizations
required under all Environmental Laws to carry on its business as now being
or as proposed to be conducted, except to the extent failure to have any such
permit, license or authorization would not (either individually or in the
aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and each Obligor is in
compliance with the terms and conditions thereof, and is also in compliance
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect.
In addition, except as set forth in Schedule III hereto:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by any Obligor to have any environmental, health or safety permit,
license or other authorization required under any Environmental Law in
connection with the conduct of the business of the Company or any of its
Subsidiaries or with respect to any generation, treatment, storage,
recycling, transportation, discharge or disposal, or any Release of any
Hazardous Materials generated by the Company or any of its Subsidiaries.
(b) None of the Obligors owns, operates or leases a treatment,
storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act of 1976, as amended, or under any comparable
state or local statute; and
(i) no polychlorinated biphenyls (PCB's) is or has been present
at any site or facility now or previously owned, operated or leased
by any Obligor;
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(ii) no asbestos or asbestos-containing materials is or has been
present at any site or facility now or previously owned, operated or
leased by any Obligor;
(iii) there are no underground storage tanks or surface
impoundments for Hazardous Materials, active or abandoned, at any
site or facility now or previously owned, operated or leased by any
Obligor;
(iv) no Hazardous Materials have been Released at, on or under
any site or facility now or previously owned, operated or leased by
any Obligor in a reportable quantity established by statute,
ordinance, rule, regulation or order; and
(v) no Hazardous Materials have been otherwise Released at, on
or under any site or facility now or previously owned, operated or
leased by any Obligor,
in each case, that would (either individually or in the aggregate) have a
Material Adverse Effect.
(c) None of the Obligors has transported or arranged for the
transportation of any Hazardous Material to any location that is listed on
the National Priorities List ("NPL") under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
listed for possible inclusion on the NPL by the Environmental Protection
Agency in the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. Section 300.5 ("CERCLIS"),
or on any similar state or local list or that is the subject of Federal,
state or local enforcement actions or other investigations that may lead
to Environmental Claims against any Obligor.
(d) No Hazardous Material generated by any Obligor has been
recycled, treated, stored, disposed of or Released by any Obligor at any
location other than those listed in Schedule III hereto.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of any Obligor and no site or
facility now or previously owned, operated or leased by any Obligor is
listed or proposed for listing on the NPL, CERCLIS or any similar state
list of sites requiring investigation or clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by any Obligor, and no
government action has been
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taken or is in process that could subject any such site or facility to such
Liens and none of the Obligors would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such site or
facility is located.
(g) All environmental investigations, studies, audits, tests,
reviews or other analyses conducted by or that are in the possession of
any Obligor in relation to facts, circumstances or conditions at or
affecting any site or facility now or previously owned, operated or leased
by any Obligor and that could result in a Material Adverse Effect have been
made available to the Lenders.
8.14 CAPITALIZATION. The authorized capital stock of the
Company, and the ownership thereof, as of the date hereof, is correctly
described on Schedule V hereto. As of the date hereof, (x) except for the
warrants and options described on said Schedule V, there are no outstanding
Equity Rights with respect to the Company and (y) there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem,
or otherwise acquire any shares of capital stock of the Company nor are there
any outstanding obligations of the Company or any of its Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value
of the Company or any of its Subsidiaries.
8.15 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule IV hereto is a complete and
correct list, as of the date hereof, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests
in such Subsidiary and (iii) the nature of the ownership interests held by
each such Person and the percentage of ownership of such Subsidiary
represented by such ownership interests. Except as disclosed in Part A of
Schedule IV hereto, (x) each of the Company and its Subsidiaries owns, free
and clear of Liens (other than Liens created pursuant to the Security
Documents), and has the unencumbered right to vote, all outstanding ownership
interests in each Person shown to be held by it in Part A of Schedule IV
hereto, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) Set forth in Part B of Schedule IV hereto is a complete and
correct list, as of the date of this Agreement, of
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all Investments (other than Investments disclosed in Part A of said Schedule
IV hereto) held by the Company or any of its Subsidiaries in any Person and,
for each such Investment, (x) the identity of the Person or Persons holding
such Investment and (y) the nature of such Investment. Except as disclosed
in Part B of Schedule IV hereto, each of the Company and its Subsidiaries
owns, free and clear of all Liens (other than Liens created pursuant to the
Security Documents), all such Investments.
8.16 TITLE TO ASSETS. Each Obligor owns and has on the date
hereof, and will own and have on the Closing Date, good and marketable title
(subject only to Liens permitted by Section 9.06 hereof) to the Properties
shown to be owned in the most recent financial statements referred to in
Section 8.02 hereof (other than Properties disposed of in the ordinary course
of business or otherwise permitted to be disposed of pursuant to Section 9.05
hereof). Each Obligor owns and has on the date hereof, and will own and have
on the Closing Date, good and marketable title to, and enjoys on the date
hereof, and will enjoy on the Closing Date, peaceful and undisturbed
possession of, all Properties (subject only to Liens permitted by Section
9.06 hereof) that are necessary for the operation and conduct of its
businesses.
8.17 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Basic
Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole do not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished after the date
hereof by any Obligor to the Agent and the Lenders in connection with this
Agreement and the other Basic Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on
the date as of which such information is stated or certified. There is no
fact known to the Company that could have a Material Adverse Effect that has
not been disclosed herein, in the other Basic Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
8.18 LEGAL FORM. This Agreement and each other Basic
Document is in proper legal form under the laws of the United
Kingdom and Switzerland, as the case may be, for the enforcement
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against any Obligor subject to the jurisdiction of such law, and if this
Agreement and each other Basic Document were stated to be governed by such
law, they would constitute legal, valid and binding obligations of such
Obligor under such law, enforceable in accordance with their respective
terms. All formalities required in the United Kingdom and Switzerland, as
the case may be, for the validity and enforceability of this Agreement and
each other Basic Document (including, without limitation, any necessary
registration, recording or filing with any court or other authority in the
United Kingdom and Switzerland) have been accomplished (except that any
amendment to the Security Agreement must be registered under the U.K.
Companies Act 1985 within 21 days after the Closing Date), and no Foreign
Taxes are required to be paid and no notarization is required, for the
validity and enforceability thereof.
Section 9. COVENANTS OF THE COMPANY. The relevant Obligor (as
specified below) covenants and agrees with the Lenders and the Agent that, so
long as any Commitment, Loan or Letter of Credit Liability is outstanding and
until payment in full of all amounts payable by the Company hereunder:
9.01 FINANCIAL STATEMENTS, ETC. The Company shall deliver to
each of the Lenders:
(a) within 30 days prior to the end of each fiscal year, but no
earlier than 60 days prior to the end of such fiscal year, a budget (on a
monthly basis) for the Company and its Subsidiaries for the following
fiscal year, substantially in the form of Exhibit H-1 hereto (including
consolidating and consolidated statements of income, cash flow and balance
sheets prepared in accordance with GAAP); and promptly after any material
revision to any such budget, such budget as so revised;
(b) as soon as available and in any event within 30 days after the
end of each month, consolidated and consolidating statements of income and
cash flow of the Company and its Subsidiaries for such period and for the
fiscal year to date, setting forth in comparative form the corresponding
consolidated and consolidating figures provided in the budget required
under Section 9.01(a) hereof for such period, and the related consolidated
and consolidating balance sheets of the Company and its Subsidiaries as at
the end of such period, in each case substantially in the form of
Exhibit H-2 hereto, accompanied by a certificate of a senior financial
officer of the Company, which certificate shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Company and its Subsidiaries,
and said consolidating
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financial statements fairly present the respective individual
unconsolidated financial condition and results of operations of the Company
and of each of its Subsidiaries, in each case in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(c) as soon as available and in any event within 150 days after the
fiscal year ending on December 31, 1994 and within 90 days after the end of
each fiscal year of the Company thereafter, consolidated and consolidating
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of the Company, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall not have any Impermissible Qualification and shall
state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the Company
and its Subsidiaries as at the end of, and for, such fiscal year in
accordance with generally accepted accounting principles, and a certificate
of such accountants stating that, in making the examination necessary for
their opinion, they obtained no knowledge, except as specifically stated,
of any Default, and (ii) in the case of said consolidating statements and
balance sheets, by a certificate of a senior financial officer of the
Company, which certificate shall state that said consolidating financial
statements fairly present the respective individual unconsolidated
financial condition and results of operations of the Company and of each of
its Subsidiaries, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for,
such fiscal year;
(d) as soon as available and in any event within 30 days after the
end of each Quarterly Date, analyses of the chief financial officer of the
Company as to (x) the financial condition of the Company and its
Subsidiaries, on a consolidated and consolidating basis, as of such
Quarterly Date, and (y) sales to the Obligors' ten largest customers for
the month ending on such Quarterly Date and for the period from the
beginning of the fiscal year (of which such Quarterly Date is a part) to
such Quarterly Date, in each case, as compared the Obligors' sales to such
customers for
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the corresponding time period in the immediately preceding fiscal year (for
Quarterly Dates after December 31, 1995) and as compared to the projects
set forth in the budget required under Section 9.01(a) hereof.
(e) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
(f) promptly upon the mailing thereof to the shareholders of the
Company generally or to any holder of Senior Subordinated Debt or any
holder of any other Indebtedness of any Obligor, copies of all financial
statements, annual reports and proxy statements so mailed; and, promptly
upon the receipt thereof, a copy of each other report submitted to any
Obligor by independent accountants in connection with any annual, interim
or special audit of the books of any Obligor made by such accountants, or
any management letters or similar document submitted to any Obligor by such
accountants;
(g) as soon as possible, and in any event within ten days after any
Obligor knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a senior financial officer of any Obligor
setting forth details respecting such event or condition and the action, if
any, that any Obligor or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to PBGC by any Obligor or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (PROVIDED that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of
the issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
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(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by any Obligor or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by any Obligor or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by any Obligor or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or
the receipt by any Obligor or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Obligor or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if any Obligor or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(h) as soon as available and in any event within fifteen Business
Days after the end of each monthly accounting period (ending on the last
day of each calendar month), a Borrowing Base Certificate as at the last
day of such accounting period; PROVIDED, HOWEVER, that (x) for any monthly
accounting period ending prior to June 30, 1995, a Borrowing Base
Certificate shall be delivered as soon as available and in any event within
twenty Business Days after the end of such monthly accounting period and
(y) the Company may furnish Borrowing Base Certificates with more frequency
than required by this Section 9.01(h);
(i) periodically (but in any event no less frequently than once a
year) at the request of the Agent or the
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Majority Lenders, a report of the Collateral Auditor (at the expense of the
Company (as provided below)) with respect to the Receivables and Inventory
components included in the Borrowing Base as at the end of any monthly
accounting period which report shall indicate that, based upon a review by
such auditors of the Receivables (including, without limitation,
verification with respect to the amount, aging, identity and credit of the
respective account debtors and the billing practices of the Obligors) and
Inventory (including, without limitation, verification as to the value,
location and respective types), the information set forth in the Borrowing
Base Certificate delivered by the Company as at the end of such accounting
period is accurate and complete in all material respects;
(j) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;
(k) from time to time such other information regarding the financial
condition, operations, business or prospects of any Obligor (including,
without limitation, any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA) as any Lender or the Agent
may reasonably request; and
(1) within 45 Business Days after the end of each fiscal quarter, a
certificate of a senior financial officer of the Company substantially in
the form of Exhibit H-3 hereto (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the
action that the Company has taken or proposes to take with respect thereto)
and (ii) setting forth in reasonable detail the computations necessary to
determine whether the Company is in compliance with Section 9.10, 9.11,
9.12, 9.13, 9.14, 9.15, 9.16 and 9.17 hereof as of the end of the
respective monthly period or fiscal year.
The Company shall pay to the Collateral Auditor monthly in advance a
monthly fee of $1,500, and shall promptly reimburse the Collateral Auditor
for out-of-pocket expenses (including, without limitation, reasonable travel
expenses (including airfare at coach rates)) incurred in connection with the
collateral audits performed pursuant to paragraph (i) of this Section 9.01.
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9.02 LITIGATION. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting any
Obligor, except proceedings that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company will give to each
Lender notice of the assertion of any Environmental Claim by any Person
against, or with respect to the activities of, any Obligor and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect.
9.03 EXISTENCE, ETC. Each Obligor will:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (PROVIDED that nothing
in this Section 9.03 shall prohibit any transaction expressly permitted
under Section 9.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with GAAP;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
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(f) upon reasonable notice to the Company, permit representatives of
any Lender or the Agent, during normal business hours, to examine, copy and
make extracts from its books and records, to inspect any of its Properties,
and to discuss its business and affairs with its officers, all to the
extent requested by such Lender or the Agent (as the case may be).
9.04 INSURANCE. Each Obligor will maintain insurance with
financially sound and reputable insurance companies, and with respect to
Property and risks of a character usually maintained by corporations engaged
in the same or similar business similarly situated, against loss, damage and
liability of the kinds and in the amounts customarily maintained by such
corporations. The Obligors will in any event maintain:
(1) CASUALTY INSURANCE -- insurance against loss or damage
covering all of the tangible real and personal Property and improvements
of the Obligors by reason of any Peril (as defined below), other than
earthquakes and floods, in such amounts (subject to such deductibles as
shall be satisfactory to the Majority Lenders) as shall be reasonable
and customary and sufficient to avoid the insured named therein from
becoming a co-insurer of any loss under such policy but in any event in
an amount (i) in the case of fixed assets and equipment (including,
without limitation, vehicles), at least equal to 100% of the actual
replacement cost of such assets (including, without limitation,
foundation, footings and excavation costs), subject to deductibles as
aforesaid and (ii) in the case of inventory, not less than the fair
market value thereof, subject to deductibles as aforesaid.
(2) AUTOMOBILE LIABILITY INSURANCE FOR BODILY INJURY AND PROPERTY
DAMAGE -- insurance against liability for bodily injury and property
damage in respect of all vehicles (whether owned, hired or rented any
Obligor) at any time located at, or used in connection with, its
Properties or operations in such amounts as are then customary for
vehicles used in connection with similar Properties and businesses, but
in any event to the extent required by applicable law.
(3) COMPREHENSIVE GENERAL LIABILITY INSURANCE -- insurance against
claims for bodily injury, death or Property damage occurring on, in or
about the Properties (and adjoining streets, sidewalks and waterways) of
any Obligor, in such amounts as are then customary for Property similar
in use in the jurisdictions where such Properties are located.
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(4) WORKERS' COMPENSATION INSURANCE -- workers' compensation
insurance (including, without limitation, Employers' Liability
Insurance) to the extent required by applicable law.
(5) PRODUCT LIABILITY INSURANCE -- insurance against claims for
bodily injury, death or Property damage resulting from the use of
products sold by any Obligor in such amounts as are then customarily
maintained by responsible persons engaged in businesses similar to that
of the Company and such Obligor.
(6) BUSINESS INTERRUPTION INSURANCE -- insurance against loss of
operating income (up to an aggregate amount equal to the greater of (x)
$15,000,000 and (y) for the period commencing after January 1, 1995, the
sum of the following for the fiscal year of the Company most recently
ended: "the aggregate sales of the Obligors, LESS the aggregate cost of
sales of the Obligors, PLUS the aggregate payroll expense of the
Obligors) by reason of any Peril (other than earthquakes and floods).
(7) EARTHQUAKE INSURANCE -- insurance against loss in respect of
any earthquake or any flood in an aggregate amount equal to $10,000,000
for the period commencing after March 31, 1995.
(8) KEY MAN INSURANCE -- insurance in the amount of $2,000,000 in
respect of the life of Mr. R. Jack DeCrane.
(9) OTHER INSURANCE -- such other insurance, including, without
limitation, War-Risk Insurance when and to the extent obtainable from
the United States Government, in each case as generally carried by
owners of similar Properties in the jurisdictions where such Properties
are located, in such amounts and against such risks as are then
customary for Property similar in use.
Such insurance shall be written by financially responsible companies selected
by the Obligors and having an A. M. Best rating of "A-" or better and being
in a financial size category of VII or larger, or by other companies
acceptable to the Majority Lenders, and (other than workers' compensation)
shall name the Agent as loss payee (to the extent covering risk of loss or
damage to tangible property) and as an additional named insured as its
interests may appear (to the extent covering any other risk). Each policy
referred to in this Section 9.04 shall provide that it will not be canceled
or reduced, or allowed to lapse without renewal, except after not less than
30 days' notice to the Agent and shall also provide that the interests of the
Agent and the Lenders shall not be invalidated by any act or
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negligence of any Obligor or any Person having an interest in any Property
covered by such policy nor by occupancy or use of any such Property for
purposes more hazardous than permitted by such policy nor by any foreclosure
or other proceedings relating to such Property. The Company will advise the
Agent promptly of any policy cancellation, reduction or amendment.
Within 15 days after the Original Closing Date the Company will
deliver to the Agent certificates of insurance satisfactory to the Agent
evidencing the existence of all insurance required to be maintained by the
Obligors hereunder setting forth the respective coverages, limits of
liability, carrier, policy number and period of coverage and showing that
such insurance will remain in effect through the December 31 falling at least
six months after the date hereof, subject only to the payment of premiums as
they become due (and attaching original copies of any policies with respect
to casualty insurance). Thereafter, on each November 15 in each year
(commencing with the first November 15 after the date hereof), the Obligors
will deliver to the Agent certificates of insurance evidencing that all
insurance required to be maintained by the Company hereunder will be in
effect through the December 31 of the calendar year following the calendar
year of the current November 15, subject only to the payment of premiums as
they become due. In addition, the Company will not modify any of the
provisions of any policy with respect to casualty insurance without
delivering the original copy of the endorsement reflecting such modification
to the Agent accompanied by a written report of The James B. Oswald Company,
or any other firm of independent insurance brokers of nationally recognized
standing, stating that, in their opinion, such policy (as so modified)
adequately protects the interests of the Lenders and the Agent, is in
compliance with the provisions of this Section 9.04, and is comparable in all
respects with insurance carried by responsible owners and operators of
Properties similar to those owned or leased by the Obligors. None of the
Obligors will obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section 9.04
unless the Agent is the named insured thereunder, with loss payable as
provided herein. Any Obligor will immediately notify the Agent whenever any
such separate insurance is obtained and shall deliver to the Agent the
certificates evidencing the same.
Without limiting the obligations of any Obligor under the foregoing
provisions of this Section 9.04, in the event the Company shall fail to
maintain in full force and effect insurance as required by the foregoing
provisions of this Section 9.04, then the Agent may, but shall have no
obligation so to do, procure insurance covering the interests of the Lenders
and the Agent in such amounts and against such risks as the Agent (or the
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Majority Lenders) shall deem appropriate, and the Company shall reimburse the
Agent in respect of any premiums paid by the Agent in respect thereof.
For purposes hereof, the term "PERIL" shall mean, collectively,
fire, lightning, flood, windstorm, hail, earthquake, explosion, riot and
civil commotion, vandalism and malicious mischief, damage from aircraft,
vehicles and smoke and all other perils covered by the "all-risk" endorsement
then in use in the jurisdictions where the Properties of the Company and its
Subsidiaries are located.
9.05 PROHIBITION OF FUNDAMENTAL CHANGES. No Obligor will enter
into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), except that each of the Obligors may reincorporate in the State
of Delaware. No Obligor will, without the prior consent of the Agent (with
the approval of the Majority Lenders), acquire any business or Property from,
or capital stock of, or be a party to any acquisition of, any Person except
for purchases of inventory and other Property to be sold or used in the
ordinary course of business, Investments permitted under Section 9.08 hereof,
and Capital Expenditures permitted under Section 9.15 hereof. No Obligor
will convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, any part of its business or
Property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests, but excluding (i) obsolete
or worn-out Property, tools or equipment no longer used or useful in its
business so long as the aggregate amount thereof sold in any single fiscal
year by Obligors shall not have a fair market value in excess of $200,000 and
(ii) any inventory or other Property sold or disposed of in the ordinary
course of business and on ordinary business terms).
9.06 LIMITATION ON LIENS. No Obligor will, or will permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its Property (excluding any Property owned by a customer but in the
possession of the Obligor or its Subsidiary), whether now owned or hereafter
acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule II hereto (excluding, however, following the making of the
initial Loans hereunder, Liens securing Indebtedness to be repaid with
the proceeds of such Loans, as indicated on said Schedule II, but
including any continuation of any existing Liens on Property of Unidec
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securing any refinancing of the Indebtedness of Unidec identified in Part A
of Schedule II hereto);
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or that
are being contested in good faith and by appropriate proceedings and
Liens securing judgments but only to the extent for an amount and for a
period not resulting in an Event of Default under Section 10(h) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the Property
subject thereto or interfere with the ordinary conduct of the business
of any Obligor; and
(h) Liens upon real and/or tangible personal Property acquired
after the date hereof (by purchase, construction or otherwise) by any
Obligor, each of which Liens either (A) existed on such Property before
the time of its acquisition and was not created in anticipation thereof
or (B) was created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of such Property; PROVIDED that (i)
no such Lien shall extend to or cover any Property of any Obligor, other
than the Property so acquired and improvements thereon and (ii) the
principal amount of Indebtedness secured by any such Lien
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shall at no time exceed 80% of the fair market value (as determined in good
faith by a senior financial officer of the relevant Obligor) of such
Property at the time it was acquired (by purchase, construction or
otherwise).
9.07 INDEBTEDNESS. No Obligor will create, incur or suffer to exist
any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in Part
A of Schedule II hereto (excluding, however, following the making of the
initial Loans hereunder, the Indebtedness to be repaid with the proceeds
of such Loans, as indicated on said Schedule II, but including any
refinancing of the Indebtedness of Unidec listed in such Part so long as
the principal amount thereof is not increased);
(c) the Senior Subordinated Debt;
(d) Indebtedness arising under the Convertible Subordinated Notes;
(e) Indebtedness arising under the Allard Non-Compete Documentation;
(f) Indebtedness of Subsidiaries of the Company to the Company or
to other Subsidiaries of the Company; and
(g) Indebtedness, in an aggregate amount not to exceed $600,000,
consisting of obligations to Gamberg under the Restrictive Covenant
Agreement referred to in the Cory Purchase Agreement;
(h) additional Indebtedness of the Company and its Subsidiaries up
to but not exceeding $1,000,000 at any one time outstanding.
9.08 INVESTMENTS. No Obligor will make or permit to remain
outstanding any Investments except:
(a) Investments outstanding on the date hereof and identified in
Part B of Schedule IV hereto;
(b) operating deposit accounts with the Cash Management Agent and
other banks;
(c) Permitted Investments;
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(d) Investments by the Company and its Subsidiaries in capital
stock of Subsidiaries of the Company to the extent outstanding on the
date of the financial statements of the Company and its Subsidiaries
referred to in Section 8.02 hereof and advances by the Company and its
Subsidiaries to Subsidiaries of the Company in the ordinary course of
business, PROVIDED that the aggregate amount of advances to be made to
Tri-Star Technologies at any one time outstanding shall not exceed
$250,000; and
(e) Interest Rate Protection Agreements and Commodity Price
Protection Agreements entered into by the Company pursuant to Section
9.18 hereof.
9.09 DIVIDEND PAYMENTS. No Obligor will declare or make any
Dividend Payment at any time. Cory will not declare or make any dividend
payment in respect of its capital stock unless such dividend payment is made
ratably to Cory's shareholders. Tri-Star Technologies will not make any
distribution to its partners unless such distribution is made in accordance
with its partnership agreement.
9.10 LEVERAGE RATIO. The Obligors will not permit the Leverage
Ratio to exceed the following respective ratios at any time during the
following respective periods:
Period Ratio
------ -----
From September 30, 1996
through December 30, 1996 6.65 to 1
From December 31, 1996
through June 29, 1997 5.90 to 1
From June 30, 1997
through December 30, 1997 3.60 to 1
From December 31, 1997
through June 29, 1998 2.90 to 1
From June 30, 1998
through December 30, 1998 2.75 to 1
From December 31, 1998 and at
all times thereafter 2.25 to l.
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9.11 EBITDA RATIO. The Obligors will not permit the EBITDA Ratio
to exceed the following respective amounts at any time during the following
respective periods:
Period Ratio
------ -----
From September 30, 1996
through December 30, 1996 6.70 to 1
From December 31, 1996
through June 29, 1997 4.90 to 1
From June 30, 1997
through December 30, 1997 2.75 to 1
From December 31, 1997
through June 29, 1998 2.25 to 1
From June 30, 1998 and
at all times thereafter 1.75 to 1.
9.12 NET WORTH. The Obligors will not permit the Company's Net
Worth to be less than the following respective amounts at any time during the
following respective periods:
Period Amount
------ ------
From September 30, 1996
through December 30, 1996 $6,936,000
From December 31, 1996
through June 29, 1997 $7,845,000
From June 30, 1997
through December 30, 1997 $11,500,000
From December 31, 1997
through June 29, 1998 $14,250,000
From June 30, 1998
through December 30, 1998 $17,500,000
From December 31, 1998 and at
all times thereafter $20,000,000.
9.13 CURRENT RATIO. The Obligors will not permit the ratio of
current assets of the Obligors to current liabilities of the Obligors to be
less than 1.25 to 1 at any time. For purposes hereof, the terms "CURRENT
ASSETS" and "CURRENT LIABILITIES"
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shall have the respective meanings assigned to them by GAAP, PROVIDED that in
any event there shall be included in current liabilities the outstanding
amount of Revolving Credit Loans and there shall be excluded from current
liabilities the current portion of long-term debt and amounts outstanding
under the Convertible Subordinated Note.
9.14 FIXED CHARGES RATIO. The Obligors will not permit the Fixed
Charges Ratio to be less than the following respective ratios at any time
during the following respective periods:
Period Ratio
------ -----
From September 30, 1996
through December 30, 1996 0.75 to 1
From December 31, 1996
through June 29, 1997 0.95 to 1
From June 30, 1997
through December 30, 1997 1.15 to 1
From December 31, 1997 and
at all times thereafter 1.40 to 1.
9.15 CAPITAL EXPENDITURES. The Obligors will not permit the
aggregate amount of Capital Expenditures (other than the ADS Purchase) by the
Obligors to exceed the following respective amounts for the following
respective periods:
Period Amount
------ ------
From January 1, 1996
through December 31, 1996 $2,000,000
For each fiscal year of the
Company thereafter AMOUNT $2,500,000.
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9.16 INTEREST COVERAGE RATIO; SELLING. GENERAL AND ADMINISTRATIVE
EXPENSE RATIO.
(a) The Obligors will not permit the Interest Coverage Ratio to be
less than the following amounts at any time during the following
respective periods:
Period Ratio
------ -----
From September 30, 1996
through December 30, 1996 1.25 to 1
From December 31, 1996
through June 29, 1997 1.50 to 1
From June 30, 1997
through December 30, 1997 2.00 to 1
From December 31, 1997
through June 29, 1998 2.50 to 1
From June 30, 1998 and at
all times thereafter 3.00 to l.
(b) The Obligors will not permit the Selling, General and
Administrative Expense Ratio to less than the following amounts at any
time during the following respective periods:
Period Ratio
------ -----
From September 30, 1996
through December 30, 1996 0.187 to 1
From December 31, 1996
through December 30, 1997 0.185 to 1
From December 31, 1997 and
at all times thereafter 0.180 to 1
9.17 ACCOUNTS PAYABLE RATIO. The Obligors will not permit the
Accounts Payable Ratio to be greater than the following respective amounts at
any time during the following respective periods:
Period Ratio
------ -----
From September 30, 1996 and at
all times thereafter 60.0 to 1.
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9.18 INTEREST RATE AND COMMODITY PRICE PROTECTION AGREEMENTS. The
Company will within 60 days of the Original Closing Date and at all times
thereafter maintain in full force and effect one or more Interest Rate
Protection Agreements with one or more of the Lenders (and/or with a bank or
other financial institution having capital, surplus and undivided profits of
at least $500,000,000), that effectively enables the Company (in a manner
satisfactory to the Majority Lenders), as at any date, to protect itself
against interest rate risk for a period of at least five years (and for no
longer than seven years) and for an amount (which may be an amortizing
amount) of at least $10,000,000 (and for no more than $15,000,000). The
Company will, by no later than ten Business Days after the Original Closing
Date and at all time thereafter to and including December 31, 1996, maintain
in full force and effect one or more Commodity Price Protection Agreements
with ING (or an affiliate thereof) that effectively enables the Company (in a
manner satisfactory to the Majority Lenders), as at any date, to protect
itself against the Swiss franc exposure of Unidec for an amount of at least
Sfr 585,000 per month. For each day after such tenth day on which the
Company shall not have entered into such Commodity Price Protection
Agreements, the Company shall pay to the Agent, for account of the Lenders, a
fee equal to $500, payable on demand.
9.19 SUBORDINATED INDEBTEDNESS: ALLARD NON-COMPETE.
(a) Neither the Company nor any of its Subsidiaries will purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any voluntary payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Senior Subordinated Debt or Indebtedness in respect of the
Convertible Subordinated Note, except (in the case of Senior Subordinated
Debt) for regularly scheduled payments of principal and interest in respect
thereof required pursuant to the instruments evidencing such Senior
Subordinated Debt.
(b) None of the Obligors will make any payment in respect of the
Allard Non-Compete during any period during which any amount payable by any
Obligor hereunder or under any other Basic Document shall remain due and
unpaid.
9.20 LINES OF BUSINESS. Neither the Company nor any of its
Subsidiaries will engage to any substantial extent in any line or lines of
business activity other than the business of manufacturing, distributing and
selling aircraft components, avionics integrated systems and related products.
9.21 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted
by this Agreement, no Obligor will directly
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or indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell,
lease, assign or otherwise dispose of any Property to an Affiliate; (c) merge
into or consolidate with or purchase or acquire Property from an Affiliate;
or (d) enter into any other transaction directly or indirectly with or for
the benefit of an Affiliate (including, without limitation, Guarantees and
assumptions of obligations of an Affiliate); PROVIDED that (i) any Affiliate
who is an individual may serve as a director, officer or employee of any
Obligor and receive reasonable compensation for his or her services in such
capacity, (ii) the Company, Cory and Cory Holdings may make payments or
distributions to Gamberg pursuant to the Gamberg Documents, (iii) Cory may
pay any Indebtedness owing to any Obligor, (iv) Tri-Star Technologies may
make payments required under the TST Partnership Agreement and the Kerner
Employment Agreement, (v) any non-Wholly-Owned Subsidiary of an Obligor may
make transfers or payments to such Obligor; and (vi) any Obligor may enter
into transactions (other than extensions of credit by any Obligor to an
Affiliate) providing for the leasing of Property, the rendering or receipt of
services or the purchase or sale of inventory and other Property in the
ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Obligors as the
monetary or business consideration that would obtain in a comparable
transaction with a Person not an Affiliate.
9.22 USE OF PROCEEDS. The Company will use the proceeds of the
Loans hereunder solely to finance the ADS Purchase and to finance the working
capital and general corporate purposes of the Obligors (in compliance with
all applicable legal and regulatory requirements); PROVIDED that neither the
Agent nor any Lender shall have any responsibility as to the use of any of
such proceeds.
9.23 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES. Each Obligor
will take such action from time to time as shall be necessary to ensure that
such Obligor at all times owns (subject only to the Lien of the Security
Agreement) at least the same percentage of the issued and outstanding shares
of each class of stock of each of its Subsidiaries as is owned on the date
hereof. In the event that any such additional shares of stock shall be issued
by any Subsidiary, the respective Obligor agrees forthwith to deliver to the
Agent pursuant to the Security Agreement the certificates evidencing such
shares of stock, accompanied by undated stock powers executed in blank and to
take such other action as the Agent shall request to perfect the security
interest created therein pursuant to the Security Agreement. No Obligor will
permit any of its Subsidiaries to enter into, after the date of this
Agreement, any indenture, agreement, instrument or other arrangement that,
directly or indirectly, prohibits or restrains, or has the effect of
prohibiting or restraining, or
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imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens, the declaration or payment of dividends,
the making of loans, advances or Investments or the sale, assignment,
transfer or other disposition of Property.
9.24 MODIFICATIONS OF CERTAIN DOCUMENTS. No Obligor will, without
the prior consent of the Agent (with the approval of the Majority Lenders),
consent to any material modification, supplement or waiver of (a) its
constitutional or organizational documents or (b) the provisions of (i) any
agreement, instrument or other document evidencing or relating to (A) Senior
Subordinated Debt, (B) the Cory Repurchase, (C) the 1996 (February) Warrants
or Section 7 of the 1996 (February) Securities Purchase Agreement or (D) the
1996 (September) Warrants, the Convertible Subordinated Notes or Section 7 of
the 1996 (September) Securities Purchase Agreement, or (ii) any agreement
relating to employee compensation or similar arrangements. To the extent
that the Company is permitted to withhold its consent to any transfer of any
interest in the Senior Subordinated Debt, the Company shall not grant such
consent without the prior consent of the Majority Lenders (but in no event
shall the Majority Lenders require that the Company withhold its consent to
any such transfer if the Company is not permitted under the Senior
Subordinated Debt Documents to so withhold its consent).
9.25 VENDOR PAYABLES. The Obligors shall not permit the aggregate
amount of payables owed by them to trade vendors on December 31, 1994 to
exceed $6,800,000.
9.26 GOVERNMENTAL APPROVALS. Each Obligor shall promptly obtain,
at its own expense, all governmental licenses, authorizations, consents,
permits and approvals as may be required for such Obligor to (a) comply with
its obligations and preserve its rights under, each Basic Document and (b)
maintain the existence, priority and perfection of the Liens created under
the Security Documents.
9.27 SWISS RECEIVABLES. If at any time the Indebtedness of Unidec
identified on Schedule II hereto, and any refinancing thereof, shall have
been repaid in full and all commitments in respect thereof shall have been
terminated or cancelled, the Obligors shall cause to be delivered to the
Agent such agreements or other instruments, and take such other actions, to
provide that the Agent shall have for the benefit of the Lenders a first
priority perfected security interest in all receivables owing or to be owing
to Unidec.
9.28 INTERCOMPANY NOTE. Cory agrees to perform all of its
obligations under the Intercompany Note and, so long as any
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Commitment, Loan or Letter of Credit Liability is outstanding and until
payment in full of all amounts payable by the Company hereunder, to make all
payments under the Intercompany Note directly to the Agent for application to
the payment of principal and/or interest in respect of the Loans.
9.29 ADS FINANCIAL STATEMENTS. The Company shall deliver to each
of the Lenders, as soon as available and in any event no later than October
15, 1996, statements of income and cash flow of ADS for each of the
respective fiscal years ending on December 31, 1994 and December 31, 1995,
and the related balance sheets of ADS as at the end of such fiscal year, in
each case substantially in the form and substance of the financial statements
of ADS heretofore presented by the Company to the Lenders, and accompanied
(i) by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall not have any Impermissible
Qualification and shall state that said financial statements fairly present
the financial condition and results of operations of ADS as at the end of,
and for, such period in accordance with generally accepted accounting
principles, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except
as specifically stated, of any Default, and (ii) by a certificate of a senior
financial officer of the Company, which certificate shall state that said
consolidated financial statements fairly present the financial condition and
results of operations of ADS, in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for, such
period.
9.30 DEAL COSTS. The Company will not permit the aggregate amount
of Deal Costs to exceed $1,000,000, and shall only pay those Deal Costs
disclosed in writing by the Company to the Agent prior to the date hereof.
Section 10. EVENTS OF DEFAULT. If one or more of the
following events (herein called "EVENTS OF DEFAULT") shall occur
and be continuing:
(a) The Company shall: (i) default in the payment of any
principal of any Loan or any Reimbursement Obligation when due (whether
at stated maturity or at mandatory or optional prepayment); or (ii)
default in the payment of any interest on any Loan, any fee or any other
amount payable by it hereunder or under any other Basic Document when
due and such default shall have continued unremedied for one or more
Business Days; or
(b) Any Obligor shall default in the payment when due of any
principal of or interest on any of its other
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Indebtedness, or in the payment when due of any amount under any Interest
Rate Protection Agreement or Commodity Price Protection Agreement; or
any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness or any event specified
in any Interest Rate Protection Agreement or Commodity Price Protection
Agreement shall occur if the effect of such event is to cause, or (with
the giving of any notice or the lapse of time or both) to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf
of such holder or holders) to cause, such Indebtedness to become due, or
to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or, in the case of
an Interest Rate Protection Agreement or Commodity Price Protection
Agreement, to permit the payments owing under such Interest Rate
Protection Agreement or Commodity Price Protection Agreement (as the
case may be) to be liquidated; or
(c) Any representation, warranty or certification made or deemed
made herein or in any other Basic Document (or in any modification or
supplement hereto or thereto) by any Obligor, or any certificate
furnished to any Lender or the Agent pursuant to the provisions hereof
or thereof, shall prove to have been false or misleading as of the time
made or furnished in any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 9.01(h), 9.01(j), 9.05, 9.06, 9.07,
9.08, 9.09, 9.10, 9.11, 9.12, 9.13, 9.14, 9.16, 9.17, 9.18, 9.19 or 9.21
hereof, or any Obligor shall default in the performance of any of its
obligations under Section 4.2 or 5.2 of the Security Agreement; or any
Obligor shall default in the performance of any of its other obligations
in this Agreement or any other Basic Document and such default shall
continue unremedied for a period of fifteen or more Business Days after
notice thereof (specifying such default and setting forth, if
applicable, calculations showing such default) to the Company and any
Significant Holder (as defined in the 1994 Securities Purchase
Agreement) by the Agent or any Lender (through the Agent); or
(e) Any Obligor shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
Property, (ii) make a
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general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Bankruptcy Code, (iv) file a petition seeking
to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing;
or
(g) A proceeding or case shall be commenced, without the
application or consent of the affected Obligor, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of such Obligor or
of all or any substantial part of its Property, or (iii) similar relief
in respect of such Obligor under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an
order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of 60
or more days; or an order for relief against any Obligor shall be
entered in an involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in
excess of $100,000 in the aggregate shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction
against any Obligor and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within 30 days from the date of entry thereof and
such Obligor shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed or
fully bonded, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(i) An event or condition specified in Section 9.01(g) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and,
as a result of such event or condition, together with all other such
events or conditions, any Obligor or any ERISA Affiliate shall incur or
in the opinion of the Majority Lenders shall be reasonably likely to
incur a liability to a Plan, a Multiemployer Plan or PBGC (or any
combination of the foregoing) that, in the determination of the Majority
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Lenders, would (either individually or in the aggregate) have a Material
Adverse Effect; or
(j) A reasonable basis shall exist for the assertion against any
Obligor, or any predecessor in interest of any Obligor or Affiliates, of
(or there shall have been asserted against any Obligor) an Environmental
Claim that, in the judgment of the Majority Lenders is reasonably likely
to be determined adversely to any Obligor, and the amount thereof
(either individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by any
Obligor but after deducting any portion thereof that is reasonably
expected to be paid by other creditworthy Persons jointly and severally
liable therefor); or
(k) R. Jack DeCrane shall (i) cease to have the power to direct
the management and policies of the Company and a replacement acceptable
to the Majority Lenders shall not have assumed R. Jack DeCrane's duties
within fifteen days thereafter, (ii) cease to own or control 4% of the
Company's capital stock (on a fully-diluted basis), or (iii) shall die
or be unable to perform his duties as a senior executive of the Company
and a replacement acceptable to the Majority Lenders shall not have
assumed R. Jack DeCrane's duties within 90 days after such death or
disability; or
(l) The Liens created by the Security Documents shall at any time
not constitute a valid and perfected Lien on the collateral intended to
be covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Agent, free and clear of all other Liens (other than Liens permitted
under Section 9.06 hereof or under the respective Security Documents),
or, except for expiration in accordance with its terms, any of the
Security Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by any Obligor; or
(m) An event or condition of the type described in Section 10(e),
(f) or (g) hereof shall occur or exist with respect to Boeing or
Claircom or (if the aggregate value of the Obligors' backlog of orders
that relate to IFT constitute at least 20% of the aggregate value of all
of the Obligors' backlog of orders) IFT; or
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(n) The Obligors' business relationship with Boeing or Claircom
shall be modified in a manner that is reasonably likely to have a
Material Adverse Effect or shall terminate; or
(o) Any license, consent, authorization, registration or approval
at any time necessary to enable any Obligor to comply with any of its
obligations under this Agreement or any other Basic Document shall be
revoked, withdrawn or withheld or shall be modified or amended in a
manner materially prejudicial, in the opinion of the Majority Lenders,
to the interests of the Lenders hereunder;
THEREUPON: (1) in the case of an Event of Default other than one referred to
in clause (f) or (g) of this Section 10, (A) the Agent may and, upon request
of the Majority Lenders shall, by notice to the Company, terminate the
Commitments and they shall thereupon terminate, and (B) the Agent may and,
upon request by the Majority Lenders shall, by notice to the Company declare
the principal amount then outstanding of, and the accrued interest on, the
Loans, the Reimbursement Obligations and all other amounts payable by the
Obligors hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 or 5.06 hereof) to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which
are hereby expressly waived by each Obligor; and (2) in the case of the
occurrence of an Event of Default referred to in clause (f) or (g) of this
Section 10 with respect to any Obligor, the Commitments shall automatically
be terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Obligors hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by each Obligor.
In addition, upon the occurrence and during the continuance of any Event of
Default (if the Agent has declared the principal amount then outstanding of,
and accrued interest on, the Revolving Credit Loans and all other amounts
payable by the Company hereunder and under the Notes to be due and payable),
the Company agrees that it shall, if requested by the Agent or the Majority
Lenders through the Agent (and, in the case of any Event of Default referred
to in clause (f) or (g) of this Section 10 with respect to the Company,
forthwith, without any demand or the taking of any other action by the Agent
or such Lenders) provide cover for the Letter of Credit Liabilities by paying
to the Agent immediately available funds in an amount
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equal to the then aggregate undrawn face amount of all Letters of Credit,
which funds shall be held by the Agent in the Collateral Account as
collateral security in the first instance for the Letter of Credit
Liabilities and be subject to withdrawal only as therein provided.
Section 11. THE AGENT.
11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes each of the Agent and the Cash Management
Agent to act as its agent hereunder and under the other Basic Documents with
such powers as are specifically delegated to the Agent and the Cash
Management Agent, respectively, by the terms of this Agreement and of the
other Basic Documents, together with such other powers as are reasonably
incidental thereto. Each of the Agent and the Cash Management Agent (which
term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 hereof shall include reference to its Affiliates and its own
and its Affiliates' officers, directors, employees and agents): (a) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and in the other Basic Documents, and shall not by reason of this
Agreement or any other Basic Document be a trustee for any Lender; (b) shall
not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Basic Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any
other Basic Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other Basic
Document or any other document referred to or provided for herein or therein
or for any failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other
Basic Document; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other Basic Document or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good
faith. The Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment
or transfer thereof shall have been filed with the Agent (to the extent
provided in Section 12.06(b) hereof).
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11.02 RELIANCE BY AGENT. Each of the Agent and the Cash
Management Agent shall be entitled to rely upon any certification, notice or
other communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent and the Cash Management
Agent, respectively. As to any matters not expressly provided for by this
Agreement or any other Basic Document, the Agent and the Cash Management
Agent, respectively, shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with
instructions given by the Majority Lenders or all of the Lenders as is
required in such circumstance, and such instructions of such Lenders and any
action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
11.03 DEFAULTS. The Agent shall not be deemed to have knowledge
or notice of the occurrence of a Default unless the Agent has received notice
from a Lender or the Company specifying such Default and stating that such
notice is a "Notice of Default". In the event that the Agent receives such a
notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Lenders. The Agent shall (subject to Section 11.07 hereof)
take such action with respect to such Default as shall be directed by the
Majority Lenders, PROVIDED that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interest of the Lenders except to the
extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders or all of the Lenders.
11.04 RIGHTS AS A LENDER. With respect to its Commitments and the
Loans made by it, ING (and any successor acting as Agent) in its capacity as
a Lender hereunder shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not acting as the
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. ING (and any
successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make investments
in and generally engage in any kind of banking, trust or other business with
the Obligors (and any of their Subsidiaries or Affiliates) as if it were not
acting as the Agent, and ING and its Affiliates may accept fees and other
consideration from the Obligors for
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services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
11.05 INDEMNIFICATION. The Lenders agree to indemnify the Agent
(to the extent not reimbursed under Section 12.03 hereof, but without
limiting the obligations of the Company under said Section 12.03, and
including in any event any payments under any indemnity that the Agent is
required to issue to any bank referred to in Section 4.02 of the Security
Agreement to which remittances in respect of Accounts, as defined therein,
are to be made) ratably in accordance with their respective Commitments, for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the Agent
(including by any Lender) arising out of or by reason of any investigation in
or in any way relating to or arising out of this Agreement or any other Basic
Document or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses that the Company is obligated to
pay under Section 12.03 hereof, and including also any payments under any
indemnity that the Agent is required to issue to any bank referred to in
Section 4.02 of the Security Agreement to which remittances in respect of
Accounts, as defined therein, are to be made, but excluding, unless a Default
has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents, PROVIDED that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of
the party to be indemnified.
11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Obligors and decision to
enter into this Agreement and that it will, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this
Agreement or under any other Basic Document. The Agent shall not be required
to keep itself informed as to the performance or observance by any Obligor of
this Agreement or any of the other Basic Documents or any other document
referred to or provided for herein or therein or to inspect the Properties or
books of any Obligor. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder or under the Security Documents, the Agent shall not have any duty
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or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Obligors (or
any of their Affiliates) that may come into the possession of the Agent or
any of its affiliates.
11.07 FAILURE TO ACT. Except for action expressly required of the
Agent hereunder and under the other Basic Documents, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction
from the Lenders of their indemnification obligations under Section 11.05
hereof against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action.
11.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign
at any time by giving notice thereof to the Lenders and the Company, and the
Agent may be removed at any time with or without cause by the Majority
Lenders (and, during any period during which there are only two Lenders and a
court of competent jurisdiction shall have determined that the Agent shall
have acted hereunder with gross negligence of wilful misconduct, the Lender
that is not acting as Agent (the "Other Lender") shall have the right to
remove the Agent). Upon any such resignation or removal, the Majority
Lenders shall have the right to appoint a successor Agent (or, if the Agent
is removed by the Other Lender as above provided, the Other Lender shall have
the right to appoint a successor Agent). If no successor Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, that
shall be a bank that has an office in New York, New York. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After
any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 11 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent. The Agent may at any time assign all of its rights and
obligations hereunder to any affiliate of the Agent by notice to the Company
and each Lender.
11.09 AGENCY FEE; CASH MANAGEMENT FEE. Until payment in full of
the principal of and interest on the Loans and all other amounts payable by
the Company hereunder and termination of the Commitments hereunder,
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(a) the Company will pay to the Agent an agency fee of $75,000 per
annum, which shall accrue on the first Business Day of each fiscal year of
the Company (commencing on the first Business Day of 1996) and shall be
payable quarterly in arrears on the last Business Day of each fiscal quarter
(commencing on the Business Day immediately preceding March 31, 1996), and
(b) the Company will pay to the Cash Management Agent a cash management
fee of $25,000 per annum, which shall accrue on the first Business Day of
each fiscal year of the Company (commencing on the first Business Day of
1996) and shall be payable quarterly in arrears on the last Business Day of
each fiscal quarter (commencing on the Business Day immediately preceding
March 31, 1996);
PROVIDED that, upon payment in full of the principal of and interest on the
Loans and the termination o the Commitments hereunder, accrued but unpaid
amounts under this Section 11.09 shall automatically become due and payable.
11.10 CONSENTS UNDER OTHER BASIC DOCUMENTS. Except as otherwise
provided in Section 12.04 hereof with respect to this Agreement, the Agent
may, with the prior consent of the Majority Lenders (but not otherwise),
consent to any modification, supplement or waiver under any of the Basic
Documents, PROVIDED that, without the prior consent of each Lender, the Agent
shall not (except as provided herein or in the Security Documents) release
any collateral or otherwise terminate any Lien under any Basic Document
providing for collateral security, or agree to additional obligations being
secured by such collateral security, except that no such consent shall be
required, and the Agent is hereby authorized, to release any Lien covering
Property that is the subject of a disposition of Property permitted hereunder
or to which the Majority Lenders have consented.
11.11 COLLATERAL SUB-AGENTS. Each Lender by its execution and
delivery of this Agreement agrees, as contemplated by Section 4.3 of the
Security Agreement, that, in the event it shall hold any Permitted
Investments referred to therein, such Permitted Investments shall be held in
the name and under the control of such Lender, and such Lender shall hold
such Permitted Investments as a collateral sub-agent for the Agent
thereunder. The Company by its execution and delivery of this Agreement
hereby consents to the foregoing. In addition, the Cash Management Agent
shall hold the Zero Balance Account and any cash or investments therein as a
collateral sub-agent for the Agent thereunder.
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11.12 RESIGNATION OF CASH COLLATERAL AGENT; ETC.. The Cash
Management Agent may resign at any time by at least 30 days notice to the
Agent and the Company, whereupon the Cash Management Agent shall have no
further obligations hereunder and all provisions herein providing for
payments to be made to the Cash Management Agent shall be deemed to have been
amended to provide for payments to be made to an account designated by the
Agent. All obligations of the Cash Management Agent under the Cash
Management Agreement shall automatically terminate upon the termination of
the Commitments or the acceleration of the maturity of the Loans pursuant to
Section 10 hereof.
Section 12. MISCELLANEOUS.
12.01 WAIVER. No failure on the part of the Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
Each Obligor irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Agent or any Lender relating in any way to this Agreement should be dismissed
or stayed by reason, or pending the resolution, of any action or proceeding
commenced by any Obligor relating in any way to this Agreement whether or not
commenced earlier. To the fullest extent permitted by applicable law, the
Obligors shall take all measures necessary for any such action or proceeding
commenced by the Agent or any Lender to proceed to judgment prior to the
entry of judgment in any such action or proceeding commenced by any Obligor.
12.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under,
this Agreement) shall be given or made in writing (including, without
limitation, by telex or telecopy), or, with respect to notices given pursuant
to Section 2.03 hereof, by telephone, confirmed in writing by telecopier by
the close of business on the day the notice is given, delivered (or
telephoned, as the case may be) to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Any communication required to be delivered to a
Significant Holder (as that term is defined in the
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1994 Securities Purchase Agreement) shall be given at the address for the
Purchasers referred to therein, specified in Section 17J of the 1994
Securities Purchase Agreement (or such other address as shall be designated
by such Purchasers in a notice to the Agent). Except as otherwise provided
in this Agreement, all such communications shall be deemed to have been duly
given when transmitted by telex or telecopier (with confirmation) or
personally delivered or, in the case of a mailed notice, upon receipt, in
each case given or addressed as aforesaid.
12.03 EXPENSES, ETC. The Company agrees to pay or reimburse each
of the Lenders and the Agent for: (a) all reasonable out-of-pocket costs and
expenses of each Lander (including, without limitation, the reasonable fees
and expenses of Mayer, Brown & Platt, special New York counsel to ING) in
connection with (i) the negotiation, preparation, execution and delivery of
this Agreement and the other Basic Documents and the extension of credit
hereunder and (ii) the negotiation or preparation of any modification,
supplement or waiver of any of the terms of this Agreement or any of the
other Basic Documents (whether or not consummated); (b) all reasonable
out-of-pocket costs and expenses of the Lenders and the Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 12.03; and (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority
in respect of this Agreement or any of the other Basic Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated
by any Basic Document or any other document referred to therein.
The Company hereby agrees to indemnify the Agent and each Lender
and their respective directors, officers, employees, attorneys and agents
from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or
expenses incurred by the Agent to any Lender, whether or not the Agent or any
Lender is a party thereto) arising out of or by reason of any investigation
or litigation or other proceedings (including any threatened investigation or
litigation or other proceedings)
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relating to the extensions of credit hereunder or any actual or proposed use
by Obligors of the proceeds of any of the extensions of credit hereunder,
including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the person to be indemnified). Without limiting the generality
of the foregoing, the Company will (x) indemnify the Agent for any payments
that the Agent is required to make under any indemnity issued to any bank
referred to in Section 4.02 of the Security Agreement to which remittances in
respect to Accounts, as defined therein, are to be made and (y) indemnify the
Agent and each Lender from, and hold the Agent and each Lender harmless
against, any losses, liabilities, claims, damages or expenses described in
the preceding sentence (excluding, as provided in the preceding sentence, any
loss, liability, claim, damage or expense incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) arising
under any Environmental Law as a result of the past, present or future
operations of the Obligors (or any predecessor in interest to the Obligors),
or the past, present or future condition of any site or facility owned,
operated or leased at any time by the Company or any of its Subsidiaries (or
any such predecessor in interest), or any Release or threatened Release of
any Hazardous Materials at or from any such site or facility, including any
such Release or threatened Release that shall occur during any period when
the Agent or any Lender shall be in possession of any such site or facility
following the exercise by the Agent or any Lender of any of its rights and
remedies hereunder or under any of the Security Documents.
12.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Company, the
Agent and the Majority Lenders, or by the Company and the Agent acting with
the consent of the Majority Lenders, and any provision of this Agreement may
be waived by the Majority Lenders or by the Agent acting with the consent of
the Majority Lenders; PROVIDED that: (a) no modification, supplement or
waiver shall, unless by an instrument signed by all of the Lenders or by the
Agent acting with the consent of all of the Lenders: (i) increase, or extend
the term of any of the Commitments, or extend the time or waive any
requirement for the reduction or termination of any of the Commitments, (ii)
extend the date fixed for the payment of principal of or interest on any
Loan, the Reimbursement Obligations or any fee hereunder, (iii) reduce the
amount of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon or any fee is payable hereunder, (v) alter the
rights or obligations of the Company to prepay Loans, (vi) alter the terms of
this
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Section 12.04, (vii) modify the definition of the term "Majority Lenders" or
modify in any other manner the number or percentage of the Lenders required
to make any determinations or waive any rights hereunder or to modify any
provision hereof, or (viii) waive any of the conditions precedent set forth
in Section 7.01 hereof; (b) any modification or supplement of Section 11
hereof shall require the consent of the Agent; and (c) any modification or
supplement of Section 6 hereof shall require the consent of each Subsidiary
Guarantor.
12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Obligor may assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders
and the Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and its Letter of Credit Interest (but only with the consent of
the Agent and, in the case of the Revolving Credit Commitment or a Letter of
Credit Interest, the Issuing Bank); PROVIDED that (i) no such consent by the
Company shall be required in the case of any assignment to another Lender;
(ii) any such partial assignment shall be in an amount at least equal to
$2,500,000; and (iii) each such assignment by a Lender shall be made in such
manner so that the same portion of its Revolving Credit Loans and Revolving
Credit Commitment is assigned to the respective assignee. Upon execution and
delivery by the assignee to the Company, the Agent and the Issuing Bank of an
instrument in writing pursuant to which such assignee agrees to become a
"Lender" hereunder (if not already a Lender) having the Commitment(s), Loans,
and, if applicable, Letter of Credit Interest specified in such instrument,
and upon consent thereto by the Agent and the Issuing Bank, to the extent
required above, the assignee shall have, to the extent of such assignment
(unless otherwise provided in such assignment with the consent of the
Company, the Agent and the Issuing Bank), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s), Loans and, if
applicable, Letter of Credit Interest (or portions thereof) assigned to it
(in addition to the Commitment(s), Loans and Letter of Credit Interest, if
any, theretofore held by such assignee) and the assigning Lender shall, to
the extent of such assignment, be released from the Commitment(s) (or
portion(s) thereof) so assigned. Upon each such assignment the assigning
Lender shall pay the Agent an assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other
Persons a participation in all or any part of any Loans or
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Letter of Credit Interest held by it, or in its Commitments, in which event
each purchaser of a participation (a "PARTICIPANT") shall be entitled to the
rights and benefits of the provisions of Section 9.01(k) hereof with respect
to its participation in such Loans, Letter of Credit Interest and Commitments
as if (and the Company shall be directly obligated to such Participant under
such provisions as if) such Participant were a "Lender" for purposes of said
Section, but, except as otherwise provided in Section 4.07(c) hereof, shall
not have any other rights or benefits under this Agreement or any Note or any
other Basic Document (the Participant's rights against such Lender in respect
of such participation to be those set forth in the agreements executed by
such Lender in favor of the Participant). All amounts payable by the Company
to any Lender under Section 5 hereof in respect of Loans, Letter of Credit
Interest held by it, and its Commitments, shall be determined as if such
Lender had not sold or agreed to sell any participations in such Loans,
Letter of Credit Interest and Commitments, and as if such Lender were funding
each of such Loan, Letter of Credit Interest and Commitments in the same way
that it is funding the portion of such Loan, Letter of Credit Interest and
Commitments in which no participations have been sold. In no event shall a
Lender that sells a participation agree with the Participant to take or
refrain from taking any action hereunder or under any other Basic Document
except that such Lender may agree with the Participant that it will not,
without the consent of the Participant, agree to (i) increase or extend the
term, or extend the time or waive any requirement for the reduction or
termination, of such Lender's related Commitment, (ii) extend the date fixed
for the payment of principal of or interest on the related Loan or Loans,
Reimbursement Obligations or any portion of any fee hereunder payable to the
Participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee, (v) alter the rights
or obligations of the Company to prepay the related Loans or (vi) consent to
any modification, supplement or waiver hereof or of any of the other Basic
Documents to the extent that the same, under Section 11.10 or 12.04 hereof,
requires the consent of each Lender.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.06, any Lender may (without
notice to the Company, the Agent or any other Lender and without payment of
any fee) (i) assign and pledge all or any portion of its Loans and its Notes
to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank and (ii)
assign all or any portion of its rights under this Agreement and its Loans
and its Notes to an Affiliate.
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No such assignment shall release the assigning Lender from its obligations
hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 12.12(b) hereof.
(f) Anything in this Section 12.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Company or any of its Affiliates or
Subsidiaries without the prior consent of each Lender.
12.07 SURVIVAL. The obligations of the Company under Sections
5.01, 5.05, 5.06 and 12.03 hereof, the obligations of each Subsidiary
Guarantor under Section 6.03 hereof, and the obligations of the Lenders under
Section 11.05 hereof, shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments. In
addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit (whether by means of a Loan or a Letter of
Credit), herein or pursuant hereto shall survive the making of such
representation and warranty.
12.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Agreement.
12.09 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
12.10 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) This Agreement (including, without limitation, Section 6
hereof as it applies to Unidec) and the Notes shall be governed by, and
construed in accordance with, the internal laws of the State of New York.
Each Obligor hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New
York state court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Obligor irrevocably waives, to the fullest extent
permitted by applicable law, any objection that it may now or hereafter have
to the laying of the venue of any such proceeding brought in such a court and
any
- 108 -
<PAGE>
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum.
(b) Each Obligor hereby agrees that service of all writs, process
and summonses in any such suit, action or proceeding brought in the State of
New York may be made upon CT Corporation (the "PROCESS AGENT"), presently
located at 1633 Broadway, New York, New York 10019, and each Obligor hereby
represents and agrees that the Process Agent has been duly and irrevocably
appointed as its agent and true and lawful attorney-in-fact in its name,
place and stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give any
notice of such service of process to any Obligor shall not impair or affect
the validity of-such service or of any judgment based thereon. Each Obligor
hereby further irrevocably consents to the service of process in any suit,
action or proceeding by the mailing thereof by the Agent or any Lender by
registered or certified mail, postage prepaid, at its address set forth
beneath its signature hereto.
(c) Nothing herein shall in any way be deemed to limit the ability
of the Agent or any Lender to serve any such writs, process or summonses in
any other manner permitted by applicable law or to obtain jurisdiction over
any Obligor in such other jurisdictions, and in such manner, as may be
permitted by applicable law.
12.11 WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OP OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
12.12 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) The Obligors acknowledge that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Obligors (in connection with this Agreement or otherwise) by any Lender
or by one or more Subsidiaries or Affiliates of such Lender and each of the
Obligors hereby authorizes each Lender to share any information delivered to
such Lender by the Obligors pursuant to this Agreement, or in connection with
the decision of such Lender to enter into this Agreement, with any such
Subsidiary or Affiliate, it being understood that any such Subsidiary or
Affiliate receiving such information shall be bound by the provisions of
clause (b) below as if it were a Lender hereunder. Such authorization shall
survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments.
- 109 -
<PAGE>
(b) Each Lender and the Agent agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by any Obligor pursuant to this Agreement that is
identified by such Person as being confidential at the time the same is
delivered to the Lenders or the Agent, PROVIDED that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Lenders or the Agent, (iii) to bank examiners, auditors or accountants,
(iv) to the Agent or any other Lender, (v) in connection with any litigation to
which any one or more of the Lenders or the Agent is a party, (vi) to a
Subsidiary or Affiliate of such Lender as provided in clause (a) above or
(vii) to any assignee or participant (or prospective assignee or participant)
so long as such assignee or participant (or prospective assignee or
participant) first executes and delivers to the respective Lender a
Confidentiality Agreement substantially in the form of Exhibit I hereto. In
no event shall any Lender or the Agent be obligated or required to return any
materials furnished by any Obligor. In addition, the obligations of any
assignee that has executed a Confidentiality Agreement in the form of
Exhibit I hereto shall be superseded by this Section 12.12 upon the date upon
which such assignee becomes a Lender hereunder pursuant to Section 12.06 hereof.
12.13 JUDGMENT CURRENCY. The specification of Dollars and payment in
the United States is of the essence, and the obligations of any Obligor under
this Agreement and the other Basic Documents to make payment to (or for the
account of) a Lender in Dollars shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into
any other currency or in another place except to the extent that such tender
or recovery results in the effective receipt by such Lender in the United
States of the full amount of Dollars payable to such Lender under this
Agreement. If for the purpose of obtaining judgment in any court it is
necessary to covert a sum due hereunder in Dollars into another currency (the
"JUDGMENT CURRENCY"), the rate of exchange which shall be applied shall be
that at which in accordance with market practices the Agent could purchase
such Dollars in New York City with the judgment currency on the Business Day
following the day on which such judgment is rendered. The obligation of the
Obligors in respect of any sum due from it to the Agent or any Lender
hereunder or under any Basic Document (any "ENTITLED PERSON") shall,
notwithstanding the rate of exchange actually applied in rendering such
judgment, be discharged only to the extent that on the Business Day following
receipt by such Entitled Person of any
- 110 -
<PAGE>
sum adjudged to be due hereunder in the judgment currency such Entitled
Person may in accordance with market practices purchase and transfer Dollars
to New York City in the amount of the judgment currency so adjudged to be
due; and each of the Obligors hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify such Entitled Person
against, and to pay such Entitled Person on demand, in Dollars, the amount
(if any) by which the sum originally due to such Entitled Person in Dollars
hereunder exceeds the amount of Dollars so purchased and transferred.
- 111 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By /s/ R. Jack DeCrane
---------------------------------
Title:
Address for Notices:
DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue
Suite 210
Copley, Ohio 44321
Attention: Mr. R. Jack DeCrane
Chief Executive Officer
Telecopier No.: (330) 668-2518
Telephone No.: (330) 668-3061
- 112 -
<PAGE>
SUBSIDIARY GUARANTORS
ADS ACQUISITION, INC.
By /s/ R. Jack DeCrane
----------------------------
Title:
TRI-STAR HOLDINGS, INC.
By /s/ R. Jack DeCrane
-----------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL,
INC.
By /s/ R. Jack DeCrane
-----------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By /s/ R. Jack DeCrane
-----------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri Star Technologies, Inc., as
as general partner
By /s/ R. Jack DeCrane
-----------------------------
Title:
TRI-STAR ELECTRONICS EUROPE S.A.,
MEZZOVICO
By
-----------------------------
Title:
CORY HOLDINGS, INC.
By /s/ R. Jack DeCrane
-----------------------------
Title:
- 113 -
<PAGE>
SUBSIDIARY GUARANTORS
ADS ACQUISITION, INC.
By
----------------------------
Title:
TRI-STAR HOLDINGS, INC.
By
-----------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL,
INC.
By
-----------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By
-----------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri Star Technologies, Inc., as
as general partner
By
-----------------------------
Title:
TRI-STAR ELECTRONICS EUROPE S.A.,
MEZZOVICO
By /s/ [ILLEGIBLE]
-----------------------------
Title:
CORY HOLDINGS, INC.
By
-----------------------------
Title:
- 113 -
<PAGE>
CORY COMPONENTS, INC.
By /s/ R. Jack DeCrane
-----------------------------
Title:
HOLLINGSEAD INTERNATIONAL, INC.
By /s/ R. Jack DeCrane
-----------------------------
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By /s/ R. Jack DeCrane
-----------------------------
Title:
- 114 -
<PAGE>
LENDERS
-------
Revolving Credit Commitment INTERNATIONALE NEDERLANDEN (U.S)
- --------------------------- CAPITAL CORPORATION
$9,375,000
Term Loan Commitment
- --------------------
$11,250,000
By /s/ David Balistrery
--------------------------
Title: Senior Associate
Lending Office for all Loans:
Internationale Nederlanden (U.S.)
Capital Corporation
135 East 57th Street
New York, New York 10021
Address for Notices:
Internationale Nederlanden (U.S.)
Capital Corporation
135 East 57th Street
New York, New York 10021
Attention: Corporate Finance Group
Telecopier No.: (212) 593-3362
Telephone No.: (212) 409-1955
- 115 -
<PAGE>
Revolving Credit Commitment THE PROVIDENT BANK
- ----------------------------
$3,125,000
Term Loan Commitment
- --------------------
$3,750,000 By [ILLEGIBLE]
-----------------------------
Title: VP
Lending Office for all Loans:
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Address for Notices:
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Nick Jevic
Corporate Banking
Telecopier No.: (513) 579-2858
Telephone No.: (513) 579-2385
- 116 -
<PAGE>
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION,
as Agent
By /s/ David Balistrey
------------------------------
Title: SENIOR ASSOCIATE
Address for Notices to
ING as Agent:
Internationale Nederlanden (U.S.)
Capital Corporation
135 East 57th Street
New York, New York 10021
Attention: Corporate Finance Group
Telecopier No.: (212) 593-3362
Telephone No.: (212) 409-1955
- 117 -
<PAGE>
[EXECUTION COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of September 18, 1996, between DeCRANE
AIRCRAFT HOLDINGS, INC., a corporation duly organized and validly existing
under the laws of the State of Ohio (the "COMPANY"); each of the Subsidiaries
of the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (collectively, the "SUBSIDIARY GUARANTORS" and,
together with the Company, the "OBLIGORS"); and INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders
named in the Amended and Restated Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "AGENT").
The Company, certain of the Subsidiary Guarantors, the Lenders, the
Cash Management Agent identified therein and the Agent entered into a Credit
Agreement, dated as of November 2, 1994 (the "CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for extensions of credit (by
making loans and issuing letters of credit) to be made by said Lenders to the
Company. In order to induce the Lenders to enter into the Credit Agreement,
the Company, the Subsidiary Guarantors identified therein and the Agent
entered into a Security Agreement, dated as of November 2, 1994 (the
"SECURITY AGREEMENT"), providing for the pledge and grant of a security
interest in certain collateral as security for the obligations of the
Obligors under the Credit Agreement.
The Obligors, the Lenders, the Cash Management Agent identified
therein and the Agent entered into an Amended and Restated Credit Agreement,
dated as of September 18, 1996 (the "AMENDED AND RESTATED CREDIT AGREEMENT"),
amending and restating the Credit Agreement for the purpose of providing,
subject to the terms and conditions thereof, additional credit to the Company
to finance certain capital expenditures, the operations of the Company and
for other purposes. To induce the Lenders to enter into the Amended and
Restated Credit Agreement and for other good and valuable consideration, the
Company, the Subsidiary Guarantors party to the Security Agreement and the
Agent wish to modify the Security Agreement to, among other things, include
ADS Acquisition, Inc. as a party to the Security Agreement.
<PAGE>
Accordingly, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment, terms defined in the Amended and Restated Credit Agreement are
used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the
date hereof, the Security Agreement shall be amended as follows:
2.01 AMENDED AND RESTATED CREDIT AGREEMENT. Each reference to the
Credit Agreement in the Security Agreement shall be a reference to the
Amended and Restated Credit Agreement.
2.02 ADS. ADS Acquisition, Inc. shall be included as a
"Subsidiary Guarantor" and "Obligor" under the Security Agreement, with all
of the rights and obligations of a Subsidiary Guarantor thereunder.
Section 3. REPRESENTATIONS AND WARRANTIES. Each of the Obligors
represents and warrants to the Lenders that the representations and
warranties set forth in Section 2 of the Security Agreement are true and
complete on the date hereof, as if made on and as of the date hereof (or, if
such representation warranty is expressly stated to have been made as of a
specific date, as of such specific date), and as if each reference in said
Section 2 to "this Agreement" included reference to this Amendment.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2 above,
the amendment to the Security Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the execution and delivery of
this Amendment by the Obligors and the Agent.
Section 5. MISCELLANEOUS. Except as herein provided, the Security
Agreement shall remain unchanged and in full force and effect. This
Amendment 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 by signing any such
counterpart. This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By /s/ R. Jack DeCrane
---------------------------------
Title:
-3-
<PAGE>
SUBSIDIARY GUARANTORS
TRI-STAR HOLDINGS, INC.
By /s/ R. Jack DeCrane
--------------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL,
INC.
By /s/ R. Jack DeCrane
--------------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By /s/ R. Jack DeCrane
--------------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies, Inc., as
as general partner
By /s/ R. Jack DeCrane
--------------------------------
Title:
TRI-STAR ELECTRONICS EUROPE S.A.,
MEZZOVICO
By
--------------------------------
Title:
CORY HOLDINGS, INC.
By /s/ R. Jack DeCrane
--------------------------------
Title:
-4-
<PAGE>
SUBSIDIARY GUARANTORS
TRI-STAR HOLDINGS, INC.
By
--------------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL,
INC.
By
--------------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By
--------------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies, Inc., as
as general partner
By
--------------------------------
Title:
TRI-STAR ELECTRONICS EUROPE S.A.,
MEZZOVICO
By /s/ [ILLEGIBLE]
--------------------------------
Title:
CORY HOLDINGS, INC.
By
--------------------------------
Title:
-4-
<PAGE>
CORY COMPONENTS, INC.
By /s/ R. Jack DeCrane
--------------------------------
Title:
HOLLINGSEAD INTERNATIONAL, INC.
By /s/ R. Jack DeCrane
--------------------------------
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By /s/ R. Jack DeCrane
--------------------------------
Title:
ADS ACQUISITION, INC.
By /s/ R. Jack DeCrane
--------------------------------
Title
AGENT
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION,
as Agent
By /s/ [ILLEGIBLE]
--------------------------------
Title: Senior Associate
-5-
<PAGE>
MB&P Draft of December 11, 1996
AMENDMENT NO. 2
AMENDMENT NO. 2, dated as of December 12, 1996, between DeCRANE AIRCRAFT
HOLDINGS INC., a corporation duly organized and validly existing under the
laws of the State of Ohio (the "COMPANY"); each of the Subsidiaries of the
Company identified under the caption "SUBSIDIARY GUARANTORS" on the signature
pages hereto (collectively, the "SUBSIDIARY GUARANTORS" and, together with
the Company, the "OBLIGORS"); each of the lenders that is a signatory hereto
identified under the caption "LENDERS" on the signature pages hereto or that
pursuant to Section 12.06(b) of the Credit Agreement (defined below), shall
become a "Lender" under the Credit Agreement (collectively, the LENDERS");
THE PROVIDENT BANK, an Ohio banking corporation, as Cash Management Agent (in
such capacity, together with its successors in such capacity, the "CASH
MANAGEMENT AGENT"); and ING (U.S.) CAPITAL CORPORATION, a Delaware
corporation, as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "AGENT").
The Obligors, the Lenders, the Cash Management Agent and the Agent are
parties to an amended and restated Credit Agreement, dated as of September
18, 1996 (as heretofore amended, the "CREDIT AGREEMENT"), providing, subject
to the terms and conditions thereof, for extensions of credit (by making
loans and issuing letters of credit) to be made by said Lenders to the
Company in an aggregate principal or face amount not exceeding $27,500,000.
The Obligors, the Lenders, the Cash Management Agent and the Agent wish to
increase the aggregate amount of the Revolving Credit Commitments under the
Credit Agreement from $12,500,000 to $15,750,000, to make additional Term
Loans in an aggregate amount equal to $5,000,000 and to modify the Credit
Agreement in certain other respects and accordingly, the parties hereto
hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Amendment,
terms defined in the Credit Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 5 below, but effective as of the date hereof,
the Credit Agreement shall be amended as follows:
2.01 AMP ACQUISITION.
(a) The following defined terms shall be added to Section 1.01 of the
Credit Agreement (Definitions) in their respective appropriate alphabetical
locations:
""AMP" shall mean AMP Incorporated, a corporation duly organized
and validly existing under the laws of the Commonwealth of
Pennsylvania."
""AMP ACQUISITION" shall mean the acquisition by the Company of
(i) all of the assets of AMP related to its Qualitronix manufacturing
activities and (ii) certain specific proprietary rights and
intellectual property of Whitaker, in each case pursuant to the AMP
Purchase Agreement."
""AMP PURCHASE AGREEMENT" shall mean the Asset Purchase and
Sale Agreement, dated as of November 25, 1996, among the Company, AMP
and Whitaker."
<PAGE>
""SUPPLY CONTRACTS" shall have the meaning given to that term in
the AMP Purchase Agreement."
""WHITAKER" shall mean The Whitaker Corporation, a corporation
duly organized and validly existing under the laws of the State of
Delaware."
(b) Section 9.05 of the Credit Agreement (Prohibition of Fundamental
Changes) shall be amended by deleting the word "and" in the second
sentence thereof, and by adding the following at the end of such sentence:
"and the AMP Acquisition"
(c) Section 9.22 of the Credit Agreement (Use of Proceeds) shall be
amended by adding the following at the end thereof:
", and FURTHER PROVIDED that the proceeds of Loans made on the date
that the AMP Acquisition is consummated shall be used solely to make
payments due under the AMP Purchase Agreement, and to pay related fees and
expenses."
(d) Section 9.24 of the Credit Agreement (Modification of Certain
Documents) shall be amended by adding the following at the end of the first
sentence thereof:
", or (iii) either of the Supply Contracts"
(e) Annex 6 to the Security Agreement (Locations) shall be amended in
its entirety to read as Annex 6 hereto.
2.02 INCREASE IN REVOLVING CREDIT COMMITMENTS. The definition of
"Revolving Credit Commitment" in Section 1.01 of the Credit Agreement shall
be amended in its entirety to read as follows:
""REVOLVING CREDIT COMMITMENT" shall mean, as to each Lender, the
obligation of such Lender to make Revolving Credit Loans in an
aggregate amount at any one time outstanding up to but not exceeding
the amount set opposite the name of such Lender on the signature pages
of Amendment No. 2 hereto under the caption "Revolving Credit
Commitment" (as the same may reduced from time to time pursuant to
Section 2.04 hereof)."
2.03 ADDITIONAL TERM LOANS
(a) The Following shall be added immediately following the first
sentence of Section 2.01(b) of the Credit Agreement (Commitment to Make
Term Loans):
"In addition, each Lender severally agrees, on the terms and
conditions of this Agreement, to make a term loan to the Company
in Dollars on the date on which the AMP Acquisition is consummated
in a principal amount equal to (a) in the case of ING, $3,750,000 and
(b) in the case of Provident, $1,250,000."
(b) Section 3.01(b) of the Credit Agreement (Amortization of Term
Loans) shall be amended in its entirety to read as follows:
- 2 -
<PAGE>
"(b) The Company hereby promises to pay to the Agent for account of
each Lender the principal of such Lender's Term Loans in 20 installments
payable on the Principal Payment Dates as follows:
PRINCIPAL PAYMENT DATE AMOUNT OF INSTALLMENT ($)
December 31, 1996 $375,000
March 31, 1997 468,750
June 30, 1997 468,750
September 30, 1997 468,750
December 31, 1997 468,750
March 31, 1998 875,000
June 30, 1998 875,000
September 30, 1998 875,000
December 31, 1998 875,000
March 31, 1999 968,750
June 30, 1999 968,750
September 30, 1999 968,750
December 31, 1999 968,750
March 31, 2000 968,750
June 30, 2000 968,750
September 30, 2000 968,750
December 31, 2000 968,750
March 31, 2001 968,750
June 30, 2001 968,750
September 30, 2001 1,937,500"
2.04 COVENANT MODIFICATIONS.
[To be provided]
Section 3. FEES.
(a) On the date that this Amendment No. 2 shall become effective, the
Company agrees to pay to the Agent, for the benefit of the Lenders, a fee in
an amount equal to $250,000.
(b) Effective as of the date hereof, the following new Section 2.12
shall be added to the Credit Agreement:
"9.22 SEMI-ANNUAL FEES. Until the payment in full of all obligations
of the Company hereunder and the termination or expiration of the
Commitments, the Company shall pay to the Agent, for account of the
Lenders, a fee in an amount equal to the Semi-annual Fee Amount, payable
on each May 15 and November 15 in each year, commencing with May 15, 1997.
For purposes hereof, the 'SEMI-ANNUAL FEE AMOUNT' shall mean, with respect
to any payment of a fee pursuant to this Section 9.22 , the sum of $67,000
PLUS the aggregate amount of all fees theretofore required to have been
made (E.G., the payment due on November 15, 1997 will be calculated as
follows: $67,00 PLUS $67,000 (the payment required to have been made on
May 15, 1997) EQUALS $134,000)."
- 3 -
<PAGE>
(c) Notwithstanding that the increase of the Revolving Credit
Commitments contemplated by Section 2 hereof shall not become effective
until the satisfaction of the conditions precedent specified in Section 6
hereof, for purposes of calculating the amount of commitment fee payable
under Section 2.05 of the Credit Agreement, the Revolving Credit
Commitments of the Lenders shall be deemed to have been so increased
immediately upon the execution of this Amendment by each of the Lenders.
Section 4. REPRESENTATIONS AND WARRANTIES. Each of the Obligors
represents and warrants to the Lenders that (i) the representations and
warranties set forth in Section 8 of the Credit Agreement are true and
complete on the date hereof, as if made on and as of the date hereof ( or, if
such representation warranty is expressly stated to have been made as of a
specific date, as of such specific date), and as if each reference in said
Section 8 to "this Agreement" included reference to this Amendment No. 2 and
(ii) after giving effect to this Amendment No. 2, no Default shall have
occurred and be continuing.
Section 5. CONDITIONS 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, subject to the satisfaction of the
following conditions:
5.01 EXECUTION. This Amendment No. 2 shall have been duly executed
and delivered by the Company, the Subsidiary Guarantors, the Agent and each
of the Lenders.
5.02 NOTES. The Company shall have delivered to the Agent for each
Lender, in exchange for the Notes heretofore delivered to such Lender
pursuant to Section 2.08 of the Credit Agreement, new Notes, date the date
of the Notes being exchanged, payable to such Lender in a principal amount
equal to its Revolving Credit Commitment (as increased hereby) and the
aggregate amount of its Term Loans (as increased hereby), respectively,
and otherwise duly completed.
5.03 AMP PURCHASE AGREEMENT. The Agent shall have received a copy of
the AMP Purchase Agreement, together with all documents and agreements
relating thereto (including, without limitation, the Supply Contracts),
each in form and substance satisfactory to the Agent.
5.04 UCCs. Appropriate Uniform Commercial Code Financing statements
shall have been delivered to the Agent for filing in such jurisdiction as
the Agent shall request to perfect the Lien created by the Security
Agreement over the Properties acquired by the Company in the AMP
Acquisition.
5.05 FEE. The Agent shall have received the fee referred to in
Section 3(a) hereof.
Section 6. MISCELLANEOUS. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This
Amendment 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 by signing any such
counterpart. This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By_____________________________
Title:
SUBSIDIARY GUARANTORS
TRI-STAR HOLDING, INC.
By_____________________________
Title:
TRI-STAR ELECTRONICS INTERNATIONAL,
INC.
By_____________________________
Title:
TRI-STAR TECHNOLOGIES, INC.
By_____________________________
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies, Inc., as
as general partner
By_____________________________
Title:
UNIDEC, S.A.
By_____________________________
Title:
- 5 -
<PAGE>
CORY HOLDINGS, INC.
By_____________________________
Title:
CORY COMPONENTS, INC.
By_____________________________
Title:
HOLLINGSEAD INTERNATIONAL, INC.
By_____________________________
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By_____________________________
Title:
ELSINORE AEROSPACE SERVICES, INC.
By_____________________________
Title:
EE ACQUISITIONS, INC.
By_____________________________
Title:
- 6 -
<PAGE>
LENDERS
Revolving Credit Commitment: ING (U.S.) CAPITAL CORPORATION
$11,812,500
By_____________________________
Title:
Revolving Credit Commitment: THE PROVIDENT BANK
$3,937,500
By_____________________________
Title:
ING (U.S.) CAPITAL CORPORATION,
as Agent
By_____________________________
Title:
- 7 -
<PAGE>
CONSENTS OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 9, 1996 relating
to the consolidated financial statements of DeCrane Aircraft Holdings, Inc.
which appears in such Prospectus. We also consent to the application of such
report to the Financial Statement Schedule for the three years ended December
31, 1995 listed under Item 16(b) of this Registration Statement when such
schedule is read in conjunction with the financial statements referred to in
our report. The audits referred to in such report also included this
schedule. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
PRICE WATERHOUSE LLP
Cleveland, Ohio
December , 1996
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 2, 1996 relating
to the financial statements of Aerospace Display Systems which appears in
such Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
December , 1996
<PAGE>
EXECUTION COPY
AMENDMENT NO. 3
AMENDMENT NO. 3, dated as of February 20, 1996, between DeCRANE
AIRCRAFT HOLDINGS, INC., a corporation duly organized and validly existing
under the laws of the State of Ohio (the "COMPANY"); each of the Subsidiaries
of the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (collectively, the "SUBSIDIARY GUARANTORS" and,
together with the Company, the "OBLIGORS"); each of the lenders that is a
signatory hereto identified under the caption "LENDERS" on the signature
pages hereto or that, pursuant to Section 12.06(b) of the Credit Agreement
(defined below), shall become a "Lender" under the Credit Agreement
(collectively, the "LENDERS"); THE PROVIDENT BANK, an Ohio banking
corporation, as Cash Management Agent (in such capacity, together with its
successors in such capacity, the "CASH MANAGEMENT AGENT"); and INTERNATIONALE
NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation, as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "AGENT").
The Obligors, the Lenders, the Cash Management Agent and the Agent
are parties to a Credit Agreement, dated as of November 2, 1994 (as
heretofore amended, the "CREDIT AGREEMENT"), providing, subject to the terms
and conditions thereof, for extensions of credit (by making loans and issuing
letters of credit) to be made by said Lenders to the Company in an aggregate
principal or face amount not exceeding $20,000,000. The Obligors, the
Lenders and the Agent wish to modify the Credit Agreement and, accordingly,
the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment, terms defined in the Credit Agreement are used herein as defined
therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the
date hereof, the Credit Agreement shall be amended as follows, and compliance
by the Obligors with certain provisions of the Credit Agreement waived as
follows:
2.01 NEW DEFINITIONS. The following defined terms shall be added
to Section 1.01 of the Credit Agreement in their respective appropriate
alphabetical locations:
<PAGE>
"'APPLICABLE ANNUALIZATION FACTOR' shall mean:
(a) for the fiscal quarter ending on March 31, 1996, 4.0;
(b) for the fiscal quarter ending on June 30, 1996, 2.0; and
(c) for the fiscal quarter ending on September 30, 1996, 1.33.
"'COMMODITY PRICE PROTECTION AGREEMENT' shall mean, for any Person,
an exchange-traded or over-the-counter commodity (including, without
limitation, foreign exchange) forward, future, option, swap, swaption,
cap, collar, floor or similar arrangement to which such Person is a
party, providing for the transfer or mitigation of commodity (including
foreign exchange) risks either generally or under specific
contingencies."
"'CORY PURCHASE AGREEMENT' shall mean the Stock Purchase Agreement,
dated January 1, 1995, between the Company, Cory and Gamberg."
"'CORY REPURCHASE' shall mean the purchase by the Company from
Gamberg of 25% of the outstanding capital stock of Cory pursuant to Cory
Purchase Agreement."
"'NASSAU' shall mean Nassau Capital Partners L.P., a Delaware
limited partnership, and NAS Partners I L.L.C., a Delaware limited
liability company."
"'NASSAU EQUITY INFUSION' shall mean the purchase by Nassau for
cash, on or about the date of Amendment No. 3 hereto, of shares of preferred
stock of the Company and Nassau Warrants for a purchase price equal to
$6,500,000 pursuant to the Nassau Purchase Agreement."
"'NASSAU/GAMBERG DEAL COSTS' shall mean all costs and expenses
incurred by the Company or any of its Subsidiaries in connection with
the transactions contemplated by the Cory Repurchase, the Nassau Equity
Infusion and Amendment No. 3 to the Credit Agreement, including (without
limitation) the following: (a) fees and expenses paid to the Lenders,
the Agent, Nassau, Electra and their respective counsel and (b)
investment banking, independent accountant, brokerage, arrangement and
commitment fees, commissions and expenses."
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<PAGE>
"'NASSAU PURCHASE AGREEMENT' shall mean the Securities Purchase
Agreement dated as of February 20, 1996 among the Company and Nassau."
"'NASSAU WARRANTS' shall mean the warrants to be acquired by Nassau,
pursuant to the terms of the Nassau Purchase Agreement."
"'QUALIFIED PUBLIC OFFERING' shall mean an underwritten public
offering of the common stock of the Company registered under the
Securities Act of 1933, as amended."
"'SENIOR SUBORDINATED DEBT AMENDMENTS' shall mean (i) Amendment No.
1, dated as of February 20, 1996, to the Securities Purchase Agreement
among the Company, Electra Investment Trust P.L.C. and Electra Associates,
Inc and (ii) Amendment No. 1, dated as of February 20, 1996, to the
Advisory Agreement among the Company and Electra Inc."
2.02 MODIFIED DEFINITIONS. The following definitions in Section 1.01
of the Credit Agreement shall be amended as follows:
(a) The existing definition of "Borrowing Base" shall be changed to be
a definition of "GROSS BORROWING BASE" and "Borrowing Base" shall be defined
as follows:
"'BORROWING BASE' shall mean, as at any date, the lesser of the
following:
(i) the sum of the Gross Borrowing Base MINUS the aggregate
amount payable by the Company on or after such date under the
Restrictive Covenant Agreement referred to in the Cory Purchase
Agreement, and
(ii) the aggregate amount of the Commitments on such date
MINUS the aggregate amount payable by the Company on or after such
date under the Restrictive Covenant Agreement referred to in the Cory
Purchase Agreement."
(b) The definition of "EBITDA" is hereby amended by replacing the
second parenthetical phrase therein with the following:
"(including, without limitation, (x) amortization of intangibles, (y)
amortization of Deal Costs (to the extent that such Deals Costs do not
exceed $2,500,000)
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<PAGE>
and (z) amortization of Nassau/Gamberg Deal Costs (to the extent that such
Nassau/Gamberg Deal Costs do not exceed $600,000) and amortization of
legal expenses incurred prior to February 20, 1996, in connection with a
derivative action maintained by Gamberg, on behalf of Cory, against the
Company and certain Subsidiary Guarantors (to the extent that such legal
expenses do not exceed $350,000))"
(c) The definition of "EBITDA RATIO" is hereby amended by adding the
following proviso immediately prior to the end of such definition:
"; PROVIDED that, with respect to any date prior to December 31, 1996,
'EBITDA RATIO' shall mean the ratio of (a) all Indebtedness of the
Obligors at such time to (b) the product of (x) EBITDA for the period
commencing on January 1, 1996 and ending on the fiscal quarter ending on
or most recently ended prior to such date and (y) the Applicable
Annualization Factor"
(d) The definition of "FIXED CHARGES RATIO" is hereby amended by
deleting the parenthetical in clause (a) thereof and adding the following
proviso immediately prior to the end of such definition:
"PROVIDED that, with respect to any date prior to December 31, 1996,
'FIXED CHARGES RATIO' shall mean the ratio of Cash Flow for the period
commencing on January 1, 1996 and ending on the fiscal quarter on or most
recently ended prior to such date to Debt Service for such period".
(e) The definition of "INTEREST COVERAGE RATIO" is hereby amended by
deleting the parenthetical in clause (a) thereof and adding the following
proviso immediately prior to the end of such definition:
"PROVIDED that, with respect to any date prior to December 31, 1996,
'INTEREST COVERAGE RATIO' shall mean the ratio of Cash Flow for the period
commencing on January 1, 1996 and ending on the fiscal quarter ending on
or most recently ended prior to such date to Interest Expense that is
payable in cash for such period".
(f) The definition of "INTEREST EXPENSE" is hereby amended by
relettering the existing clause "(b)" thereof as clause "(c)", deleting the
word "and" at the end of clause (a) and by adding the following new clause
(b):
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<PAGE>
"(b) the aggregate amount payable by the Company pursuant to Section
11.09 hereof (whether or not actually paid) during such period, and".
(g) The definition of "NET WORTH" is hereby amended by replacing clause
(e) thereof in its entirety with the following:
"(e) the value ascribed to the Warrants and the Nassau Warrants and the
cumulative effect of any change in the valuation of the Warrants and the
Nassau Warrants; PLUS".
(h) The definition of "SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
RATIO" is hereby amended by adding the following proviso immediately prior to
the end of such definition:
"PROVIDED that, with respect to any date prior to December 31, 1996,
'SELLING, GENERAL AND ADMINISTRATIVE EXPENSES RATIO' shall mean the ratio
of Selling, General and Administrative Expenses for the period commencing
on January 1, 1996 and ending on the fiscal quarter ending on or most
recently ended prior to such' date to Net Sales for such period".
Section 2.03 MANDATORY PREPAYMENTS.
(a) The Lenders waive the requirement of Section 2.10(c) of the Credit
Agreement that the Company prepay the Loans with the proceeds of the Nassau
Equity Infusion.
(b) Section 2.10(d) of the Credit Agreement is hereby amended by
replacing the reference therein to "60%" with a reference to "70%."
(c) Section 2.10(f)(i) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(i) first, the amount of the prepayment specified in such clauses
shall be applied to the installments of the Term Loans then outstanding in
the inverse order of the maturity thereof; and"
Section 2.04 LIMITATIONS ON CORY GUARANTEE. The proviso at the end of
the first sentence of Section 6.08 of the Credit Agreement and Section 6.10
of the Credit Agreement are hereby deleted.
Section 2.05 CORY REPURCHASE. The Lenders waive the provisions of
Section 9.05 of the Credit Agreement to the
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<PAGE>
extent necessary to permit the Company to consummate the Cory Repurchase.
The Lenders also waive the provisions of Section 9.24(b)(i) with respect to
the Senior Subordinated Debt Amendments to the extent necessary to permit the
Company to consummate the Cory Repurchase. In addition, Section 9.08(e) of
the Credit Agreement is hereby amended in its entirety to read as follows:
"(e) Investments in the capital stock of Cory made pursuant to the
Cory Purchase Agreement; and".
Section 2.06 NON-COMPETE OBLIGATIONS. Section 9.07 of the Credit
Agreement is hereby amended by relettering the existing clause "(e)" as
clause "(f)," by deleting the word "and" at the end of clause (d) and by
adding the following new clause (e):
"(e) Indebtedness, in an aggregate amount not to exceed $600,000,
consisting of obligations to Gamberg under the Restrictive Covenant
Agreement referred to in the Cory Purchase Agreement; and"
Section 2.07 LEVERAGE RATIO. The Lenders hereby waive, compliance by
the Obligors with the provisions of Section 9.10 of the Credit Agreement on
September 30, 1995 and December 31, 1995. In addition, the table in Section
9.10 of the Credit Agreement is hereby amended for all periods prior to March
31, 1997 to read as follows:
"PERIOD RATIO
------ -----
From January 1, 1996
through March 30, 1996 11.00 to 1
From March 31, 1996
through June 29, 1996 3.62 to 1
From June 30, 1996
through September 29, 1996 3.47 to 1
From September 30, 1996
through December 30, 1996 3.07 to 1
From December 31, 1996
through March 30, 1997 2.58 to 1"
Section 2.08 EBITDA RATIO. The Lenders hereby waive compliance by the
Obligors with the provisions of Section 9.11 of the Credit Agreement on
September 30, 1995 and on December 31, 1995. In addition, the table in
Section 9.11 of the Credit Agreement is hereby amended for all periods
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<PAGE>
after December 31, 1995 and prior to March 31, 1997 to read as follows:
"PERIOD RATIO
------ -----
From March 31, 1996
through June 29, 1996 7.15 to 1
From June 30, 1996
through September 29, 1996 4.89 to 1
From September 30, 1996
through December 30, 1996 3.68 to 1
From December 31, 1996
through March 30, 1997 2.97 to 1"
Section 2.09 NET WORTH. The Lenders hereby waive compliance by the
Obligors with the provisions of Section 9.12 of the Credit Agreement on
September 30, 1995 and December 31, 1995. In addition, the table in Section
9.12 of the Credit Agreement is hereby amended for all periods prior to March
31, 1997 to read as follows:
"PERIOD AMOUNT
------ ------
From January 1, 1996
through March 30, 1996 $ 3,000,000
From March 31, 1996
through June 29, 1996 $ 9,922,000
From June 30, 1996
through September 29, 1996 $10,284,000
From September 30, 1996
through December 30, 1996 $11,225,000
From December 31, 1996
through March 30, 1997 $12,410,000"
Section 2.10 FIXED CHARGES RATIO. The Lenders hereby waive compliance
by the Obligors with the provisions of Section 9.14 of the Credit Agreement
on December 31, 1995. In addition, the table in Section 9.14 of the Credit
Agreement is hereby amended for all periods after December 31, 1995 and prior
to March 31, 1997 to read as follows:
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<PAGE>
"PERIOD RATIO
------ -----
From March 31, 1996
through June 29, 1996 0.26 to 1
From June 30, 1996
through September 29, 1996 0.74 to 1
From September 30, 1996
through December 30, 1996 0.99 to 1
From December 31, 1996
through March 30, 1997 1.21 to 1"
Section 2.11 INTEREST COVERAGE RATIO. The table in Section 9.16(a) of
the Credit Agreement is hereby amended for all periods after December 31,
1995 and prior to March 31, 1997 to read as follows:
"PERIOD RATIO
------ -----
From March 31, 1996
through June 29, 1996 0.41 to 1
From June 30, 1996
through September 29, 1996 1.17 to 1
From September 30, 1996
through December 30, 1996 1.61 to 1
From December 31, 1996
through March 30, 1997 2.02 to 1"
Section 2.12 SELLING, GENERAL AND ADMINISTRATIVE EXPENSE RATIO. The
table in Section 9.16(b) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"PERIOD RATIO
------ -----
From March 31, 1996
through June 29, 1996 0.2114 to 1
From June 30, 1996
through September 29, 1996 0.1907 to 1
From September 30, 1996
through December 30, 1996 0.1810 to 1
From December 31, 1996
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<PAGE>
through March 30, 1997 0.1750 to 1
From March 31, 1997 and
at all times thereafter 0.1700 to 1"
Section 2.13 AGENCY AND CASH MANAGEMENT FEES. Section 11.09 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"11.09 AGENCY FEE; CASH MANAGEMENT FEE. Until payment in full of
the principal of and interest on the Loans and all other amounts payable
by the Company hereunder and termination of the Commitments hereunder,
(a) the Company will pay to the Agent an agency fee of $75,000
per annum, which shall accrue on the first Business Day of each
fiscal year of the Company (commencing on the first Business Day of
1996) and shall be payable quarterly in arrears on the last Business
Day of each fiscal quarter (commencing on the Business Day
immediately preceding March 31, 1996), and
(b) the Company will pay to the Cash Management Agent a cash
management fee of $25,000 per annum, which shall accrue on the first
Business Day of each fiscal year of the Company (commencing on the
first Business Day of 1996) and shall be payable quarterly in arrears
on the last Business Day of each fiscal quarter (commencing on the
Business Day immediately preceding March 31, 1996);
PROVIDED that, upon payment in full of the principal of and interest on
the Loans and the termination of the Commitments hereunder, accrued but
unpaid amounts under this Section 11.09 shall automatically become due and
payable."
Section 2.14 PREPAYMENT FEES. The Credit Agreement is hereby amended
by adding the following Section 2.11:
"2.11 PREPAYMENT FEES. The Company agrees to pay the following
prepayment fees:
(a) A prepayment fee of $400,000 shall be due and payable by
the Company to the Agent, for account of the Lenders, upon repayment
of all principal and interest on the Loans and termination of the
Commitments hereunder pursuant to Section 2.09 or Section 2.10 hereof
or
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<PAGE>
otherwise (exclusive, however, of repayment pursuant to paragraphs
(a), (b) or (d) of Section 2.10), if the same shall occur on or prior
to February 20, 1997.
(b) A prepayment fee of $200,000 shall be due and payable by
the Company to the Agent, for account of the Lenders, upon repayment
of all principal and interest on the Loans and termination of the
Commitments hereunder pursuant to Section 2.09 or Section 2.10 hereof
or otherwise (exclusive, however, or repayment pursuant to paragraphs
(a), (b) or (d) of Section 2.10), if the same shall occur after
February 20, 1997 and on or prior to February 20, 1998.
Notwithstanding the foregoing, no such prepayment fee shall be payable
upon repayment of all principal and interest on the Loans and termination
of the Commitments hereunder pursuant to Section 2.10(c) hereof in
connection with a Qualified Public Offering."
Section 2.15 FOREIGN EXCHANGE PROTECTION. Section 9.08(f) of the
Credit Agreement in hereby amended in its entirety to read as follows:
"(f) Interest Rate Protection Agreements and Commodity Price
Protection Agreements entered into by the Company pursuant to Section 9.18
hereof."
In addition, Section 9.18 of the Credit Agreement is hereby amended by
renaming said Section "INTEREST RATE AND COMMODITY PRICE PROTECTION
AGREEMENTS" and by adding the following at the end of said Section:
"The Company will, by no later than ten Business Days after the
date hereof and at all time thereafter to and including December 31,
1996, maintain in full force and effect one or more Commodity Price
Protection Agreements with ING (or an affiliate thereof) that
effectively enables the Company (in a manner satisfactory to the
Majority Lenders), as at any date, to protect itself against the
Swiss franc exposure of Unidec for an amount of at least Sfr 585,000
per month. For each day after such tenth day on which the Company
shall not have entered into such Commodity Price Protection
Agreements, the Company shall pay to the Agent, for account of the
Lenders, a fee equal to $500, payable on demand."
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<PAGE>
Section 2.16 MODIFICATIONS TO CERTAIN DOCUMENTS. Section 9.24 of
the Credit Agreement is hereby amended by adding to clause (b)(i) thereof,
immediately following "Senior Subordinated Debt" the following:
"or the Cory Repurchase, or the Nassau Warrants or Section 7
of the Nassau Purchase Agreement".
Section 3. REPRESENTATIONS AND WARRANTIES. Each of the Obligors
represents and warrants to the Lenders that (i) the representations and
warranties set forth in Section 8 of the Credit Agreement are true and
complete on the date hereof, as if made on and as of the date hereof (or,
if such representation warranty is expressly stated to have been made as
of a specific date, as of such specific date), and as if each reference in
said Section 8 to "this Agreement" included reference to this Amendment
No. 3 and (ii) after giving effect to this Amendment No. 3, no Default
shall have occurred and be continuing.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2 above, the
amendment to the Credit Agreement set forth in said Section 2 shall become
effective, as of the date hereof, subject to the satisfaction of the following
conditions:
4.01 EXECUTION; DUE AUTHORIZATION. This Amendment No. 3 shall
have been duly executed and delivered by the Company, the Subsidiary
Guarantors, the Agent and the Majority Lenders. In addition, the Agent
shall have received resolutions of the Board of Directors of the Company
authorizing the transactions contemplated by this Agreement, including
(without limitation) the amendments to the Senior Lender Warrant
Agreements referred to in Section 4.09 hereof.
4.02 CORY PURCHASE AGREEMENT. The Agent shall have received a
copy of the Cory Purchase Agreement and all documents and agreements
relating thereto, each in form and substance satisfactory to the Agent,
certified by the Company to be a true and complete copies of the originals
thereof, and each of which shall be in full force and effect.
4.03 NASSAU PURCHASE AGREEMENT AND NASSAU WARRANTS. The Agent
shall have received a copies of the Nassau Purchase Agreement and all
documents and agreements relating thereto (including the Nassau Warrants),
each in form and substance satisfactory to the Agent, certified by the
Company to be true and complete copies of the originals thereof, and each
of which shall be in full force and effect prior to or concurrently with
the effectiveness of this Amendment.
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<PAGE>
4.05 SUBORDINATED DEBT DOCUMENTS. The Agent shall have received a
copy of the Senior Subordinated Debt Amendments, in form and substance
satisfactory to the Agent (and which, in any event shall include
covenant levels that are at least 10% more favorable to the Company than
those set forth in the Credit Agreement as amended by this Amendment No.
3), certified by the Company to be true and complete copies of the
originals thereof, each of which shall be in full force and effect
and shall constitute all waivers necessary by the holders of the
Senior Subordinated Debt to permit the Cory Repurchase, the Nassau
Equity Infusion and the transactions contemplated thereby and hereby.
4.06 EQUITY PROCEEDS: DEAL COSTS. Evidence satisfactory to
the Agent that (a) the Company has received from Nassau cash proceeds of
at least $6,500,000 from the Nassau Equity Infusion, (b) the aggregate
amount of Nassau/Gamberg Deal Costs do not and will not substantially
exceed $600,000 and (c) the proceeds of the Nassau Equity Infusion will
be sufficient to pay substantially all of the Nassau/Gamberg Deal Costs.
4.07 FEES AND EXPENSES. The Agent shall have received, for account
of the Lenders, a fee in an amount equal to $75,000. In addition, the
Company shall have paid, or reimbursed the Agent for paying, the fees and
expenses of Mayer, Brown & Platt, special New York counsel to ING, in
connection with this Amendment No. 3 and the transactions contemplated
hereby.
4.08 SECURITY. The Agent shall have received all certificates
evidencing stock of Cory acquired by the Company in connection with the
Cory Repurchase, together with undated stock powers duly executed in blank.
4.09 AMENDMENT TO WARRANTS. The Company, ING and Provident shall
have entered into an amendment to each of the Warrants to which ING or
Provident is a party, in substantially the form of Exhibit A hereto. In
addition, the Agent shall have received copies of amendments or other
documents evidencing modifications to any other Warrants, each in form and
substance satisfactory to the Agent, certified by the Company to be true
and complete copies of the originals thereof.
4.10 LETTER REGARDING FUTURE SENIOR FINANCINGS. The Company shall
have executed and delivered to ING and Provident a letter in substantially
the form of Exhibit B hereto.
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<PAGE>
Section 5. MISCELLANEOUS. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This
Amendment 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 by signing any such
counterpart. This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
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<PAGE>
SUBSIDIARY GUARANTORS
TRI-STAR HOLDINGS, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies, Inc., as
as general partner
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
UNIDEC, S.A.
By
-------------------------------------
Title:
CORY HOLDINGS, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
CORY COMPONENTS, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
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<PAGE>
SUBSIDIARY GUARANTORS
TRI-STAR HOLDINGS, INC.
By
-------------------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By
-------------------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By
-------------------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies, Inc., as
as general partner
By
-------------------------------------
Title:
UNIDEC, S.A.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
CORY HOLDINGS, INC.
By
-------------------------------------
Title:
CORY COMPONENTS, INC.
By
-------------------------------------
Title:
-15-
<PAGE>
HOLLINGSEAD INTERNATIONAL, INC.
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By /s/ [ILLEGIBLE]
-------------------------------------
Title:
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<PAGE>
LENDERS
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By /s/ [ILLEGIBLE]
-------------------------------------
Title: Senior Associate
THE PROVIDENT BANK
By
-------------------------------------
Title:
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<PAGE>
LENDERS
INTERNATIONAL NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By
-------------------------------------
Title:
THE PROVIDENT BANK
By /s/ [ILLEGIBLE]
-------------------------------------
Title: Vice President
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<PAGE>
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION,
as Agent
By /s/ [ILLEGIBLE]
-------------------------------------
Title: Senior Associate
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<PAGE>
EXHIBIT A
[Letterhead of DeCrane Aircraft Holdings, Inc.]
February 20, 1996
To: Internationale Nederlanden (U.S.)
Capital Corporation
The Provident Bank
Re: FUTURE SENIOR FINANCINGS
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of November 2,
1994 (the "CREDIT AGREEMENT") among DeCrane Aircraft Holdings,
Inc. (the "COMPANY"), the subsidiaries of the Company parties
thereto, the lenders referred to therein and Internationale
Nederlanden (U.S.) Capital Corporation ("ING"), as Agent. As
consideration for your agreeing to enter into Amendment No. 3 to
the Credit Agreement, the Company hereby agrees as follows:
Section 1. RIGHT TO MAKE FIRST PROPOSAL. If the Company
wishes to raise additional senior financing, or to refinance the
Credit Agreement (collectively, a "FUTURE FINANCING"), the
Company shall (before requesting proposals from any other
possible source or arranger of such Future Financing (an "OTHER
FINANCING SOURCE") and before advising any Other Financing Source
of the Company's desire to raise such Future Financing) advise
each of you of its desire to raise such Future Financing and give
you the opportunity to make a proposal to the Company regarding
the terms and conditions on which ING (or both of you together)
would propose to arrange such Future Financing.
Section 2. RIGHT TO MATCH OTHER PROPOSALS. If, after
receiving proposals from you pursuant to Section 1 hereof, the
Company wishes to solicit additional proposals for raising such
Future Financing, it may do so, PROVIDED that, before granting a
mandate to an Other Financing Source or accepting any proposal or
commitment presented by an Other Financing Source, it shall
disclose to you the terms and conditions of the proposal or
commitment presented by such Other Financing Source and, if ING
(or both of you acting together) agree to make a proposal or
commitment on substantially the same terms and conditions as (or
terms and condition preferable to) the Other Financing Source's
proposal or commitment, ING or both of you acting together (as
<PAGE>
the case may be) shall be given the exclusive right to arrange
such Other Financing.
Section 3. TERMINATION; SURVIVAL. The Company's
obligations under this letter shall terminate on the second
anniversary of the date hereof. The Company's obligations under
this letter shall survive any termination of the Credit
Agreement.
Section 4. GOVERNING LAW. This letter shall be governed
by, and construed in accordance with, the law of the State of New
York.
Very truly yours,
DeCRANE AIRCRAFT HOLDINGS, INC.
By
----------------------------
Title:
-2-
<PAGE>
EXHIBIT B
[Form of Amendment to Senior Lender Warrant Agreement]
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of February 20, 1996 (this "Amendment"), to
the Common Stock Purchase Warrant, dated as of November 2, 1994 (the
"Warrant"), entitling INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
a Delaware corporation ("ING"), to purchase Common Stock of DeCRANE AIRCRAFT
HOLDINGS, INC., an Ohio corporation (the "CORPORATION"), which includes a
guarantee of the obligations of the Corporation thereunder by each of the
Subsidiaries of the Corporation identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereto (collectively, the "SUBSIDIARY
GUARANTORS"). Except as otherwise defined in this Amendment, terms defined
in the Warrant are used herein as defined therein.
I. AMENDMENTS
The Corporation, the Subsidiary Guarantors and ING wish to
amend the Warrant and, accordingly, the parties hereto hereby
agree that, effective as of the date hereof, the Warrant shall be
amended as follows:
A. NEW DEFINITION. The following defined term shall
be added to Section 1.1 of the Warrant in its
appropriate alphabetical location:
"'NASSAU PURCHASE AGREEMENT' shall mean the
Securities Purchase Agreement, dated February 20, 1996,
among the Corporation, Nassau Capital Partners L.P. and
NAS Partners I L.L.C."
B. REMOVAL OF LIMITATIONS ON CORY GUARANTEE. The provisos at the
end of the first sentence of Section 8.6 of the Warrant and
Section 8.8 of the Warrant are hereby deleted.
C. PUT FINANCING. Section 5.2(i) is hereby amended in its
entirety to read as follows:
"(i) Notwithstanding anything to the contrary in this Section 5.2:
Immediately upon receipt of notice from the holders of warrants
issued pursuant to the Senior Subordinate Documents, the Securities
Purchase Agreement or the Nassau Purchase Agreement (such holders
being referred to herein collectively as the "OTHER HOLDERS" and,
together with the Holders, the
<PAGE>
"PUT HOLDERS") that such Other Holder intends to exercise put
rights in connection with the repurchase of warrants (or shares
issuable upon exercise of such warrants) by the Corporation, the
Corporation shall, before repurchasing any such warrants (or shares
issuable upon exercise of such warrants), give written notice
thereof to the Holders. For a period of twenty (20) days following
receipt of such notice, each Put Holder, shall be entitled, by
written notice to the Corporation, to elect to require the
Corporation to repurchase for cash its pro rata share of warrants
(or shares issuable upon exercise of such warrants), on the basis
of the number of shares of Common Stock then held or issuable upon
exercise of all of the warrants held by the Put Holders and each
such Put Holder. If, at the end of the expiration of such
twenty-day period, any Put Holders have not elected to have the
Corporation repurchase warrants (or shares issuable upon exercise
of such warrants), the Corporation shall repurchase only those
warrants (or shares issuable upon exercise of such warrants) for
which notice has been received.
If such event occurs on or prior to December 31, 2000, the holders
of the warrants issued pursuant to the Securities Purchase
Agreement (the "ELECTRA WARRANTS") shall only be entitled to
include up to 40% of the Common Stock issuable upon exercise of the
Electra Warrants for the purposes of calculating the pro rata share
of such holders. Penalty Warrants (as defined in the Securities
Purchase Agreement) shall be excluded for purposes of calculating
the pro rata share of the holders of the Electra Warrants.
The repurchase of a Holder's Warrants (or Warrant Shares) shall
occur within (10) Business Days following the end of the
above-described twenty-day period. At the Holder's option, any
repurchase obligation not satisfied in full in cash at such time
may be evidenced by a promissory note of the Corporation due within
366 days and bearing interest at a rate of 14% per annum.
Notwithstanding anything to the contrary is this Section 5.2(i),
the Company shall not make any payment to the holders of the
warrants issued pursuant to the Nassau Purchase Agreement in
satisfaction of such holders' put rights under such warrants or the
Nassau Purchase Agreement, until after such time as the Company's
payment obligations to the Holders under this Section 5.2(i) have
been satisfied in full in cash."
-2-
<PAGE>
II. REPRESENTATIONS AND WARRANTIES
The Corporation represents and warrants to the Holder that
the representations and warranties set forth in Section 6.2 of
the Warrant are true and complete on the date hereof, as if made
on and as of the date hereof, and as if each reference in said
Section 6.2 to "this Warrant" included reference to this
Amendment No. 1.
III. MISCELLANEOUS
Except as herein provided, the Warrant shall remain
unchanged and in full force and effect. This Amendment 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 by
signing any such counterpart. This Amendment shall be governed
by, and construed in accordance with, the internal laws of the
State of New York.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By
----------------------------
Title:
-4-
<PAGE>
SUBSIDIARY GUARANTORS
TRI-STAR HOLDINGS, INC.
By
--------------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By
--------------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By
--------------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies, Inc., as
as general partner
By
----------------------------
Title:
UNIDEC, S.A.
By
--------------------------------
Title:
CORY HOLDINGS, INC.
By
--------------------------------
Title:
CORY COMPONENTS, INC.
By
--------------------------------
Title:
-5-
<PAGE>
HOLLINGSEAD INTERNATIONAL, INC.
By
--------------------------------
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By
--------------------------------
Title:
-6-
<PAGE>
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By
--------------------------------
Title:
-7-
<PAGE>
EXHIBIT 10.14
GENERAL TERMS AGREEMENT
between
THE BOEING COMPANY
and
CORY COMPONENTS
Number 6-5752-0002
i
<PAGE>
GENERAL TERMS AGREEMENT
TABLE OF CONTENTS
SECTION TITLE
- ------- ------
1.0 DEFINITIONS
2.0 ISSUANCE OF PURCHASE ORDERS
AND APPLICABLE TERMS
2.1 Issuance of Purchase Orders
2.2 Acceptance of Purchase Orders
2.3 Written Authorization to Proceed
2.4 Rejection of Purchase Orders
3.0 TITLE AND RISK OF LOSS
4.0 DELIVERY
4.1 Requirements
4.2 Delay
4.3 Notice of Labor Disputes
5.0 ON-SITE REVIEW AND RESIDENT
REPRESENTATIVES
5.1 Review
5.2 Resident Representatives
6.0 INVOICE AND PAYMENT
7.0 PACKING AND SHIPPING
8.0 QUALITY ASSURANCE, INSPECTION
REJECTION AND ACCEPTANCE
8.1 Controlling Document
8.2 Seller's Inspection
8.3 Boeing's Inspection and Rejection
8.4 Federal Aviation Administration or
Equivalent Government Agency Inspection
8.5 Retention of Records
ii
<PAGE>
SECTION TITLE
- ------- -----
8.6 Source Inspection
8.7 Language for Technical Information
9.0 EXAMINATION OF RECORDS
10.0 CHANGES
10.1 General
10.2 Model Mix
11.0 PRODUCT ASSURANCE
12.0 TERMINATION FOR CONVENIENCE
13.0 EVENTS OF DEFAULT AND REMEDIES
14.0 EXCUSABLE DELAY
15.0 SUSPENSION OF WORK
16.0 TERMINATION OR CANCELLATION: INDEMNITY
AGAINST SUBCONTRACTOR'S CLAIMS
17.0 ASSURANCE OF PERFORMANCE
18.0 RESPONSIBILITY FOR PROPERTY
19.0 LIMITATION OF SELLER'S RIGHT TO
ENCUMBER ASSETS
20.0 PROPRIETARY INFORMATION AND
ITEMS
21.0 COMPLIANCE WITH LAWS
22.0 INTEGRITY IN PROCUREMENT
23.0 INFRINGEMENT
24.0 BOEING'S RIGHTS IN SELLER'S, PATENTS
COPYRIGHTS, TRADE SECRETS AND TOOLING
25.0 NOTICES
25.1 Addresses
25.2 Effective Date
25.3 Approval or Consent
iii
<PAGE>
SECTION TITLE
- ------- ------
26.0 PUBLICITY
27.0 PROPERTY INSURANCE
27.1 Insurance
27.2 Certificate of Insurance
27.3 Notice of Damage or Loss
28.0 RESPONSIBILITY FOR PERFORMANCE
28.1 Subcontracting
28.2 Reliance
28.3 Assignment
29.0 NON-WAIVER
30.0 HEADINGS
31.0 PARTIAL INVALIDITY
32.0 APPLICABLE LAW
33.0 AMENDMENT
34.0 LIMITATION
35.0 TAXES
35.1 Inclusion of Taxes in Price
35.2 Litigation
35.3 Rebates
36.0 FOREIGN PROCUREMENT OFFSET
37.0 ENTIRE AGREEMENT/ORDER
OF PRECEDENCE
37.1 Entire Agreement
37.2 Incorporated By Reference
37.3 Order of Precedence
37.4 Disclaimer
iv
<PAGE>
AMENDMENT
AMEND
NUMBER DESCRIPTION DATE APPROVAL
- ------ ----------- ---- --------
v
<PAGE>
GENERAL TERMS AGREEMENT
RELATING TO
BOEING PRODUCTS
THIS GENERAL TERMS AGREEMENT ("Agreement") is entered into as of (DATE), by
and between CORY COMPONENTS, a California corporation, with its principal
office in El Segundo, CA, ("Seller"), and The Boeing Company, a Delaware
corporation with its principal office in Seattle, Washington acting by and
through its division the Boeing Commercial Airplane Group ("Boeing").
RECITALS
A. Boeing produces commercial airplanes.
B. Seller manufactures and sells certain goods and services for use in the
production and support of such aircraft.
C. Seller desires to sell and Boeing desires to purchase certain of Seller's
goods and services in accordance with the terms set forth in this
Agreement.
Now therefore, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
1
<PAGE>
AGREEMENTS
1.0 DEFINITIONS
The definitions set forth below shall apply to the following terms as
they are used in this Agreements, any Order, or any related Special
Business Provisions ("SBP"). Words importing the singular number shall
also include the plural number and vice versa.
(a) "Customer" means any owner, operator or user of Products and any
other individual, partnership, corporation or entity which has or
acquires any interest in the Products from, through or under
Boeing.
(b) "Derivative" means any new model airplane designated by Boeing as
a derivative of an existing Model airplane and which: (1) has the
same number of engines as the existing model airplane; (2)
utilizes essentially the same aerodynamic and propulsion design,
major assembly components, and systems as the existing model
airplane and (3) achieves other payload/range combinations by
changes in body length, engine thrust, or variations in certified
gross weight.
(c) "Drawing" means an automated or manual depiction of graphics or
technical information representing a Product or any part thereof
and which includes the parts list and specifications relating
thereto.
(d) "End Item Assembly" means any Product which is described by a
single part number and which is comprised of more than one
component part.
(e) "FAA" means the United States Federal Aviation Administration or
any successor agency thereto.
(f) "FAR" means the Federal Acquisition Regulations in effect on the
date of this Agreement.
(g) "Material Representative" means the individual designated from
time to time, by Boeing as being primarily responsible for
interacting with Seller regarding this Agreement and any Order.
(h) "Order" means each purchase order issued by Boeing and accepted
by Seller under the terms of this Agreement. Each Order is a
contract between Boeing and Seller.
(i) "Product" means goods, including components and parts thereof,
services, documents, data, software, software documentation and
other information or items furnished or to be furnished to Boeing
under any Order, including Tooling except for Rotating Use Tools.
(j) "Purchased on Assembly Production Detail Part (POA)" means a
component part of an End Item Assembly.
(k) "Shipset" means the total quantity of a given part number or
material necessary for production of one airplane.
2
<PAGE>
(l) "Spare" means any Product, regardless of whether the Product is
an End Item Assembly or a Purchased on Assembly Production Detail
Part, which is intended for use or sale as a spare part or a
production replacement.
(m) "Tooling" means all tooling, as defined in Boeing Document
M31-24, "Boeing Suppliers Tooling Manual," and/or described on
any Order, including but not limited to Boeing-Use Tooling,
Supplier-Use Tooling and Common-Use Tooling as defined in Boeing
Document D6-49004, "Operations General Requirements for
Suppliers," and Rotating-Use Tooling as defined in Boeing
Document M31-13, "Accountability of Inplant/Outplant Special
(Contract) Tools." For purposes of this Agreement, in the
documents named in this subparagraph, the term "Supplier Use
Tooling" shall be changed to Seller Use Tooling.
2.0 ISSUANCE OF ORDERS AND APPLICABLE TERMS
2.1 ISSUANCE OF ORDERS
Boeing may issue Orders to Seller from time to time. Each Order shall
contain a description of the Products ordered, a reference to the
applicable specifications and Drawings, the quantities and prices, the
delivery schedule, the terms and place of delivery and any special
conditions.
Each Order which incorporates this Agreement shall be governed by and
be deemed to include the provisions of this Agreement. Purchase Order
Terms and Conditions, Form D1-4100-4045, Form P252T and any other
purchase order terms and conditions which may conflict with this
Agreement, do not apply to the Orders.
2.2 ACCEPTANCE OF ORDERS
Each Order is Boeing's offer to Seller and acceptance is strictly
limited to its terms. Boeing will not be bound by and specifically
objects to any term or condition which is different from or in
addition to the provisions of the Order, whether or not such term or
condition will materially alter the Order. Seller's commencement of
performance or acceptance of the Order in any manner shall
conclusively evidence Seller's acceptance of the Order as written.
Boeing may revoke any Order prior to Boeing's receipt of Seller's
written acceptance or Seller's commencement of performance.
2.3 WRITTEN AUTHORIZATION TO PROCEED
Boeing's Material Representative may give written authorization to
Seller to commence performance before Boeing issues an Order. If
Boeing in its written authorization specifies that an Order will be
issued, Boeing and Seller shall proceed as if an Order had been
issued. This Agreement, the applicable SBP and the terms stated in the
written authorization shall be deemed to be a part of Boeing's offer
and the parties shall promptly agree on any open Order terms. If
Boeing does not specify in its written authorization that an Order
shall be issued, Boeing's obligation is strictly limited to the terms
of the written authorization. For purposes of this Section 2.3 only,
written authorization includes electronic transmission chosen by
Boeing.
3
<PAGE>
If Seller commences performance before an Order is issued or without
receiving Boeing's prior authorization to proceed, such performance
shall be at Seller's expense.
2.4 REJECTION OF PURCHASE ORDER
Any rejection by Seller of an Order shall specify the reasons for
rejection and any changes or additions that would make the Order
acceptable to Seller; provided, however, that Seller may not reject
any Order for reasons inconsistent with the provisions of this
Agreement or the applicable SBP.
3.0 TITLE AND RISK OF LOSS
Title to and risk of any loss of or damage to the Products shall pass
from Seller to Boeing at the F.O.B. point as specified in the
applicable Order, except for loss or damage thereto resulting from
Seller's fault or negligence. Passage of title on delivery does not
constitute Boeing's acceptance of Products.
4.0 DELIVERY
4.1 REQUIREMENTS
Deliveries shall be strictly in accordance with the quantities, the
schedule and other requirements specified in the applicable Order.
Seller may not make early or partial deliveries without Boeing's prior
written authorization. Deliveries which fail to meet Order
requirements may be returned to Seller at Seller's expense.
4.2 DELAY
Seller shall notify Boeing immediately, of any circumstances that may
cause a delay in delivery, stating the estimated period of delay and
the reasons therefor. If requested by Boeing, Seller shall use
additional effort, including premium effort, and shall ship via air or
other expedited routing to avoid or minimize delay to the maximum
extent possible. All additional costs resulting from such premium
effort or premium transportation shall be borne by Seller with the
exception of such costs attributable to delays caused directly by
Boeing. Nothing herein shall prejudice any of the rights or remedies
provided to Boeing in the applicable Order or by law.
4.3 NOTICE OF LABOR DISPUTES
Seller shall immediately notify Boeing of any actual or potential
labor dispute that may disrupt the timely performance of an Order.
Seller shall include the substance of this Section 4.3, including this
sentence, in any subcontract relating to an Order if a labor dispute
involving the subcontractor would have the potential to delay the
timely performance of such Order. Each subcontractor, however, shall
only be required to give the necessary notice and information to its
next higher-tier subcontractor.
5.0 ON-SITE REVIEW AND RESIDENT REPRESENTATIVES
5.1 REVIEW
At Boeing's request, Seller shall provide at Boeing's facility or at a
place designated by Boeing, a review explaining the status of the
Order, actions taken or planned relating to the Order and any other
relevant information. Nothing herein may be construed as a waiver of
Boeing's rights to proceed against Seller because of any delinquency.
BCAG CONTRACT 07-01-95 4
<PAGE>
Boeing's authorized representatives may enter Seller's plant at all
reasonable times to conduct preliminary inspections and tests of the
Products and work-in-process. Seller shall include in its subcontracts
issued in connection with an Order a like provision giving Boeing the
right to enter the premises of Seller's subcontractors. When requested
by Boeing, Seller shall accompany Boeing to Seller's subcontractors.
5.2 RESIDENT REPRESENTATIVES
Boeing may in its discretion and for such periods as it deems
necessary assign resident personnel at Seller's facilities. Seller
shall furnish, free of charge, all office space, secretarial service
and other facilities and assistance reasonably required by Boeing's
representatives at Seller's plant. The resident team will function
under the guidance of Boeing's manager. The resident team will provide
communication and coordination to ensure timely performance of the
Order. Boeing's resident team shall be allowed access to all work
areas, Order status reports and management review necessary to assure
timely performance and conformance with the requirements of each
Order. Notwithstanding such assistance, Seller remains solely
responsible for performing in accordance with each Order.
6.0 INVOICE AND PAYMENT
Unless otherwise provided in the applicable Order, invoicing and
payment shall be in accordance with SBP Section 7.0.
7.0 PACKING AND SHIPPING
Seller shall (a) prepare for shipment and suitably pack all Products
to prevent damage or deterioration, (b) where Boeing has not
identified a carrier, secure lowest transportation rates, (c) comply
with the appropriate carrier tariff for the mode of transportation
specified by Boeing and (d) comply with any special instructions
stated in the applicable Order.
Boeing shall pay no charges for preparation, packing, crating or
cartage unless stated in the applicable Order. Unless otherwise
directed by Boeing, all standard routing shipments forwarded on one
day must be consolidated. Each container must be consecutively
numbered and marked as set forth below. Container and Order numbers
must be indicated on the applicable bill of lading. Two copies of the
packing sheets must be attached to the No. 1 container of each
shipment and one copy in each individual container. Each pack sheet
must include as a minimum the following: a) Seller's name, address and
phone number; b) Order and item number; c) ship date for the Products;
d) total quantity shipped and quantity in each container, if
applicable; e) legible pack slip number; f) nomenclature; g) unit of
measure; h) ship to if other than Boeing; i) warranty data and
certification, as applicable; j) rejection tag, if applicable; k)
Seller's certification that Products comply with Order requirements;
and, l) identification of optional material used, if applicable.
Products sold F.O.B. place of shipment must be forwarded collect.
Seller may not make any declaration concerning the value of the
Products shipped, except on Products where the tariff rating or rate
depends on the released or declared value, and in such event the value
shall be released or declared at the maximum value for the lowest
tariff rating or rate.
5
<PAGE>
The following markings shall be included on each unit container: a)
Seller's name; b) Seller's part number, if applicable; c) Boeing part
number, if applicable; d) part nomenclature; e) Order number; f)
quantity of Products in container; g) unit of measure; h) serial
number, if applicable; i) date (quarter/year) identified as assembly
or rubber cure date, if applicable; j) precautionary handling
instructions or marking as required.
In addition, the following markings/labels shall be included on each
shipping container: a) Name and address of consignee; b) Name and
address of consigner; c) Order number; d) Part number as shown on the
Order; e) Quantity of Products in container; f) Unit of measure; g)
Box number; h) Total number of boxes in shipment; and, i)
Precautionary handling, labeling or marking as required.
8.0 QUALITY ASSURANCE, INSPECTION, REJECTION, & ACCEPTANCE
8.1 CONTROLLING DOCUMENT
The controlling quality assurance document for Orders shall be as set
forth in the SBP Section 4.0.
8.2 SELLER'S INSPECTION
Seller shall inspect or otherwise verify that all Products and
components thereof, including those procured from or furnished by
subcontractors or Boeing, comply with the requirements of the Order
prior to shipment to Boeing or Customer. Seller shall be responsible
for all tests and inspections of the Product and any component thereof
during receiving, manufacture and Seller's final inspection. Seller
shall include on each packing sheet a certification that the Products
comply with the requirements of the Order.
8.2.1 SELLER'S DISCLOSURE
Seller will immediately notify Boeing when discrepancies in Seller's
processes or Product are discovered or suspected for Products Seller
has delivered.
8.3 BOEING'S INSPECTION AND REJECTION
Unless otherwise specified on an Order, Products shall be subject to
final inspection and acceptance by Boeing at destination,
notwithstanding any payment or prior inspection. Boeing may reject any
Product which does not strictly conform to the requirements of the
applicable Order. Boeing shall by notice, rejection tag or other
communication notify Seller of such rejection. Whenever possible,
Boeing may coordinate with Seller prior to disposition of the rejected
Product(s), however, Boeing shall retain final disposition authority
with respect to all rejections. At Seller's risk and expense, all such
Products will be returned to Seller for immediate repair, replacement
or other correction and redelivery to Boeing; provided, however, that
with respect to any or all of such Products and at Boeing's election
and at Seller's risk and expense, Boeing may: (a) hold, retain, or
return such Products without permitting any repair, replacement or
other correction by Seller; (b) hold or retain such Products for
repair by Seller or, at Boeing's election, for repair by Boeing with
such assistance from Seller as Boeing may require; (c) hold such
Products until Seller has delivered conforming replacements for such
Products; (d) hold such Products until conforming replacements are
obtained from a third party; (e) return such Products with
instructions to Seller as to whether the Products shall be repaired or
replaced and as to the
6
<PAGE>
manner of redelivery or (f) return such Products with instructions
that they be scrapped. Upon final disposition by Boeing that the
non-conforming Product(s) are not subject to repair and prior to the
Products being scrapped. Seller shall render the Product(s) unusable.
Seller shall also maintain, pursuant to their quality assurance
system, records certifying destruction of the applicable Products.
Said certification shall state the method and date of mutilation and
destruction of the subject Product(s). Boeing shall have the right to
review and inspect these records at any time it deems necessary.
Failure to comply with these requirements shall be a material breach
of this Agreement and grounds for default pursuant to GTA Section
13.0. All repair, replacement and other corrections and redelivery
shall be completed within such time as Boeing may require. All costs
and expenses, loss of value and any other damages incurred as a result
of or in connection with nonconformance and repair, replacement or
other correction may be recovered from Seller by an equitable price
reduction, set-off or credit against any amounts that may be owed to
Seller under the applicable Order or otherwise.
Boeing may revoke its acceptance of any Products and have the same
rights with regard to the Products involved as if it had originally
rejected them.
8.4 FEDERAL AVIATION ADMINISTRATION OR EQUIVALENT
GOVERNMENT AGENCY INSPECTION
Representatives of Boeing, the FAA or any equivalent government agency
may inspect and evaluate Seller's plant including, but not limited to,
Seller's and subcontractor's facilities, systems, data, equipment,
inventory holding areas, procedures, personnel, testing, and all work-
in-process and completed Products. For purposes of this Section 8.4,
equivalent government agency shall mean those governmental agencies so
designated by the FAA or those agencies within individual countries
which maintain responsibility for assuring aircraft airworthiness.
8.5 RETENTION OF RECORDS
Quality assurance records shall be maintained on file at Seller's
facility and available to Boeing's authorized representatives. Seller
shall retain such records for a period of not less than seven (7)
years from the date of final payment under the applicable Order.
8.6 SOURCE INSPECTION
If an Order contains a notation that "100% Source Inspection" is
required, the Products shall not be packed for shipment until they
have been submitted to Boeing's quality assurance representative for
inspection. Both the packing list and Seller's invoice must reflect
evidence of this inspection.
8.7 LANGUAGE FOR TECHNICAL INFORMATION
All reports, drawings and other technical information submitted to
Boeing for review or approval shall be in English and shall employ the
units of measure customarily used by Boeing in the U.S.A.
7
<PAGE>
9.0 EXAMINATION OF RECORDS
Seller shall maintain complete and accurate records showing the sales
volume of all Products. Such records shall support all services
performed, allowances claimed and costs incurred by Seller in the
performance of each Order, including but not limited to those factors
which comprise or affect direct labor hours, direct labor rates,
material costs, burden rates and subcontracts. Such records and other
data shall be capable of verification through audit and analysis by
Boeing and be available to Boeing at Seller's facility for Boeing's
examination and audit at all reasonable times from the date of the
applicable Order until three (3) years after final payment under such
Order. Seller shall provide assistance to interpret such data if
requested by Boeing. Such examination shall provide Boeing with
complete information regarding Seller's performance for use in price
negotiations with Seller relating to existing or future orders for
Products, including but not limited to negotiation of equitable
adjustments for changes and termination/obsolescence claims pursuant
to GTA Section 10.0. Boeing shall treat all information disclosed
under this Section as confidential.
10.0 CHANGES
10.1 GENERAL
Boeing's Material Representative may at any time by written change
order make changes within the general scope of an Order in any one or
more of the following: drawings, designs, specifications, shipping,
packing, place of inspection, place of delivery place of acceptance,
adjustments in quantities, adjustments in delivery schedules, or the
amount of Boeing furnished material. Seller shall proceed immediately
to perform the Order as changed. If any such change causes an increase
or decrease in the cost of or the time required for the performance of
any part of the work, whether changed or not changed by the change
order, an equitable adjustment shall be made in the price of or the
delivery schedule for those Products affected, and the applicable
Order shall be modified in writing accordingly. Any claim by Seller
for adjustment under this Section 10.1 must be received by Boeing in
writing no later than (60) days from the date of receipt by Seller of
the written change order or within such further time as the parties
may agree in writing or such claim shall be deemed waived. Nothing in
this Section 10.1 shall excuse Seller from proceeding with an Order as
changed, including failure of the parties to agree on any adjustment
to be made under this Section 10.1.
If Seller considers that the conduct of any of Boeing's employees has
constituted a change hereunder, Seller shall immediately notify
Boeing's Material Representative in writing as to the nature of such
conduct and its effect on Seller's performance. Pending direction from
Boeing's Material Representative, Seller shall take no action to
implement any such change.
10.2 MODEL MIX
In the event any Derivative aircraft(s) is introduced by
Boeing, Boeing may (but is not obligated to) direct Seller
within the scope of the applicable Order and in accordance
with the provisions of GTA Section 10.0 to supply Boeing's
requirements for Products for such Derivative aircraft(s)
which correspond to those Products being produced under the
applicable Order.
8
<PAGE>
11.0 PRODUCT ASSURANCE
Boeing's acceptance of any Product does not alter or affect the
obligations of Seller or the rights of Boeing and its customers under
the document referenced in the SBP Section 6.0 or as provided by law.
12.0 TERMINATION FOR CONVENIENCE
12.1 BASIS FOR TERMINATION; NOTICE
Boeing may, from time to time and at Boeing's sole discretion,
terminate all or part of any Order issued hereunder, by written notice
to Seller. Any such written notice of termination shall specify the
effective date and the extent of any such termination.
12.2 TERMINATION INSTRUCTIONS
On receipt of a written notice of termination pursuant to GTA Section
12.1, unless otherwise directed by Boeing, Seller shall:
A. Immediately stop work as specified in the notice;
B. Immediately terminate its subcontracts and purchase orders
relating to work terminated;
C. Settle any termination claims made by its subcontractors or
suppliers; provided, that Boeing shall have approved the amount
of such termination claims prior to such settlement;
D. Preserve and protect all terminated inventory and Products;
E. At Boeing's request, transfer title (to the extent not previously
transferred) and deliver to Boeing or Boeing's designee all
supplies and materials, work-in-process. Tooling and
manufacturing drawings and data produced or acquired by Seller
for the performance of this Agreement and any Order, all in
accordance with the terms of such request;
F. Take all reasonable steps required to return, or at Boeing's
option and with prior written approval to destroy, all Boeing
Proprietary Information and Items in the possession, custody or
control of Seller;
G. Take such other action as, in Boeing's reasonable opinion, may be
necessary, and as Boeing shall direct in writing, to facilitate
termination of this Order; and
H. Complete performance of the work not terminated.
12.3 SELLER'S CLAIM
If Boeing terminates an Order in whole or in part pursuant to Section
12.1 above, Seller shall have the right to submit a written
termination claim to Boeing in accordance with the terms of this
Section 12.3. Such termination claim shall be submitted to Boeing not
later than six (6) months after Seller's receipt of the termination
notice and shall be in the form prescribed by Boeing. Such claim must
contain sufficient detail to explain the amount claimed, including
detailed inventory schedules and a detailed breakdown of all costs
claimed separated into categories ( e.g., materials, purchased parts,
finished components, labor, burden, general and administrative), and
to explain the basis for allocation of all other costs. Seller shall
be entitled to be compensated in accordance with and to the extent
allowed under the terms of FAR 52-249-2(e)-(m) excluding (i), (as
published in 48 CFR Section 52.249-2) which is incorporated herein by
this reference except "Government" and "Contracting Officer" shall
mean Boeing, "Contractor" shall mean Seller and "Contract" shall mean
Order.
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12.4 FAILURE TO SUBMIT A CLAIM
Notwithstanding any other provision of this Section 12.0, if Seller
fails to submit a termination claim within the time period set forth
above, Seller shall be barred from submitting a claim and Boeing shall
have no obligation for payment to Seller under this Section 12.0
except for those Products previously delivered and accepted by Boeing.
12.5 PARTIAL TERMINATION
Any partial termination of an Order shall not alter or affect the
terms and conditions of the Order or any Order with respect to
Products not terminated.
12.6 PRODUCT PRICE
Termination under any of the above paragraphs shall not result in any
change to unit prices for Products not terminated.
12.7 EXCLUSIONS OR DEDUCTIONS
The following items shall be excluded or deducted from any claim
submitted by Seller:
A. All unliquidated advances or other payments made by Boeing to
Seller pursuant to a terminated Order;
B. Any claim which Boeing has against Seller;
C. The agreed price for scrap allowance;
E. Except for normal spoilage and any risk of loss assumed by
Boeing, the agreed fair value of property that is lost,
destroyed, stolen or damaged.
12.8 PARTIAL PAYMENT/PAYMENT
Payment, if any, to be paid under this Section 12.0 shall be made
thirty (30) days after settlement between the parties or as otherwise
agreed to between the parties. Boeing may make partial payments and
payments against costs incurred by Seller for the terminated portion
of the Order, if the total of such payments does not exceed the amount
to which Seller would be otherwise entitled. If the total payments
exceed the final amount determined to be due, Seller shall repay the
excess to Boeing upon demand.
12.9 SELLER'S ACCOUNTING PRACTICES
Boeing and Seller agree that Seller's "normal accounting practices"
used in developing the price of the Product(s) shall also be used in
determining the allocable costs at termination. For purposes of this
Section 12.9, Seller's "normal accounting practices" refers to
Seller's method of charging costs as either a direct charge, overhead
expense, general administrative expense, etc.
12.10 RECORDS
Unless otherwise provided in this Agreement or by law, Seller shall
maintain all records and documents relating to the terminated portion
of the Order for three (3) years after final settlement of Seller's
termination claim.
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13.0 EVENTS OF DEFAULT AND REMEDIES
13.1 EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
A. Any failure by Seller to deliver, when and as required
by this Agreement or any Order, any Product, except as
provided in GTA Section 14.0; or
B. Any failure by Seller to provide an acceptable
Assurance of Performance within the time specified in
GTA Section 17.0, or otherwise in accordance with
applicable law; or,
C. Any failure by Seller to perform or comply with any
obligation set forth in GTA Section 20.0; or
D. Seller is or has participated in the sale, purchase or
manufacture of airplane parts without the required
approval of the FAA.
E. Any failure by Seller to perform or comply with any
obligation (other than as described in the foregoing
Sections 13.1.A, 13.1.B, 13.1.C and 13.1.D) set forth in
this Agreement and such failure shall continue
unremedied for a period of thirty (30) days or more
following receipt by Seller of notice from Boeing
specifying such failure; or
F. (a) the suspension, dissolution or winding-up of Seller's
business, (b) Seller's insolvency, or its inability to pay debts,
or its nonpayment of debts, as they become due, (c) the
institution of reorganization, liquidation or other such
proceedings by or against Seller or the appointment of a
custodian, trustee, receiver or similar Person for Seller's
properties or business, (d) an assignment by Seller for the
benefit of its creditors, or (e) any action of Seller for the
purpose of effecting or facilitating any of the foregoing.
13.2 REMEDIES
If any Event of Default shall occur:
A. CANCELLATION
Boeing may, by giving written notice to Seller,
immediately cancel this Agreement and/or any Order, in
whole or in part, and Boeing shall not be required
after such notice to accept the tender by Seller of any
Products with respect to which Boeing has elected to
cancel this Agreement.
B. COVER
Boeing may manufacture, produce or provide, or may
engage any other persons to manufacture, produce or
provide, any Products in substitution for the Products
to be delivered or provided by Seller hereunder with
respect to which this Agreement or any Order has been
cancelled and, in addition to any other remedies or
damages available to Boeing hereunder or at law or in
equity, Boeing may recover from Seller the difference
between the price for each such Product and the
aggregate expense, including, without limitation,
administrative and other indirect costs, paid or
incurred by Boeing to manufacture, produce or provide,
or engage other persons to manufacture, produce or
provide, each such Product.
C. REWORK OR REPAIR
Boeing may rework or repair any Product in accordance
with GTA Section 8.3;
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D. SETOFF
Boeing shall, at its option, have the right to set off
against and apply to the payment or performance of any
obligation, sum or amount owing at any time to Boeing
hereunder or under any Order, all deposits, amounts or
balances held by Boeing for the account of Seller and any
amounts owed by Boeing to Seller, regardless of whether any
such deposit, amount, balance or other amount or payment is
then due and owing.
E. TOOLING AND OTHER MATERIALS
As compensation for the additional costs which Boeing will
incur as a result of the actual physical transfer of
production capabilities from Seller to Boeing or Boeing's
designee, Seller shall upon the request of Boeing, transfer
and deliver to Boeing or Boeing's designee title to any or
all (i) Tooling, (ii) Boeing-furnished material, (iii) raw
materials, parts, work-in-process, incomplete or completed
assemblies, and all other Products or parts thereof in the
possession or under the effective control of Seller or any
of its subcontractors (iv) Proprietary Information and
Materials of Boeing including without limitation planning
data, drawings and other Proprietary Information and
Materials relating to the design, production, maintenance,
repair and use of Tooling, in the possession or under the
effective control of Seller or any of its subcontractors, in
each case free and clear of all liens, claims or other
rights of any person.
Seller shall be entitled to receive from Boeing
reasonable compensation for any item accepted by Boeing
which has been transferred to Boeing pursuant to this
Section 13.2.E (except for any item the price of which
shall have been paid to Seller prior to such transfer);
provided, however, that such compensation shall not be
paid directly to Seller, but shall be accounted for as
a setoff against any damages payable by Seller to
Boeing as a result of any Event of Default.
F. REMEDIES GENERALLY
No failure on the part of Boeing in exercising any right or
remedy hereunder, or as provided by law or in equity, shall
impair, prejudice or constitute a waiver of any such right
or remedy, or shall be construed as a waiver of any Event of
Default or as an acquiescence therein. No single or partial
exercise of any such right or remedy shall preclude any
other or further exercise thereof or the exercise of any
other right or remedy. No acceptance of partial payment or
performance of any of Seller's obligations hereunder shall
constitute a waiver of any Event of Default or a waiver or
release of payment or performance in full by Seller of any
such obligation. All rights and remedies of Boeing hereunder
and at law and in equity shall be cumulative and not
mutually exclusive and the exercise of one shall not be
deemed a waiver of the right to exercise any other. Nothing
contained in this Agreement shall be construed to limit any
right or remedy of Boeing now or hereafter existing at law
or in equity.
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14.0 EXCUSABLE DELAY
If delivery of any Product is delayed by unforeseeable circumstances
beyond the control and without the fault or negligence of Seller or of
its suppliers or subcontractors (any such delay being hereinafter
referred to as "Excusable Delay"), the delivery of such Product shall
be extended for a period to be determined by Boeing after an
assessment by Boeing of alternate work methods. Excusable Delays may
include, but are not limited to, acts of God, war, riots, acts of
government, fires, floods, epidemics, quarantine restrictions, freight
embargoes, strikes or unusually severe weather, but shall exclude
Seller's noncompliance with any rule, regulation or order promulgated
by any governmental agency for or with respect to environmental
protection. However, the above notwithstanding, Boeing expects Seller
to continue production, recover lost time and support all schedules as
established under this Agreement or any Order. Therefore, it is
understood and agreed that (i) delays of less than two (2) days'
duration shall not be considered to be Excusable Delays unless such
delays shall occur within thirty (30) days preceding the scheduled
delivery date of any Product and (ii) if delay in delivery of any
Product is caused by the default of any of Seller's subcontractors or
suppliers, such delay shall not be considered an Excusable Delay
unless the supplies or services to be provided by such subcontractor
or supplier are not obtainable from other sources in sufficient time
to permit Seller to meet the applicable delivery schedules. If
delivery of any Product is delayed by any Excusable Delay for more
than three (3) months, Boeing may, without any additional extension,
cancel all or part of any Order with respect to the delayed Products,
and exercise any of its remedies in accordance with GTA Section 13.2
provided however, that Boeing shall not be entitled to monetary
damages or specific performance to the extent Seller's breach is the
result of an Excusable Delay.
15.0 SUSPENSION OF WORK
Boeing may at any time, by written order to Seller, require Seller to
stop all or any part of the work called for by this Agreement
hereafter referred to as a "Stop Work Order" issued pursuant to this
Section 15.0. On receipt of a Stop Work Order, Seller shall promptly
comply with its terms and take all reasonable steps to minimize the
occurrence of costs arising from the work covered by the Stop Work
Order during the period of work stoppage. Within the period covered by
the Stop Work Order (including any extension thereof) Boeing shall
either (i) cancel the Stop Work Order or (ii) terminate or cancel the
work covered by the Stop Work Order in accordance with the provisions
of GTA Section 12.0 or 13.0. In the event the Stop Work Order is
cancelled by Boeing or the period of the Stop Work Order (including
any extension thereof) expires, Seller shall promptly resume work in
accordance with the terms of this Agreement or any applicable Order.
16.0 TERMINATION OR CANCELLATION AND INDEMNITY AGAINST SUBCONTRACTOR CLAIMS
Boeing shall not be liable for any loss or damage resulting from any
termination pursuant to GTA Section 12.1, except as expressly provided
in GTA Section 12.3 or any cancellation under GTA Section 13.0 except
to the extent that such cancellation shall have been determined by
Boeing and Seller to have been wrongful, in which case such wrongful
cancellation shall be deemed a termination pursuant to GTA Section
12.1 and therefore shall be limited to the payment to Seller of the
amount or amounts identified in GTA Section
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12.3. As subcontractor claims are included in Seller's termination
claim pursuant to GTA Section 12.3, Seller shall indemnify Boeing and
hold Boeing harmless from and against (i) any and all claims, suits
and proceedings against Boeing by any subcontractor or supplier of
Seller in respect of any such termination and (ii) and any and all
costs, expenses, losses and damages incurred by Boeing in connection
with any such claim, suit or proceeding.
17.0 ASSURANCE OF PERFORMANCE
A. SELLER TO PROVIDE ASSURANCE
If Boeing determines, at any time or from time to time, that it
is not sufficiently assured of Seller's full, timely and
continuing performance hereunder, or if for any other reason
Boeing has reasonable grounds for insecurity, Boeing may request,
by notice to Seller, written assurance (hereafter an "Assurance
of Performance") with respect to any specific matters affecting
Seller's performance hereunder, that Seller is able to perform
all of its respective obligations under this Agreement when and
as specified herein. Each Assurance of Performance shall be
delivered by Seller to Boeing as promptly as possible, but in any
event no later than 15 calendar days following Boeing's request
therefore and each Assurance of Performance shall be accompanied
by any information, reports or other materials, prepared by
Seller, as Boeing may reasonably request. Boeing may suspend all
or any part of Boeing's performance hereunder until Boeing
receives an Assurance of Performance from Seller satisfactory in
form and substance to Boeing.
B. MEETINGS AND INFORMATION
Boeing may request one or more meetings with senior management or
other employees of Seller for the purpose of discussing any
request by Boeing for Assurance of Performance or any Assurance
of Performance provided by Seller. Seller shall make such persons
available to meet with representatives of Boeing as soon as may
be practicable following a request for any such meeting by Boeing
and Seller shall make available to Boeing any additional
information, reports or other materials in connection therewith
as Boeing may reasonably request.
18.0 RESPONSIBILITY FOR PROPERTY
On delivery to Seller or manufacture or acquisition by it of any
materials, parts, Tooling or other property, title to any of which is
in Boeing, Seller shall assume the risk of and shall be responsible
for any loss thereof or damage thereto. In accordance with the
provisions of an Order, but in any event on completion thereof, Seller
shall return such property to Boeing in the condition in which it was
received except for reasonable wear and tear and except to the extent
that such property has been incorporated in Products delivered under
such Order or has been consumed in the normal performance of work
under such Order.
19.0 LIMITATION OF SELLER'S RIGHT TO ENCUMBER ASSETS
Seller warrants to Boeing that it has good title to all
inventory, work-in-process, tooling and materials to be
supplied by Seller in the performance of its obligations
under any Order ("Inventory"), and that pursuant to the
provisions of such Order, it will transfer to Boeing title
to such Inventory, whether transferred separately or as part
of any Product delivered under the Order, free of any liens,
charges, encumbrances or rights of others.
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20.0 PROPRIETARY INFORMATION AND ITEMS
Boeing and Seller shall each keep confidential and protect from
disclosure all (a) confidential, proprietary, and/or trade secret
information; (b) tangible items containing, conveying, or embodying
such information; and (c) tooling obtained from and/or belonging to
the other in connection with this Agreement or any Order (collectively
referred to as "Proprietary Information and Materials"). Boeing and
Seller shall each use Proprietary Information and Materials of the
other only in the performance of and for the purpose of this Agreement
and/or any Order. Provided, however, that despite any other
obligations or restrictions imposed by this Section 20.0, Boeing shall
have the right to use and disclose of Seller's Proprietary Information
and Materials for the purposes of testing, certification, use, sale,
or support of any item delivered under this Agreement, an Order, or
any airplane including such an item; and any such disclosure by Boeing
shall, whenever appropriate, include a restrictive legend suitable to
the particular circumstances. The restrictions on disclosure or use of
Proprietary Information and Materials by Seller shall apply to all
materials derived by Seller or others from Boeing's Proprietary
Information and Materials. Upon Boeing's request at any time, and in
any event upon the completion, termination or cancellation of this
Agreement, Seller shall return all of Boeing's Proprietary Information
and Materials, and all materials derived from Boeing's Proprietary
Information and Materials to Boeing unless specifically directed
otherwise in writing by Boeing. Seller shall not, without the prior
written authorization of Boeing, sell or otherwise dispose of (as
scrap or otherwise) any parts or other materials containing,
conveying, embodying, or made in accordance with or by reference to
any Proprietary Information and Materials of Boeing. Prior to
disposing of such parts or materials as scrap, Seller shall render
them unusable. Boeing shall have the right to audit Seller's
compliance with this Section 20.0. Seller may disclose Proprietary
Information and Materials of Boeing to its subcontractors as required
for the performance of an Order, provided that each such subcontractor
first assumes, by written agreement, the same obligations imposed upon
Seller under this Section 20.0 relating to Proprietary Informations
and Materials; and Seller shall be liable to Boeing for any breach of
such obligation by such subcontractor. The provisions of this Section
20.0 are effective in lieu of, and will apply notwithstanding the
absence of, any restrictive legends or notices applied to Proprietary
Informations and Materials; and the provisions of this Section 20.0
shall survive the performance, completion, termination or cancellation
of this Agreement or any Order. This Section 20.0 supersedes and
replaces any and all other prior agreements or understandings between
the parties to the extent that such agreements or understandings
relate to Boeing's obligations relative to confidential, proprietary,
and/or trade secret information, or tangible items containing,
conveying, or embodying such information, obtained from Seller and
related to any Product, regardless of whether disclosed to the
receiving party before or after the effective date of this Agreement.
21.0 COMPLIANCE WITH LAWS
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21.1 SELLER'S OBLIGATION
Seller shall be responsible for complying with all laws, including,
but not limited to, any statute, rule, regulation, judgment, decree,
order, or permit applicable to its performance under this Agreement.
Seller further agrees (1) to notify Boeing of any obligation under
this Agreement which is prohibited under applicable environmental law,
at the earliest opportunity but in all events sufficiently in advance
of Seller's performance of such obligation so as to enable the
identification of alternative methods of performance, and (2) to
notify Boeing at the earliest possible opportunity of any aspect of
its performance which becomes subject to additional environmental
regulation or which Seller reasonably believes will become subject to
additional regulation during the performance of this Agreement.
21.2 GOVERNMENT REQUIREMENTS
If any of the work to be performed under this Agreement is performed
in the United States, Seller shall, via invoice or other form
satisfactory to Boeing, certify that the Products covered by the Order
were produced in compliance with Sections 6, 7, and 12 of the Fair
Labor Standards Act (29 U. S. C. 201-291), as amended, and the
regulations and orders of the U. S. Department of Labor issued
thereunder. In addition, the following Federal Acquisition Regulations
are incorporated herein by this reference except "Contractor" shall
mean "Seller":
FAR 52.222-26 "Equal Opportunity"
FAR 52.222-35 "Affirmative Action for Special Disabled and
Vietnam Era Veterans"
FAR 52.222-36 "Affirmative Action for Handicapped Workers".
22.0 INTEGRITY IN PROCUREMENT
Boeing's policy is to maintain high standards of integrity in
procurement. Boeing's employees must ensure that no favorable
treatment compromises their impartiality in the procurement process.
Accordingly, Boeing's employees must strictly refrain from soliciting
or accepting any payment, gift, favor or thing of value which could
improperly influence their judgement with respect to either issuing a
Order or administering this Agreement. Consistent with this policy,
Seller agrees not to provide or offer to provide any employees of
Boeing any payment, gift, favor or thing of value for the purposes of
improperly obtaining or rewarding favorable treatment in connection
with any Order or this Agreement. Seller shall conduct its own
procurement practices and shall ensure that its suppliers conduct
their procurement practices consistent with these standards. If Seller
has reasonable grounds to believe that this policy may have been
violated, Seller shall immediately report such possible violation to
the appropriate Director of Material or Ethics Advisor of Boeing.
23.0 INFRINGEMENT
Seller shall indemnify, defend, and save Boeing and Customers harmless
from all claims, suits, actions, awards (including but not limited to
awards based on intentional infringement of patents known to Seller at
the time of such infringement, exceeding actual damages, and/or
including attorneys' fees and/or costs), liabilities, damages, costs
and attorneys' fees related to the actual or alleged infringement of
any United States or foreign intellectual property right (including
but not limited to any right in a patent, copyright, industrial design
or
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semiconductor mask work, or based on misappropriation or wrongful use
of information or documents) and arising out of the manufacture. sale
or use of Products by Boeing or Customers. Boeing and/or Customers
shall duly notify Seller of any such claim, suit or action; and Seller
shall, at its own expense, fully defend such claim, suit or action on
behalf of Boeing and/or Customers. Seller shall have no obligation
under this Section 23.0 with regard to any infringement arising from:
(i) Seller's compliance with formal specifications issued by Boeing
where infringement could not be avoided in complying with such
specifications or (ii) use or sale of Products in combination with
other items when such infringement would not have occurred from the
use or sale of those Products solely for the purpose for which they
were designed or sold by Seller. For purposes of this Section 23.0
only, the term Customer shall not include the United States
Government; and the term Boeing shall include The Boeing Company
(Boeing) and all Boeing subsidiaries and all officers, agents, and
employees of Boeing or any Boeing subsidiary.
24.0 BOEING'S RIGHTS IN SELLER'S PATENTS, COPYRIGHTS, TRADE SECRETS, AND
TOOLING
Seller hereby grants to Boeing an irrevocable, nonexclusive, paid-up
worldwide license to practice and/or use, and license others to
practice and/or use on Boeing's behalf, all of Seller's patents,
copyrights, trade secrets (including, without limitation, designs,
processes, drawings, technical data and tooling), industrial designs,
semiconductor mask works, and tooling (collectively hereinafter
referred to as "Licensed Property") related to the development,
production, maintenance or repair of Products. Boeing hereafter
retains all of the aforementioned license rights in Licensed Property,
but Boeing hereby covenants not to exercise such rights except in
connection with the making, having made, using and selling of Products
or products of the same kind, and then only in the event of any of the
following:
a. Seller discontinues or suspends business operations or the
production of any or all of the Products;
b. Seller is acquired by or transfers any or all of its rights to
manufacture any Product to any third party, whether or not
related;
c. Boeing cancels this Agreement or any Order for cause pursuant to
GTA Section 13.0 herein;
d. in Boeing's judgement it becomes necessary, in order for Seller
to comply with the terms of this Agreement or any Order, for
Boeing to provide support to Seller (in the form of design,
manufacturing, or on-site personnel assistance) substantially in
excess of that which Boeing normally provides to its suppliers;
e. Seller's trustee in bankruptcy (or Seller as debtor in
possession) fails to assume this Agreement and all Orders by
formal entry of an order in the bankruptcy court within sixty
(60) days after entry of an order for relief in a bankruptcy case
of the Seller, or Boeing elects to retain its rights to Licensed
Property under the bankruptcy laws;
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f. Seller is at any time insolvent (whether measured under a balance
sheet test or by the failure to pay debts as they come due) or
the subject of any insolvency or debt assignment proceeding under
state or nonbankruptcy law; or
g. Seller voluntarily becomes a debtor in any case under bankruptcy
law or, in the event an involuntary bankruptcy petition is filed
against Seller, such petition is not dismissed within thirty (30)
days.
As a part of the license granted under this Section 24.0, Seller
shall, at the written request of Boeing and at no additional cost to
Boeing, promptly deliver to Boeing any and all Licensed Property
considered by Boeing to be necessary to satisfy Boeing's requirements
for Products and their substitutes.
25.0 NOTICES
25.1 ADDRESSES
Notices and other communications shall be given in writing by personal
delivery, mail, telex, teletype, telegram, facsimile, cable or other
electronic transmission addressed to the respective party as set forth
in the SBP Section 9.0.
25.2 EFFECTIVE DATE
The date on which any such communication is received by the addressee
is the effective date of such communication.
25.3 APPROVAL OR CONSENT
With respect to all matters subject to the approval or consent of
either party, such approval or consent shall be requested in writing
and is not effective until given in writing. With respect to Boeing,
authority to grant approval or consent is limited to Boeing's Material
Representative.
26.0 PUBLICITY
Seller will not, and will require that its subcontractors and
suppliers of any tier will not, (i) cause or permit to be released any
publicity, advertisement, news release, public announcement, or denial
or confirmation of the same, in whatever form, regarding any Order or
Products, or the program to which they may pertain, or (ii) use, or
cause or permit to be used, the Boeing name or any Boeing trademark in
any form of promotion or publicity without Boeing's prior written
approval.
27.0 PROPERTY INSURANCE
27.1 INSURANCE
Seller shall maintain continuously in effect a property insurance
policy covering loss or destruction of or damage to all property in
which Boeing does or could have an insurable interest pursuant to this
Agreement, including but not limited to Tooling, Boeing-furnished
property, raw materials, parts, work-in process, incomplete or
completed assemblies and all other products or parts thereof, and all
drawings, specifications, data and other materials relating to any of
the foregoing in each case to the extent in the possession or under
the effective care, custody or control of Seller, in the amount of
full
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replacement value thereof providing protection against all perils
normally covered in an "all risk" property insurance policy (including
without limitation fire, windstorm, explosion, riot, civil commotion,
aircraft, earthquake, flood or other acts of God). Any such policy
shall be in the form and with insurers acceptable to Boeing and shall
(i) provide for payment of loss thereunder to Boeing, as loss payee,
as its interests may appear and (ii) contain a waiver of any rights of
subrogation against Boeing, its subsidiaries, and their respective
directors, officers, employees and agents.
27.2 CERTIFICATE OF INSURANCE
Prior to commencement of this Agreement, Seller shall provide to
Boeing's Material Representative, for Boeing's review and approval,
certificates of insurance reflecting full compliance with the
requirements set forth in GTA Section 27.1. Such certificates shall be
kept current and in compliance throughout the period of this Agreement
and shall provide for thirty (30) days advanced written notice to
Boeing's Material Representative in the event of cancellation, non-
renewal or material change adversely affecting the interests of
Boeing.
27.3 NOTICE OF DAMAGE OR LOSS
Seller shall give prompt written notice to Boeing's Material
Representative of the occurrence of any damage or loss to any property
required to be insured herein. If any such property shall be damaged
or destroyed, in whole or in part, by an insured peril or otherwise,
and if no Event of Default shall have occurred and be continuing, then
Seller may, upon written notice to Boeing, settle, adjust, or
compromise any and all such loss or damage not in excess of Two
Hundred Fifty Thousand Dollars ($250,000) in any one occurrence and
Five Hundred Thousand Dollars ($500,000) in the aggregate. Seller may
settle, adjust or compromise any other claim by Seller only after
Boeing has given written approval, which approval shall not be
unreasonably withheld.
28.0 RESPONSIBILITY FOR PERFORMANCE
Seller shall be responsible for the requirements of this Agreement and
any Order referencing this Agreement. Seller shall bear all risks of
providing adequate facilities and equipment to perform each Order in
accordance with the terms thereof. Seller shall include as part of its
subcontracts those elements of the Agreement which protect Boeing's
rights including but not limited to right of entry provisions,
proprietary information and rights provisions and quality control
provisions. In addition, Seller shall provide to its subcontractors
sufficient information to clearly document that the work being
performed by Seller's subcontractor is to facilitate performance under
this Agreement or any Order. Sufficient information may include but is
not limited to Order number, GTA number or the name of Boeing's
Material Representative. No subcontracting by Seller shall relieve
Seller of its obligation under the applicable Order.
28.1 SUBCONTRACTING
Seller may not procure any Product, as defined in the applicable
Order, from a third party in a completed or a substantially completed
form without Boeing's prior written consent.
19
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Where required by the requirements of the Order, no raw material
and/or material process may be incorporated in a Product unless: (a)
Seller uses an approved source or (b) Boeing has surveyed and
qualified Seller's receiving inspection personnel and laboratories to
test the specified raw materials an/or material process. No waiver of
survey and qualification requirements will be effective unless granted
by Boeing's Engineering and Quality Control Departments. Utilization
of a Boeing-approved raw material source does not constitute a waiver
of Seller's responsibility to meet all specification requirements.
28.2 RELIANCE
Boeing's entering into this Agreement is in part based upon Boeing's
reliance on Seller's ability, expertise and awareness of the intended
use of the Products. Seller agrees that Boeing and Boeing's customers
may rely on Seller as an expert, and Seller will not deny any
responsibility or obligation hereunder to Boeing or Boeing's customers
on the grounds that Boeing or Boeing's customers provided
recommendations or assistance in any phase of the work involved in
producing or supporting the Products, including but not limited to
Boeing's acceptance of specifications, test data or the Products.
28.3 ASSIGNMENT
Each Order shall inure to the benefit of and be binding on each of the
parties hereto and their respective successors and assigns, provided
however, that no assignment of any rights or delegation of any duties
under such Order is binding on Boeing unless Boeing's written consent
has first been obtained. Notwithstanding the above, Seller may assign
claims for monies due or to become due under any Order provided that
Boeing may recoup or setoff any amounts covered by any such assignment
against any indebtedness of Seller to Boeing, whether arising before
or after the date of the assignment or the date of this Agreement, and
whether arising out of any such Order or any other agreement between
the parties.
Boeing may settle all claims arising out of any Order, including
termination claims, directly with Seller. Boeing may unilaterally
assign any rights or title to property under the Order to any wholly-
owned subsidiary of The Boeing Company.
29.0 NON-WAIVER
Boeing's failure at any time to enforce any provision of an Order does
not constitute a waiver of such provision or prejudice Boeing's right
to enforce such provision at any subsequent time.
30.0 HEADINGS
Section and Section headings used in this Agreement are for
convenient reference only and do not affect the
interpretation of the Agreement.
31.0 PARTIAL INVALIDITY
If any provision of any Order is or becomes void or unenforceable by
force or operation of law, the other provisions shall remain valid and
enforceable.
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32.0 APPLICABLE LAW; JURISDICTION
Each Order, including all matters of construction, validity and
performance, shall in all respects be governed by, and construed and
enforced in accordance with, the law as set forth in SBP Section 5.0.
33.0 AMENDMENT
Oral statements and understandings are not valid or binding. Except as
otherwise provided in GTA Section 10.0 and SBP Section 12.0, no Order
may be changed or modified except by a writing signed by Seller and
Boeing's Material Representative.
34.0 LIMITATION
Seller may not (except to provide an inventory of Products to support
delivery acceleration and to satisfy reasonable replacement and Spares
requirements) manufacture or fabricate Products or procure any goods
in advance of the reasonable flow time required to comply with the
delivery schedule in the applicable Order. Notwithstanding any other
provision of an Order, Seller is not entitled to any equitable
adjustment or other modification of such Order for any manufacture,
fabrication, or procurement of Products not in conformity with the
requirements of the Order, unless Boeing's written consent has first
been obtained. Nothing in this Section 34.0 shall be construed as
relieving Seller of any of its obligations under the Order.
35.0 TAXES
35.1 INCLUSION OF TAXES IN PRICE
All taxes, including but not limited to federal, state and local
income taxes, value added taxes, gross receipt taxes, property taxes,
and custom duties taxes are deemed to be included in the Order price,
except applicable sales or use taxes on sales to Boeing ("Sales
Taxes") for which Boeing has not supplied a valid exemption
certificate or unless otherwise indicated on the applicable Order.
35.2 LITIGATION
In the event that any taxing authority has claimed or does claim
payment for Sales Taxes, Seller shall promptly notify Boeing, and
Seller shall take such action as Boeing may direct to pay or protest
such taxes or to defend against such claim. The actual and direct
expenses, without the addition of profit and overhead, of such defense
and the amount of such taxes as ultimately determined as due and
payable shall be paid directly by Boeing or reimbursed to Seller. If
Seller or Boeing is successful in defending such claim, the amount of
such taxes recovered by Seller, which had previously been paid by
Seller and reimbursed by Boeing or paid directly by Boeing, shall be
immediately refunded to Boeing.
35.3 REBATES
If any taxes paid by Boeing are subject to rebate or reimbursement,
Seller shall take the necessary actions to secure such rebates or
reimbursement and shall promptly refund to Boeing any amount
recovered.
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36.0 FOREIGN PROCUREMENT OFFSET
With respect to work covered by the Order, Seller shall use its best
efforts to cooperate with Boeing in the fulfillment of any foreign
offset program obligation that Boeing may have accepted as a condition
of the sale of Boeing's products. In the event that Seller solicits
bids or proposals for, or procures or offers to procure any goods or
services relating to the work covered by an Order from any source
outside of the United States, Boeing shall be entitled, to the
exclusion of all others, to all industrial benefits and other "offset"
credits which may result from such solicitations, procurements or
offers to procure. Seller agrees to take any actions that may be
required on its part to assure that Boeing receives such credits.
37.0 ENTIRE AGREEMENT/ORDER OF PRECEDENCE
37.1 ENTIRE AGREEMENT
The Order sets forth the entire agreement, and supersedes any and all
other prior agreements understandings and communications between
Boeing and Seller related to the subject matter of an Order. The
rights and remedies afforded to Boeing or Customers pursuant to any
provisions of an Order are in addition to any other rights and
remedies afforded by any other provisions of this Order, by law or
otherwise.
37.2 INCORPORATED BY REFERENCE
In addition to the documents previously incorporated herein by
reference, the documents listed below are by this reference made a
part of this Agreement:
A. Engineering Drawing by Part Number and Related Outside
Production Specification Plan (OPSP).
B. Any other exhibits or documents agreed to by the parties to be a
part of this Agreement.
37.3 ORDER OF PRECEDENCE
In the event of a conflict or inconsistency between any of the terms
of the following documents, the following order of precedence shall
control:
A. SBP (excluding the Administrative Agreement identified in E
below)
B. This General Terms Agreement (excluding the documents identified
in D and F below)
C. Order (excluding the documents identified in A and B above)
D. Engineering Drawing by Part Number and, if applicable, related
Outside Production Specification Plan (OPSP).
E. Administrative Agreement (If Applicable)
F. Any other exhibits or documents the parties agree shall be part
of the Agreement.
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37.4 DISCLAIMER
Unless otherwise specified on the face of the applicable Order, any
CATIA Dataset or translation thereof (each or collectively "Data)
furnished by Boeing is furnished as an accommodation to Seller. It is
the Seller's responsibility to compare such Data to the comparable two
dimensional computer aided design drawing to confirm the accuracy of
the Data.
BOEING HEREBY DISCLAIMS, AND SELLER HEREBY WAIVES, ALL WARRANTIES AND
LIABILITIES OF BOEING AND ALL CLAIMS AND REMEDIES OF SELLER, EXPRESS
OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY DEFECT IN
ANY CATIA DATASET OR TRANSLATION THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY (A) IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR
USE OR FOR A PARTICULAR PURPOSE, (B) ANY IMPLIED WARRANTY ARISING FROM
COURSE OF DEALING OR PERFORMANCE OR USAGE OF TRADE, (C) RECOVERY BASED
UPON TORT, WHETHER OR NOT ARISING FROM BOEING'S NEGLIGENCE, AND (D)
ANY RECOVERY BASED UPON DAMAGED PROPERTY, OR OTHERWISE BASED UPON
DAMAGED PROPERTY, OR OTHERWISE BASED UPON LOSS OF USE OR PROFIT OR
OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES.
EXECUTED in duplicate as of the date and year first written above by the duly
authorized representatives of the parties.
THE BOEING COMPANY CORY COMPONENTS
by and through its division
Boeing Commercial Airplane Group
Name: /s/ illegible Name:
-------------------------- ---------------------------
Title: Buyer Title:
-------------------------- ---------------------------
Date: Dec. 1, 95 Date:
--------------------------- --------------------------
23
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37.4 DISCLAIMER
Unless otherwise specified on the face of the applicable Order, any
CATIA Dataset or translation thereof (each or collectively "Data)
furnished by Boeing is furnished as an accommodation to Seller. It is
the Seller's responsibility to compare such Data to the comparable two
dimensional computer aided design drawing to confirm the accuracy of
the Data.
BOEING HEREBY DISCLAIMS, AND SELLER HEREBY WAlVES, ALL WARRANTIES AND
LIABILITIES OF BOEING AND ALL CLAIMS AND REMEDIES OF SELLER, EXPRESS
OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY DEFECT IN
ANY CATIA DATASET OR TRANSLATION THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY (A) IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR
USE OR FOR A PARTICULAR PURPOSE, (8) ANY IMPLIED WARRANTY ARISING FROM
COURSE OF DEALING OR PERFORMANCE OR USAGE OF TRADE, (C) RECOVERY BASED
UPON TORT, WHETHER OR NOT ARISING FROM BOEING'S NEGLIGENCE, AND (D)
ANY RECOVERY BASED UPON DAMAGED PROPERTY, OR OTHERWISE BASED UPON
DAMAGED PROPERTY, OR OTHERWISE BASED UPON LOSS OF USE OR PROFIT OR
OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES.
EXECUTED in duplicate as of the date and year first written above by the duly
authorized representatives of the parties.
THE BOEING COMPANY CORY COMPONENTS
by and through its division
Boeing Commercial Airplane Group
Name: /s/ illegible Name:
-------------------------- ---------------------------
Title: Buyer Title:
-------------------------- ---------------------------
Date: Dec. 1, 95 Date:
--------------------------- --------------------------
23
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Exhibit 10.15
SPECIAL BUSINESS PROVISIONS
SPECIAL BUSINESS PROVISIONS
between
THE BOEING COMPANY
and
CORY COMPONENTS
Number 6-5752-0004
BCAG CONTRACT 11/30/95
<PAGE>
SPECIAL BUSINESS PROVISIONS
SPECIAL BUSINESS PROVISIONS
TABLE OF CONTENTS
Section Item
- ------- ----
1.0 DEFINITIONS
2.0 PURCHASE ORDER NOTE
3.0 PRICES
3.1 Product Pricing
3.2 Manufacturing Configuration Baseline
3.3 Packaging
4.0 GOVERNING QUALITY
ASSURANCE REQUIREMENT
5.0 APPLICABLE LAW/JURISDICTION
6.0 PRODUCT ASSURANCE
7.0 PAYMENT
7.1 Recurring Cost
7.2 Non-Recurring Cost
8.0 ACCEL/DECEL AT NO COST
9.0 NOTICES
9.1 Addresses
10.0 OBLIGATION TO PURCHASE AND SELL
11.0 COST AND FINANCIAL
PERFORMANCE VISIBILITY
12.0 CHANGES
12.1 Changes to the Statement of Work
12.2 Computation of Equitable Adjustment
12.3 Obsolescence
12.4 Change Absorption
12.5 Planning Schedule
12.6 Value Engineering
12.7 Reduction in Quantity to be Delivered
13.0 SPARES AND OTHER PRICING
13.1 Spares
13.2 Short Flow Production Requirements
13.3 Tooling
BCAG CONTRACT 11/30/95
ii
<PAGE>
SPECIAL BUSINESS PROVISIONS
TABLE OF CONTENTS
Section Item
- ------- ----
13.4 Pricing of Boeing's Supporting
Requirements
13.5 Pricing of Requirements for
Modification or Retrofit
13.6 Similar to Pricing
14.0 STATUS REPORTS/REVIEWS
15.0 FOREIGN PROCUREMENT REPORT
16.0 SUPPLIER FURNISHED MATERIAL
17.0 ASSIGNMENT
18.0 INVENTORY AT CONTRACT COMPLETION
19.0 OWNERSHIP OF INTELLECTUAL PROPERTY
19.1 Technical Work Product
19.2 Inventions and Patents
19.3 Works of Authorship and Copyrights
19.4 Pre-Existing Inventions and
Works of Authorship
20.0 ADMINISTRATIVE AGREEMENT
21.0 GUARANTEED WEIGHT REQUIREMENTS
22.0 SUPPLIER DATA REQUIREMENTS
23.0 DEFERRED PAYMENT TERMS
24.0 SOFTWARE PROPRIETARY
INFORMATION RIGHTS
Attachment 1 Work Statement and Pricing
Attachment 2 Foreign Procurement Report
Attachment 3 Rates and Factors
Attachment 4 Boeing AOG Coverage
Attachment 5 Boeing AOG/Critical
Shipping Notification
Attachment 6 Supplier Data Requirements List
Customer Support
Attachment 7 Supplier Data Requirements List
Engineering
BCAG CONTRACT 11/30/95
iii
<PAGE>
SPECIAL BUSINESS PROVISIONS
AMENDMENTS
AMEND
NUMBER DESCRIPTION DATE APPROVAL
- ------ ----------- ---- --------
BCAG CONTRACT 11/30/95
iv
<PAGE>
SPECIAL BUSINESS PROVISIONS
SPECIAL BUSINESS PROVISIONS
THESE SPECIAL BUSINESS PROVISIONS are entered into as of DATE by and between
CORY COMPONENTS, a California corporation with its principal office in El
Segundo, CA ("Seller"), and The Boeing Company, a Delaware corporation with an
office in Seattle, Washington acting by and through its division the Boeing
Commercial Airplane Group ("Boeing").
RECITALS
A. Boeing and Seller entered into a General Terms Agreement GTA #6-5752-0002
dated (DATE) (the "Agreement") which is incorporated herein and made a part
hereof by this reference, for the sale by Seller and purchase by Boeing of
Products.
B. Boeing and Seller desire to include these special business provisions
("SBP") relating to the sale by Seller and purchase by Boeing of Products.
Now, therefore, in consideration of the mutual covenants set forth herein, the
parties agree as follows:
PROVISIONS
1.0 DEFINITIONS
The definitions used herein shall be the same as used in the Agreement.
2.0 PURCHASE ORDER NOTE
The following note shall be contained in any Order to which these SBP are
applicable:
This Order is subject to and incorporates by this reference SBP 6-
5752-0004 between The Boeing Company and Cory Components dated (DATE).
Each Order bearing such note shall be governed by and be deemed to include
the provisions of these SBP.
3.0 PRICES
3.1 PRODUCT PRICING
The prices and applicable period of performance of Products scheduled for
delivery under this SBP are set forth in Attachment 1. Prices are in United
States dollars, F.O.B. El Segundo, CA.
BCAG CONTRACT 11/30/95
1
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SPECIAL BUSINESS PROVISIONS
3.2 MANUFACTURING CONFIGURATION BASELINE
Unit pricing for each Product or part number shown in Attachment 1 is based
on the latest revisions of the engineering drawings or specifications at
the time of the signing of this SBP.
3.3 PACKAGING
The prices shown in Attachment 1 include packaging costs and all materials
and labor required to package Products identified in Attachment 1.
Packaging shall be furnished by the Seller in accordance with Document M6-
1025, Volume II, "Supplier Part Protection Guide" or Document D200-10038-2
"Supplier Packaging Requirements" as applicable. In the case of Products to
be shipped directly to Customers, A.T.A. Specification 300 "Specification
for Packaging of Airline Supplies" shall apply unless otherwise directed by
Boeing.
4.0 GOVERNING QUALITY ASSURANCE REQUIREMENT
(For D1-9000 Suppliers)
All work performed under this SBP shall be in accordance with the following
document which is incorporated herein and made a part hereof by this
reference:
Document D1-9000, "Advanced Quality System for Boeing Suppliers," as
amended from time to time.
5.0 APPLICABLE LAW JURISDICTION
Each Order, including all matters of construction, validity and
performance, shall in all respects be governed by, and construed and
enforced in accordance only with the law of the State of Washington as
applicable to contracts entered into and to be performed wholly within such
State between citizens of such State, without reference to any rules
governing conflicts of law. Seller hereby irrevocably consents to and
submits itself exclusively to the jurisdiction of the applicable courts of
the State and the federal courts therein for the purpose of any suit,
action or other judicial proceeding arising out of or connected with any
Order or the performance or subject matter thereof. Seller hereby waives
and agrees not to assert by way of motion, as a defense, or otherwise, in
any such suit, action or proceeding, any claim that (a) Seller is not
personally subject to the jurisdiction of the above-named courts, (b) the
suit, action or proceeding is brought in an inconvenient forum or (c) the
venue of the suit, action or proceeding is improper.
2
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SPECIAL BUSINESS PROVISIONS
6.0 PRODUCT ASSURANCE
6.1 GOVERNING DOCUMENT
Seller acknowledges that Boeing and Customers must be able to rely on each
Product performing as specified and that Seller will provide all required
support. Accordingly, the following provisions and document(s) are
incorporated herein and made a part hereof:
Seller warrants to Boeing and Customers that Products shall: {a) conform in
all respects to all the requirements of the Order; (b) be free from all
defects in materials and workmanship; and (c) to the extent not
manufactured pursuant to detailed designs furnished by Boeing, be free from
all defects in design and be fit for the intended purposes.
7.0 PAYMENT
7.1 RECURRING PRICE
Unless otherwise provided in the applicable Order, payment of the recurring
price shall be made in accordance with Form X-27981 "Pay From Receipt -
Additional Terms and Conditions Regarding Invoicing and Payment". Payment
terms shall be net thirty (30) days except as otherwise agreed to by the
parties. All payments are subject to adjustment for shortages, credits and
rejections.
7.2 NON-RECURRING PRICE/SPECIAL CHARGES
Unless otherwise provided in the applicable Order, any non-recurring price
payable by Boeing under Attachment 1 shall be paid within the term discount
period or thirty (30) calendar days (whichever is later) after receipt by
Boeing of both acceptable Products and a correct invoice.
8.0 ACCELERATION/DECELERATION AT NO COST
Notwithstanding GTA Section 10.0, Boeing may make changes in the delivery
schedule without additional cost or change to the unit price stated in the
applicable Order if (a) the delivery date of the Product under such Order
is on or before the last date of contract, if applicable, and (b) Boeing
provides Seller with written notice of such changes.
9.0 NOTICES
9.1 ADDRESSES
Notices and other communications shall be given in writing by personal
delivery, United States mail, telex, teletype, telegram, facsimile, cable
or electronic transmission addressed to the respective party as follows:
To Boeing: Attention: Lisa Eng: M/S 38-FX
BOEING COMMERCIAL AIRPLANE GROUP
MATERIAL DIVISION
P.O. Box 3707
Seattle, Washington 98124-2207
To Seller: Attention:
SUPPLIER NAME
ADDRESS
3
<PAGE>
SPECIAL BUSINESS PROVISIONS
10.0 OBLIGATION TO PURCHASE AND SELL
Boeing and Seller agree that in consideration of the prices set forth under
Attachment 1, Boeing shall issue Orders for Products from time to time to
Seller for Boeing's requirements. Such Products shall be shipped at any
scheduled rate of delivery, as determined by Boeing, and Seller shall sell
to Boeing Boeing's requirements of such Products, provided that, without
limitation on Boeing's right to determine its requirements, Boeing shall
not be obligated to issue any Orders for any given Product if:
A. Any of Boeing's customers specify an alternate product;
B. Such Product is, in Boeing's reasonable judgment, not technologically
competitive at any time, for reasons including but not limited to the
availability of significant changes in technology, design, materials,
specifications, or manufacturing processes which result in a reduced
price or weight or improved appearance, functionality, maintainability
or reliability;
C. Boeing gives reasonable notice to Seller of a change in any of
Boeing's aircraft which will result in Boeing no longer requiring such
Product for such aircraft;
D. Seller has materially defaulted in any of its obligations under any
Order, whether or not Boeing has issued a notice of default to Seller
pursuant to GTA Section 13.0; or,
E. Boeing reasonably determines that Seller cannot support Boeing's
requirements for Products in the amounts and within the delivery
schedules Boeing requires.
11.0 COST AND FINANCIAL PERFORMANCE VISIBILITY
Seller shall provide all necessary cost support data, source documents for
direct and indirect costs, and assistance at the Seller's facility for cost
performance reviews performed by Boeing pursuant to any Order.
Furthermore, Seller shall provide financial data, on a quarterly basis, or
as requested, to Boeing's Credit Office and Material Representative for
credit and financial condition reviews. Said data shall include but not be
limited to balance sheets, schedule of accounts payable and receivable,
major lines of credit, creditors, income statements (profit and loss), cash
flow statements, firm backlog, and headcounts. Copies of such data are to
be made available within 72 hours of any written request by Boeing. This
data is required in addition to the cost data provided pursuant to GTA
Section 9.0. All such information shall be treated as confidential in
accordance with GTA Section 20.0.
12.0 CHANGES
12.1 CHANGES TO THE STATEMENT OF WORK
Boeing may direct Seller within the scope of the applicable Order and in
accordance with the provisions of GTA Section 10.0, to increase or decrease
the work to be performed by the Seller in the manufacture of any Product.
4
<PAGE>
SPECIAL BUSINESS PROVISIONS
12.2 COMPUTATION OF EQUITABLE ADJUSTMENT NOT APPLICABLE
The Rates and Factors set forth in Attachment 3, which by this reference is
incorporated herein, shall be used to determine the equitable adjustment,
if any, (including equitable adjustments, if any, in the prices of Products
to be incorporated in Derivative Aircraft), to be paid by Boeing pursuant
to SBP Section 12.1 and GTA Section 10.0 for each individual change.
12.3 OBSOLESCENCE
Claims for obsolete or surplus material and work-in-process created by
change orders issued pursuant to this Section shall be subject to the
procedures set forth in GTA Section 12.0, except that Seller may not submit
a claim for obsolete or surplus material resulting from an individual
change order that has a total claim value of Twenty-Five Hundred Dollars
($2500.00) or less. Payment for obsolete or surplus materials shall be made
by check deposited as first class mail to the address designated by Seller
in SBP Section 9.1. Payment will be made on the tenth (10th) day of the
month following the month of the obsolescence claim settlement.
12.4 CHANGE ABSORPTION
12.4.1 NON-RECURRING AND RECURRING CHANGE ABSORPTION
Notwithstanding the provisions of GTA Section 10.0 and SBP Section 12.1,
Seller will absorb 100% of all changes defined through the completion of
production flight test certification. Provided, that, changes made by
Boeing subsequent to certification which significantly revise the Product
function as defined in the Specification or Specification Control Drawing
(SCD), will be subject to provisions for adjustment of price pursuant to
GTA Section 10.0 and SBP Section 12.1.
12.5 PLANNING SCHEDULE
Any planning schedule or quantity estimate provided by Boeing shall be used
solely for production planning. Boeing may purchase Products in different
quantities and specify different delivery dates as necessary to meet
Boeing's requirements. Such planning schedule and quantity estimate shall
be subject to adjustment from time to time. Any such adjustment is not a
change under GTA Section 10.0.
12.6 VALUE ENGINEERING
Seller may from time to time submit proposals to Boeing to change drawings,
designs, specifications or other requirements that:
a. decrease Seller's performance costs; or
b. produce a net reduction in the cost to Boeing of installation,
operation, maintenance or production of the Product.
Provided, that such change shall not impair any essential functions or
characteristics of the Products or Tooling.
5
<PAGE>
SPECIAL BUSINESS PROVISIONS
12.6.1 SUBMISSION OF PROPOSAL
Proposals shall be submitted to Boeing's Material Representative. Boeing
shall not be liable for any delay in acting upon a proposal. Boeing's
decision to accept or reject any proposal shall be final. If there is a
delay and the net result in savings no longer justifies the investment,
Seller will not be obligated to proceed with the change. Seller has the
right to withdraw, in whole or in part, any proposal not accepted by Boeing
within the time period specified in the proposal. Seller shall submit, as a
minimum, the following information with the proposal:
a. description of the difference between the existing requirement and the
proposed change, and the comparative advantages and disadvantages of
each;
b. the specific requirements which must be changed if the proposal is
adopted;
c. the cost savings and Seller's implementation costs;
d. Each proposal shall include the need dates for engineering release and
the time by which a proposal must be approved so as to obtain the
maximum cost reduction.
12.6.2 ACCEPTANCE AND COST SHARING
Boeing may accept, in whole or in part, any proposal by issuing a change
order. Until such change has been issued, Seller shall remain obligated to
perform in accordance with the terms and requirements of the original Order
as written. Boeing and Seller shall share the savings as follows:
(50%) savings to Boeing;
(50%) savings to Seller.
Seller shall include with each proposal verifiable cost records and other
data as required by Boeing for proposal review and analysis.
Each party shall be responsible for its own implementation costs, including
but not limited to non-recurring costs.
12.6.3 COST SAVINGS COMPUTATION
A change order shall be issued by Boeing and the unit price shall be
reduced in an amount equal to the savings portion attributable to Boeing as
set forth above. The applicable unit price as set forth in Attachment 1
Statement of Work shall be amended to reflect such change.
EXAMPLE:
-------
Current Price: $600.00
Proposed Cost Savings: $100.00/unit
Boeing's Percentage: 50.0%
Seller's Percentage: 50.0%
6
<PAGE>
SPECIAL BUSINESS PROVISIONS
12.6.3 COST SAVINGS COMPUTATION (Continued)
STEP BY STEP COMPUTATION:
l. $100.00 unit savings x 50.0% Boeing's percentage of savings
= $50.00 Boeing savings.
2. $100.00 unit savings x 50.0% Seller's percentage of savings
= $50.00 Seller savings.
3. Net affect to the unit cost = $50.00
New Unit Price For Units = $550.00
12.6.4 WEIGHT REDUCTION PROPOSALS
Seller is encouraged to submit proposals to Boeing that reduce the
Product's weight without impairing any essential functions or
characteristics of the Product.
Seller shall submit such proposals in accordance with SBP Section 12.6.1
above. The amount of any costs or savings that result from a weight
reduction proposal shall be agreed by Boeing and Seller. Seller shall
include with each proposal verifiable cost records and other data as
required by Boeing for proposal review and analysis.
Boeing may accept in whole or in part, any such proposal by issuing a
change order to the applicable Order.
12.7 REDUCTION IN QUANTITY TO BE DELIVERED
Notwithstanding the provisions of GTA Sections 10.0 and 12.0, Boeing's
maximum liability for an equitable adjustment resulting from a decrease in
quantity or termination of Product(s) shall be limited to costs directly
attributable to THREE months worth of scheduled deliveries of the Products.
For purposes of this Section, scheduled deliveries shall be determined by
the applicable schedule in effect at the time Seller commenced work on the
Product(s) that are the subject of the termination or decrease.
13.0 SPARES AND OTHER PRICING
13.1 SPARES
For purposes of this Section, the following definitions shall apply:
A. AIRCRAFT ON GROUND (AOG) - means the highest Spares priority. Seller
will expend best efforts to provide the earliest possible delivery of
any Spare designated AOG by Boeing. Such effort includes but is not
limited to working twenty-four (24) hours a day, seven days a week and
use of premium transportation. Seller shall specify the delivery date
and time of any such AOG Spare within two (2) hours of receipt of an
AOG Spare request.
B. CRITICAL - means an imminent AOG work stoppage. Seller will expend
best efforts to provide the earliest possible delivery of any Spare
designated Critical by Boeing. Such effort includes but is not limited
to working two (2) shifts a day, five (5) days a week and use of
premium transportation. Seller shall specify the delivery date and
time of any such Critical Spare within the same working day of receipt
of a Critical Spare request.
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SPECIAL BUSINESS PROVISIONS
13.1 SPARES (Continued)
C. EXPEDITE (CLASS I) - means a Spare required in less than Seller's
normal leadtime. Seller will expend best efforts to meet the
requested delivery date. Such effort includes but is not limited to
working overtime and use of premium transportation.
D. ROUTINE (CLASS III) - means a Spare required in Seller's normal
leadtime.
E. POA REQUIREMENT (POA) - means any detail component needed to replace a
component on an End Item Assembly currently in Boeing's assembly line
process. Seller shall expend best efforts feasible to provide the
earliest possible delivery of any Spare designated as POA by Boeing.
Such effort includes but is not limited to working twenty-four (24)
hours a day, seven days a week and use of premium transportation.
Seller shall specify the delivery date and time of any such POA within
two (2) hours of an AOG Spare request.
F. IN-PRODUCTION - means any Spare with a designation of AOG, Critical,
Expedite, Routine, POA or End Item Assembly which is in the current
engineering configuration for the Product and is used on a model
aircraft currently being manufactured by Boeing.
G. NON-PRODUCTION REQUIREMENTS - means any Spare with a designation of
AOG, Critical, Expedite and Routine requirements which is used on
model aircraft no longer being manufactured by Boeing (Post
Production) or is in a non-current engineering configuration for the
Product (Out of Production).
H. BOEING PROPRIETARY SPARE - means any Spare which is manufactured (i)
by Boeing, or (ii) to Boeing's detailed designs with Boeing's
authorization or (iii) in whole or in part using Boeing's Proprietary
Materials.
13.1.1 SPARES SUPPORT
Seller shall provide Boeing with a written Spares support process
describing Seller's plan for supporting AOG and Critical commitments and
manufacturing support. The process must provide Boeing with the name and
number of a twenty-four (24) hour contact for coordination of AOG and
Critical requirements. Such contact shall be equivalent to the coverage
provided by Boeing to its Customers as outlined in Attachment 4 "Boeing AOG
Coverage" which is incorporated herein and made a part hereof by this
reference.
Seller shall notify Boeing as soon as possible via fax, telecon, or as
otherwise agreed to by the parties of each AOG and Critical requirement
shipment using the form identified in Attachment 5 "Boeing AOG and Critical
Shipping Notification". Such notification shall include time and date
shipped, quantity shipped, Order, pack slip, method of transportation and
air bill if applicable. Seller shall also notify Boeing immediately upon
the discovery of any delays in shipment of any requirement and identify the
earliest revised shipment possible.
8
<PAGE>
SPECIAL BUSINESS PROVISIONS
13.1.2 RECLASSIFICATION OR RE-EXERCISES
Boeing may on occasion, instruct Seller to re-prioritize or reclassify an
existing requirement in order to improve or otherwise change the
established shipping schedule. Seller shall expend the effort required to
meet the revised requirement as set forth above in the definitions of the
requirements. Seller's commitment of a delivery schedule shall be given in
accordance with that set forth above for the applicable classification but
in no case shall it exceed twenty-four (24) hours from notification by
Boeing.
13.1.3 SPARE PRICING
Except as set forth in subsections 13.1.3.1 and 13.1.3.2 below, the price
for Spare(s) shall be the same as the production price for the Products as
listed on Attachment 1, in effect at the time the Spare(s) are ordered. POA
parts shall be priced so that the sum of the prices for all POA parts of an
End Item Assembly equals the applicable recurring portion of the End Item
Assembly.
13.1.3.1 AIRCRAFT ON GROUND (AOG), CRITICAL SPARES AND POA REQUIREMENT
The price for AOG and Critical Spares and POA requirements shall be
the price for such Products listed on Attachment 1.
13.1.3.2 EXPEDITE SPARE (CLASS 1)
The price for Expedite Spares shall be the price for such Products
listed on Attachment 1.
13.1.4 SPECIAL HANDLING
The price for all effort associated with the handling and delivery of
Spare(s) is deemed to be included in the price for such Spare(s). Provided,
that if Boeing directs delivery of Spares to an F.O.B. point other than
Seller's plant, Boeing shall reimburse Seller for shipping charges,
including insurance, paid by Seller from the plant to the designated F.O.B.
point. Such charges shall be shown separately on all invoices.
13.2 SHORT FLOW PRODUCTION REQUIREMENTS
Expedite charges, if any, to be paid for short flow production requirements
shall not exceed the amount payable under SBP Section 13.1.3.1 above for
that portion of the Order which is released short flow except as otherwise
agreed to in writing by Boeing. In the event Boeing agrees to pay an amount
in excess of that set forth in SBP Section 13.1.3.1 above, Seller shall
provide data to verify expedite charges requested. For purposes of this
Section, "Short Flow Production" shall be defined as any requirement
released less than Seller's current Re-Order Leadtime (ROLT). If Seller
fails to meet the required delivery, Boeing shall not be obligated to pay
the agreed upon amount.
9
<PAGE>
SPECIAL BUSINESS PROVISIONS
13.3 TOOLING
13.3.1 RESPONSIBLE PARTY
Seller shall absorb all costs for Tooling manufactured and/or purchased by
Seller necessary for the manufacture and delivery of the Products including
but not limited to rework, repair and maintenance of the Tooling.
13.3.2 BOEING FURNISHED TOOLING
In the event Boeing furnishes Tooling to Seller to support the delivery of
Product(s), Seller shall comply with the Terms and Conditions applicable to
the Blanket Tooling Purchase Control Order established with Seller who
possess or controls Tooling. No repair, replacement or rework required
shall be performed without Boeing's prior written consent. Boeing shall
notify Seller of, what if any, action shall be required for all discrepant
Tooling.
13.4 PRICING OF BOEING'S SUPPORTING REQUIREMENTS
Any Products required to assist Boeing's supporting requirements, including
but not limited to requirements for color and appearance samples, Boeing-
owned simulators, test requirements, factory support, flight test spares
will be provided for not more than the applicable price as set forth in
Attachment 1.
13.5 PRICING OF REQUIREMENTS FOR MODIFICATION OR RETROFIT
Any Products required by Boeing to support a modification or retrofit
program shall be provided for not more than the applicable price as set
forth in Attachment 1.
13.6 SIMILAR PRICING
New Products ordered by Boeing that are similar to or within Product
families of Products currently being manufactured by Seller shall be priced
using the same methodology or basis as that used to price the existing
Product(s).
14.0 STATUS REPORTS/REVIEWS
When requested by Boeing, Seller shall update and submit, as a minimum,
monthly status reports on data requested by Boeing using a method mutually
agreed upon by Boeing and Seller.
When requested by Boeing, Seller shall provide to Boeing a manufacturing
milestone chart identifying the major purchasing, planning and
manufacturing operations for the applicable Product(s).
10
<PAGE>
SPECIAL BUSINESS PROVISIONS
Upon request by Boeing, a program review may be held between the parties.
The location of such review shall be mutually agreed to by the parties. The
purpose of the review is to improve communication and understanding between
the parties to ensure program success.
15.0 PROVISIONS FOR OFFSET/BUSINESS STRATEGIES
FOREIGN PROCUREMENT REPORT
Seller agrees to cooperate with Boeing in identifying possible
subcontractors for work under any Order that support Boeing's offset or
business strategies. Prior to releasing any request for proposal to a
subcontractor to support Boeing's offset or business strategy, Seller shall
coordinate with Boeing.
Seller shall document on Attachment 2 all offers to contract and executed
contracts with such subcontractors including the dollars contracted.
Seller shall provide to Boeing with an updated copy of Attachment 2 for the
six-month periods ending June 30 and December 31 of each year. The reports
shall be submitted on the 1st of August and the 1st of February
respectively.
16.0 BOEING FURNISHED MATERIAL
NOT APPLICABLE
17.0 ASSIGNMENT
Boeing and Seller agree that Boeing may, in its discretion, assign, in part
or in whole, its purchasing obligations under the Agreement or any Order,
as applicable, at the prices set forth in Attachment 1 thereof. Boeing
reserves the right to rescind its assignment at anytime.
Boeing's assignment of purchasing obligation includes scheduling, issuance
of Order(s), receival and inspection of Products, acceptance or rejection
of Products, payment for accepted Products, and ensuring conformance to the
quality assurance system requirements.
Boeing shall retain all other rights and obligations pursuant to the
applicable terms and conditions. In addition, Boeing reserves the right,
where necessary, to coordinate with and mediate between Seller and any
assignee regarding such assignment.
18.0 INVENTORY AT CONTRACT COMPLETION
NOT APPLICABLE
19.0 OWNERSHIP OF INTELLECTUAL PROPERTY
NOT APPLICABLE
19.1 TECHNICAL WORK PRODUCT
NOT APPLICABLE
19.2 INVENTIONS AND PATENTS
NOT APPLICABLE
19.3 WORKS OF AUTHORSHIP AND COPYRIGHTS
NOT APPLICABLE
11
<PAGE>
SPECIAL BUSINESS PROVISIONS
19.4 PRE-EXISTING INVENTIONS AND WORKS OF AUTHORSHIP
NOT APPLICABLE
20.0 ADMINISTRATIVE AGREEMENTS
NOT APPLICABLE
21.0 GUARANTEED WEIGHT REQUIREMENTS
NOT APPLICABLE
22.0 SUPPLIER DATA REQUIREMENTS
NOT APPLICABLE
23.0 DEFERRED PAYMENT
NOT APPLICABLE
24.0 SOFTWARE PROPRIETARY INFORMATION RIGHTS
NOT APPLICABLE
EXECUTED in duplicate as of the date and year first set forth above by the duly
authorized representatives of the parties.
THE BOEING COMPANY
By and Through its Division
Boeing Commercial Airplane Group
Name: /s/ illegible Name: /s/ illegible
------------------------ ------------------------
Title: PRESIDENT Title:
------------------------ ------------------------
Date: Date:
------------------------ ------------------------
12
<PAGE>
ATTACHMENT 1 TO
SPECIAL BUSINESS PROVISIONS
WORK STATEMENT AND PRICING
The price for Products to be delivered on or before December 31, 199, except as
otherwise noted below, shall be as follows:
PART NUMBER LEAD TIME NOMENCLATURE UNIT PRICE
- ----------- --------- ------------ ----------
SEE ENCLOSURE A
1
<PAGE>
Attachment 1 to Special Business Provisions
Work Statement and Pricing
The price for products to be delivered through December 31, 1999 shall be
as follows:
(a) designates new parts added to the contract.
Contract
Part Number/Family Lead Time Nomenclature Price
-------------------- --------- ------------ ----------
(a) CA1044-1 12 Weeks Latch $1.01
(a) CAMA11A1S 12 Weeks Connector $25.39
(a) CAMA11W1P 12 Weeks Connector $11.00
(a) CAMA11W1S 12 Weeks Connector $25.45
(a) CAMA11W1SLF 12 Weeks Connector $37.75
(a) CAMA15S 12 Weeks Connector $11.05
CAMA15S5LF 12 Weeks Connector $55.94
CB004-5P 12 Weeks Contact $1.67
CB005-5P 12 Weeks Contact $1.97
(a) CB008-5P 12 Weeks Contact $4.23
(a) CB009-5P 12 Weeks Contact $3.50
CB02-15P1 12 Weeks Connector $25.50
CB02C-15P 12 Weeks Receptacle $55.48
CB02C-15S 12 Weeks Connector $54.44
CB05-15S 12 Weeks Plug $39.25
(a) CB06-15P 12 Weeks Connector $25.20
(a) CB06-15S 12 Weeks Connector $24.44
CB12P1 12 Weeks Plug $7.75
CBCX12R1A 12 Weeks Receptacle $67.93
(a) CBCX12RP1A 12 Weeks Connector $407.02
(a) CBMA21W1P 12 Weeks Connector $17.75
(a) CBMA21W1S 12 Weeks Connector $18.68
(a) CBX12PM1A 12 Weeks Connector $51.80
(a) CC5791-3 12 Weeks Contact $33.38
CCM25A3P-SP 12 Weeks D-Sub $39.57
(a) CCMA17W5PK87 12 Weeks Connector $40.05
(a) CCMA17W5S 12 Weeks Connector $27.48
(a) CCMA21WA4S 12 Weeks Connector $18.42
(a) CCMA25W3S 12 Weeks Connector $18.55
(a) CCMA37PK87 12 Weeks Connector $18.06
(a) CDMA36W4S 12 Weeks Connector $23.96
(a) CJC200 12 Weeks Connector $315.25
(a) CJC400 12 Weeks Dummy VDU $441.57
(a) CJC600 12 Weeks Switch $275.00
(a) CLPT12SP06 12 Weeks Adapter Connector $592.25
(a) CLPT12SP07 12 Weeks Adapter Connector $592.25
CMP002-P103 12 Weeks Contact $4.82
CMP002-Sl03 12 Weeks Contact $5.11
CMP003-P103 12 Weeks Contact $4.72
1
<PAGE>
Attachment 1 to Special Business Provisions
Work Statement and Pricing
The price for products to be delivered through December 31, 1999 shall be
as follows:
(a) designates new parts added to the contact.
Contract
Part Number/Family Lead Time Nomenclature Price
-------------------- --------- ------------ ----------
CMP003-S103 12 Weeks Contact $5.02
CMP004-P103 12 Weeks Contact $4.72
CMP004-S103 12 Weeks Contact $5.02
(a) CMX006S102 12 Weeks Contact $6.00
(a) CMX006S102E 12 Weeks Contact $15.79
(a) CPIS001 12 Weeks Connector $107.00
(a) CPX3MAB32C4PD106S67P 12 Weeks Connector $447.65
(a) CPX3MAB32C4SD106P67S 12 Weeks Connector $437.40
(a) CPXBMA32-33S0001 12 Weeks Connector $100.00
(a) CQAEM 12 Weeks Connector $23.00
CQAMA11W1P 12 Weeks Connector $41.91
(a) CQAMA11W1S 12 Weeks Connector $48.37
CQAMA15P 12 Weeks Connector $17.50
CQAMA15S 12 Weeks Connector $47.85
CQAPM 12 Weeks Backshell $3.09
(a) CQARA11W1P 12 Weeks Connector $585.18
(a) CQARA11W1S 12 Weeks Connector $195.12
CQASM 12 Weeks Backshell $3.24
(a) CQBMA13W3P 12 Weeks Connector $39.95
(a) CQBMA13W3S 12 Weeks Connector $77.29
(a) CQBMA17W2P 12 Weeks Connector $30.35
(a) CQBMA25P 12 Weeks Connector $116.73
(a) CQBPM 12 Weeks Connector $22.37
(a) CQBSM 12 Weeks Backshell $17.11
CQCMA21WA4S 12 Weeks Connector $51.55
(a) CQCMA25W3P 12 Weeks Connector $331.36
(a) CQCMA25W3S 12 Weeks Connector $39.63
CQCMA2SW3S 12 Weeks Connector $45.25
CQCMA37P 12 Weeks Connector $45.62
CQCPM 12 Weeks Backshell $14.12
CQCRA21WA4P 12 Weeks Connector $193.86
CQCRA21WA4S 12 Weeks Connector $193.83
CQCSM 12 Weeks Backshell $4.09
(a) CQDMA24W7P 12 Weeks Connector $697.54
(a) CQDMA24W7S 12 Weeks Connector $43.75
CQDMA36W4S 12 Weeks Connector $54.73
CQDMA50S 12 Weeks Connector $60.31
CQDPM 12 Weeks Backshell $20.52
CQDRA24SW7S 12 Weeks Connector $697.54
2
<PAGE>
Attachment 1 to Special Business Provisions
Work Statement and Pricing
The price for products to be delivered through December 31, 1999 shall be
as follows:
(a) designates new parts added to the contract.
Contract
Part Number/Family Lead Time Nomenclature Price
-------------------- --------- ------------ ----------
CQDRA50P 12 Weeks D Sub $195.15
CQDSM 12 Weeks Backshell $15.02
CQEEM 12 Weeks Backshell $5.68
CQEMA9P 12 Weeks Connector $32.77
CQEMA9S 12 Weeks Connector $16.87
CQEPM 12 Weeks Backshell $3.35
CQESM 12 Weeks Backshell $6.56
(a) CQMEF200 12 Weeks Contact $19.95
(a) CQMEF316 12 Weeks Contact $22.12
CQMEF501 12 Weeks Contact $8.43
CQMEF501A 12 Weeks Contact $10.45
CQMEF502A 12 Weeks Contact $24.02
(a) CQMEF503 12 Weeks Contact $29.75
(a) CQMEM200 12 Weeks Contact $17.47
(a) CQMEM316 12 Weeks Connector $18.99
CQMEM501 12 Weeks Contact $14.22
CQMEM502 12 Weeks Contact $19.56
(a) CQMEM503 12 Weeks Connector $28.58
(a) CRC280-2 12 Weeks Contact $27.71
(a) CRC280-3 12 Weeks Contact $28.38
(a) CRC280-4 12 Weeks Contact $26.76
(a) CRM280-2 12 Weeks Contact $72.12
(a) CRM280-3 12 Weeks Contact $28.74
(a) CRM280-4 12 Weeks Contact $26.78
(a) CRMEF501 12 Weeks Contact $16.71
(a) CRMEM501 12 Weeks Contact $15.38
CSLT21P1A 12 Weeks Plug $21.70
CT14S 12 Weeks Backshell $0.87
CTB0802 12 Weeks Terminal Block $303.13
CTB8C 12 Weeks Terminal Block Cover $25.96
(a) CTB9000 12 Weeks Terminal Block $542.21
(a) CTB9CS 12 Weeks Terminal Cover $62.61
CTER100 12 Weeks Terminal Assembly $125.00
CTER120 12 Weeks Terminal Assembly $125.00
(a) CTR14S 12 Weeks Backshell $3.45
(a) CTR90SR1S 12 Weeks Backshell $206.86
CTX623-6CH 12 Weeks Telephone Jack $60.33
(a) CTZ623-6CH 12 Weeks Telephone Jack $23.78
(a) CWC01-1210 12 Weeks Connector $59.66
3
<PAGE>
Attachment 1 to Special Business Provisions
Work Statement and Pricing
The price for products to be delivered through December 31, 1999 shall be
as follows:
(a) designates new parts added to the contract.
Contract
Part Number/Family Lead Time Nomenclature Price
-------------------- --------- ------------ ----------
(a) CWC01-2006 12 Weeks Terminal $23.31
(a) CWC01-2010 12 Weeks Terminal $23.34
CWC02-2006 12 Weeks Terminal $56.45
CWC02-2010 12 Weeks Terminal $62.92
(a) DSB3 12 Weeks Backshell $23.83
(a) DSB4 12 Weeks Backshell $23.83
(a) DSB5 12 Weeks Backshell $23.83
(a) K3004-0001-2005 12 Weeks Contact $1.69
(a) K3004-0002-1605 12 Weeks Contact $3.14
(a) K4004-0001-2005 12 Weeks Contact $2.90
(a) K4004-0002-1605 12 Weeks Contact $3.05
4
<PAGE>
ATTACHMENT 2 TO
SPECIAL BUSINESS PROVISIONS
FOREIGN PROCUREMENT REPORT FORM
(Seller to Submit)
(Reference Section 15.0)
COMMODITY/ BID CONTRACTED
SUPPLIER NAME COUNTRY NOMENCLATURE DOLLARS DOLLARS
- ------------- ------- ------------ ------- ----------
2
<PAGE>
ATTACHMENT 3 TO
SPECIAL BUSINESS PROVISIONS
RATES AND FACTORS
(Reference Section 12.2)
3
<PAGE>
ATTACHMENT 4 TO
SPECIAL BUSINESS PROVISIONS
BOEING AOG COVERAGE
- - NORMAL HOURS BOEING'S MATERIAL REPRESENTATIVE(MATERIAL
DIVISION)
Approximately 5:30 a.m. - 6:00 p.m.
- Performs all functions of procurement process.
- Manages formal communication with Seller.
- - SECOND SHIFT - AOG PROCUREMENT SUPPORT (MATERIAL DIVISION)
3:00 p.m. - 11:00 p.m.
- May place order and assist with commitment and shipping information,
working with several suppliers on a priority basis.
- Provides a communication link between Seller and Boeing.
- - 24 HOUR AOG SERVICE - AOG CUSTOMER REPRESENTATIVE
(CUSTOMER SERVICE DIVISION ) 544-9000
- Support commitment information particularly with urgent orders.
- Customer Service Representative needs (if available):
- Part Number
- Boeing Purchase Order
- Airline Customer & customer purchase order number
- Boeing S.I.S. #
If Seller is unable to contact any of the above, please provide AOG/Critical
shipping information notification via FAX using Boeing AOG/Critical shipping
notification form (Attachment 5).
4
<PAGE>
ATTACHMENT 5 TO
SPECIAL BUSINESS PROVISIONS
BOEING
AOG/CRITICAL
SHIPPING NOTIFICATION
- --------------------------------------------------------------------------------
To: FAX: (206) 544-9261 or 544-9262 Phone: (206) 544-9296
-------------------------- ------------------------------
Buyer Name: Phone:
--------------------- ------------------------------
From: Today's Date:
--------------------- ------------------------------
- --------------------------------------------------------------------------------
Part Number: Customer PO:
--------------------- -----------------------
Customer: Ship Date:
--------------------- -----------------------
Qty Shipped: *SIS Number:
--------------------- -----------------------
Boeing PO: Pack Sheet
--------------------- -----------------------
*Airway Bill: or Invoice:
--------------------- -----------------------
Carrier: *Flight #:
--------------------- -----------------------
Freight
Forwarder:
---------------------
* If Applicable
Shipped To:(Check One) Boeing
-----
Direct Ship
to Customer
-----
Direct Ship
to Supplier
-----
Remarks:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
IF UNABLE TO CONTACT BUYER,
PLEASE USE THIS FORM TO FAX SHIPPING INFORMATION.
5
<PAGE>
ATTACHMENT 6 TO
SPECIAL BUSINESS PROVISIONS
SUPPLIER DATA REQUIREMENTS LIST ("SDRL")
CUSTOMER SUPPORT
(Reference Section 21.0)
NOT APPLICABLE
6
<PAGE>
ATTACHMENT 7 TO
SPECIAL BUSINESS PROVISIONS
SUPPLIER DATA REQUIREMENTS LIST ("SDRL")
ENGINEERING
(Reference Section 21.0)
NOT APPLICABLE
7
<PAGE>
SPECIAL BUSINESS PROVISIONS
19.4 PRE-EXISTING INVENTIONS AND WORKS OF AUTHORSHIP
NOT APPLICABLE
20.0 ADMINISTRATIVE AGREEMENTS
NOT APPLICABLE
21.0 GUARANTEED WEIGHT REQUIREMENTS
NOT APPLICABLE
22.0 SUPPLIER DATA REQUIREMENTS
NOT APPLICABLE
23.0 DEFERRED PAYMENT
NOT APPLICABLE
24.0 SOFTWARE PROPRIETARY INFORMATION RIGHTS
NOT APPLICABLE
EXECUTED in duplicate as of the date and year first set forth above by the duly
authorized representatives of the parties.
THE BOEING COMPANY CORY COMPONENTS
By and Through its Division
Boeing Commercial Airplane Group
Name: /s/ Name: /s/
-------------------- ---------------------
Title: Buyer Title: PRESIDENT
-------------------- ---------------------
Date: December 1, 1995 Date: 2/12/96
-------------------- ---------------------
12
<PAGE>
EXHIBIT 10.16
BOEING
PURCHASE AGREEMENT
9423JC4548
between
BOEING DEFENSE & SPACE-IRVING CO.
3131 STORY ROAD WEST
IRVING, TEXAS 75038
and
CORY COMPONENTS
2201 ROSECRANS AVENUE
EL SEGUNDO, CA 90245
Period of Performance
January 1, 1995 through December 31, 1999
<PAGE>
AGREEMENT #9423JC4548
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.0 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Products. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Material Representative . . . . . . . . . . . . . . . . . . . 1
1.3 F.O.B . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Specification . . . . . . . . . . . . . . . . . . . . . . . . 2
2.0 ISSUANCE OF ORDERS AND APPLICABLE TERMS. . . . . . . . . . . . . . 2
2.1 Issuance of Orders. . . . . . . . . . . . . . . . . . . . . . 2
2.2 Supplier Scheduling . . . . . . . . . . . . . . . . . . . . . 2
2.3 Acceptance of Orders. . . . . . . . . . . . . . . . . . . . . 2
2.4 Rejection of Orders . . . . . . . . . . . . . . . . . . . . . 3
2.5 Written Authorization to Proceed. . . . . . . . . . . . . . . 3
3.0 TITLE AND RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . 3
4.0 PRICING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.0 NON-RECURRING COSTS. . . . . . . . . . . . . . . . . . . . . . . . 4
6.0 LEADTIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.0 DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Expedited Delivery . . . . . . . . . . . . . . . . . . . . . 5
8.0 ON-SITE REVIEW AND RESIDENT REPRESENTATIVES. . . . . . . . . . . . 5
8.1 Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.2 Resident Representatives. . . . . . . . . . . . . . . . . . . 6
9.0 PRODUCT CONFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . 6
10.0 QUALITY CONTROL, INSPECTION, REJECTION, AND ACCEPTANCE . . . . . . 6
10.1 Controlling Document. . . . . . . . . . . . . . . . . . . . . 6
i
<PAGE>
10.2 Inspection and Rejection. . . . . . . . . . . . . . . . . . . 6
10.3 SELLER's Notice of Discrepancies. . . . . . . . . . . . . . . 7
10.4 Right of Entry. . . . . . . . . . . . . . . . . . . . . . . . 7
10.5 Certification . . . . . . . . . . . . . . . . . . . . . . . . 8
10.6 Retention of Records. . . . . . . . . . . . . . . . . . . . . 8
10.7 Source Inspection . . . . . . . . . . . . . . . . . . . . . . 8
11.0 PATENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12.0 EXAMINATION OF RECORDS . . . . . . . . . . . . . . . . . . . . . . 9
13.0 CHANGES TO SPECIFICATIONS. . . . . . . . . . . . . . . . . . . . . 9
14.0 CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
15.0 INVOICE AND PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . 10
16.0 PACKAGING AND SHIPPING . . . . . . . . . . . . . . . . . . . . . . 10
17.0 WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18.0 TERMINATION FOR DEFAULT. . . . . . . . . . . . . . . . . . . . . . 11
19.0 TERMINATION FOR CONVENIENCE. . . . . . . . . . . . . . . . . . . . 11
20.0 FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
21.0 RESPONSIBILITY FOR PROPERTY. . . . . . . . . . . . . . . . . . . . 12
22.0 TECHNOLOGICAL DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . 12
22.1 Proprietary Information . . . . . . . . . . . . . . . . . . . 13
23.0 COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS. . . . . . . . . . . 13
23.1 Clean Air Act . . . . . . . . . . . . . . . . . . . . . . . . 13
24.0 BUYER'S RIGHTS IN SELLER'S DATA, PATENTS AND TOOLING . . . . . . . 14
25.0 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
25.1 Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . 14
25.2 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . 15
26.0 PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
27.0 FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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28.0 RELIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
29.0 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
30.0 SUBCONTRACTING . . . . . . . . . . . . . . . . . . . . . . . . . . 16
31.0 NOTICE OF LABOR DISPUTES . . . . . . . . . . . . . . . . . . . . . 16
32.0 NON-WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
33.0 HEADING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
34.0 PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . 16
35.0 APPLICABLE LAW; JURISDICTION . . . . . . . . . . . . . . . . . . . 16
36.0 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
36.1 Exclusion of Taxes in Price . . . . . . . . . . . . . . . . . 16
36.2 Tax Claims. . . . . . . . . . . . . . . . . . . . . . . . . . 17
37.0 ENTIRE AGREEMENT; ORDER OF PRECEDENCE. . . . . . . . . . . . . . . 17
ATTACHMENT "A" Specifications and Pricing. . . . . . . . . . . . . . . 19
ATTACHMENT "B" Leadtime. . . . . . . . . . . . . . . . . . . . . . . . 20
ATTACHMENT "C" Supplier Scheduling Program . . . . . . . . . . . . . . 21
ATTACHMENT "D" Supplier Scheduling Report. . . . . . . . . . . . . . . 23
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AGREEMENT NO. 9423JC4548
This Agreement is made this date, February 8, 1995, by and between BOEING
DEFENSE & SPACE - IRVING CO., of 3131 Story Road West, Irving, TX 75038, herein
known as "BUYER", and CORY COMPONENTS, of 2201 Rosecrans Ave., El Segundo, CA
90245, herein known as "SELLER".
This Agreement shall be in effect from January 1, 1995 through December 31, 1999
and for the delivery schedules through June 30, 2000 with option to extend. The
terms of this Agreement may also be extended to compensate for an amount of time
equal to the time the contract is on hold due to quality problems, should any be
encountered.
RECITALS
A. BUYER is currently supporting production of commercial aircraft.
B. SELLER manufactures and sells certain goods and services for use in
the production and support of commercial aircraft.
C. SELLER desires to sell and BUYER desires to purchase certain of
Seller's goods and services for the production and support of
commercial aircraft.
D. SELLER and BUYER desire to enter into an agreement for the sale by
Seller and purchase by BUYER of Products as defined herein.
Now, therefore, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
AGREEMENTS
1.0 DEFINITIONS
1.1 "PRODUCTS" shall mean (a) all goods purchased and described on any
Order and (b) services purchased and described on any Order or
attachments to this Agreement.
1.2 "MATERIAL REPRESENTATIVE" shall mean the employee and his/her
management designated as such by BUYER from time to time, or in the
absence of such designation, BUYER's employee and his/her management
primarily responsible for dealing with SELLER in connection with
administration of the applicable Order.
1.3 "F.O.B." shall mean "Free on Board".
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1.4 "ORDER": Each purchase order accepted by SELLER is a contract between
BUYER and SELLER and shall be referred to herein as an "Order". (See
Article 2.2, "Supplier Scheduling").
1.5 "SPECIFICATION": Specifications shall be defined to mean the
document(s) which are referenced and/or attached hereto, and also
include those incorporated as Attachment "A".
2.0 ISSUANCE OF ORDERS AND APPLICABLE TERMS
2.1 ISSUANCE OF ORDERS
BUYER shall issue Orders to SELLER from time to time. Each Order
shall contain a description of the Products ordered, a reference to
the applicable specifications and drawings, the quantities, the
prices, the delivery schedule, the terms and place of delivery, any
special conditions and the following note:
"This Order is placed in accordance with Agreement No. 9423JC4548
between Boeing Defense & Space - Irving Co. and Cory Components.
Period of performance January 1, 1995 through December 31, 1999 with
deliveries through June 30, 2000."
2.2 SUPPLIER SCHEDULING
In the future, this contract may be modified by mutual agreement to
include Supplier Scheduling disciplines and techniques which may
alter leadtimes, Order releases and reschedule policies.
For Supplier Scheduling disciplines and techniques, this Agreement
shall be modified for Orders released by BUYER as agreed to in
Attachments "C" and "D". Leadtimes, minimum production releases and
order policies may be altered as mutually agreed between BUYER and
SELLER.
2.3 ACCEPTANCE OF ORDERS
Each Order is BUYER's offer to SELLER and acceptance is strictly
limited to its terms. BUYER WILL NOT BE BOUND BY AND SPECIFICALLY
OBJECTS TO ANY TERM OR CONDITION WHICH IS DIFFERENT FROM OR IN
ADDITION TO THE PROVISIONS OF THE ORDER, WHETHER OR NOT SUCH TERM OR
CONDITION WILL MATERIALLY ALTER THE ORDER. SELLER's commencement of
performance or acceptance of the Order in any manner shall
conclusively evidence SELLER's acceptance of the Order as written.
BUYER may revoke, at no charge, any Order/release prior to receipt of
SELLER's written acceptance or SELLER's commencement of performance.
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2.4 REJECTION OF ORDERS
Any rejection by SELLER of an Order shall specify the reasons for
rejection and any changes or additions that would make the Order
acceptable to SELLER; provided, however, that SELLER may not reject
any Order for reasons inconsistent with the provisions of this
Agreement.
2.5 WRITTEN AUTHORIZATION TO PROCEED
BUYER may give written authorization to SELLER to commence
performance before BUYER issues an Order. If BUYER in its written
authorization specifies that an Order will be issued, BUYER and
SELLER shall proceed as if an Order had been issued. This Agreement
and the terms stated in such written authorization shall be deemed to
be a part of BUYER's offer, and the parties shall promptly agree on
any open Order terms. If BUYER does not specify in its written
authorization that an Order shall be issued, BUYER's obligation is
strictly limited to the terms of the written authorization.
If SELLER commences performance (a) before an Order is issued or (b)
without receiving BUYER's prior written authorization to proceed,
such performance shall be at SELLER's expense.
3.0 TITLE AND RISK OF LOSS
Title to and risk of any loss of or damage to the Products shall pass
from SELLER to BUYER at F.O.B. point El Segundo, CA, except for loss
or damage thereto resulting from SELLER's fault or negligence.
Passage of title on delivery does not constitute BUYER's acceptance
of Products.
4.0 PRICING
Pricing for all product(s) purchased under this Agreement shall not
exceed the prices shown in Attachment "A", and shall remain firm
through December 31, 1999 and for deliveries through June 30, 2000,
unless altered by specification changes outlined in Article 13.0,
"CHANGES TO SPECIFICATIONS". Pricing shall be available to all BOEING
locations and subsidiaries should they elect to participate under the
terms of this Agreement.
If during the term of this Agreement, SELLER, in its sales to other
customers, reduces prices or leadtimes of like quantities of
comparable items, below those stated herein, the lowest prices and
reduced leadtimes will be made available to the BUYER and prevail
under this Agreement. SELLER shall promptly, in writing, notify BUYER
of such reductions as they become known and/or effective.
If, during the term of this Agreement, a qualified Supplier offers
BUYER a qualified product which is comparable to a product herein, at
a price which is more than five percent (5%) lower than the price
specified herein, then SELLER shall be offered the
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opportunity to continue providing the product, or comparable product
acceptable to BUYER, under this Agreement at such lower price.
If SELLER is unwilling to meet competition as specified above, then
the product affected may, at BUYER's option, be deleted from this
Agreement and BUYER shall have no further obligations to such product
under this Agreement. Such deletion shall have no effect upon BUYER's
obligation to accept delivery of product already released by BUYER
prior to such deletion. The Agreement, as modified, shall remain in
full force and effect with respect to the remaining products.
All purchases of units shall be made only upon BUYER's standard
Order(s) then in use at its various buying locations. (Reference
Article 2.2 "Supplier Scheduling"). All such Orders shall be
accumulated in calculating quantities. Orders shall specify BUYER's
part numbers, quantities, due dates, and agreement numbers. ESTIMATES
AND REQUIREMENTS USED IN ANY DOCUMENT RELATING TO THIS AGREEMENT ARE
INFORMATIONAL ONLY AND REPRESENT NO COMMITMENT BY BUYER UNTIL A
SPECIFIC ORDER IS RELEASED. BUYER DOES NOT COMMIT TO PURCHASE ALL OR
ANY SPECIFIC PORTION OF ITS TOTAL NEEDS, ESTIMATES, OR REQUIREMENTS
FROM SELLER.
BUYER shall in no event or under any circumstances whatsoever be
liable for raw material, work in process, components, or any other
expenses or damages except as expressly agreed to herein.
BUYER's maximum liability shall not at any time exceed the number of
furnished units for which Orders have been released, times the
furnished unit price specified herein.
Items furnished by SELLER, but not listed on Attachment "A" may be
negotiated and added to this Agreement by written addendum.
5.0 NON-RECURRING COSTS
A. Non-recurring charges, if any, incurred by BUYER in
conjunction with this Agreement shall be an all inclusive,
one-time charge, shown, upon occurrence, in Attachment "A",
to produce the corresponding product(s) listed in Attachment
"A". Such charges shall be itemized and invoiced separately
from product costs.
B. All tooling, jigs, fixtures, drawings, etc. shall become the
property of BUYER at time of payment of the Order invoice for
same, and shall be maintained in an industry acceptable
manner and covered for replacement value by the SELLER while
in SELLER's possession. In the event of termination of this
Agreement BUYER shall provide disposition of such property
to SELLER.
6.0 LEADTIME
SELLER shall maintain "not to exceed" leadtimes as stated in
Attachment "B". BUYER, at its option, may specify longer time
intervals.
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7.0 DELIVERY
7.1 REQUIREMENTS
Deliveries shall be strictly in accordance with the quantities, the
schedule and other requirements specified in the applicable Order.
SELLER may not make early deliveries without BUYER's prior written
authorization. All delivery dates shown on the Order(s) are to be
considered BUYER's on DOCK DATES. SELLER agrees to ship in sufficient
time to meet the required date without preceding it by more than five
(5) calendar days or exceeding it by more than zero (0) days provided
that the quantities and schedules are in accordance with the
requirements of this Agreement.
BUYER reserves the right to reschedule for later delivery any item on
the Order(s) at no charge, by giving notice at least fifteen (15)
working days prior to the date of the original scheduled due date of
that item.
BUYER's expectation is 100% On-Time delivery to SELLER's commitment.
SELLER shall maintain a minimum of 96% on-time delivery to SELLER
commitment as measured by BUYER's performance rating system. It is
understood that BUYER's minimum acceptable performance will increase
during the term of this Agreement.
7.2 DELAY
SELLER shall notify BUYER immediately, in writing, upon learning of
any circumstance that may cause a delay in delivery, stating the
period of delay and the reasons therefore. SELLER shall use
reasonable additional effort, including premium effort, and shall
ship via air or other expedited routing to avoid or minimize delay to
the maximum extent possible. All additional costs resulting from such
premium effort or premium transportation shall be borne by SELLER.
Nothing herein may be construed to prejudice any of the rights or
remedies provided to BUYER in the applicable Order or by law.
7.3 EXPEDITED DELIVERY
In the event BUYER has requirements that necessitate an expedited
delivery date, SELLER will strive to meet this need and any premium
charges shall be negotiated at time of Order. In the event SELLER
fails to exert reasonable effort to meet a delivery date for which
premium charges have been authorized, such charges shall become void.
8.0 ON-SITE REVIEW AND RESIDENT REPRESENTATIVES
8.1 REVIEW
At BUYER's request, SELLER shall provide at BUYER's facility, or at a
place designated by BUYER, a review explaining the status of any
Order, actions taken
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or planned to be taken relating to such Order and any other relevant
information. Nothing herein may be construed as a waiver of BUYER's
rights to proceed against SELLER because of any delinquency.
8.2 RESIDENT REPRESENTATIVES
BUYER may in its discretion and for such periods as it deems
necessary assign resident personnel at SELLER's facilities in
addition to the resident Quality Control personnel provided for in
Article 10.3, "Right of Entry". The resident team will function under
the guidance of BUYER's manager who will provide program coordination
within the scope of the work authorized by any Order. The resident
team will provide communication and coordination to ensure timely
performance of any Order. BUYER's resident team shall be allowed
access to all work areas, Order status reports and management review
necessary to assure timely coordination and conformance with the
requirements of each Order. SELLER, however, remains fully
responsible for performing in accordance with each Order.
9.0 PRODUCT CONFORMANCE
SELLER shall manufacture Product(s) listed in Attachment "A" to the
requirements set forth in the specifications listed in Attachment "A".
SELLER warrants that Products delivered under this Agreement shall conform
100% to the performance and design parameters of BUYER'S Specifications.
10.0 QUALITY CONTROL, INSPECTION, REJECTION, AND ACCEPTANCE
10.1 CONTROLLING DOCUMENT
All work performed under each Order shall be subject to Document
D1-9000 "Advanced Quality System for Boeing Suppliers", latest
revision as revised from time to time. Such document by this
reference is incorporated herein.
10.2 INSPECTION AND REJECTION
Products shall be subject to final inspection and acceptance by BUYER
at destination, notwithstanding any payment or prior inspection. All
Products from all lots received by BUYER shall either be new and
unused Products or Products authorized by BUYER's reject tag
disposition. Final inspection of a Product will be made within a
reasonable time after receipt of such Product. BUYER may reject any
or all of the Products which do not strictly conform to the
requirements of the applicable Order. BUYER may reject an entire lot
of Product based on discrepancies detected in a sample quantity
selected from the lot. BUYER shall by notice, rejection tag or other
communication notify SELLER of such rejection. At SELLER's risk and
expense, all such Products will be returned to SELLER for immediate
rework, replacement or other correction and redelivery or full credit
to BUYER; provided, however, that with respect to any or all of such
Products and at BUYER's election and at SELLER's risk and expense,
BUYER
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may: (a) hold, retain or return such Products without permitting any
rework, replacement or other correction by SELLER; (b) hold or retain
such Products for rework by SELLER or, at BUYER's election, for
rework by BUYER with such assistance from SELLER as BUYER may
require; (c) return such Products for full credit only (d) hold such
Products until SELLER has delivered conforming replacements for such
Products; (e) hold such Products until confirming replacements are
obtained from a third party; or (f) return such Products with
instructions to SELLER as to whether such Products shall be reworked
or replaced and as to the manner of redelivery. Any attempt by SELLER
to salvage Products rejected by BUYER shall be in accordance with the
BUYER's rejection tag disposition. BUYER shall provide rejection tag
documentation to the SELLER to authorize the salvage. Lots delivered
with BUYER's rejection tag deviations shall contain a copy of the
rejection tag authorizing such deviation and must be attached to the
applicable packing sheets. BUYER shall provide a copy of the
rejection tag to the SELLER. SELLER shall strive to complete all
rework, replacement and other corrections and redelivery within
fifteen (15) calendar days. All costs and expenses, loss of value and
any other damages incurred as a result of or in connection with
nonconformance and rework, replacement or other correction may be
recovered from SELLER by a mutually agreeable equitable price
reduction, set-off or credit against any amounts that may be owed to
SELLER under the applicable Order or otherwise.
BUYER may revoke its acceptance of any Products and have the same
rights with regard to the Products involved as if it had originally
rejected them.
10.3 SELLER'S NOTICE OF DISCREPANCIES
The SELLER shall notify BUYER, in writing within five (5) days,
should the SELLER believe and/or have been notified in any manner,
that non-compliant Product has or may have been delivered against
this Agreement. This condition shall survive beyond the performance
period of the Agreement.
10.4 RIGHT OF ENTRY
BUYER's authorized representatives and/or Federal Aviation
Administration may enter SELLER's plant at all reasonable times to
conduct preliminary inspections and tests of the Products and work-
in-process. SELLER shall include in its major subcontracts issued in
connection with an Order a like provision giving BUYER the right to
enter the plants of SELLER's subcontractors. BUYER may assign
representatives at SELLER's plant on a full-time basis. SELLER shall
furnish, free of charge, all office space, secretarial service and
other facilities and assistance reasonably required by BUYER's
representatives at SELLER's plant.
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10.5 CERTIFICATION
A certification that materials and/or finished parts have been
controlled and tested in accordance with and will meet specified
Order requirements and applicable specifications and that records are
on file subject to BUYER's examination shall be included on or with
the packing sheet accompanying each shipment. The drawing or
specification revision will be noted on such packing sheet. Such
packing sheet shall note if BUYER has provided materials. Copies of
manufacturing planning, test and inspection results or certifications
shall be furnished to BUYER on request.
10.6 RETENTION OF RECORDS
Quality Control records shall be maintained on file and available to
BUYER's authorized representatives. SELLER shall retain such records
for a period of not less than three (3) years from the date of final
payment under the applicable Order. Prior to disposal of any such
records, BUYER shall be notified and SELLER shall transfer such
records as BUYER may direct.
10.7 SOURCE INSPECTION
If an Order contains a notation that "Source Inspection" is required,
the Products may not be packed for shipment until they have been
submitted to BUYER's Quality Control representative for inspection.
Both the packing list and SELLER's invoice must reflect evidence of
this inspection.
11.0 PATENTS
SELLER shall defend any suit or proceeding brought against BUYER, insofar
as such suit or proceeding is based on a claim that goods manufactured and
supplied to BUYER constitute direct infringement of any patent or
copyright. SELLER must be notified promptly of such claim in writing and
must be given all necessary authority, information and assistance (at
SELLER's expense). SELLER will pay all damages and costs awarded against
BUYER.
If the use of such Product or part is enjoined, SELLER will, in its sole
discretion and expense, procure for BUYER the right to continue using said
Product or part, replace same with an acceptable non-infringing product or
part or modify it so that it becomes non-infringing, in a manner that is
acceptable to the BUYER.
SELLER shall have no liability for any infringement of patents, copyrights,
trademarks or other intellectual property rights resulting from use of said
Product other than as specified in relevant SELLER publications or from use
of said Product with Products not supplied by SELLER.
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12.0 EXAMINATION OF RECORDS
SELLER shall maintain complete and accurate records showing the sales
volume of all Products. Such records shall support all services performed,
allowances claimed and costs incurred by SELLER in the performance of each
Order, including but not limited to those factors which comprise or affect
direct labor hours, direct labor rates, material costs, burden rates and
subcontracts. Such records and other data shall be capable of verification
through audit and analysis by BUYER and be available to BUYER at SELLER's
facility for BUYER's examination and audit at all reasonable times from the
date of the applicable Order until three (3) years after final payment
under such Order. SELLER shall provide assistance to interpret such data if
required by BUYER. Such examination shall provide BUYER with complete
information regarding SELLER's performance for use in price negotiations
with SELLER relating to existing or future Orders for Products (including
but not limited to negotiation of equitable adjustments for changes and
termination/obsolescence claims pursuant to Article 14.0, "CHANGES"). BUYER
shall treat such information as confidential.
13.0 CHANGES TO SPECIFICATIONS
With respect to each Product, SELLER shall notify BUYER in writing whenever
SELLER's design or development activities indicate the need for any
configuration detail or function of such Product to differ from the Product
that has been qualification tested or previously delivered or from the
configuration in Seller's approved design. With respect to each Product,
SELLER shall obtain BUYER's approval prior to incorporation of:
a. Changes which alter the form, fit or function of such Product;
b. Changes which affect the repair or replacement interchange ability of
such Product;
c. Changes to processes after construction of the qualification test
Product;
d. Changes involving material or component substitution or finish
changes;
e. Changes that effect the downward compatibility of the Product;
f. Changes which alter the weight, center of gravity or moment of
inertia of such Product.
If BUYER requests, SELLER shall submit a supplement to the applicable
qualification report to document and qualify the above changes.
14.0 CHANGES
BUYER's Material Representative may at any time by written change Order
make reasonable changes within the general scope of an Order in any one or
more of the following: (a) drawings, designs or specifications; (b)
shipping or packing; (c) place of
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inspection, delivery or acceptance; (d) adjustments in quantities and
delivery schedules, or both; and (e) the amount of BUYER-furnished
property. SELLER shall proceed immediately to perform the Order as changed.
If any such change causes an increase or decrease in the cost of, or the
time required for, the performance of any part of the work, whether changed
or not changed by the change Order, an equitable adjustment shall be made
in the price of or the delivery schedule for those Products affected, and
the applicable Order and any affected pricing shown in Attachment "A" shall
be modified in writing accordingly. Any claim by SELLER for adjustment
under this Article must be received by BUYER in writing within thirty (30)
days from the date of receipt by SELLER of the written change Order or
within such further time as the parties may agree in writing or such claim
shall be deemed waived. Nothing in this paragraph shall excuse SELLER from
proceeding with an Order as changed, including failure of the parties to
agree on any adjustment to be made under this paragraph.
If SELLER considers that the conduct of any of BUYER's employees has
constituted a change hereunder, SELLER shall immediately notify BUYER in
writing as to the nature of such conduct and its effect on SELLER's
performance. PENDING DIRECTION FROM BUYER'S MATERIAL REPRESENTATIVE, SELLER
SHALL TAKE NO ACTION TO IMPLEMENT ANY SUCH CHANGE.
15.0 INVOICE AND PAYMENT
A separate invoice shall be issued for each shipment of Products. Unless
otherwise specified in the applicable Order, no invoice may be issued prior
to shipment of the Products. Payment shall be Net 30 days. Payment due
dates shall be computed from (a) the date of receipt of the Product, (b)
the date of receipt of a correct invoice or (c) the scheduled delivery date
of such Product, whichever is last, up to and including the date BUYER's
check is mailed. All payments are subject to adjustment for shortages,
credits and rejections. Invoices without this information will be
considered incomplete and return for correction. Mail to:
Boeing Defense & Space - Irving Co.
P.O. Box 152707
Irving, Texas 75015-2707
Attn: Accounts Payable
16.0 PACKAGING AND SHIPPING
SELLER shall prepare for shipment and suitably pack all Products to prevent
damage or deterioration, or comply with any special instructions stated in
the applicable Order. BUYER shall pay no charges for preparation, packing,
crating or cartage unless stated in the applicable Order. BUYER's Order
numbers and part numbers must be indicated on the applicable Bill of Lading
or packing list.
All shipments will be made via UPS GROUND. Any deviation from this method
must be authorized by the BUYER, or the BUYER's Material Representative.
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17.0 WARRANTY
It is BUYER's expectation to receive 100% defect-free Product. SELLER
warrants that all Products delivered shall: (a) be free from defects in
material and workmanship; (b) conform to the requirements of the Order
including, but not limited to, the applicable descriptions, specifications
and drawings, and (c) be free from defects in design and fit for the
intended purpose for a period of three (3) years from date of delivery.
Products proved to be in non-conformance with the requirements stated above
shall be returned to SELLER pursuant to Article 10.2, "Inspection and
Rejection".
The warranty does not extend to any Product supplied by SELLER which has
been subjected to misuse, neglect or accident.
18.0 TERMINATION FOR DEFAULT
BUYER and/or SELLER may terminate this Agreement by written notice to the
other party upon the happening of any of the following events:
a. The SELLER and/or SELLER's Agent, or BUYER, seeks relief under any
provision of the bankruptcy or insolvency laws, or is adjudicated
bankrupt or insolvent, or in the event a receiver is appointed for
all, or substantially all, of its property;
b. If the SELLER defaults in the performance of its obligations under
this Agreement and fails to correct such default within thirty (30)
days of written notice by BUYER;
c. If SELLER fails to demonstrate to BUYER's satisfaction the ability to
meet the specifications referenced in Attachment "A".
In the event of BUYER's termination for default, SELLER must be notified of
such default in writing and given thirty (30) days from receipt of notice
of default. SELLER shall be liable for all costs and expenses for non-
delivered finished goods, raw material, work in process, components,
SELLER's commitments to its sources of supply and any damages incurred by
SELLER under this Agreement, or Orders released in conjunction with this
Agreement that occur prior to any cancellation.
19.0 TERMINATION FOR CONVENIENCE
BUYER may terminate the performance of the work under this Agreement in
whole at any time, or from time to time in part, by written notice to
SELLER. Upon receipt of such notice, SELLER shall, unless the notice
directs otherwise, immediately discontinue all work and the placing in all
orders for materials, facilities, and supplies in connection with
performance of this order and shall proceed to cancel promptly all existing
orders and terminate all subcontracts insofar as such orders or
subcontracts are chargeable to this order. Upon the termination of work
under this order, full and complete settlement of
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all claims of SELLER with respect to the termination work shall be made as
follows: (Reference Article 12.0 "EXAMINATION OF RECORDS")
a. Shipments due forty-five (45) calendar days or less from date of
notification are not cancelable.
b. Cancellation of shipments for individual part numbers due forty-six
(46) calendar days or more from date of notification will be at no
charge to BUYER.
Under no circumstances shall BUYER'S cancellation liability for all
materials, subassemblies, or finished goods exceed the agreed to unit price
times the quantity of undelivered units.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT OR CONSEQUENTIAL
DAMAGES.
20.0 FORCE MAJEURE
Neither party shall be liable in damages for delay in delivery due to any
causes beyond the control or without its fault or negligence including,
without limitation, acts of God or the public enemy, acts of the
government, fires, flood, epidemics, quarantine restrictions, strikes,
freight embargo, and unusually severe weather. SELLER and/or BUYER shall
notify the other in writing of such causes within two (2) scheduled working
days after one first learns of same.
21.0 RESPONSIBILITY FOR PROPERTY
On delivery to SELLER or manufacture or acquisition by it of any materials,
parts, tooling or other property, title to any of which is with BUYER,
SELLER shall assume the risk of and be responsible for any loss thereof or
damage thereto. In accordance with the provisions of an Order, but in any
event on completion thereof, SELLER shall return such property to BUYER in
the condition in which it as received except for reasonable wear and tear
and except to the extent that such property has been incorporated in
Products delivered under such Order or has been consumed in the normal
performance of work under such Order.
22.0 TECHNOLOGICAL DEVELOPMENTS
SELLER shall promptly advise BUYER of technological advances which are
known, or become known, to SELLER over the course of performance of its
obligations under this Agreement, which may result in the product(s) having
added value to BUYER. Should BUYER elect to incorporate such advances, it
shall do so pursuant to the conditions of Article 13.0, "CHANGES TO
SPECIFICATIONS".
12
<PAGE>
22.1 PROPRIETARY INFORMATION
Proprietary Information Agreement Number 91-3014 dated October 30,
1991, shall remain in force through the term of this Agreement and is
incorporated, by reference, into this Agreement.
23.0 COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS
SELLER warrants that in the performance of each Order it has complied with
and will comply with all applicable federal, state and local laws and
ordinances and all Orders, rules and regulation thereunder. In SELLER's
invoice or other form satisfactory to BUYER, SELLER shall certify that the
Products covered by the applicable Order were produced in compliance with
Sections 6, 7, and 12 of the Fair Labor Standard Act (29 U.S.C. 201-219),
as amended, and the regulations and Orders of the U.S. Department of Labor
issued under Section 14 thereof.
The "Equal Opportunity" clause in FAR 52.222-26,-35, -36 is incorporated
herein by this reference, except "Contractor" shall mean SELLER.
23.1 CLEAN AIR ACT
The item(s) to be delivered under this Agreement may be manufactured
using Class 1 ozone depleting substances and the following warning
statement shall apply to such items(s):
WARNING: MANUFACTURED WITH CFC-11, 12, 13, 111, 112, 113, 114, 115,
211, 212, 213, 214, 215, 216, 217, HALONS 1211, 1301, 2402, CARBON
TETRACHLORIDE OR METHYL CHLOROFORM SUBSTANCES WHICH HARM PUBLIC
HEALTH AND ENVIRONMENT BY DESTROYING OZONE IN THE UPPER STRATOSPHERE.
The item(s) to be delivered under this Agreement may contain Class 1
ozone depleting substances and the following warning statement shall
apply to such item(s):
WARNING: MANUFACTURED WITH CFC-11, 12, 13, 111, 112, 113, 114, 115,
211, 212, 213, 214, 215, 216, 217, HALONS 1211, 1301, 2402, CARBON
TETRACHLORIDE OR METHYL CHLOROFORM SUBSTANCES WHICH HARM PUBLIC
HEALTH AND ENVIRONMENT BY DESTROYING OZONE IN THE UPPER STRATOSPHERE.
It is agreed that the above warning statements satisfy the
requirement of the Clean Air Act Amendments of 1990 (Section 611),
Title 40 CFR Part 82. Accordingly, no method of marking or tagging
items shall be used unless the item is a chemical or chemical
compound.
13
<PAGE>
24.0 BUYER'S RIGHTS IN SELLER'S DATA, PATENTS AND TOOLING
BUYER shall have an irrevocable, nonexclusive, free license to use, and
license others to use on BUYER's behalf, all of SELLER's patents, designs,
processes, drawings, technical data and tooling related to the development,
production, maintenance or rework of any Product; provided, however, that
such license is conditioned upon the occurrence of one or more of the
following events:
a. Institution of reorganization, arrangement or liquidation proceedings
by or against SELLER;
b. Failure of SELLER's trustee in bankruptcy or SELLER as debtor in
possession to assume any Order within sixty (60) days after a
bankruptcy petition was filed;
c. SELLER's insolvency;
d. Appointment of a trustee or receiver for SELLER's property or
business;
e. Assignment for the benefit of creditors of SELLER;
f. SELLER's suspension of production of all or any of such Product;
g. SELLER's suspension of business operations;
h. Cancellation of any Order in whole or in part pursuant to Article
18.0, "TERMINATION FOR DEFAULT"; or
i. The acquisition of SELLER by, or SELLER's sale of any or all of its
rights to manufacture such Product to, a third party, when the sale
of any or all of those rights precludes in any way, shape, or form
the SELLER's ability to manufacture and deliver any or all of those
Products listed on Attachment "A".
In support of the license granted herein, and without further cost to
BUYER, SELLER shall provide all assistance BUYER requires to permit the
immediate transfer of the patents, designs, processes, drawings, technical
data and tooling to BUYER in a manner that satisfies BUYER's production
requirements.
25.0 NOTICES
Notices and other communications shall be given in writing to the
respective party as follows:
25.1 ADDRESSES
To BUYER: BOEING DEFENSE & SPACE - IRVING CO.
3131 STORY ROAD WEST
IRVING, TEXAS 75038
ATTN: PROCUREMENT REPRESENTATIVE
MAIL STOP: TR-41
14
<PAGE>
To SELLER: CORY COMPONENTS
2201 ROSECRANS AVE.
EL SEGUNDO, CALIFORNIA 90245
ATTN: MR. BRIAN GAMBERG
25.2 EFFECTIVE DATE
The date on which any such communication is delivered to the
addressee is the effective date of such communication.
26.0 PUBLICITY
SELLER may not, and shall require that its subcontractors and suppliers of
any tier may not, cause or permit to be released any publicity,
advertisement, news release, public announce, or denial or confirmation of
the same, in whatever form, regarding any aspect of any Order without
BUYER's prior written approval.
27.0 FACILITIES
SELLER shall bear all risk of providing adequate facilities and equipment
to perform each Order in accordance with the terms thereof. If any
contemplated use of government or other facilities or equipment is not
permitted by the government or is not available for any other reason,
SELLER shall be responsible for arranging for equivalent facilities and
equipment at no costs to BUYER. Any failure to do so does not excuse any
deficiencies in SELLER's performance or affect BUYER's right to cancel
under Article 18.0 "TERMINATION FOR DEFAULT", or under any provision of
law.
28.0 RELIANCE
SELLER acknowledges that SELLER is an expert in all phases of the work
involved in producing and supporting the Products, including but not
limited to the designing, testing, developing, manufacturing, improving,
and servicing of the Products. SELLER agrees that BUYER and BUYER's
customers may rely on SELLER as an expert and SELLER will not deny any
responsibility or obligation hereunder to BUYER or BUYER's customers on the
grounds that BUYER or BUYER's customers provided recommendations or
assistance in any phase of the work involved in producing or supporting the
Products, including but not limited to BUYER's acceptance of
specifications, test data or the Products.
29.0 ASSIGNMENT
This Agreement shall insure to the benefit of and be binding on each of the
parties hereto and their respective successors and assigns, provided
however, that no assignment of any rights or delegation of any duties under
such Agreement is binding on either party unless the other party's written
consent has first been obtained. Notwithstanding the above, SELLER may
assign claims for monies due or to become due under any Order provided that
BUYER may recoup or setoff any amounts covered by any such assignment
against any indebtedness of SELLER to BUYER, whether arising before or
after the date of the
15
<PAGE>
assignment or the date of this Agreement, and whether arising out of any such
Order or any other agreement between the parties. BUYER may settle all claims
arising out of any Order, including termination claims, directly with SELLER.
BUYER may unilaterally assign any rights or title to property under this
Agreement to any wholly-owned subsidiary of The Boeing Company.
30.0 SUBCONTRACTING
SELLER may not procure any Product from a third party in a completed or a
substantially completed form without BUYER's prior written consent.
31.0 NOTICE OF LABOR DISPUTES
SELLER shall immediately notify BUYER of any actual or potential labor
dispute that may disrupt the timely performance of an Order. SELLER shall
include the substance of this Article, including this sentence, in any
subcontract relating to an Order if a labor dispute involving the
subcontractor would have the potential to delay the timely performance of
such Order. Each subcontractor, however, shall only be required to give the
necessary notice and information to its next higher-tier subcontractor.
32.0 NON-WAIVER
Neither party's failure at any time to enforce any provision of this
Agreement does not constitute a waiver of such provision or prejudice the
other party's right to enforce such provision at any subsequent time.
33.0 HEADING
Article and paragraph headings used in this Agreement are for convenience
reference only and do not affect the interpretation of the Agreement.
34.0 PARTIAL INVALIDITY
If any provision of this Agreement is or becomes void or unenforceable by
force or operation of law, the other provisions shall remain valid and
enforceable.
35.0 APPLICABLE LAW; JURISDICTION
This Agreement shall be governed by, subject to and construed according to
the laws of the State of Texas. For purposes of applying Texas law, this
Agreement shall be deemed to have been entered into and wholly performed in
Texas.
36.0 TAXES
36.1 EXCLUSION OF TAXES IN PRICE
All items purchased will be exempt from Texas State and local sales
and use taxes under certificate number 1-91-0840170-4.
16
<PAGE>
36.2 TAX CLAIMS
In the event that SELLER invoices and collects a tax for a state or
local taxing authority that SELLER should not have collected from
BUYER because of 36.1 above, SELLER shall promptly refund to BUYER
the amount of tax collected by SELLER.
37.0 ENTIRE AGREEMENT; ORDER OF PRECEDENCE
This Agreement sets forth the entire agreement, and supersedes any and all
other agreements, understandings, representations, and communications
between BUYER and SELLER, whether written or oral, related to the subject
matter of such Order. In addition to the documents previously incorporated
herein by reference, the documents listed below are by this reference made
a part of this Agreement:
A. Specification Control Documents.
B. Any other exhibits or documents agreed to by the parties to be a part
of this Agreement.
In the event of a conflict or inconsistency between any of the terms of the
following documents, the following order of precedence shall control:
A. Purchase Agreement
B. Order
C. Specification Control Drawing (if applicable)
D. Any other exhibits or documents the parties agree shall be part of
this Agreement.
17
<PAGE>
EXECUTED in duplicate as of the date and year first written above by the duly
authorized representatives of the parties.
BUYER: SELLER:
BOEING DEFENSE & SPACE -
IRVING CO. CORY COMPONENTS
/s/ John Chiarello /s/ Brian Gamberg
- ---------------------------- ------------------------------
John Chiarello Brian Gamberg
Contract Administrator/Buyer President
3-21-95 3-15-95
- ---------------------------- ------------------------------
Date Date
/s/ T.D. (Tim) Fehr
- ----------------------------
T.D. (Tim) Fehr
Vice President - CAS
5 May 95
- ----------------------------
Date
18
<PAGE>
ATTACHMENT "A"
SPECIFICATIONS AND PRICING
TO AGREEMENT NO. 9423JC4548
5 YEAR
SPEC NUMBER EST. USAGE PRICE
----------- ---------- -----
S906-70293-111 * 13,800 EA $20.58 EA
S906-70293-112 30,900 EA $16.44 EA
S906-70293-113 * 10,200 EA $45.95 EA
S906-70293-114 * 10,200 EA $23.85 EA
S906-70293-115 30,900 EA $26.55 EA
S906-70293-210 30,900 EA $ 7.77 EA
S906-70297-16 49,500 PR $20.79 EA
S906-70297-28 148,500 PR $ 2.88 PR
S906-70297-29 49,500 EA $22.97 EA
S906-70297-30 49,500 EA $53.22 EA
S906-70293-221 *USAGE EST. $21.58 EA
SHARED WITH
S906-70293-111
S906-70293-222 *USAGE EST. $24.85 EA
SHARED WITH
S906-702093-114
S906-70293-225 * USAGE EST. $46.95 EA
SHARED WITH
S906-70293-113
NOTE:
QUANTITIES SHOWN ARE ESTIMATES FOR PLANNING PURPOSES ONLY AND DO NOT
REPRESENT A FIRM COMMITMENT.
19
<PAGE>
ATTACHMENT "B"
LEADTIME
TO AGREEMENT NO. 9423JC4548
LEADTIME IN WEEKS
SPEC NUMBER 1995 1996 1997 1998 1999
S906-70293-111 10 8 8 8 8
S906-70293-112 10 8 8 8 8
S906-70293-113 10 8 8 8 8
S906-70293-114 10 8 8 8 8
S906-70293-115 10 8 8 8 8
S906-70293-210 10 8 8 8 8
S906-70297-16 10 8 8 8 8
S906-70297-28 10 8 8 8 8
S906-70297-29 10 8 8 8 8
S906-70297-30 10 8 8 8 8
S906-70293-221 10 8 8 8 8
S906-70293-222 10 8 8 8 8
S906-70293-225 10 8 8 8 8
20
<PAGE>
ATTACHMENT "C"
SUPPLIER SCHEDULING PROGRAM
TO AGREEMENT NO. 9423JC4548
BUYER (Irving, Texas Plant) shall implement a Supplier Scheduling Program
("Program") with SELLER based on BUYER's Program's disciplines and techniques.
BUYER and SELLER have agreed to the following terms and conditions relating to
BUYER's Program:
1. BUYER shall provide SELLER with educational training on BUYER's Program.
2. BUYER shall eliminate the processing of formal, individual Purchase Orders.
3. BUYER shall, on a weekly basis, process and provide SELLER with BUYER's
Supplier Scheduling Reports ("Reports"). An example of this Report is
provided in Attachment "D".
4. Each Report provided to SELLER by BUYER shall contain the following
information:
A. Each Report shall identify BUYER's and SELLER's part number.
B. On each report an asterisk ("*"), if any, shall precede each line item
that identifies quantities and specific dates which represents BUYER's
confirmed release requirements, and shall be construed as SELLER's
authorization to manufacture and ship such products to BUYER in the
quantities and in accordance with the dates specified on the Report.
C. Line items that contain quantities and specific dates, and are not
preceded with an asterisk, represent BUYER's offer to purchase such
quantities of product(s). SELLER shall indicate its acceptance,
acceptance with modification or rejection to BUYER's offer within
three (3) business days of receipt of BUYER's Report. If, through no
fault of the BUYER, SELLER fails to respond by the close of business
on the third (3rd) working day after receipt of the BUYER's Report,
BUYER shall proceed as though the SELLER had accepted. ("Silence is
acceptance/approval").
On an existing committed receipt, SELLER shall have three (3) working
days from date of BUYER's notification to SELLER to accept BUYER's
reschedule in, reschedule out or cancellation. If, through no fault of
the BUYER, SELLER fails to respond by the close of business on the
third (3rd) working day after receipt of the BUYER's Report, BUYER
shall proceed as though the SELLER had accepted.
21
<PAGE>
Upon SELLER's verbal or written acceptance to BUYER's offer to
purchase products, BUYER shall immediately modify the Report by adding
an asterisk ("*") to the appropriate line item(s) to signify
confirmation of order release.
D. Those quantities listed in monthly and/or quarterly columns without an
asterisk and/or specific date are to be used by the SELLER for
"PLANNING" purpose ONLY. This information is subject to automatically
change as our Material Requirements Planning (MRP) changes. These
quantities shall be referred to as projected forecasts and/or planned
orders.
5. For Item 4 refer to Attachment "D" which represents an example report.
6. SELLER shall reference the master agreement number and the contract number
(See Attachment "D" on the packing lists and invoices issued under this
Supplier Scheduling Section. See Article 15.0 "Invoice and Payment" and
16.0 "Packaging and Shipping" for additional references required.
7. SELLER agrees to be bound by BUYER's Supplier Scheduling program in the
area of offer and acceptance (Refer to Item 4[C]).
8. SELLER agrees all terms and conditions of this Agreement shall apply to
Supplier Scheduled part numbers, (i.e., selling price, lead-time, payment
terms, FOB, warranties, etc.) as modified in this Supplier Scheduling
section.
9. To the best of BUYER's knowledge, all fields of information on the Report
are correct. If SELLER discovers any discrepancies or errors in the Report,
SELLER shall notify BUYER in within three (3) working days of such
discovery.
22
<PAGE>
ATTACHMENT "D"
AGREEMENT NO. 9423JC4548
<TABLE>
<S> <C> <C> <C> <C>
PMS-SSS-B02 (VERSION: 10/22/92) BOEING AEROSPACE AND ELECTRONIC - IRVING 02/03/95 09:43 PAGE: 1
DELIVER TO: PCR
SUPPLIER SCHEDULE REPORT
FOR: CORY COMPONENTS
Supplier Name
Scheduler
Report
02/03/95
CORY COMPONENTS BA&E-I
2201 ROSECRANS AVENUE 3131 STORY ROAD WEST
EL SEGUNDO, CA 90245 IRVING, TX 75038
9423JC4548 SARAH HART
310-536-0034 214-659-2681
310-536-0206 214-659-4198
REFERENCE: MASTER AGREEMENT 9423JC4548
</TABLE>
23
<PAGE>
ATTACHMENT "D"
BOEING DEFENSE & SPACE - IRVING CO.
SUPPLIER SCHEDULE REPORT
for XYZ CORPORATION
<TABLE>
<S><C>
P/N: DESC: P. O. XX-XXXXX START: 9-1-94 STOP: 8-31-99
SUPPLIER P/N: U/M: EA ABCD: A PRICE: L/T: 30 S/C AA
REL TO DATE: 398 QTY TO STOCK: 298 QTY PAST DUE: 100 QTY ON DOCK: 0 LAST RCVD DATE: 04/24/91
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEXT NEXT
JUN/91 JUL/91 AUG/91 SEPT/91 OCT/91 NOV/91 DEC/91 JAN/92 FEB/92 MAR/92 APR/92 MAY/92 QTR QTR
- ----------------------------------------------------------------------------------------------------------------------------------
100 150 195 0 0 235 0 0 85 205 0 150 70 55
06/10* 07/15
70 75
100 0 0 0 0 0 0 0 0 0 0 0
06/22 *
- ----------------------------------------------------------------------------------------------------------------------------------
200 150 195 0 0 235 0 0 85 205 0 150 140 130
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXTERNAL NOTES: SHP: SPECIAL SHIPPING INSTRUCTIONS
CXL: CANCEL IDENTIFIED SCHEDULE/QUANTITY
R/I: RESCHEDULE-IN REQUEST
R/O: RESCHEDULE-OUT REQUEST
24
<PAGE>
AGREEMENT NO. D&SG/PIA-91-3014
PROPRIETARY INFORMATION AGREEMENT
Effective October 30, 1991, The Boeing Company, Defense & Space Group, acting
through its Electronics Systems Division, having an office at Seattle,
Washington, and Cory Components, having an office at El Segundo, California,
agree as follows:
1. The parties may exchange information, some of which may be Proprietary
Information, as defined below, for the purposes of review, evaluation, new
Boeing parts development and source selection in connection with 777 development
efforts (hereinafter referred to as the "Project"). The parties desire to
protect such Proprietary Information from unauthorized disclosure and use under
the terms and conditions herein.
2. For purposes of this Agreement, Proprietary Information means information
related to connectors and connector technology, including compliant pin
connectors; and which is disclosed hereunder by one party to the other in
connection with the Project; provided that, when disclosed, such information is
in written or other permanent form and is identified as proprietary to the
originating party by clear and conspicuous markings. Information not in written
or other permanent form shall be considered Proprietary Information from time of
disclosure, provided originating Party identifies such information as
proprietary at the time of disclosure and sends receiving Party a detailed
written description of the information, with such clear and conspicuous
markings, within thirty (30) days of the disclosure.
Page 1 of 5
<PAGE>
3. Each party shall preserve Proprietary Information (other than Boeing parts
drawings) received from the other party in confidence for a period of five (5)
years from the effective date of this Agreement. During this period, each party
shall not disclose such Proprietary Information to any third party without
written authorization from the originating party. Proprietary Information in the
form of a Boeing parts drawing shall be preserved in confidence, and shall not
be disclosed to any third party without written authorization from Boeing, until
such time as Boeing gives written notice to the other party that the drawing is
no longer proprietary to Boeing.
4. Until such time as this Agreement shall terminate pursuant to paragraph 9,
each party may use Proprietary Information received from the other party, but
only for the purposes set forth in paragraph 1. Upon the expiration of the
period set forth in paragraph 3, all limitations on use of Proprietary
Information shall cease.
5. The obligations of this Agreement regarding disclosure and use of
Proprietary Information shall be satisfied by each party through the exercise of
the same degree of care (provided the degree of care is reasonable) used to
restrict disclosure and use of its own information of like importance.
6. This Agreement shall not restrict disclosure or use of Proprietary
Information that is:
A. Known to the receiving party without restriction as to further
disclosure when received, or thereafter is developed
independently by the receiving party; or
B. Obtained without restriction as to further disclosure from a
source other than the originating party through no breach of
confidence by such source; or
Page 2 of 5
<PAGE>
C. In the public domain when received, or thereafter enters the
public domain through no fault of the receiving party; or
D. Disclosed by the originating party to a third party, including
the United States Government, without restriction as to further
disclosure.
7. Proprietary Information shall remain the property of the originating party.
Neither this Agreement nor the disclosure of Proprietary Information shall be
construed as granting any right or license under any inventions, patents,
copyrights, or the like, now or hereafter owned or controlled by either party.
Any such disclosure shall not constitute any representation, warranty,
assurance, guaranty or inducement concerning the infringement of any patent or
other rights of others. No warranty of accuracy or completeness of any
Proprietary Information is provided herein.
8. Proprietary Information, as well as notices and authorizations under this
Agreement, shall be transmitted between the parties addressed as follows:
Boeing Defense & Space Group Cory Components
P.O. Box 3999 2201 Rosecrans Ave.
Seattle, WA 98124-2499 El Segundo, CA 90245
Attention: J. Chiarello Attention: Brian Gamberg
M/S OU-34
Telephone: (206) 342-3324 Telephone: (213) 536-0034
A party may change its address or designee by written notice to the other party.
9. This Agreement may be terminated by either party upon thirty (30) days
written notice to the other. Unless thus earlier terminated, this Agreement
shall terminate upon completion of the Project or upon
Page 3 of 5
<PAGE>
expiration of a period of three (3) years from the effective date set forth
above, whichever occurs first. Termination of this Agreement for any reason
shall not relieve either party of any obligation to preserve Proprietary
Information received prior to termination in confidence pursuant to paragraph
3, and all such obligations shall continue until expiration of the period set
forth in paragraph 3.
10. Upon termination, each party shall cease use of Proprietary Information
received from the other party, and shall, upon request, utilize its best efforts
to destroy all Proprietary Information, including copies thereof, then in its
possession or control. Alternatively, at the request of the originating party,
the receiving party shall return all such Proprietary Information and copies to
the originating party. Notwithstanding the other provisions of this paragraph,
each party may retain one copy of such Proprietary Information, but only for
archival purposes.
11. Each party shall bear all costs and expenses incurred by it under or in
connection with this Agreement. Nothing in this Agreement creates an obligation
by either party to enter into a contract, subcontract, or other business
relationship with the other party in connection with the Project.
12. The rights and obligations provided by this Agreement shall take precedence
over specific legends or statements associated with Proprietary Information
when received.
13. This Agreement contains the entire understanding between the parties,
superseding all prior or contemporaneous communications, agreements, and
understandings between the parties with respect to the disclosure and protection
of Proprietary Information in connection
Page 4 of 5
<PAGE>
with the Project. This Agreement shall not be amended except by further written
agreement executed by duly authorized representatives of the parties.
IN WITNESS WHEREOF, the duly authorized representatives of the parties execute
duplicate originals of this Agreement.
THE BOEING COMPANY CORY COMPONENTS
Defense & Space Group
Electronics Systems Division
By /s/ John Chiarello By /s/ Brian Gamberg
---------------------------- ------------------------------
Title Buyer Title President
------------------------- ---------------------------
Date 10-30-91 Date 11/4/91
-------------------------- ----------------------------
Page 5 of 5
<PAGE>
EXHIBIT 10.17
BOEING
Boeing Commercial Airplane Group
P.O. Box 2707
Seattle, WA 58124-2207
Contact Contract Extension
Letter Agreement, dated June 28, 1993 between Boeing Commercial Airplane Group
and Tri-Star Electronics International
June 28, 1993
6-5752-01-215
Mr Jack DeCrane
Tri-Star Electronics International
2201 Rosecrans Ave.
El Segundo CA. 90245
Subject: Contact Contract Extension
Dear Jack,
Attached is a revised Letter of Agreement which will extend our current contract
for Electrical Contacts through May 31, 1998.
If you are in agreement with the proposed terms, conditions, and pricing, sign
the attached agreement and return to me no later than July 13, 1993. Should
Tri-Star Electronics International choose not to agree to the revised Letter of
Agreement these contact part numbers will be open for competitive bid.
If you have any questions, please contact me.
Sincerely,
MATERIEL DIVISION
/s/ Laura Robnett
Laura Robnett
Org. 6-5752 M/S 39-TT
Phone: (206) 266-1787
<PAGE>
BOEING
Boeing Commercial Airplane Group
P.O. Box 2707
Seattle, WA 58124-2207
June 28, 1993
6-5752-01-215
Subject: Electrical Contact Procurement Contract
Letter of Agreement
Gentlemen:
The Boeing Company, the Buyer, will place a number of orders for those part
numbers in Attachment "A" for any quantity, any schedule, firm fixed-price
contract, referred to herein as the Procurement Package, with Tri-Star
Electronics International, the Seller. This letter states the provisions
applying to those orders and future orders which reference the procurement
package which are referred to herein as Subsequently Placed Orders.
GENERAL
The Seller agrees to accept Subsequently Placed Order for unlimited quantities
from Boeing Commercial Airplanes at the same price and under the same terms that
apply to the original procurement package for the duration of this agreement.
Such Subsequently Placed Orders must be entered with the Seller lead time away
and scheduled for delivery prior to May 31, 1996. In the event that the Seller
fails to deliver prior to May 31, 1998 as scheduled, such delinquent shipments
will continue to have the pricing and terms of the procurement package until
delivery is made. Delivery schedules for Subsequently Placed Orders will be
negotiated with the seller at the time of order placement.
In the event additional quantities/part numbers are required, the seller shall
be given the first opportunity to supply such parts at the contract price.
Should the seller be unable to supply items in quantities and schedule
required, the buyer reserves the right to purchase such items from other
suppliers.
Supplier shall reserve, at all times, at least five (5) percent of the next 12
months requirements in stock to accommodate shortflow requirements.
DURATION
The duration of this agreement will extend from the signature date of this
Letter of Agreement through May 31, 1998.
<PAGE>
LETTER # 6-5752-01-215
PAGE 2
BOEING
TERMS AND CONDITIONS
The Boeing Commercial Airplanes Terms and Conditions, form D1 4100 4045, Rev,
5/92, will apply to all orders of the procurement package and all subsequently
placed orders referencing this letter (See note A52 below). In the event
conflict exists between the Terms and Conditions and this letter, the latter
shall govern.
ADDITIONAL PROVISIONS PER PURCHASE ORDER NOTES
The Buyer and Seller have mutually agreed that the following purchase order
notes will apply to the procurement package and Subsequently Placed Orders
referencing it:
APM50 Invoicing on this purchase contract should be mailed to the Boeing
Commercial Airplane Group, Attention Accounts Payable, P. 0. Box 34125,
Seattle, WA., 98124-1125
A02 This purchase order shall be governed by and deemed to include the
provisions of Boeing document D6-55772 entitled "Pay From Receipt -
additional terms and conditions regarding invoicing and payment." In the
event of conflict between the provisions of Boeing document D6-55772 and
any other applicable terms and conditions, the provisions of Boeing
document D6-55772 shall control.
A18 Seller agrees not to make any change in materials or design details which
would affect the part or any component part thereof with regard to (A) part
number identification, (B) physical or functional changeability, and (C)
repair and overhaul procedures and processes and material changes which
affect these procedures without prior written approval of buyer, and
without revising the part numbers and the originals of all drawings or
data. (Seller will place the above clause in all its subcontracts for
supplier identified purchased equipment whether such equipment is supplied
to seller as an end item or as a component parts of an end item.)
A52 This order is subject to agreements per Boeing Letter 6-5752-01-215 between
Boeing Commercial Airplane Group Materiel and Tri-Star Electronics
International dated June 28, 1993.
B39 Strict adherence to the purchase order delivery schedule is required.
Immediate written notice of shipment delays must be given by the supplier
to the Boeing Buyer.
<PAGE>
LETTER # 6-5752-01-215
PAGE 3
BOEING
B83 Any shipment delinquent 5 days past promised ship date will be routed via
premium air at seller's expense, provided delay is not Boeing's
responsibility.
H54 Notwithstanding the provisions of the changes clause, seller hereby waives
any claim it might have against Buyer as a result of the rescheduling of
the delivery requirements of this order and relieves and releases Buyer of
any cost, charge or liabilities.
H57 Seller agrees that, notwithstanding the provisions of the termination for
convenience clause, any unshipped portion of this order may be terminated
by Buyer without any cost, charge, or liability to Buyer, provided, Buyer
notifies Seller at least 90 days in advance of the shipping date specified
in the Purchase Order.
L01 Parts returned to seller for rework due to grief or rejection that appear
on the Buyer's shortage report will be shipped premium air at Seller's
expense from and to Boeing receiving.
Q09 Seller certifies that material and/or finished parts shall be controlled
and tested in accordance with, and will meet, specified order requirements,
and that applicable records are on file subject to examination. Seller
agrees to furnish certified copies of test and/or control data upon request
from buyer.
Q87 "This order is subject to document D1-9000. Boeing reserves the right to
conduct surveillance at seller's plant."
S01 Work under this order is subject to Boeing surveillance at Seller's plant.
Boeing Quality Control representative may elect to conduct inspection
either on a random basis or to the extent of 100 percent inspection. Seller
will be notified if Boeing inspection is to be conducted on specific
shipments. No shipments are to be held for Boeing inspection unless
notification is received prior to, or at time of, material being ready for
shipment.
S68 Representatives of the buyer and/or Federal Aviation Administration (if
non-domestic, equivalent government agency) may inspect and evaluate
seller's facilities' system, data, equipment, personnel and all completed
articles manufactured for installation on Boeing commercial production
airplanes.
<PAGE>
LETTER # 6-5752-01-215
PAGE 4
BOEING
ADDITIONAL TERMS
All other Boeing Companies, divisions or groups may purchase to this agreement
at the same pricing and terms afforded to the Boeing Commercial Group.
PRICING
The pricing applying to the orders making up the procurement package and all
subsequently placed orders referencing this letter are as listed on Attachment
A. This pricing, as listed, will be firm for any quantity for orders placed from
the date of the contract and scheduled for delivery prior to May 31, 1998.
ABNORMAL RHODIUM ESCALATION CHARGES
The Following concept for calculating abnormal escalation for rhodium plated
electrical contacts will be in effect. The amount of rhodium in each electrical
contacts is as follows:
PART NUMBER RHODIUM CONTENT (GRAMS)
-----------------------------------------------------
BACC47CN3 .003151
BACC47CN3B .003151
BACC47CP2T .002620
BACC47CP2TB .002620
BACC47CP3T .003744
The base price for rhodium shall be $50.00 per gram. A +/- 5% band shall not
be calculated for price adjustments that fall within this band. The following
formula shall be used for price adjustments.
(Monthly weighted average rhodium price - (base rhodium price +/- 5%) X rhodium
content (grams) X quantity of electrical contacts delivered in the referenced
tine period.
Price adjustments will be in effect for electrical contacts delivered to Boeing
from June 28, 1993 through May 31, 1996.
As soon as practical after each quarter delivery date (March 31, June 31,
September 30, December 31), Tri-Star will send, to Boeing, an assertion for the
rhodium adjustment for that quarter. Documentation provided to Boeing shall
include:
<PAGE>
LETTER # 6-5752-01-215
PAGE 5
BOEING
- Part number
- Quantity of parts
- Price adjustments for that part number
- All invoices for rhodium purchased in the delivery month
- Rhodium cost used in the adjustment formula
As soon as the data can be verified, Boeing will issue a non-receivable purchase
order for the cost adjustment.
Examples
RHODIUM PRICE INCREASE
Current month weighted average price: $70.00/gr.
Base price: $50.00/gr. + 5% = $52.50/gr.
P/N deliveries: BACC47CN3 18,000 for month
Rhodium Content: .003151 gr.
Adjustment: ($70.00 - $52.50) X .003151 X 18,000
= $992.57
RHODIUM PRICE NO CHARGE
Current month weighted average price: $51.00/gr.
Base price: $50.00/gr. + 5% = $52.50/gr.
Adjustment: Current price is not above $52.50/gr.
therefore no price adjustment.
RHODIUM PRICE DECREASE
Current month weighted average price: $40.00/gr.
Base price: $50.00/gr. - 5% = $47.50/gr.
P/N deliveries: BACC47CN3 18,000 for month
Rhodium Content: .003151 gr.
Adjustment: ($40.00 - $47.50) X .003151 X 18,000
= ($425.39)
ACCEPTANCE
This order is Buyer's offer to Seller, and acceptance is strictly limited to its
terms. Buyer shall not be bound by and specifically objects to any term or
condition whatsoever which is different from or in addition to the provisions of
the order. Seller's commencement or performance or acceptance of this order, in
any matter shall conclusively evidence agreement to this order unless such term
or condition is mutually agreed to by the parties in writing.
<PAGE>
BOEING LIMITED
ATTACHMENT -- A
Suppliers: TRI-STAR ELECTRONICS INTERNATIONAL
PERIOD OF PERFORMANCE: 06/01/93 TO 05/31/98
NUMBER OF MONTHS: 60
------------------------------------- ----------------------
Vendor Boeing Contract
Part Number Part Number Price Each 1993-1998
------------------------------------- ----------------------
M39029-4-113 $0.1920
M39029-56-348 $0.0960
M39029-56-351 $0.1248
M39029-58-363 $0.0672
M39029-5-116 $0.1056
M39029-5-118 $0.2400
M39029-11-145 $0.0912
M39029-1-100 $0.1440
M39029-1-101 $0.0960
M39029-1-102 $0.1440
M39029-30-217 $0.2400
M39029-30-220 $1.4400
M39029-57-354 $0.0960
M39029-57-356 $0.2400
M39029-57-357 $0.1152
M39029-58-362 $0.0960
M39029-63-368 $0.0960
M39029-64-369 $0.0768
M39029-85-456 $4.8000
Page No. 2
<PAGE>
BOEING LIMITED
ATTACHMENT -- A
Suppliers: TRI-STAR ELECTRONICS INTERNATIONAL
PERIOD OF PERFORMANCE: 06/01/93 TO 05/31/98
NUMBER OF MONTHS: 60
--------------------------------------- ------------------------
Vendor Boeing Contract
Part Number Part Number Price Each (1993-1998)
--------------------------------------- ------------------------
TRI-STAR INC.
118-2020-074 $0.1824
316-1616-634 $0.3840
316-1620-634 $0.3840
318-2020-252 $0.4320
BACC47CN1S $0.0960
BACC47CN3 $0.3072
BACC47CN3B $0.3648
BACC47CP1S $0.1152
BACC47CP2T $0.2880
BACC47CP2TB $0.3456
BACC47CP3T $0.4224
BACC47DE1 $0.1248
BACC47DE4 $0.1536
BACC47DE5 $0.1152
BACC47DE6 $0.1152
BACC47DE7 $0.1536
BACC47DE8 $0.1152
BACC47DJ2 $0.3360
BACC47DP1 $0.3360
BACC47DP2 $0.5760
BACC47DP3 $2.4000
BACC47DP4 $2.4000
BACC47DP5 $2.8800
BACC47DR1 $0.4320
BACC47DR1B $0.4320
BACC47DR3 $2.4000
BACC47DR4 $3.3600
BACC47DR5 $3.8400
BACC47EF1 $0.0864
BACC47EF2 $0.1344
BACC47EG1 $0.2112
BACC47EG2 $0.2112
BACC47ER1 $0.3168
M39029-32-248 $0.2400
M39029-4-110 $0.0672
M39029-4-111 $0.0768
Page No. 1
<PAGE>
BOEING
CONCLUSION
Concurrence to the various points discussed in this letter of agreement is
attested to by the signatures of the Buyer and Seller below.
Tri-Star Electronics Boeing Commercial
International Airplane Group
/s/ John Schneph 7/8/93 /s/ Laura Robnett 6-28-93
- ------------------------------ ---------------------------
John Schneph Date L. L. Robnett Date
President Buyer
/s/ Dale Peterson 6-28-93
---------------------------
D. M. Peterson Date
Buyer Lead
/s/ Donald W. Torcaso 6/28/93
---------------------------
D. W. Torcaso Date
Manager, Electrical Stds.
<PAGE>
BOEING COMMERCIAL AIRPLANE GROUP
PURCHASE ORDER TERMS AND CONDITIONS
1. ACCEPTANCE. This Order is Buyer's offer to Seller, and acceptance is
strictly limited to its terms. Buyer shall not be bound by and
specifically objects to any term or condition whatsoever which is different
from or in addition to the provisions of this Order, whether or not such
term or condition will materially alter this Order, Seller's commencement
of performance, or acceptance of this Order, in any manner shall
conclusively evidence agreement to this Order, as written.
2. DEFINITIONS. Whenever used in this Order, (a) "Customer" means any
customer of Buyer, any subsequent owner, operator or user of the Goods, and
any other individual, partnership, corporation or person or entity which
has or acquires any interest in the Goods from, through or under Buyer; (b)
"FAR" means the United States Government Federal Acquisition Regulations;
(c) "Goods" means all of the goods, services, documents, data, software and
other information or items furnished or to be furnished to Buyer under this
Order; and (d) "Order" means this purchase order, including the provisions
on its face, these Purchase Order Terms and Conditions, and all of the
specifications, technical descriptions, statements of work, drawings,
designs, documents, and other requirements and provisions attached to,
incorporated into or otherwise made a part of this purchase order by Buyer.
3. SHIPMENT/DELIVERY. Shipments or deliveries, as specified in this Order,
shall be strictly in accordance with the specified quantities, without
shortage or excess; the specified schedules, neither ahead of nor behind
schedule; and the other requirements of this Order. Seller shall promptly
notify Buyer in writing of any anticipated or actual delay, the reasons
therefor, and the actions being taken by Seller to overcome or minimize the
delay. If requested by Buyer, Seller shall, at Seller's expense, ship
Goods via air or other fast mode of transportation to avoid or minimize the
delay to the maximum extent possible.
4. PACKING AND SHIPPING. Seller shall prepare and pack the Goods to prevent
damage and deterioration, and shall comply with carrier tariffs. Charges
for preparation, packing, crating and cartage are included in the price
unless separately specified in the Order. Goods sale F.O.B. place of ship
shall be forwarded collect. Seller shall make no declaration concerning
value of Goods shipped, except for Goods on which tariff rating is
dependent upon released or declared value, in which event Seller, shall
release or declare such value at maximum value within the lowest rating.
5. INVOICE AND PAYMENT. Seller shall issue a separate invoice for each
delivery and shall not issue any invoice prior to the Order schedule date
or actual delivery date, whichever is later. Payment will be made after
receipt of Goods and current invoice. Unless freight or other charges are
itemized, any discount may be taken on the full amount of invoice. Payment
due date, including discount periods, shall be computed from the date of
receipt of Goods or correct invoice (whichever is later) to the date
Buyer's check is mailed or otherwise tendered. Seller shall promptly relay
to Buyer any amounts paid in excess of amounts due Seller.
6. EXAMINATION OF RECORDS. Seller shall maintain complete and accurate
records showing the sales volume of all Goods. Such records shall support
all services performed, allowances [illegible] and costs incurred by Seller
in the performance of the Order, including but not limited to those
[illegible]. Such records and other date shall be capable of verification
through audit and analysis by Buyer and shall be available to Buyer at
Seller's [illegible] for Buyer's examination and audit at all reasonable
times from the date of the Order until three (3) years after
that payment under the Order. Seller shall provide assistance to
interpret such data if required by Buyer. Such examination shall provide
Buyer with complete information regarding seller's performance [illegible]
once re[illegible]tions with Seller relating to existing or future orders
for Goods [illegible] out [illegible] to negotiation of accurate
adjustments pursuant to Clause 11, "CHANGES," and Clause 12, "TERMINATION
FOR CONVENIENCE." Buyer shall treat such information as confidential.
7. INSPECTION. Buyer's acceptance of Goods shall be subject to Buyer's final
inspection within a reasonable time after receipt at destination,
notwithstanding any payment or prior test or inspection in addition. Buyer
and the Federal Aviation Administration [illegible] government agency)
may inspect and evaluate Seller's ([illegible], including but not limited
to facilities, systems, equipment, testing, data, personnel and all
work-in-progress and completed goods manufactured for installation on
Buyer's [illegible]. No inspection, test or other approval or
acceptance, and no delay or failure
<PAGE>
inspect, test or give prior approval or acceptance, or failure to
discover any defect or other noncompliance, shall relieve Seller of any
of its obligations nor impair any rights or remedies of Buyer or
Customers.
8. REJECTION. Buyer [illegible] reject or revoke acceptance [illegible]
"rejection" [illegible] of any or all Goods, including any tender
thereof, which are not strictly in conformance with all of the
requirements of this Order, and shall notify seller of such rejection by
notice, rejection tag or other communication. At Seller's risk and
expense, all such goods will be returned to Seller for immediate Seller
repair, replacement or other correction and recovery to Buyer, provided,
however, that with respect to any or all such Goods, at Buyer's election
and at Seller's risk and expense. Buyer may: (a) hold, retain or return
such Goods, without permitting any repair, replacement or other
correction by Seller; (b) hold or retain such Goods for repair by Seller
or, at Buyer's election, for repair by Buyer with such assistance from
Seller as Buyer may require; (c) hold such Goods until Seller has
delivered conforming replacements for such Goods; (d) hold such Goods
until conforming replacements are obtained from a third party; or (e)
return such Goods with instructions to Seller as to whether the Goods
shall be repaired or replaced and as to the manner of redelivery. All
repair, replacement and other correction and redelivery shall be
completed within such time as Buyer may require. All costs and expenses
and loss of value incurred as a result of or in connection with
noncomformance and repair, replacement or other correction may be
recovered from seller by equitable price reduction, setoff or credit
against any amounts which may be owed to Seller under this Order or
otherwise.
9. WARRANTIES. Seller warrants to Buyer and Customers that Goods shall: (a)
conform in all respects to all of the requirements of this Order; (b) be
free from all defects in materials and workmanship; and (c) to the extent
not manufactured pursuant to detailed designs furnished by Buyer, be free
from all defects in design and be fit for the intended purposes.
10. INDEMNITY/INFRINGEMENT. Seller shall indemnify, defend, and save Buyer and
Customers harmless from all claims, suits, actions, awards (including but
not limited to awards based on intentional infringement of patents known to
Seller at the time of such infringement and those exceeding actual damages
and/or including attorneys' fees), liabilities, damages, costs and
attorneys' fees related to the actual or alleged infringement of any United
States or foreign intellectual property right (including but not limited to
any right in a patent, copyright, industrial design or semiconductor mask
work, or based on misappropriation or wrongful use of information or
documents) and arising out of the manufacture, sale or use of Goods by
Buyer or Customers. Buyer and/or Customers shall a duly notify Seller of
any such claim, suit or action on behalf of Buyer and/or Customers. Seller
shall have no obligation under this clause with regard to any infringement
arising from: (a) Seller's compliance with formal specifications issued by
Buyer where infringement could not be avoided in complying with such
specifications or (b) use or sale of Goods in combination with other items
when such infringement would not have occurred from the use or sale of
those Goods solely for the purpose for which they were designed or sold by
Seller. For purposes of this Clause 10 only, the term Customer shall not
include the U.S. Government and the term Buyer shall include The Boeing
Company (Boeing) and all Boeing subsidiaries and all officers, agents, and
employees of Boeing or any Boeing subsidiary.
11. CHANGES. Buyer's Material Representative may from time to time direct
changes in writing within the general scope of this Order in any one or
more of the following: (a) technical requirements and descriptions,
specifications, statements of work, drawings or designs: (b) shipment or
packing methods; (c) place of delivery, inspection or acceptance; (d)
reasonable adjustments in quantities or delivery specifics or [illegible]
other amount at Buyer furnished property. Seller shall comply [illegible]
with such direction and avoid unnecessary costs related thereto, if any such
change causes an increase or decrease in the cost or the time required for
[illegible] of this Order, an equitable adjustment in the [illegible]
and schedules of this Order shall be made to reflect such increase or
decrease, and this Order shall be modified in writing accordingly. Unless
otherwise agreed in writing, any Seller [illegible] adjustment must be
delivered to Buyer in writing within thirty (30) days after Seller's
receipt of such [illegible]. Seller shall make available for Buyer's
examination relevant books and records to verify Seller's claim for
adjustment. Failure of Buyer and Seller to agree upon any adjustments
shall not excuse Seller from [illegible]in accordance with such
direction. If Seller considers the conduct of any of Buyer's employees
to have constituted a change hereunder, Seller shall notify Buyer
immediately in writing as to the nature of such conduct and its effect
upon Seller's conformance. [illegible]direction from Buyer's
Material Representative, Seller shall take no action to implement
[illegible] such change.
12. TERMINATION FOR CONVENIENCE. Buyer may terminate this Order in writing or
from time to time in [illegible], effective as of the date specified by
Buyer, in accordance with the provisions of FAR 52.259-2 (APR 1984, without
Alternates [illegible] provisions are incorporated herein by reference.
In FAR 52.259-2, "Government and Contracting
<PAGE>
Officer" shall mean Buyer: "Contractor" shall mean Seller and "this
Contract" and "the Contract" shall mean this Order. All references to
one (1)-year in [illegible] clause are changed to the six (6) months,
and all references in [illegible] clause are deleted.
13. CANCELLATION FOR DEFAULT. Buyer may cancel this Order in [illegible]
[illegible] to time in part, effective as of the date specified by Buyer in
accordance with provisions at FAR 52.249-8 (APR 1984: without Alternates),
which provisions are incorporated herein by treference, in the event of any
Seller default or in the event of Seller's suspension of business,
insolvency, reorganization or arrangement or liquidation proceedings,
assignment for the benefit of creditors or seller's trusteee in bankruptcy
or Seller as debtor in possession not assuming this Order pursuant to a
Federal Bankruptcy Court's approval within sixty (60) days after the
bankruptcy petition was filed, or appointment of a receiver for Seller's
property. In FAR 52.249-8, "Government" and "Contracting Officer," shall
mean Buyer except in paragraph (c). "Contractor" shall mean Seller. "this
Contract" and "the Contract" shall mean this Order, and all references to a
"disputes" clause are deleted. If Buyer and Seller fail to agree on the
amount to be paid for manufacturing materials referred to in paragraph (e)
of FAR 52.249-8, the amount shall be the reasonable value thereof but shall
not exceed that portion of the price of this Order which is reasonably
allocable to such materials.
14. RESPONSIBILITY FOR PERFORMANCE. Buyer's issuance of this Order is based in
part on Buyer's reliance on Seller's ability, expertise and awareness of
the intended use of Goods, and Seller's continuing compliance with all
applicable laws and regulations during the performance of this Order.
Further, Seller shall not, by contract, operation of law, or otherwise,
assign any of its rights or interest in this Order (including but not
limited to any right to monies due or to become due), delegate any of its
duties or obligations under this Order, or subcontract all or substantially
all of its performance of this Order to one or more third parties, without
Buyer's prior written consent. No assignment, delegation or subcontracting
by Seller with or without Buyer's consent shall relieve Seller of any of
its obligations under this Order. Buyer may unilaterally assign any rights
or title to property under this Order to any wholly owned subsidiary of The
Boeing Company. Seller shall have a continuing obligation to promptly
notify Buyer of any violation of or deviation from Seller's approved
inspection/quality control system and to advise Buyer of the quantity and
specific identity of any Goods delivered to Buyer during the period of any
such violation or deviation.
15. PUBLICITY. Seller shall not, and shall not require that its subcontractors
and suppliers (of any [illegible] shall not cause or permit to be released
any publicity, advertisement, news release, public announcement or denial or
confirmation of same, in whatever form, regarding any aspect of this Order
or the Goods or program to which they pertain without Buyer's prior written
approval.
16. COMPLIANCE WITH LAWS. Seller shall be responsible for complying with all
laws, including, but not limited to, any statute rule, regulation, judgment
decree, order or permit [illegible] to its performance under this Order.
Seller further agrees (1) to notify Buyer of any obligation under this Order
which is prohibited under any applicable environmental law, at the earliest
[illegible] but in all events sufficiently in advance of Seller's
performance of such obligation so as to enable the identification of
alternative methods of performance, and (2) to notify Buyer at the earliest
possible opportunity of any aspect of its performance which becomes subject
to additional environmental regulation or which Seller reasonably believes
will become subject to additional environmental regulation during
performance of this Order.
17. RESPONSIBILITY FOR PROPERTY. Unless otherwise specified, upon delivery to
Seller or manufacture or acquisition by Seller of any materials, parts,
tooling, data or other [illegible] title to which is in Buyer, Seller
assumes the risk of and shall be responsible for any loss thereof or
damage thereto. In accordance with the provisions of this Order, but in
any event, [illegible] Seller shall return such [illegible] Buyer in the
condition in which it was received except for reasonable wear and tear
[illegible] except for such Property as has been reasonably consumed in the
performance of this Order.
18. CONFIDENTIAL, PROPRIETARY, AND/OR TRADE SECRET INFORMATION AND ITEMS.
Buyer and Seller shall each [illegible] and protect form disclosure all
(a)commercial, proprietary, and/or trade secret information; (b) tangible
items containing [illegible]. Buyer and Seller shall each use Proprietary
Materials of the other only in the performance of and for the purpose of
this Order. Provided however, that despite any other obligations or
restrictions imposed by this Clause 18, buyer shall, whenever [illegible].
Upon
<PAGE>
Buyer's request at any time, and in any event upon the completion,
termination or cancellation of this Order, Seller shall return all of
Buyer's Proprietary Materials, and all materials derived from Buyer's
Proprietary Materials, to Buyer unless specifically directed otherwise in
writing by Buyer. Seller shall not, without the prior written
authorization of Buyer, sell or otherwise dispose of (as scrap or
otherwise) any materials containing, conveying, [illegible] or made in
accordance with or by reference to any Proprietary Materials of Buyer.
Prior to disposing of such materials as scrap, Seller shall render the
materials unusable. Buyer shall have the right to audit Seller's
compliance with this Clause 18. Seller may disclose Proprietary
Materials of Buyer to its subcontractors as required for the performance
of this Order, provided that each such subcontractor first assumes, by
written agreement, the same obligations imposed on Seller under this
Clause 18 relating to such Proprietary Materials; and Seller shall be
liable to Buyer for any breach of such obligation by such subcontractor.
The provisions of this Clause 18 shall survive the performance,
completion, termination or cancellation of this Order. This Clause 18
supersedes and replaces any and all prior agreements or understandings
over confidential, proprietary, and/or trade secret information, or
tangible items containing, conveying or embodying such information,
related to any Goods, regardless of whether disclosed to the receiving
party before or after the effective date of these Purchase Order Terms
and Conditions.
19. INTEGRITY IN PROCUREMENT: Buyer's policy is to maintain high standards of
integrity in procurement. Buyer's employees must ensure that no favorable
treatment compromises their impartiality in the procurement process.
Accordingly, Buyer's employees must strictly refrain from soliciting or
accepting any payment, gift, favor, or thing of value which could
improperly influence their judgment which respect to either issuing a
purchase order or administering this Order. Consistent with this policy,
Seller agrees not to provide or offer any employee of Buyer any payment,
gift, favor or thing of value for the purpose of improperly obtaining or
rewarding favorable treatment in connection with any purchase order of this
Order. Seller shall conduct its own procurement practices, and shall
ensure that its suppliers conduct their procurement practices, consistent
with these standards. If Seller has reasonable grounds to believe that
this policy may have been violated, Seller shall immediately report such
possible violation to the appropriate Director of Material or Division
Chief Counsel of Buyer.
20. NONWAIVER AND PARTIAL INVALIDITY. Any and all failure, delay or
forbearance of Buyer in insisting upon or enforcing at any time any of the
provisions of this Order, or in exercising any rights or remedies under
this Order, shall not construed as a waiver or relinquishment of any such
provisions, rights or remedies in these or any other instances: rather, the
same shall be and remain in full force and effect. Further, if any
provision of this Order is or becomes void or unenforceable by law, the
remainder shall be valid an enforceable.
21. GOVERNMENT REQUIREMENTS. Within Seller's invoice or other them
satisfactory to Buyer, Seller shall certify that Goods covered by this
Order were procured in compliance with Sections 6, 7 and 12 of the Fair
Labor Standards Act, as amended, and the regulations and orders of the U.S.
Department of Labor issued thereunder. Paragraph (b) of the Equal
Opportunity clause set forth in FAR [illegible]. FAR [illegible].
Affirmative Action for Handicapped Workers are incorporated herein by
reference, except that "Contractor" shall mean Seller in such FAR clauses.
The appearance of a U.S. Government agency prime contract number on the
face of this Order incorporates into this Order, without further notice or
action. Boeing Form 01 4100 4050, entitled "Additional Terms and
Conditions - Government Contracts."
22. GOVERNING LAW. This Order and the performance thereof shall be governed by
the law of the State of Washington, U.S.A., exclusive of the choice of law
rules thereof.
23. ENTIRE AGREEMENT. This Order sets forth the entire agreement, and
supersedes any and all other agreements, understandings and communications
between Buyer and Seller related to the subject matter of this Order. No
amendment or modification of this Order shall be binding upon Buyer unless
set forth in a written instrument signed by Buyer's Material Representative.
The rights and remedies afforded to Buyer or Customers pursuant to any
provision of this Order are in addition to any other rights and remedies
afforded by any other provisions of this Order, by law or otherwise.
<PAGE>
EXHIBIT 10.18 ASSET PURCHASE AND SALE AGREEMENT AMONG ALLARD INDUSTRIES, INC.,
GERALD R. ALLARD, TRUSTEE OF THE GERALD R. ALLARD REVOCABLE TRUST OF 1994,
THE ALLARD CHILDREN'S TRUST F/B/O JOHN R. ALLARD, THE ALLARD CHILDREN'S TRUST
F/B/O MICHAEL E. ALLARD, YOUNES NAZARIAN, DAVID AND ANGELA NAZARIAN, TRUSTEES
OF NAZARIAN FAMILY TRUST, THE PRINCIPAL SHAREHOLDERS OF ALLARD, REGISTRANT
AND ADS ACQUISITION, INC.
ASSET PURCHASE AND SALE AGREEMENT
ASSETS OF ADS DIVISION OF ALLARD INDUSTRIES, INC.
BY ADS ACQUISITION, INC.,
A SUBSIDIARY OF DECRANE AIRCRAFT HOLDINGS, INC.
This Asset Purchase and Sale Agreement ("Agreement") is made and entered
into by and among Allard Industries, Inc. ("Allard"); Gerald R. Allard,
Trustee of The Gerald R. Allard Revocable Trust of 1994, The Allard
Children's Trust f/b/o John R. Allard, The Allard Children's Trust f/b/o
Michael E. Allard, Younes Nazarian, and David and Angela Nazarian, Trustees
of The Nazarian Family Trust, the principal shareholders of Allard
(collectively, the "Principal Shareholders"); DeCrane Aircraft Holdings, Inc.
("DAH") and ADS Acquisition, Inc. ("Buyer"), based on the following facts:
Allard is the owner of and desires to sell all of the assets of its
Aerospace Display Systems division (which division is referred to herein as
"ADS");
Buyer desires to purchase the assets of ADS;
Based on the foregoing facts and circumstances, the parties hereby agree
as follows (capitalized terms being used herein as defined where noted in
EXHIBIT A):
1. ASSETS TO BE PURCHASED AND SOLD.
1.1 THE ADS ASSETS. On the Closing Date, subject to any exclusions
provided for in Section 1.3, Allard shall transfer to Buyer all of the
assets, properties, rights (contractual or otherwise) and business of ADS
(including but not limited to the goodwill of ADS), in each case whether in
the nature of real, personal, or mixed property and whether tangible or
intangible and known or unknown (collectively, the "Property"). Without
limiting the generality of the foregoing, the assets to be transferred
include:
1.1.1 REAL PROPERTY. Any and all real property (the "Real
Property"), including that listed on Schedule 1.1.1;
1.1.2 REAL PROPERTY LEASES. Any and all rights under leases of
real property and improvements (the "Real Property Leases"), including the
ADS plant in Hatfield, Pennsylvania and the office in Phoenix, Arizona and
any others listed on Schedule 1.1.2;
1.1.3 PERSONAL PROPERTY.
(a) All machinery and equipment (the "Machinery and
Equipment"), including that listed on Schedule
1.1.3(a);
(b) All tooling (the "Tooling"), including that listed on
Schedule 1.1.3(b);
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(c) All parts and furniture ("Parts and Furniture"),
including that listed on Schedule 1.1.3(c);
(d) All rights under leases of equipment vehicles or
other tangible personal property ("Personal Property
Leases");including that listed on Schedule: 1.3.3(d);
1.1.4 INVENTORY. All raw materials, supplies, component parts,
work-in-process and finished goods inventory and other inventory (the
"Inventory"), including that listed on Schedule 1.1.4;
1.1.5 VEHICLES. All automobiles and other motor vehicles (the
"Vehicles"), including those listed on Schedule 1.1.5;
1.1.6 PERMITS. All licenses, permits, consents,
authorizations, approvals, certificates and franchises of any regulatory,
administrative or other agency or body, or issued to or held by ADS
(collectively, the "Permits"), including those matters listed in Schedule 1.1.6;
1.1.7 PROPRIETARY RIGHTS.
(a) All patents, inventions, copyrights, computer
software, trademarks, names, service marks, trade
names, marks, symbols and logos;
(b) All trade secrets, processes, proprietary knowledge,
know-how, and other processes which are not filed
or registered but which constitute confidential
proprietary information;
(c) All franchises, licenses, sublicenses, permits or
agreements in respect of any of the foregoing; and
(d) All filings, registrations, or issuances of any of the
foregoing with or by any federal, state, local or
foreign regulatory, administrative or governmental
authority, and any applications for any of the
foregoing (collectively, "Registrations");
in each case which ADS owns, uses, has used or has the right to use or to
which ADS is a party (collectively, the "Proprietary Rights"), including
those described in Schedule 1.1.7;
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1.1.8 CONTRACTS. All rights under contracts and agreements
(not otherwise described in this Section 1.1) which have in whole been
specifically for the benefit or detriment of ADS (collectively, the
"Contracts"), including purchase and sales orders, quotations, executory
commitments, instruments, guaranties, indemnifications, arrangements or other
understandings, and including those matters listed on Schedule 1.1.8;
1.1.9 RECEIVABLES. All accounts and notes receivable (the
"Receivables"), including those listed on Schedule 1.1.9;
1.1.10 INVESTMENTS. All investments which relate to or are used
in the business of ADS (the "Investments"), including those investments
described on Schedule 1.1.10;
1.1.11 DEPOSITS AND PREPAID EXPENSES. All of the deposits and
prepaid expenses excluding prepaid insurance premiums of Allard which relate
to or are used in the business of ADS (respectively, the "Deposits" and the
"Prepaid Expenses"), including those deposits and prepaid expenses listed on
Schedule 1.1.11;
1.1.12 TERMINATION CLAIMS. All claims for termination for
convenience or other claims against prime contractors, government agencies,
or others with respect to the termination of a contract prior to the complete
performance by ADS of such contract (collectively, the "Termination Claims"),
including such claims as are listed on Schedule 1.1.12;
1.1.13 [Omitted]
1.1.14 OTHER CLAIMS. All claims, causes of action, demands and
pending litigation (not otherwise described in this Section 1.1) in which
ADS, or Allard on behalf of ADS, is seeking the recovery of money or
equitable relief (collectively, the "Claims"), including those matters listed
on Schedule 1.1.14;
1.1.15 BOOKS AND RECORDS. All books of account, customer lists,
files, papers and records normally maintained by ADS, together with a
complete and accurate copy of all of the books of account and records of
Allard which relate to ADS;
1.1.16 TELEPHONE NUMBERS. All telephone, fax, e-mail and other
numbers for communication with ADS, including those numbers listed on
Schedule 1.1.16; and
1.1.17 GOODWILL. All goodwill of Allard which directly relates
to ADS or the business of ADS.
1.2 NON-ASSIGNMENT OF ASSETS. To the extent that any asset
described in Section 1.1 may not be assigned to Buyer, or may only be
assigned to Buyer with the consent
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of a third party, then NOTWITHSTANDING anything to the contrary in this
Agreement, neither this Agreement nor any action taken shall constitute an
assignment or an agreement to assign; PROVIDED, HOWEVER, that in such case
Allard will use its best efforts to obtain the consent of such party to the
assignment to Buyer.
1.3 EXCLUDED ASSETS: Notwithstanding Section 1.1, the assets (if
any) listed on Schedule 1.3 shall be excluded from the "Property" for all
purposes.
2. ASSUMPTION OF CERTAIN LIABILITIES; NO ASSUMPTION OF OTHER LIABILITIES.
2.1 On the Closing Date, Buyer will assume:
2.1.1 ACCOUNTS PAYABLE. All accounts payable for current
purchases by ADS incurred in the ordinary course of its business which (i)
are set forth on the schedule of ADS accounts payable as of April 30, 1996
attached as Schedule 2.1.1, or (ii) if incurred after April 30, 1996, are (x)
completely and accurately reflected in all material respects on ADS's books
and records delivered to the Buyer on the Closing Date and (y) are of the
kind expressly permitted by the affirmative covenants, and not prohibited by
the negative covenants, set forth in Section 4 hereof; PROVIDED, HOWEVER,
that in any case Buyer shall not assume the obligation to pay any vendor to
ADS the amount of which obligation is disputed by ADS.
2.1.2 ACCRUED OPERATING EXPENSES. All accrued operating
expenses incurred by ADS in the ordinary course of business which (i) are
reflected as a liability as set forth on the balance sheet of ADS as at April
30, 1996 attached as Schedule 2.1.2(a) (the "April 30, 1996 Balance Sheet"),
or (ii) if incurred after April 30, 1996, are (x) completely and accurately
reflected in all material respects on ADS's books and records delivered to
the Buyer on the Closing Date and (y) are of the kind expressly permitted by
the affirmative covenants, and not prohibited by the negative covenants, set
forth in Section 4 hereof.
2.1.3 REAL PROPERTY LEASES: PERSONAL PROPERTY LEASES. The
obligations of ADS or Allard arising under the Real Property Leases listed on
Schedule 1.1.2 and the Personal Property Leases listed on Schedule 1.1.3.(d).
2.1.4 OPEN PURCHASE CONTRACTS. To the best of the knowledge of
Allard and the Principal Shareholders, the obligations of ADS or Allard, as
seller, to perform all purchase contracts in existence on the Closing Date
which (a) were entered into by ADS or Allard in the ordinary course of
business and (b) on average, provide for pricing materially consistent with
practices of ADS during calendar 1996 sufficient to result in Buyer selling
such goods and/or services at the gross margin reported for the current year
to date as of the Closing Date in the Financial Statements delivered pursuant
hereto.
2.1.5 WARRANTY OBLIGATIONS. The obligation of ADS to provide
warranty work under any purchase contract fulfilled by ADS, BUT ONLY to the
extent of (i) warranty work reflected as an accrued liability on the April
30, 1996 Balance Sheet, and (ii) warranty work for which Allard reimburses
the Buyer pursuant to Section 4.2.14.
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2.1.6 ROYALTIES AND LICENSE FEES. The royalties and license
fees owing by ADS, but ONLY TO the extent specified in Schedule 2.1.6.
2.1.7 VACATION AND SICK LEAVE. To pay for vacation time and
sick leave, BUT ONLY to the extent such liabilities are specified on
Schedule 2.1.7 AND are reserved for in the April 30, 1996 Balance Sheet.
2.2 LIABILITIES NOT ASSUMED. With the exception of the liabilities
assumed pursuant to Section 2.1, Buyer shall not by the execution or
performance of this Agreement, or otherwise, assume or otherwise be
responsible for any liability or other obligation of ADS or Allard of any
kind, nature or description, whether such liability or obligation is mature
or not, liquidated or unliquidated, fixed or contingent, known or unknown,
whether arising out of occurrences prior to, at or after the date of this
Agreement, including those rising from breach of contract, breach of any
warranty, infringement, fraud, violation of any law, rule or regulation, or
out of any charge, complaint, action, suit, proceeding, hearing,
investigation, claim or other demand. Without limiting the foregoing, Buyer
shall not assume any obligations of ADS or Allard arising in connection with
any Employee Benefit Plan.
3. REPRESENTATIONS AND WARRANTIES.
3.1 JOINTLY BY BUYER AND DAH. Buyer and DAH hereby jointly and
severally represent and warrant to Allard and Principal Shareholders that,
except as set forth on Schedule 3.1, the representations and warranties of
Buyer and DAH, and either of them, contained in this Agreement, including
those contained in this Section 3.1, are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date.
Buyer and DAH hereby jointly and severally represent and warrant to Allard
and Principal Shareholders the following:
3.1.1 ORGANIZATION. DAH is a Corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio,
and has all requisite corporate power and authority to own, lease and operate
its respective properties and conduct its respective businesses as now being
conducted. Buyer is a Corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own, lease and operate its respective
properties and conduct its respective businesses as now being conducted.
Buyer and DAH are each duly qualified, or will be duly qualified prior to the
Closing Date, to do business and in good standing in each jurisdiction listed
on Schedule 3.1.1, are not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by either of them nor the
property either of them owns, leases or operates requires either of them to
qualify to do business as a foreign corporation in any other jurisdiction.
Except as set forth on Schedule 3.1.1, Buyer and DAH have not received any
written notice or assertion within the last three years from any governmental
official of any jurisdiction to the effect that Buyer or DAH is required to
be qualified or otherwise authorized to do business therein, in which Buyer
or DAH, as the case may be, has not qualified or obtained such authorization.
Buyer and DAH have previously delivered to Allard complete and correct copies
of Buyer's and DAH's articles of incorporation and code of regulations as in
effect on the date hereof, and neither Buyer nor DAH is in default in the
performance, observation or fulfillment of any provision of their respective
articles of incorporation or codes of regulations.
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3.1.2 CAPITALIZATION AND SECURITY HOLDERS. The authorized
capital stock of Buyer consists solely of 750 shares of Common Stock,
without par value ("Buyer Common Shares"). Buyer has issued 100 Buyer Common
Shares, of which 100 Buyer Common Shares are outstanding, constituting all
of the issued and outstanding shares of capital stock of any class of Buyer.
All outstanding Buyer Common Shares have been Validly issued and are fully
paid and non-assessable and free of preemptive rights. There are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings; or
other commitments or rights of any type relating to the issuance, sale or
transfer by Buyer of any securities of Buyer, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of
capital stock of Buyer; and Buyer has no obligation of any kind to issue any
additional securities.
3.1.3 AUTHORIZATION. Buyer and DAH each have all requisite
corporate power and authority to enter into this Agreement and the other
Transaction Documents to which either of them is a party, perform their
respective obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby. All necessary corporate action
has been taken by Buyer and DAH with respect to the execution and delivery of
this Agreement, and the other Transaction Documents to which either of them
is a party, and this Agreement and the other Transaction Documents to which
either of them is a party, constitute valid and binding obligations of Buyer
and DAH, enforceable against Buyer and DAH, as the case may be, in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally.
3.1.4 LITIGATION. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial, pending or,
to the knowledge of Buyer or DAH, threatened against Buyer or DAH, at law or
in equity, before any federal, state or local court or regulatory agency, or
other governmental authority, which might have an adverse effect on their
ability to perform any of their obligations under this Agreement or upon the
consummation of the transactions contemplated by this Agreement.
3.1.5 BROKERS AND FINDERS. Except as disclosed in Schedule
3.1.5, neither Buyer, DAH nor any of their officers, directors or employees,
has engaged any broker or finder or incurred any liability for any brokerage
fees, commissions, finders' fees or similar fees or expenses and no broker or
finder has acted directly or indirectly for Buyer or DAH in connection with
this Agreement or the transactions contemplated hereby.
3.1.6 FINANCING. DAH has discussed the transaction contemplated
by this Agreement with its senior lender and its subordinated lender; subject
to each such lender's review of the definitive transaction documents
(including this Agreement), DAH has no basis to believe that its lenders will
not give their respective required consent to the transactions contemplated
by this Agreement.
3.2 JOINTLY BY ALLARD AND PRINCIPAL SHAREHOLDERS. Allard and,
subject to the limitations of Section 3.3, Principal Shareholders hereby
jointly and severally represent and
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warrant to Buyer and DAH that, except as set forth on Schedule 3.2, the
representations and warranties of Allard and Principal Shareholders, and
either of them, contained in this Agreement, including those contained in
this Section 3.2, are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date. As used in this
Section 3.2, (i) unless stated to the contrary; all representations and
warranties which are made to the "Knowledge of Allard" and the Principal
Shareholders relate only to ADS, its business, assets and liabilities; (ii)
all representations and warranties relate only to the time period from
December 1, 1992, to the date of this Agreement when ADS, its business,
assets and liabilities were owed by Allard and (iii) when reference is made
to ADS as if it were a legal entity, the representation is meant to be with
respect to the ADS division of Allard as if ADS were a separate legal entity.
As used in this Agreement, "to the Knowledge of Allard" shall mean the
knowledge of John R. Allard or Richard Murray after reasonable inquiry made
to Robert B. Martin and appropriate members of ADS management or staff.
Allard and, subject to the limitations of Section 3.3, Principal
Shareholders hereby jointly and severally represent and warrant to Buyer and
DAH the following:
3.2.1 CORPORATE ORGANIZATION. Allard is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New Hampshire, and has all requisite corporate power and authority to own,
lease and operate its properties and conduct its business as now being
conducted. Allard is duly qualified to do business and in good standing in
each jurisdiction listed on Schedule 3.2.1, is not qualified to do business
in any other jurisdiction and neither the nature of the business conducted by
it nor the property it owns, leases or operates requires it to qualify to do
business as a foreign Corporation in any other jurisdiction. Except as set
forth on Schedule 3.2.1, Allard has not received any written notice or
assertion within the last three years from any governmental official of any
jurisdiction to the effect that Allard is required to be qualified or
otherwise authorized to do business therein, in which Allard has not
qualified or obtained such authorization. Allard has previously delivered to
Buyer complete and correct copies of Allard's articles of incorporation and
by-laws as in effect on the date hereof, and Allard is not in default in the
performance, observation or fulfillment of any provision of either of its
articles of incorporation or by-laws.
3.2.2 CAPITALIZATION AND SECURITY HOLDERS. The authorized
capital stock of Allard consists solely of Sixty (60) shares of Class A
Common Stock, no par value and Three Hundred (300) shares of Class B
Non-Voting Common Stock, no par value ("Allard Common Shares"); Allard has
issued Sixty (60) shares of Class A Common Stock and Allard has issued Two
Hundred Seventy (270) shares of Class B Non-Voting Common Stock; all
outstanding Allard Common Shares have been validly issued and are fully paid
and non-assessable and free of preemptive rights. Schedule 3.2.2 accurately
sets forth the names and addresses of, the number of Allard Common Shares
held at the date of this Agreement of record and/or beneficially by, and any
Allard Common Shares to be issued, sold or otherwise transferred at or prior
to the Closing Date to, each and every shareholder of Allard.
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3.2.3 AUTHORIZATION OF ALLARD AND PRINCIPAL SHAREHOLDERS.
Allard has full corporate power and authority to enter into this Agreement,
and the other Transaction Documents to which it is a party, perform its
obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. Each of the Principal Shareholders has all
requisite power, authority and legal capacity and is competent to execute and
deliver this agreement, and the other Transaction Documents to which he or
she is a party, perform his obligations hereunder and thereunder and
consummate the transactions contemplated hereby. All necessary and
appropriate corporate action has been taken by Allard with respect to the
execution and delivery of this Agreement, and the other Transaction Documents
to which it is a party. This Agreement constitutes, and the other Transaction
Documents to which Allard and Principal Shareholders are parties when
executed and delivered by Allard and Principal Shareholders will constitute,
valid and binding obligations of Allard and Principal Shareholders,
enforceable against Allard and Principal Shareholders in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.2.4
are (i) the balance sheets of ADS as at December 31, 1995, 1994 and 1993 and
the April 30, 1996 Balance Sheet, (ii) the related statements of income,
retained earnings, and cash flows for the years ended December 31, 1995, 1994
and 1993 and the 4 months ended April 30, 1996 (all of such documents
referred to collectively as the "Financial Statements"). All of the year-end
Financial Statements reflect all year-end adjustments reflected in the
audited consolidated financial statements of Allard to the extent such
adjustments pertain to ADS. The Financial Statements dated as of April 30,
1996 either (a) reflect the equivalent of any adjustments made in the
December 31, 1995 Financial Statements or (b) have footnote disclosure to
reflect the absence of such adjustments and the dollar amount of such
adjustments had they been made. Each of the Financial Statements, and the
financial statements delivered pursuant to Section 6, (i) are true, correct
and complete in all material respects, (ii) have been prepared from and are
in accordance with the books and records of ADS, (iii) have been prepared
using an accrual basis method and LIFO inventory cost flow assumptions, (iv)
are in conformity with generally accepted accounting principles applied on a
consistent basis for such periods, and (v) fairly present the financial
position of ADS in all material respects as of the dates stated and the
results of operations and cash flows of ADS for the periods then ended in
accordance with such practices. On the date of this Agreement, ADS does not
have any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for
in the balance sheets in the Financial Statements or elsewhere in this
Agreement. Since April 30, 1996, there has been no material adverse change in
the financial condition, operations, business or prospects taken as a whole
of ADS from that set forth in the Financial Statements dated as of April 30,
1996 or elsewhere in this Agreement.
3.2.5 [Omitted]
3.2.6 ABSENCE OF CERTAIN CHANGES IN EVENTS. Except as set forth
on Schedule 3.2.6, since December 31, 1995, there has not been:
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(a) Any material adverse change in the business
operations (as now conducted or as presently
proposed to be conducted), assets, properties or
rights, prospects or condition (financial or
otherwise) of ADS or, any occurrence, circumstance,
or combination thereof which reasonably could be
expected to result in any such material adverse
change (a "Material Adverse Effect");
(b) Any material increase in amounts payable by ADS
to or for the benefit of, or committed to be paid by
ADS: (A) to or for the benefit of (x) any person
listed on Schedule 3.2.6(a) (each a "Restricted
Employee") or (y) in the aggregate, all shareholders,
directors, officers, partners, consultants, agents and
employees, in any capacity, of Allard who are not
listed on Schedule 3.2.6(b) (the "Non-Restricted
Employees") or (B) in any benefits granted under
any bonus, stock option, profit sharing, pension,
retirement, deferred compensation, insurance, or
other direct or indirect benefit plan, payment or
arrangement made to, for the benefit of, or with (x)
any Restricted Employee or (y) in the aggregate, all
Non-Restricted Employees;
(c) Any transaction entered into or carried out by ADS
other than in the ordinary and usual course of their
respective businesses;
(d) Any borrowing or agreement to borrow funds; any
incurring of any other obligation or liability,
contingent or otherwise except current liabilities
incurred in the usual and ordinary course of business
exceeding at any one time outstanding $10,000; or
any endorsement, assumption or guarantee of
payment or performance of any loan or obligation of
any other individual, firm, corporation or other
entity by Allard on behalf of ADS;
(e) Any material change made by ADS in the methods
of doing business or any change in the accounting
principles or practices of Allard with respect to the
Financial Statements or the method of application of
such principles or practices;
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(f) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance
imposed or agreed to be imposed on or with respect
to the Property;
(g) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance discharged
or satisfied, or any obligation or liability (absolute
or contingent) paid, other than current liabilities
shown on the April 30, 1996 Balance Sheet and current
liabilities incurred and obligations under contracts
entered into after such date in the usual and ordinary
course of business;
(h) Any sale, lease or other disposition of or any
agreement to sell, lease or otherwise dispose of any
of the properties or assets of ADS, other than sales
of finished goods in the usual and ordinary course
of business for ADS's scheduled prices;
(i) Any purchase of or any agreement to purchase
capital assets for an amount in excess of $50,000 for
any one such purchase or $100,000 for all such
purchases made by Allard on behalf of ADS or any
lease or any agreement to lease, as lessee, any
capital assets with payments over the term thereof to
be made by Allard for ADS exceeding an aggregate
of $30,000;
(j) Any loan or advance made by Allard on behalf of
ADS to any individual, firm, corporation or other
entity except for advances not material in amount
made in the usual and ordinary course of business to
employees;
(k) Any modification, waiver, change, amendment, release,
rescission or termination of, or accord and
satisfaction with respect to, any material term,
condition or provision of any contract, agreement,
license or other instrument to which ADS is a party,
other than any satisfaction by performance in
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accordance with the terms thereof in the usual and
ordinary course of business;
(l) Any labor disputes or disturbances materially adversely
affecting the business or financial condition of
ADS including the filing of any petition or charge of
unfair labor practices with the National Labor
Relations Board or efforts to effect a union
representation election, actual or threatened employee
strikes, work stoppages or slow downs;
(m) Any delay or postponement (beyond normal
practice) by Allard on behalf of ADS of the
payment of any accounts payable or other liabilities
of ADS; or
(n) To the best of the knowledge of Allard and each
Principal Shareholder, any other event or condition
of any character which has had a Material Adverse
Effect or may reasonably be expected to result in a
Material Adverse Effect.
3.2.7 UNDISCLOSED LIABILITIES. Except as disclosed on Schedule
3.2.7, ADS has no liability or obligation of any nature (whether liquidated,
unliquidated, accrued, absolute, known or unknown, contingent or otherwise
and whether due or to become due) except:
(a) those set forth or reflected in the April 30, 1996
Balance Sheet which have not been paid or discharged
since the date thereof;
(b) those arising under agreements or other commitments
expressly identified in any Schedule hereto; and
(c) current liabilities incurred in or as a result of
the conduct of its business in the ordinary and usual
course consistent with past practice since April 30,
1996, which are completely and accurately reflected
in all material respects on its books and records and
which are not inconsistent with the other
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representations, warranties and agreements of Allard
and Principal Shareholders, or either of them, set
forth in this Agreement or in the other Transaction
Documents (none of which relates to any breach of
contract, breach of warranty, tort, infringement,
fraud, or violation of law; or arose out of any
charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand).
3.2.8 TAXES. Except as set forth on Schedule 3.2.8, Allard has
filed all applicable Federal, State and local tax returns relating to the
business of ADS.
3.2.9 COMPLIANCE WITH LAW.
(a) Each of Allard and the Principal Shareholders is in
compliance in all material respects (with respect to
the business of ADS) with all applicable laws,
statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or
orders entered, by any federal, state, local or foreign
court or governmental authority or instrumentality
relating to ADS or any of its businesses or
properties.
(b) Allard is in compliance in all material respects with
all federal, state and local laws, ordinances, rules
and regulations pertaining to environmental matters,
including solid waste disposal, toxic substances,
hazardous substances, hazardous materials,
hazardous waste, toxic chemicals, pollutants,
contaminants and air or water pollution and to the
storage, use, handling, transportation, discharge and
disposal (including spills and leaks) of gaseous,
liquid, semi-solid or solid materials. Allard has not,
and to the best knowledge of Allard and Principal
Shareholders, no third party has, disposed or
discharged any chemicals, oil or solid wastes on any
part of the Real Property or any other any property
owned; operated, leased or used by ADS. To the
best of the knowledge of Allard and the Principal
Shareholders there are no underground storage
tanks located on any part of the Real Property or
any other property owned, operated, leased or used
by ADS.
(c) Schedule 1.1.6 contains a complete and accurate list
of the Permits. Each of the Permits is currently
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valid and in full force and effect and assignable to
Buyer. The Permits constitute all franchises,
licenses, permits, consents, authorization, approvals,
and certificates of any regulatory, administrative or
other agency or body necessary for the conduct of
the business of ADS. Neither ADS nor Allard is in
violation of any of the Permits and there is no
pending or to the best of the knowledge of Allard
and Principal Shareholders threatened proceeding
which could result in the revocation, cancellation or
inability of ADS or Allard to renew or transfer any
Permit.
(d) To the best of the knowledge of Allard and the
Principal Shareholders, except as set forth in
Schedule 3.2.9, neither Allard nor any Principal
Shareholder is under investigation (with respect to
the business of ADS) with respect to, or has been
charged with or given notice of any violation of,
any applicable law.
3.2.10 PROPRIETARY RIGHTS. Schedule 1.1.7 sets forth all of the
Proprietary Rights and Registrations in respect thereof. Other than those
Proprietary Rights listed on Schedule 1.1.7, to the best of the knowledge of
Allard and the Principal Shareholders, no patent, invention, trade secret,
process, proprietary right, proprietary knowledge, know-how, computer
software, trademark, name, service mark, trade name, copyright, mark, symbol,
logos, franchise, permit, license, sublicense or other such right is
necessary for the operation of the business of ADS as the same is currently
conducted. None of the Proprietary Rights are registered with any
governmental or regulatory authority except as set forth on Schedule 1.1.7.
The business of ADS as conducted prior to the Closing Date, the sale by
Allard, and ownership by Buyer of any of the Property, was not, is not and
will not infringe or be in contravention of any trade name, service mark,
patent, trademark, copyright or other proprietary right of any third party.
The amount of each of the royalties and license fees presently
paid by ADS in the ordinary course of its business is listed in Schedule
2.1.6.
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Except as set forth on Schedule 3.2.10, ADS is the sole and
exclusive owner of all right, title and interest in and to all Proprietary
Rights free and clear of all liens, claims, charges, equities, rights of use,
encumbrances and restrictions whatsoever. Except as set forth in Schedule
3.2.10, none of the Proprietary Rights: (i) as been hypothecated, sold,
assigned or licensed by Allard or to the best knowledge of Allard and
Principal Shareholders, any other person, corporation, firm or other legal
entity; (ii) infringes upon or violates the rights of any person, firm,
corporation, or other legal entity; (iii) is subject to challenge, claims of
infringement, unfair competition or other claims; or (iv) to the best
knowledge of Allard and Principal Shareholders, is being infringed upon or
violated by any person, firm, corporation or other legal entity. Except as
set forth in Schedule 3.2.10: (w) Allard nor ADS has given any
indemnification against patent, trademark or copyright infringement as to any
equipment, materials' products, services or supplies which ADS produces,
uses, licenses or sells; (x) no product, process, method or operation
presently sold, engaged in or employed by ADS infringes upon any rights
owned by any other person' firm, corporation or other legal entity; (y) there
is not pending or threatened any claim or litigation against Allard or ADS
contesting the right of ADS to sell, engage in or employ any such product,
process, method, or operation; and (z) there is not, to the best knowledge
of ADS and Principal Shareholders, pending, proposed or threatened, any
patent, copyright, trade name, trademark, service mark, invention, device,
application or principle, or Registration therefor, which would materially
adversely affect the future operation by Buyer of ADS's business after the
Closing Date on substantially the same basis as said business was
theretofore operated.
3.2.11 RESTRICTIVE DOCUMENTS OR LAWS. With the exception of the
matters listed on Schedule 3.2.11, neither ADS, the Principal Shareholders
(with respect to the business of ADS), is a party to or bound under any and,
to the best knowledge of Allard and Principal Shareholders, there is no
pending, proposed or threatened regulation, certificate, mortgage, lien,
lease, agreement, contract, instrument, law, vote, order, judgment or decree,
or any similar restriction not of general application which materially
adversely affects, or reasonably could be expected materially adversely to
affect (i) the condition, financial or otherwise, of ADS or the Property;
(ii) the continued operation by Buyer of the business of ADS after the
Closing Date on substantially the same basis as said business was theretofore
operated; or (iii) the consummation of the transactions contemplated in this
Agreement.
3.2.12 INSURANCE. To the best of the knowledge of Allard and
the Principal Shareholders ADS is insured with respect to its property and
the conduct of its business in such amounts and against such risks as are
sufficient for compliance with law, and for compliance with the terms of each
of its contractual commitments (including under each of the Real Property
Leases, Personal Property Leases and Contracts). Schedule 3.2.12 is a true,
correct and complete list of all insurance policies and bonds in force in
which Allard or ADS is named as an insured party, in respect of the business
of ADS, or for which ADS has been charged or has paid any premiums. Except as
disclosed in Schedule 3.2.12, all such policies or bonds are currently in
full force and effect and neither Allard nor ADS has received any notice from
any such insurer with respect to the cancellation of any such insurance.
Allard will continue all of such insurance in full force and effect up to and
including the Closing Date. All premiums due and payable on such policies
have been paid. Neither Allard nor ADS is a co-insurer under any term of any
insurance policy.
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3.2.13 BANK ACCOUNTS, DEPOSITORIES, POWERS OF ATTORNEY.
Schedule 3.2.13 is a true, correct and complete list of the names and
locations of all banks or other depositories in which ADS maintains accounts
or safe deposit boxes, and the names of the persons authorized to draw
thereon, borrow therefrom or have access thereto. No person or entity holds
a power of attorney on behalf of ADS.
3.2.14 REAL PROPERTY. Except as set forth in Schedule 1.1.1,
and except with respect to real property leased pursuant to the Real Property
Leases listed on Schedule 1.1.2, ADS has no real property. The Property which
is real property constitutes all of the real property now used in and
necessary for the conduct of the business of ADS as presently conducted.
Except as set forth in Schedule 3.2.14, to the best of the
knowledge of Allard and Principal Shareholders, all real property, buildings
and structures owned or used by ADS and material to the operation of its
business is suitable for the purpose or purposes for which it is being used,
and is in such condition and repair as to permit the continued operation of
said businesses. To the best of the knowledge of Allard and the Principal
Shareholders, none of such real property, buildings or structures is in need
of maintenance or repairs except for ordinary, routine maintenance and
repairs. To the best of Allard's knowledge and the knowledge of the Principal
Shareholders, there are no material structural defects in the exterior walls
or the interior bearing walls, the foundation or the roof of any plant,
building, garage or other such structure owned, leased or used by ADS and the
electrical, plumbing and heating systems, and the air conditioning system, if
any, of any such plant, building, garage or structure are in reasonable
operating condition in light of their age and prior use. To the best of the
knowledge of Allard and the Principal Shareholders the utilities servicing
the real property owned, leased or used by ADS are adequate to permit the
continued operation of the business of ADS and there are no pending or
threatened zoning, condemnation or eminent domain proceedings, building,
utility or other moratoria, or injunctions or court orders which would
materially effect such continued operation. Schedule 3.2.14 lists, and Allard
has furnished or made available to Buyer copies of, all engineering, geologic
and environmental reports prepared by or for either Allard or ADS with
respect to the Real Property and the real property leased pursuant to the
Real Property Leases.
3.2.15 PERSONAL PROPERTY. Schedules 1.1.3(a), 1.1.3(b), 1.1.4
and 1.1.5 contain complete and accurate descriptions of, respectively, the
Machinery and Equipment, the Tooling and the Inventory, and the Vehicles.
Except as set forth in Schedule 3.2.15, and except with respect to personal
property leased pursuant to the Personal Property Leases, ADS has good, valid
and marketable title to all of its assets and properties which are personal
property of every kind, nature and description, tangible or intangible
wherever located, including all property and assets which are personal
property shown or reflected on the April 30, 1996 Balance Sheet. Schedule
1.1.3 contains a complete and accurate description of all Personal Property
Leases to which ADS is party or which ADS uses in its business. To the best
of knowledge of Allard and Principal Shareholders, the Property which is
personal property constitutes all of the personal property now used in and
necessary for the conduct of the business of ADS as presently conducted. The
Property is held free and clear of all mortgages, pledges, liens, security
interests, encumbrances and restrictions of any nature whatsoever, except as
listed on Schedule 3.2.15.
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No financing statement under the Uniform Commercial Code or similar
law naming Allard or ADS as debtor has been filed in any jurisdiction, and
neither Allard nor ADS is a party to or bound under any agreement or legal
obligation authorizing any party to file any such financing statement,
except as listed on Schedule 3.2.15. To the best knowledge of Allard and
Principal Shareholders, none of the Machinery or Equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repair.
3.2.16 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.2.16, the operations of ADS meet the requirements of all occupational
health and safety acts and all environmental laws and regulations of all
federal, state and local governmental or regulatory bodies having
jurisdiction over ADS. Without limiting the generality of the foregoing, and
by way of example only, except as set forth on Schedule 3.2.16:
(a) There has not been, and is not occurring, any
Release of any Hazardous Substance on any real
property owned, operated, leased or used by ADS.
For purposes of this Agreement, the terms "Release"
and "Hazardous Substance" shall have the same
meanings as those terms are given in the
Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA"), except that for
purposes of this Agreement petroleum (including crude
oil or any fraction thereof) shall be deemed a Hazardous
Substance.
(b) ADS has never sent a Hazardous Substance to a site
which, pursuant to CERCLA or any similar state
law, (A) has been placed, or is proposed to be
placed, or, to the best knowledge of Allard or
Principal Shareholders, may in the future be placed,
on the "National Priorities List" of hazardous waste
sites or on any similar list of any federal, state or
local governmental agency, including the
Comprehensive Environmental Response,
Compensation and Liability System list for potential
hazardous waste sites, or (B) is subject to a claim,
an administrative order or other request to take
"removal" or "remedial" action (as defined under
CERCLA) or to pay for any costs relating to such
site.
(c) ADS has never been or is currently in violation of
any provision of the Toxic Substances Control Act
or the regulations promulgated thereunder.
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(d) ADS is not involved in any suit or has received
notice of any claim relating to personal injuries from
exposure to Hazardous Substances.
3.2.17 BROKERS, FINDERS. The transactions contemplated herein
were not submitted to Allard by any broker or other person entitled to a
commission or finder's fee thereon, and were not with the consent of
Allard submitted to Buyer by any such broker or other person. Neither
Allard nor any of its officers, directors or employees has engaged any broker
or finder or incurred or taken any action which may give rise to any
liability against itself or the Property for any brokerage fees,
commissions, finders fees or similar fees or expenses and no broker or
finder has acted directly or indirectly for Allard in connection with this
Agreement or the transactions contemplated hereby. No investment banking,
financial advisory or similar fees have been incurred or are or will be
payable by Allard in connection with this Agreement or the transactions
contemplated hereby.
3.2.18 LEGAL PROCEEDINGS, ETC. Except as set forth on
Schedule 3.2.18, there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending or threatened against Allard,
Principal Shareholders (with respect to the business of ADS), or ADS or
involving the Property, this Agreement or the transactions contemplated
hereby, at law or in equity, before any federal, state or local court or
regulatory agency, or other governmental authority, including any unfair
labor practice or grievance, proceedings or claim. To the best knowledge of
Allard and Principal Shareholders, there is no basis upon which such claim,
litigation, action, suit or proceeding could be brought or initiated. Except
as disclosed in Schedule 3.2.18, neither Allard, Principal Shareholders (with
respect to the business of ADS), nor ADS is subject to any judgment, order or
decree, or, to the best knowledge of Allard and Principal Shareholders, any
governmental restriction applicable to Allard, Principal Shareholders (with
respect to the business of ADS), or ADS which has a reasonable probability of
having a Material Adverse Effect, or which materially adversely affects the
ability of ADS to conduct business in any area, or of Buyer to continue the
business of ADS as presently conducted.
3.2.19 NO CONFLICT OR DEFAULT. Except as set forth on
Schedule 3.2.19, neither the execution and delivery of this Agreement or any
other Transaction Document, nor compliance with the terms and provisions
hereof or thereof, including the consummation of the transactions contemplated
hereby and thereby, will (a) violate in any material respect any statute,
regulation or ordinance of any governmental authority, or (b) conflict with or
result in the breach of any term, condition or provision of the articles of
incorporation or bylaws of Allard or of any agreement, deed, contract,
mortgage, indenture, writ, order, decree, legal obligation or instrument
(with respect to the business of ADS) to which Allard or any of the Principal
Shareholders, is a party or by which Allard or any of the Principal
Shareholders or any part of the Property is or may be bound, or (c)
constitute a material default (or an event which with the lapse of time or
the giving of notice, or both, would constitute a material default)
thereunder, or (d) result in the creation or imposition of any lien, charge
or encumbrance, or restriction of any nature whatsoever with respect to any
part of the Property, or (e) give to others any interest or rights, including
rights of termination, acceleration or cancellation in or with respect to any
part of the Property or the business of ADS.
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3.2.20 LABOR RELATIONS. Schedule 3.2.20 sets forth all
collective bargaining or other labor agreements to which ADS or Allard is
bound and which covers ADS employees. Allard has previously delivered to
Buyer true, correct and complete copies of each such agreement. There is no
labor strike, dispute, slowdown or stoppage, or any union organizing
campaign, or petition for certification actually pending or, to the best
knowledge of Allard and Principal Shareholders, threatened against or
involving ADS. Schedule 3.2.20 sets forth all pending grievances and
arbitration proceedings against ADS arising out of or under a collective
bargaining or other labor agreement. No collective bargaining or other labor
agreement is currently being negotiated by Allard on behalf of ADS or by ADS.
Neither ADS nor Allard has experienced any work stoppage or other material
labor difficulty over the past three years. No agreement which is binding on
ADS restricts it from relocating or closing any or all of its operations.
3.2.21 EMPLOYEE BENEFIT PLANS.
(a) To the best of the knowledge of Allard and
Principal Shareholders except as set forth in
Schedule 3.2.21, neither Allard nor ADS, currently
sponsors, maintains or contributes, or has within the
past 3 years sponsored, maintained or contributed to,
to any pension, retirement, profit-sharing, deferred
compensation, bonus, stock option or other incentive
plan, or any other employee benefit program,
arrangement, agreement or understanding, or
medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee
benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not any such
employee benefit plan is otherwise exempt from the
provisions of ERISA, and whether or not formal or
informal, written or oral, and whether or not legally
binding. All such plans, funds or programs
sponsored, maintained or contributed to by ADS or
Allard currently or within the past 3 years, whether
or not listed on Schedule 3.2.21, are hereinafter
referred to as the "Employee Benefit Plans"). For
the purpose of this Section 3.2.21, the term "ADS"
shall include all "entities" of ADS and of Allard,
whether or not incorporated, with which it would be
treated as a single employer for purposes of
Sections 414(b), (c) or (m) of the Internal Revenue
Code (the "Code").
(b) Full payment has been made of all amounts which ADS or
Allard is required, under applicable law or under any
Employee Benefit Plan or any agreement
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relating to any Employee Benefit Plan to which it is a
party, to have paid as contributions to or benefits
under any Employee Benefit Plan as of the last day of
the most recent fiscal year of such Employee Benefit
Plan ended prior to the date hereof. ADS has made
adequate provision in its financial statements for
liabilities to meet current contributions or benefit
payments.
(c) ADS and Allard have each performed all obligations
required to be performed by it under the Employee
Benefit Plans. Neither ADS nor Allard has engaged in
any transaction with respect to the Employee Benefit
Plans which would subject either of them, Buyer or DAH
to a tax, penalty or liability for a prohibited
transaction under section 406, 407 or 502(i) of ERISA or
Section 4975 of the Code, nor have either of Allard's or
ADS' directors, officers, partners, employees or agents,
to the extent they or any of them are fiduciaries with
respect to such Employee Benefit Plans, breached any of
their responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA or which would result
in any claim being made under or by or on behalf of any
such Employee Benefit Plans by any party with standing
to make such claim. Neither ADS nor Allard will have any
plan or commitment, whether formal or informal, written
or oral, and whether or not legally binding, to modify
or change any Employee Benefit Plan in any material
manner prior to the Closing Date. Allard, to the best of
the knowledge of Allard and Principal Shareholders, ADS
to the best of the knowledge of Allard and Principal
Shareholders and any "administrator(s)" (as described in
Section 3(16)(A) of ERISA) of the Employee Benefits
Plans have complied in all material respects with the
applicable requirements of ERISA, the Code and all other
statutes, orders, rules or regulations, specifically
including material compliance with all reporting and
disclosure requirements of Part 1 of Title 1 of ERISA
and of the Code in a timely and accurate manner, and
no penalties have been or will be imposed, nor is
Allard, ADS or any administrator liable for any
penalties imposed, under ERISA, the Code or otherwise
with respect to the Employee Benefit Plans or any
related trusts. Neither ADS nor Allard
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is delinquent in the payment of any federal, state or
local taxes with respect to the Employee Benefit Plans.
There is no pending litigation, arbitration, or disputed
claim, settlement adjudication or proceeding with
respect to the Employee Benefit Plans, and none of
Allard, to the best of the knowledge of Allard and
Principal Shareholders, ADS to the best of the knowledge
of Allard and Principal Shareholders or any
administrator is aware of any threatened litigation,
arbitration or disputed claim, adjudication proceeding,
or any governmental or other proceeding, or
investigation with respect to the Employee Benefit Plans
or with respect to any fiduciary or administrator
thereof (in their capacities as such), or any
party-in-interest thereto (with respect to their
relationship as such). There is no "defined benefit
plan" within the meaning of Section 414(j) of the Code
or Section 3(35) of ERISA to which either ADS or Allard
has been a party or has been required to make any
contributions at any time during the last ten years.
There is no "multiemployer plan" within the meaning of
Section 3(37) of ERISA to which either ADS or Allard has
been a party or has been required to make any
contributions at any time during the last ten years.
(d) Allard has delivered or caused to be delivered to
Buyer and DAH prior to the Closing, true, accurate and
complete copies of (A) all Employee Benefit Plans and
any related trust agreements, custodial agreements,
investment management agreements, insurance contracts or
policies, and administrative service contracts, all as
in effect, together with all amendments thereto which
will become effective at a later date; (B) the latest
Summary Plan Description and any modifications thereto
for each Employee Benefit Plan requiring same under
ERISA; (C) the Summary Annual Report for the current and
prior fiscal years for each Employee Benefit Plan
requiring same under ERISA; (D) each Form 5500 and/or
Form 990 series filing (including required schedules and
financial statements) for the current and prior fiscal
years for each Employee Benefit Plan required to file
such form; and (E) the most recent actuarial evaluation,
analysis or other report issued with respect to any
Employee Benefit Plan. None of Allard, ADS or any
officer, partner,
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employee representative or agent of either of them, has
made any written or oral representations or statements
to any current or former employees, dependents,
participants or beneficiaries or other persons which
are inconsistent in any material manner with the
provisions of these documents.
(e) With respect to any of ADS's employee welfare plans (as
defined in Section 3(1) of ERISA and including those
Employee Benefits Plans which qualify as such) which
are "group health plans" under Section 498OB of the Code
and Section 607(1) of ERISA and related regulations
(relating to the benefit continuation rights imposed by
the Consolidated Omnibus Budget Reconciliation Act of
1986 ("COBRA"), as amended to date), since such time as
Allard has owned ADS, there has been timely compliance
in all material respects with all requirements imposed
thereunder, as and when applicable to such plans, so
that Allard has not (or will not incur any) loss,
assessment, penalty, loss of federal income tax
deduction or other sanction, arising on account of or
in respect of any failure to comply with any COBRA
benefit continuation requirement, which is capable of
being assessed or asserted directly or indirectly
against Allard or ADS, or against Buyer or DAH or any
of their respective subsidiaries or other member of
Buyer's corporate control group, with respect to any
such plan.
(f) No Employee Benefit Plan maintained by Allard or ADS
which is a "welfare plan" within the meaning of
Section 3(1) of ERISA provides benefits to employees
after termination of employment, except as required by
Section 4980B of the Code.
3.2.22 CONTRACTS AND COMMITMENTS. Schedule 3.2.22 is a list of
all of the Contracts to which ADS is a party and which involve the payment by
or to ADS in the aggregate of $50,000 or more during any year, and Allard has
previously delivered to Buyer correct and complete copies of each such
Contract. The Real Property Leases, the Personal Property Leases and the
Contracts listed on Schedule 3.2.22, taken together, constitute all of the
contracts, agreements, contract rights, leases, license agreements, franchise
rights and agreements, policies, purchase and sales orders, quotations and
executory commitments, instruments, guaranties, indemnifications,
arrangements, obligations and understandings (written or oral),
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involving the payment by or to ADS, in the aggregate of $50,000 or more
during any year, necessary to the conduct of the business of ADS as conducted
by ADS.
All of the Real Property Leases, the Personal Property Leases and
the Contracts are valid and binding, in full force and effect and enforceable
against ADS in accordance with their respective provisions. Neither Allard
nor ADS has assigned, mortgage pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any Real Property
Lease, any Personal Property Lease, or any Contract. Neither Allard nor ADS
(nor, to the best knowledge of Allard and Principal Shareholders, any other
party thereto) is in violation of, in default in respect of, nor has there
occurred an event or condition which, with the passage of time of giving of
notice (or both) would constitute a violation or default of, any Real
Property Lease, any Personal Property Lease, or any Contract; and, to the
best knowledge of Allard and Principal Shareholders, there are no facts or
circumstances which would reasonably indicate that ADS (or any other party)
will be or may be in violation of or in default in respect of any Real
Property Lease, any Personal Property Lease, or any Contract, subsequent to
the date hereof. No notice has been received by Allard or ADS claiming any
such default by ADS or indicating the desire or intention of any other party
thereto to amend, modify, rescind or terminate the same.
3.2.23 ACCOUNTS RECEIVABLE, ETC.. All of the Receivables of ADS are
set forth on Schedule 1.1.9, together with the value thereof. All of the
Investments are set forth on Schedule 1.1.10, together with the value
thereof. All of the Deposits and prepaid expenses of ADS are set forth on
Schedule 1.1.11, together with the value thereof. All such Receivables,
Investments, Deposits and Prepaid Expenses, together with any additional
Receivables, Investments, Deposits and Prepaid Expenses arising between the
date hereof and the Closing Date (in each case net only of such allowance for
doubtful accounts as is included on the April 30, 1996 Balance Sheet), (a)
are or will be valid and subsisting, (b) represent or will represent sales
actually made, (c) arose or will arise in the ordinary and usual course of
the business of ADS, (d) to the extent not collected prior to the Closing
Date, will be collectible according to their terms within 90 days after the
date of the initial invoice therefor subject to the allowance for doubtful
accounts included on the April 30, 1996 Balance Sheet and (e) are not and
will not be subject to any counterclaim, set-off or defense nor any lien,
charge or encumbrance of any nature. There has not been any material adverse
change in the collectibility of the Receivables of ADS since April 30, 1996.
3.2.24 INVENTORIES. As of July 22, 1996, Schedule 1.1.4
completely and accurately lists all of the raw materials owned by ADS, and
the value thereof. Except as set forth in Schedule 3.2.24, in all material
respects, all of the raw materials of ADS consists of a quality and quantity
usable and saleable in the ordinary and usual course of business, except for
items of obsolete materials and materials of substandard quality, all of
which have been written off, written down or reserved for on the books of ADS
to net realizable prior to April 30, 1996. All Inventory not written off has
been priced at the lower of cost or market on a LIFO basis. The quantities of
each type of Inventory (whether raw materials, work-in-process, or finished
goods) are not excessive in all material aspects, consistent with past
business practice, but are
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reasonable and warranted in the present circumstances of ADS. All
work-in-process and finished goods Inventory is free of any defect or other
deficiency or, to the extent there is a defect or other deficiency, there is
a valid claim by ADS against the manufacturer or supplier thereof for an
amount adequate to fully compensate ADS therefor.
3.2.25 BACKLOG. All unfilled orders to purchase goods of ADS
are set forth in Schedule 3.2.25 and are firm and binding commitments
(subject to cancellation rights set forth therein) of the respective
purchasers (assuming that such purchaser has properly authorized by all
requisite corporate or, if not a corporation, by all other requisite action
and has properly executed and delivered such purchase order, which, to the
best knowledge of Allard and the Principal Shareholders, is the case) to
purchase the goods indicated.
3.2.26 BOOKS OF ACCOUNT: RECORDS. Except as disclosed in
Schedule 3.2.26, the general ledgers, books of account and other financial
records of ADS are complete and correct, have been maintained in accordance
with good business practices and the matters contained therein are
appropriately and accurately reflected in the Financial Statements.
3.2.27 MANAGERS, EMPLOYEES AND COMPENSATION. Schedule 3.2.27
sets forth the name of all managers of ADS, their respective terms of office,
the total salary, bonus payments, fringe benefits and perquisites each
received in each of the last 3 fiscal years ended December 31, 1995, and
changes to the foregoing which have occurred since December 31, 1995; such
Schedule also lists and described the current base salary, bonus payments,
fringe benefits and perquisites of any other employee, agent or
representative of ADS whose total current salary, bonus or other compensation
exceeds $50,000 annually during any of the last 3 fiscal years ended
December 31, 1995, and changes to the foregoing since December 31, 1995.
There are no other material forms of compensation paid to any such manager or
employee of ADS. The provisions for wages and salaries accrued on the
April 30, 1996 Balance Sheet are adequate for salaries and wages, including
accrued vacation pay, for the period up through the date thereof, and ADS has
accrued on its books and records all obligations for wages and salaries and
other compensation to its employees, including, but not limited to, vacation pay
and sick pay, and all commissions and other fees payable to agents, salesmen
and representatives. Allard has filed any and all payroll tax returns, and
paid all payroll taxes due for any and all ADS employees, due through the
Closing Date.
Except as set forth on Schedules 3.2.27 and 3.2.29, ADS has not
become obligated, directly or indirectly, to any shareholder, director,
officer or partner of Allard or any member of their families, except for
current liability for employment compensation. Except as set forth on
Schedule 3.2.27, no shareholder, director, officer, partner, agent or
employee of Allard holds any position or office with or has any financial
interest, direct or indirect, in any supplier, customer or account of, or
other outside business which has transactions with ADS. Neither Allard, nor
ADS, nor, to the best knowledge of Allard and Principal Shareholders, any
third party, has taken any action with respect to any shareholder, director,
officer, partner, employee or representative of Allard to attempt to induce
or which would influence any such person not to become associated with Buyer
from and after the Closing Date or from serving Buyer in a capacity similar
to the capacity presently held. No employee of ADS, to the best
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knowledge of Allard and Principal Shareholders, has a present intention to
leave the employ of ADS or has taken any action directed towards leaving the
employ of ADS. Except as set forth on Schedule 3.2.27, to the best knowledge
of Allard and Principal Shareholders, no former employee of Allard is
currently or intends to enter into competition with the business of ADS.
3.2.28 CREDIT TERMS: PRODUCT WARRANTIES. SCHEDULE 3.2.28 sets
forth all the terms and conditions of credit and discounts given by ADS to
its customers in the usual and ordinary course of its business and a list of
all transactions pending where there is a material departure therefrom. Also
set forth on such Schedule are the terms and conditions of all product or
service warranties and guarantees given by ADS. The aggregate amount of
losses and expenses incurred by reason of allowances, customer
dissatisfaction or liabilities arising under such warranties and guarantees
were not materially significant during the period beginning on December 1,
1992 and ending on December 31, 1995 and there has been no materially adverse
change in that experience since December 31, 1995. Except as set forth on
such Schedule, ADS has conducted all qualification inspections and quality
conformance inspections required by the specifications for products of ADS
included on qualified products lists in accordance with the requirements of
such specifications, and all products shipped have been in conformance with
such specifications.
3.2.29 CONTRACTS WITH AFFILIATES. Any contract, commitment,
lease, permit or other instrument, agreement, understanding or obligation
(written or oral) between ADS and any affiliate of Allard (including Allard
and any Principal Shareholder) is the equivalent of an "arms-length"
transaction with a third party, and is described on Schedule 3.2.29 hereto.
3.2.30 GOVERNMENT CONTRACTS.
(a) For purposes of this Section 3.2.30, the term
"Government" means any agency, division, subdivision,
audit group, or procuring office of the federal
government, including the employees or agents thereof;
the term "Transferor" means ADS and its subsidiaries,
divisions, affiliates, joint venturers, agents,
employees, officers and directors; the term "Government
Contract" means any prime contract, subcontract, basic
ordering agreement, letter contract, purchase order or
delivery order of any kind, including all amendments,
modifications
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and options thereunder or relating thereto, between the
Transferor and any of the Government, any prime
contractor of the Government, any subcontractor of such
a prime contractor or any subcontractor of another
subcontractor, however far removed from the prime
contractor such subcontractor may be, (A) currently in
force; (B) which, within the three years preceding the
date of this Agreement, expired or were terminated; or
(C) for which final payment was received within the
three years preceding the date of this Agreement; and
the term "Bid" means any outstanding quotation, bid or
proposal submitted by Transferor to the Government, any
proposed prime contractor of the Government, or any
proposed subcontractor.
(b) Schedule 3.2.30 contains a true and complete list of
all Bids which involve or can be expected to involve
aggregate consideration in excess of $100,000.
(c) Except as set forth in Schedule 3.2.30, with respect
to any Government Contract or Bid, to the best of
the knowledge of Allard and Principal Shareholders,
the Transferor has complied with and expects to
comply with all material terms thereof, all
certifications and representations of Transferor with
respect thereto, and all statutes and regulations
applicable thereto.
(d) Except as set forth in Schedule 3.2.30, (A) no show
cause notices, cure notices, or terminations have
been issued against the Transferor with respect to
any Government Contract; (B) no negative
determinations of responsibility have been issued
against the Transferor with respect to any Bid and
(C) none of the Government, any prime contractor
nor any subcontractor has notified the Transferor,
either orally or in writing, that it is in breach or
violation of any provision of any Government
Contract, any certification or representations with
respect thereto or any statutes and regulations
applicable thereto.
(e) The Transferor possesses all necessary security
clearances and permits for the execution of its
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obligations under any Government Contracts and Bids. The
Transferor has never been denied a security clearance.
(f) The Transferor is not undergoing and has not undergone
any audit, and has no knowledge or reason to know of any
basis for impending audits in the future, arising under
or relating to any Government Contract except as set
forth in Schedule 3.2.30.
(g) The Transferor has entered into no financing
arrangements with respect to the performance of any
current Government Contract except as set forth in
Schedule 3.2.30.
3.2.31 SOLVENCY. The total assets of Allard and each of the
Principal Shareholders exceed their respective total liabilities; and Allard
and each of the Principal Shareholders are able to perform their respective
financial obligations as performance thereof becomes due.
3.2.32 ALLOCATIONS. Those costs which, during the period January 1,
1993 through April 30, 1996, have been allocated by Allard to ADS, as set
forth in Schedule 3.2.32, equal or exceed the true cost to Allard, and all
such identifiable costs have been allocated to ADS. Schedule 3.2.32 sets
forth such allocations for each year 1993, 1994 and 1995, and for the 4
months ended April 30, 1996 as disclosed on the April 30, 1996 Balance Sheet.
3.2.33 COMPLETE DISCLOSURE. No representation or warranty made
by Allard or any of the Principal Shareholders in this Agreement, and no
exhibit, schedule, statement, certificate or other writing furnished to Buyer
by or on behalf of Allard or any Principal Shareholders pursuant to this
Agreement or in connection with the transactions contemplated hereby or
thereby, contains or will contain, any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein and therein not misleading.
3.2.34 REPETITIVE DISCLOSURE. To the extent that the Buyer or
DAH or Allard have made any disclosure on any schedule to this Agreement,
such disclosure shall be considered to be made for purposes of this Agreement
notwithstanding that such disclosure is not made on all applicable schedules.
3.2.35 CLAIMS. Allard shall not be liable to make any payment to
the Buyer or DAH for any damage, loss. liability, cost, penalty, fine,
assessment or expense resulting or arising from or incurred in connection
with any misrepresentation, breach of warranty or nonfulfillment or
nonperformance of any agreement, term or condition on the part of Allard or
any misrepresentation in or omission from any schedule, certificate or other
instrument
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furnished to the Buyer or DAH under this Agreement until their aggregate
liability under Section 3.2 exceeds $100,000.
3.3 INDEMNIFICATION BY PRINCIPAL SHAREHOLDERS. To the extent
specified in this Section 3.3, the Principal Shareholders hereby indemnifies
DAH and Buyer for breach of any warranty or representation of Allard or the
principal Shareholders in this Agreement. Such indemnity shall be limited and
shall occur as follows:
3.3.1 In the event DAH or Buyer has any claim for
breach of warranty or representation of Allard or the Principal Shareholder,
DAH or Buyer shall give notice to Allard and the Principal Shareholders of
such breach and the specifics thereof prior to the commencement of any
proceeding pursuant to Section 7.3;
3.3.2 Not less than 10 days following the notice
described in Section 3.3.1, DAH or Buyer may commence an arbitration against
Allard pursuant to Section 7.3;
3.3.3 Subject to the obligations of the Principal
Shareholders pursuant to this Section 3.3, no Principal Shareholder need be a
party to or otherwise participate in the Arbitration.
3.3.4 In the event that any award is made against
Allard in the Arbitration conducted pursuant to Section 7.3, and the amount
of such Award is not paid to DAH or Buyer in immediately available funds
within 30 days of the Award, each of the Principal Shareholders shall pay to
DAH or Buyer as the case may be a portion of the Award, to the extent of and
amount equal to the sum of (i) such amount as is received by such Principal
Shareholder pursuant to the Covenant Not to Compete and (ii) the aggregate
amount of distributions received by such Principal Shareholder after the
Closing Date in respect of their Allard Common Shares, other than
distributions directly related to the payment of federal or state taxes
arising out of the transaction contemplated by this Agreement, provided,
however, each Principal Shareholder shall only be liable to DAH or Buyer
based on his percentage of distributions and payments received under the
Covenant Not to Compete compared to total distributions and payments received
under the Covenant Not to Compete by all Principal Shareholders. Each
Principal Shareholder acknowledges and agrees that he shall be bound by the
Award in the Arbitration as if he had been named a party to the Arbitration
and will not contest his obligation as a result of not being a party to the
Arbitration.
3.3.5 Should any Principal Shareholder not make
payment of the amount so determined pursuant to Section 3.3.4 within 90 days
after the entry of the Award, the arbitrator may enter an Award against such
Principal Shareholder in such amount.
3.4 CLAIMS BASED ON REPRESENTATIONS AND WARRANTIES.
The recourse by DAH and Buyer against Allard and the Principal Shareholders
or by Allard and the Principal Shareholders against DAH and the Buyer for any
breach of the representations and warranties set forth in Sections 3.1 and
3.2 shall be limited to prior to May 31, 1998, except for matters as to which
notification has been given prior to May 31, 1998.
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4. COVENANTS.
4.1 COVENANTS OF BUYER.
4.1.1 PAYMENT AND PERFORMANCE OF ASSUMED LIABILITIES.
From and after the closing Date, buyer shall pay and perform the liabilities
issued pursuant to Section 2.1 in the ordinary course of its business in
accordance with Buyer's standard business practices.
4.1.2 PAYMENT FOR COVENANT NOT TO COMPETE. Subject to
the satisfaction of each of the conditions precedent set forth in Section 4.2,
DAH shall pay to Principal Shareholders its consideration for the covenants
not to compete delivered to Buyer and DAH pursuant hereto by payment of 36
equal installments of $55,555.55, on the first business day of each calendar
month for the 36 months following the Closing Date.
4.1.3 USE OF NAME. After the Closing Date, Buyer and
ADS shall not use the name "Allard" in connection with the business of ADS.
4.1.4 COVENANT AGAINST DISCLOSURE. Each of DAH and
Buyer agree not to (a) disclose to any person, association, firm, corporation
or other entity (other than Allard or those designated in writing by Allard)
in any manner, directly or indirectly, any information or data relevant to
the business of Allard (other than ADS), or whether of a technical or
commercial nature, or (b) by use, or permit or assist, by acquiescence or
otherwise, any person, association, firm corporation or other entity (other
than Allard or those designated in writing by Allard) to use, in any manner,
directly or indirectly, any such information or data, excepting only use of
such data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.1.4.
4.1.5 COVENANT AGAINST HIRING. [deleted]
4.1.6 HOLD HARMLESS. DAH and Buyer agree to indemnify
and hold harmless Allard from any liabilities to third parties arising from the
operations or business of ADS on and after the consummation of the transactions
contemplated herein on the Closing Date, except to the extent caused by the
actions, gross negligence or willful misfeasance of Allard.
4.1.7 DUTY TO COLLECT ACCOUNTS RECEIVABLES. Buyer and
DAH shall use their best efforts to collect accounts receivables outstanding at
the Closing Date; As used in this Section 4.1.7, "best efforts" shall be deemed
to have been used so long as Buyer continues the accounts receivable collection
practices used by ADS prior to the date of this Agreement.
4.1.8 EMPLOYEES. From and after the Closing Date, Buyer
and DAH shall employ substantially all of the current employees of the ADS
division, subject to normal management prerogatives to review performance and
terminate employment as necessary or appropriate for the business. The Buyer and
DAH shall compensate such employees at substantially the same level of
compensation in effect for such employees. Buyer and DAH will
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continue normal fringe benefits for such employees subject to the integration
of such fringe benefits with Buyer's and DAH's current programs.
4.2 COVENANTS OF ALLARD AND THE PRINCIPAL SHAREHOLDERS.
4.2.1 CHANGE OF NAME: USE OF NAME. ALLARD shall grant
any consents and take any other and further action, all at its own expense,
requested by Buyer to enable Buyer to use, reserve or register the names
"ADS" and "Aerospace Display Systems", and any other trademark or trade style
or name presently used by ADS, for the exclusive use of Buyer. After the
Closing Date, Allard shall discontinue use of the names "ADS" and "Aerospace
Display Systems".
4.2.2 COVENANT AGAINST DISCLOSURE. Each of Allard and
each Principal Shareholder agree not to (a) disclose to any person,
association, firm, corporation or other entity (other than Buyer or those
designated in writing by Buyer) in any manner, directly or indirectly, any
information or data relevant to the business of ADS, or whether of a
technical or commercial nature, or (b) by use, or permit or assist, by
acquiescence or otherwise, any person, association, firm corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use, in
any manner, directly or indirectly, any such information or data,' excepting
only use of such data or information as is at the time generally known to the
public other than by any breach of any provision of this Section 4.2.2.
4.2.3 COVENANT AGAINST HIRING. Each of Allard and the
Principal Shareholders understand that it is essential to the successful
operation of the business to be acquired hereunder that Buyer retain
substantially unimpaired ADS's operating organization. Each of Allard and the
Principal Shareholders agrees that neither he nor it shall purposefully take
any action which would induce any employee or representative of Allard not to
become or continue as an employee or representative of Buyer. Without
limiting the generality of the foregoing, neither ADS nor any of the
Principal Shareholders shall, whether directly or indirectly through any
subsidiary or affiliate, for a three (3) year period from the Closing Date
solicit to employ (whether as an employee, officer, director, agent,
consultant or independent contractor), or enter into any partnership, joint
venture or other business association with, any person who was at any time
during the 12 months preceding the Closing Date an employee, partner,
representative, or manager of ADS. Provided, however, if the Buyer and Robert G.
Martin sign a three (3) year employment agreement and thereafter Buyer
terminates Robert G. Martin other than "for cause" and does not compensate
him for the three (3) year period from the Closing, then Allard and the
Principal Shareholders shall have the right, after such termination, to
employ Robert G. Martin.
4.2.4 INJUNCTIVE RELIEF. Each of Allard and the
Principal Shareholders acknowledges and agrees that Buyer's remedy at law for
any breach of any of Allard's or such Principal Shareholders obligations
under Subsections 4.2.2 or 4.2.3 hereof would be inadequate, and agrees and
consents that temporary and permanent injunctive relief may be granted in a
proceeding which any be brought to enforce any provision of Subsections 4.2.2
or 4.2.3 without the necessity of proof of actual damage. The rights and
remedies conferred upon
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Buyer under this Section 4.2.4, elsewhere in this Agreement, or by any
instrument or law shall be cumulative and may be exercised singularly or
concurrently.
4.2.5 CONDUCT OF BUSINESS OF ALLARD PRIOR TO CLOSING DATE.
Each of Allard and the Principal Shareholders agrees that on and after the
date hereof and prior to the Closing Date:
(a) The business and operations, activities and
practices of ADS shall be conducted only in the
ordinary course of business and consistent with
past practice;
(b) No change shall be made in the articles of
incorporation or bylaws of Allard, except as is
necessary to comply with Section 4.2.1 hereof;
(c) No change shall be made in the number of shares of
authorized or issued capital stock of Allard; nor
shall any option, warrant, call, right, commitment
or agreement of any character be granted or made by
Allard relating to its equity;
(d) [deleted]
(e) Neither Allard nor any Principal Shareholder shall,
directly or indirectly, solicit or encourage
(including by way of furnishing any non-public
information concerning the business, properties or
assets of ADS), or enter into any negotiations or
discussions concerning, any Acquisition Proposal (as
defined below). Allard and any Principal Shareholder
will notify Buyer promptly by telephone, and
thereafter promptly confirm in writing, if any such
information is requested from, or any Acquisition
Proposal is received by Allard or such Principal
Shareholder. As used in this Agreement, "Acquisition
Proposal" shall mean any proposal received by Allard
or any Principal Shareholder prior to the Closing Date
for a merger or other business combination involving
ADS or for the acquisition of, or the acquisition of a
substantial equity interest in, or any material part
of the assets of, ADS other than the one contemplated
by this Agreement.
(f) Except as set forth in Schedule 4.2.5(f), ADS will
not, and Allard will not cause or permit ADS to:
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(i) incur, become subject to, or suffer, or agree
to incur, become subject to or suffer, any
obligation or liability (absolute or
contingent) except current liabilities incurred,
and obligations under contracts entered into,
in the ordinary course of business;
(ii) discharge or satisfy any lien or encumbrance
or pay any obligation or liability (absolute or
contingent) other than liabilities payable in
the ordinary course of business;
(iii) mortgage, pledge or subject to lien, charge
or any other encumbrance, any of the Property
or agree so to do;
(iv) sell or transfer or agree to sell or transfer
any of its assets, or cancel or agree to cancel
any debt or claim, except in each case in the
ordinary course of business;
(v) consent or agree to a waiver of any right of
substantial value;
(vi) enter into any transaction other than in the
ordinary course of its business;
(vii) without the express written consent of Buyer,
increase the rate of compensation payable or
to become payable by it to any Restricted
Employee over the rate being paid to such
Restricted Employee at April 30, 1996;
(viii) increase the rate of compensation payable or
to become payable by it to any Non-
Restricted Employee over the rate being paid
to such Non-Restricted Employee at April 30,
1996, other than in the ordinary course of
business and in accordance with ADS's past
practice;
(ix) terminate any contract, agreement, license or
other instrument to which it is a party;
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(x) through negotiation or otherwise, make any
commitment or incur any liability or
obligation to any labor organization;
(xi) without the express written consent of Buyer,
make or agree to make any accrual or
arrangement for or payment of bonuses or
special compensation of any kind to any
Restricted Employee;
(xii) make or agree to make any accrual or
arrangement for or payment of bonuses or
special compensation of any kind to any
Non-Restricted Employee, other than in the
ordinary course of business and in
accordance with ADS's practice;
(xiii) without the express written consent of Buyer,
directly or indirectly pay or make a commitment
to pay any severance or termination pay to any
Restricted Employee;
(xiv) directly or indirectly pay or make a commitment
to pay any severance or termination pay to any
Non-Restricted Employee, other than in the ordinary
course of business and in accordance with ADS's
past practice;
(xv) introduce any new method of management, operation
or accounting with respect to its business or any
of the assets, properties or rights applicable
thereto;
(xvi) offer or extend more favorable prices, discounts
or allowances than were offered or extended
regularly on and prior to April 30, 1996, other
than in the ordinary course of business;
(xvii) [Omitted]
(xviii) hire any employee earning a wage or salary
of more than $50,000 per year.
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(g) Allard and each of the Principal Shareholders will
use their respective best efforts to preserve ADS's
business organization intact, to keep available to
ADS the present service of ADS's employees, and
to preserve for ADS the good will of its suppliers,
customers and others with whom business
relationship exist; and
(h) Neither Allard nor any of the Principal
Shareholders will take, agree to take or permit to
be taken any action or do or permit to be done
anything in the conduct of the business of ADS, or
otherwise, which would be contrary to or in breach
of any of the terms or provisions of this Agreement
or which would cause any of the representations or
warranties of Allard or the Principal Shareholders
contained herein to be or become untrue in any
material respect.
4.2.6 INSPECTION OF BOOKS AND RECORDS. From the date of this
Agreement until the Closing Date, Allard shall make or cause to be made
available to Buyer for examination the Property and other materials such as
books of account, contract, agreements, commitments, records and its
documents directly relating to ADS and its business and shall permit Buyer
and its representatives, attorneys, accountants and agents to have access to
and to copy, at Buyer's expense, the same at all reasonable times. In
addition, Allard shall make, or cause to be made, available to Buyer and its
representatives, attorneys, accountants and agents the Property and all of
the above described records for any environmental compliance audit, any
environmental site assessment (including soil, groundwater and/or other
testing) and any other physical inspection which Buyer may elect to conduct
at its own expense.
4.2.7 FURTHER ASSURANCES. On and after the Closing Date, ADS
and the Principal Shareholders shall prepare, execute and deliver, at their
expense, such further instruments of conveyance, sale, assignment or
transfer, and shall take or cause to be taken such other or further action as
Buyer shall reasonably request at any time or from time to time in order to
perfect, confirm or evidence in Buyer title to all or any part of the
Property or to consummate, in any other manner, the terms and conditions of
this Agreement.
4.2.8 PRESS RELEASES AND ANNOUNCEMENTS. Neither ADS, any
Principal Shareholder, Buyer nor DAH shall issue any press release or
announcement relating to the subject matter of this Agreement without the
prior written approval of the other parties hereto; PROVIDED, HOWEVER that
ADS, any Principal Shareholder, Buyer or DAH may make any public disclosure
he or it believes in good faith is required by law (in which case he or it
will advise the other parties hereto prior to making the disclosure). On the
Closing Date, Allard, the Buyer
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and DAH will issue mutual public announcements and/or press releases announcing
the transaction contemplated by this Agreement.
4.2.9 BANKRUPTCY. Allard agreed on and after the date of this
Agreement (i) neither Allard nor any Principal Shareholder shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to any of them or seeking to adjudicate any of them
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to any of them or for all of any substantial part of any of their
assets; (ii) neither ADS nor any Principal Shareholder shall make a general
assignment for the benefit of its creditors; (iii) no case, proceeding or
other action of a nature referred to in clause (i) above shall be commenced
by any person which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed or discharged
for a period of 60 days; (iv) no case, proceeding or other action shall be
commenced by any person seeking issuance of a warrant of attachment,
execution distraint or similar process against all or any substantial part
of the assets of Allard or any Principal Shareholder which results in the
entry of an order for any such relief; and (v) neither ADS nor any Principal
Shareholder shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), (iii), or (iv) above.
4.2.10 DELIVERY OF FINANCIAL STATEMENTS. No later than July
31, 1996, Allard and the Principal Shareholders shall deliver to Buyer and
DAH the balance sheet of ADS as at June 30, 1996 and the related statements
of income, retained earnings and cash flows for the year to date then ended
(the "Second Quarter Financial Statements") and which shall be true, correct
and complete, shall have been prepared from and are in accordance with the
books and records of ADS and Allard and shall have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis for such periods using an accrual basis method, reflect
sufficient reserves for asserted and potential products liability claims, and
fairly present the financial condition of ADS as of the dates stated and the
results of operations of ADS for the periods then ended in accordance with
such practices. The Second Quarter Financial Statements shall upon delivery
to Buyer become part of the Financial Statements as defined herein for all
purposes hereof.
4.2.11 TRADE SECRETS AND CONFIDENTIAL KNOW-HOW. Between the
date hereof and the Closing Date, Allard and the Principal Shareholders and
their representatives shall, upon request by Buyer, reduce to writing all
trade secret information or other know-how of a business or technical nature
which is now used in or which is useful for the present or anticipated future
business of ADS, such writing to be confidential and afforded such protection
and confidential treatment as Buyer shall reasonably request.
4.2.12 SALES TAXES, UNEMPLOYMENT INSURANCE, ETC. Without
limiting any other term hereof, Allard shall pay all sales taxes and
unemployment insurance premiums to be paid in respect of ADS and the Property
through the Closing Date.
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4.2.13 INDEMNITY REGARDING BULK SALES, ETC. Allard hereby
agrees to indemnify and hold harmless DAH and Buyer from any claims, costs
or losses incurred as a result of the failure of Allard or ADS to comply
with any and all requirements of sales tax and bulk sales laws and
regulations arising under Pennsylvania, Arizona, New Hampshire and any
other jurisdiction in connection with the transactions contemplated herein,
including all pre-closing notice, payment and receipt requirements of
Pennsylvania Reg. 32 and Arizona Reg. Sec. 42-119, in connection with the
transactions contemplated by this Agreement.
4.2.14 WARRANTY WORK AFTER CLOSING DATE. Allard shall
reimburse Buyer for Buyer's actual direct cost of material and labor incurred
in respect of any warranty work completed by Buyer pursuant to its
liabilities assumed under Section 2.1.5. No other costs, such as SG&A,
overhead, or other charges, are to be reimbursed by Allard.
4.2.15 USE OF NAME. After the Closing Date, Buyer and ADS
shall not use the name "Allard" in connection with the business of ADS.
4.2.16 HOLD HARMLESS. Allard and Principal Shareholders agree
to indemnify and hold harmless DAH and Buyer from any liabilities to third
parties arising from the operations or business of ADS at any time prior to
the consummation of the transactions contemplated herein on the Closing Date,
except to the extent caused by the actions, gross negligence or willful
misfeasance of DAH or Buyer.
5. CLOSING AND CONDITIONS PRECEDENT.
5.1 CLOSING DATE. The date upon which the transactions contemplated
hereby shall become effective (the "Closing Date") shall be the date, no
later than September 23, 1996, upon which each of the conditions precedent
set forth in Sections 5.2 and 5.3 shall have been satisfied or waived
pursuant to the respective terms thereof.
5.1.1 CONDITIONS. On or before September 11, 1996, DAH by
giving notice to Allard, DAH may extend the Closing Date pursuant to this
Agreement to and including October 16, 1996. In the event that such notice is
given by DAH, the Purchase Price shall be increased by the sum of $100,000.00
which amount shall be payable to Allard at the Closing in immediately
available funds.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH AND BUYER. Each and
every obligation of DAH and Buyer to be performed on the Closing Date shall
be subject to the satisfaction on or before the Closing Date of each of the
following conditions (unless waived in writing by DAH and Buyer): Allard
shall have delivered to Buyer each of the following, in each case duly and
properly executed (if appropriate) and in form and substance reasonably
satisfactory to the Buyer:
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5.2.1 Good and sufficient assignments of each Real Property
Lease, conveying all of Allard's right, title and interest in and to such
Real Property Lease, free and clear of all mortgages, pledges, liens,
security interest, encumbrances, restrictions and claims of any nature
whatsoever, except those listed on Schedule 3.2.14; together with recordable
memoranda thereof if requested by Buyer.
5.2.2 Written consents of the lessors under each Real Property
Leases to the assignment of such Real Property Leases, with no adverse
condition attached, and estoppel and non-disturbance agreements of such
lessors.
5.2.3 A good and sufficient General Conveyance, Assignment and
Bill of Sale, conveying, selling, transferring and assigning to Buyer title
to all of the Property free and clear of all security interests, liens,
charges, encumbrances or equities whatsoever, except those listed on
Schedule 3.2.15.
5.2.4 Motor Vehicle Certificates of Title to each of the
Vehicles, endorsed for transfer to Buyer.
5.2.5 Good and sufficient assignments of each of the Personal
Property Leases and each of the Contracts in each case together with the
written consents of all parties necessary in order to transfer all of
Allard's rights thereunder to Buyer.
5.2.6 Copies of each of the Permits, together with evidence
satisfactory to Buyer that the same are in full force and effect, and (to the
extent requested by Buyer) evidence that such permits are eligible for
immediate transfer to Buyer.
5.2.7 The books and records described in Section 1.1.15; each
of the Financial Statements described in Section 3.2.4; the Second Quarter
Financial Statements to be delivered pursuant to Section 4.2.10; and each
policy of insurance described in Section 3.2.12, together with evidence that
such policies are in force on the Closing Date.
5.2.8 A covenant not to compete with a duration of four
years, executed by Allard and each of the Principal Shareholders, in the form
of EXHIBIT B attached hereto.
5.2.9 Robert Martin shall become an employee of Buyer or DAH.
5.2.10 Evidence of the release by BF Goodrich of Allard and
ADS with respect to all liabilities relating to ADS.
5.2.11 Omitted
5.2.12 Resolutions of the directors and shareholders of Allard
authorizing the execution and delivery of this Agreement by Allard and the
performance of its obligations hereunder, certified by the Corporate
Secretary of Allard.
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5.2.13 Allard shall have delivered to Buyer, in form suitable
for filing, such certificates, consents and other documents as are necessary
or desirable to effect the transfer of the registration of any name conveyed
to Buyer pursuant to this Agreement, in New Hampshire, Pennsylvania, Arizona
and in each other state where ADS is qualified to do business or has
registered any such name under a "trade name" or "fictitious name" statute or
similar law or has taken any other action-in order to obtain or protect
rights in such name.
5.2.14 A favorable opinion of counsel for Allard and the
Principal Shareholders, addressed to Buyer and DAH and dated the Closing
Date, in the form of EXHIBIT C attached hereto.
5.2.15 The Articles of Incorporation of Allard, certified as
of a recent date by the Secretary of State of New Hampshire.
5.2.16 The Bylaws of Allard, certified as true and complete by
the Corporate Secretary of Allard.
5.2.17 A certificate of the New Hampshire, Pennsylvania and
Arizona Secretaries of State, each dated as of a date not earlier than ten
days prior to the Closing Date, as to the good standing of Allard in such
States (and, in New Hampshire, the payment of all corporate franchise taxes),
together with facsimile confirmation of such good standing on the Closing
Date.
5.2.18 An affidavit of the Chief Executive Officer or Chief
Financial Officer of Allard stating that Allard is not a foreign seller
within the meaning of the Internal Revenue Code of 1986, as amended.
5.2.19 Such other consents as Buyer deems necessary or
desirable in order to consummate the transactions contemplated herein.
5.2.20 Such other separate instruments of sale, assignment or
transfer that Buyer may reasonably deem necessary or appropriate in order to
perfect, confirm or evidence title to all or any part of the Property.
5.2.21 On or before 5:30 P.M. Pacific Daylight Time of the 7th
calendar day following the receipt by DAH of the following: Equipment,
Tooling, Inventory, Backlog and the Financial Statements, DAH shall conclude
its due diligence.
5.2.22 On or before 5:30 P.M. Pacific Daylight Time of the
twenty-first (21st) calendar day after DAH receives the items listed in
Section 5.2.21, DAH shall use its best efforts to obtain the consent of its
senior and subordinated lenders to the transaction contemplated by this
Agreement.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF ALLARD AND THE PRINCIPAL
SHAREHOLDERS. Each and every obligation of Allard and the Principal Shareholders
to be performed on or before the Closing Date shall be subject to the
satisfaction on or before the Closing Date of each of the following conditions
(unless waived in writing by Allard and the
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Principal Shareholders): The Buyer shall have delivered to Allard each of the
following, in each case duly and properly executed (if appropriate) and in form
and substance reasonably satisfactory to Allard:
5.3.1 Payment of an amount equal to $11,000,000, plus or
minus any Working Capital Adjustment calculated pursuant to Section 6, in
immediately available funds on the Closing Date.
5.3.2 Resolutions of the directors of Buyer and DAH
authorizing the execution and delivery of this Agreement by Buyer and DAH
respectively and the performance of their respective obligations hereunder,
certified by the Corporate Secretaries of Buyer and DAH, respectively.
5.3.3 An opinion of counsel for Buyer and DAH, addressed to
Allard and the Principal Shareholders and dated the Closing Date, in the form
of EXHIBIT D attached hereto.
5.3.4 The Assumption Agreement with respect to the Assumed
Liabilities, in the form of EXHIBIT E attached hereto.
5.3.5 On or before 5:30 P.M. Pacific Daylight Time of the
twenty-first (21st) day after DAH has received the material set forth in
Section 5.2.21, DAH shall use its best efforts to obtain the consent of its
senior and subordinated lenders to the transaction contemplated by this
Agreement.
5.3.6 A covenant not to compete with a duration of four years,
executed by DAH and each of the Principal Shareholders, in the form of
EXHIBIT B attached hereto.
5.4 ALLOCATION. For purposes of income tax reporting, the parties
hereto agree that the fixed amounts to be paid by Buyer hereunder shall be
allocated as follows: (a) $4,700,000 in respect of tangible assets; (b)
$6,300,000 in respect of the goodwill of ADS; and (c) $2,000,000 in respect
of the covenants not to complete delivered to Buyer and DAH pursuant hereto.
6. WORKING CAPITAL ADJUSTMENT. In the event that the amount by which, as
of the Closing Date, (a) the aggregate value of the Receivables and the
Inventory exceeds the then current liabilities of ADS of a nature set forth
on Schedule 6 is less than (b) the amount by which, as of April 30, 1996, the
aggregate value of the Receivables and the Inventory exceeded the current
liabilities of ADS (each as set forth in the Financial Statements dated as of
April 30, 1996), the cash payment to be made pursuant to Section 5.3.1 shall
be adjusted to reflect such reduction, by a partial refund by Allard of the
purchase price paid pursuant hereto, made to DAH in immediately available
funds within ten business days of the Closing Date, calculated on the basis
of financial statements as of the Closing Date to be delivered concurrently
with such payment. Similarly, in the event that the amount by which, as of
the Closing Date, (a) the aggregate value of the Receivables and the
Inventory of a nature set forth on Schedule 6 exceeds the then current
liabilities of ADS is greater than (b) the amount by which, as of April 30,
1996,
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the aggregate value of the Receivables and the Inventory exceeded the current
liabilities of ADS (each as set forth in the Financial Statements dated as of
April 30, 1996), the cash payment to be made pursuant to Section 5.3.1 shall be
increased to reflect such excess. Such adjustment shall be made by a payment to
Allard by DAH in immediately available funds within five (5) business days of
DAH's receipt of financial statements as of the Closing Date to be delivered by
Allard to DAH. Price Waterhouse & Co. shall make a determination as to the
amount of the Working Capital Adjustment pursuant to this Section 6; in the
event that Allard does not agree with the determination so made and the
difference between the Price Waterhouse & Co. calculation and the amount
determined by Allard is less than $30,000, the working capital adjustment shall
be made by dividing the disputed amount equally between Buyer and Allard; in the
event that the dispute is $30,000 or more, the dispute shall be resolved by
Arbitration in accordance with the provisions of Section 7.3 and the non
prevailing party in the Arbitration shall pay the entire cost of the
Arbitration.
7. MISCELLANEOUS PROVISIONS.
7.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and
made, if in writing, and (i) if served by personal delivery to the party for
whom intended (which shall include overnight delivery by Federal Express or
similar service), (ii) or 3 business days after being deposited, postage
prepaid, certified or registered mail, return receipt requested, in the
United States mail bearing the address shown in this Agreement for, or such
other address as may be designated by writing hereafter by, such party, or
(iii) if sent by telecopy to the number showing in this Agreement for, or
such other number as may be designated in writing hereafter by, such party
and immediately confirmed by sending a copy of such notice by either method
described in clause (i) or (ii) above.
7.2 POST-CLOSING ACCESS. For the shorter of (1) the period DAH owns
Buyer or (ii) a period of seven (7) years commencing on the Closing Date, or for
such longer period as may be required by applicable law, the Buyer and DAH shall
retain all books, records and other data relating to the business of ADS prior
to the Closing Date. The Buyer and DAH shall grant access to such books, records
and other data to Allard and the Principal Shareholders and their
representatives during regular business hours upon reasonable prior notice to
the extent that such access is required by Allard and the Principal Shareholders
in connection with tax, regulatory or contractual matters, or otherwise in order
to permit Allard and the Principal Shareholders to comply with applicable law,
or in order to defend against any claim brought against Allard or the Principal
Shareholders. Provided, however, in the event DAH sells Buyer, DAH shall reserve
the right on behalf of Allard.
7.3 ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement or breach thereof shall be decided by Arbitration
conducted in Philadelphia, Pa. before a single arbitrator in an arbitration
proceeding otherwise conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and which arbitration provides for
reasonable discovery, including depositions, interrogatories and production of
documents. The decision of the arbitrator shall be final and binding on the
parties and such decision shall be enforceable as a judgment in any court of
competent jurisdiction. The cost of arbitration shall be shared equally between
the parties.
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7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, and the documents referred to herein and therein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
7.5 BINDING EFFECT; ASSIGNMENT. This Agreement and the rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
Allard, its successors and permitted assigns, Buyer and DAH, their respective
successors and permitted assigns, and the Principal Shareholders, their heirs,
legal representative and permitted assigns. Neither this Agreement nor any of
the rights, interest or obligations hereunder shall be transferred or assigned
(by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other party or parties except that Buyer shall have
the right to assign, in whole or in part, its rights hereunder to one or more
affiliates of Buyer, which in each case shall be a wholly-owned subsidiary of
Buyer. Any transfer or assignment of any of the rights, interests or obligations
hereunder in violation of the term hereof shall be void and of no force or
effect.
7.6 CAPTIONS. This Agreement and Section headings of this Agreement
are inserted for convenience only and shall not constitute a part of this
Agreement in construing or interpreting any provision hereof.
7.7 WAIVER: CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
7.8 NO THIRD PARTY BENEFICIARIES. Subject to Section 7.3, nothing
herein, expressed or implied, is intended or shall be construed to confer upon
or give to any person, firm, corporation or legal entity, other than the parties
hereto, any rights, remedies or other benefits under or by reason of this
Agreement.
7.9 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
7.10 FACSIMILE SIGNATURES. This Agreement may be executed by facsimile
signatures. Such signatures shall be forwarded to the other parties by overnight
mail.
7.11 SEVERABILITY. With respect to any provision of this Agreement
finally determined by a court of competent jurisdiction to be unenforceable,
Allard, Principal
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<PAGE>
Shareholders, DAH and Buyer hereby agree that such court or arbitrator(s) shall
have jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
or arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
----------------------------
ADS ACQUISITION, INC.
By:
----------------------------
ALLARD INDUSTRIES, INC.
By:
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By:
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By:
----------------------------
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<PAGE>
severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
----------------------------
ADS ACQUISITION, INC.
By: /s/ R. Jack DeCrane
----------------------------
ALLARD INDUSTRIES, INC.
By:
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By:
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By:
----------------------------
41
<PAGE>
Shareholders, DAH and Buyer hereby agree that such court or arbitrator(s) shall
have jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
or arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
----------------------------
ADS ACQUISITION, INC.
By:
----------------------------
ALLARD INDUSTRIES, INC.
By: /s/ John R. Allard, CEO
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By:
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By: /s/ John R. Allard, Trustee
----------------------------
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<PAGE>
Shareholders, DAH and Buyer hereby agree that such court or arbitrator(s) shall
have jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
or arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
----------------------------
ADS ACQUISITION, INC.
By:
----------------------------
ALLARD INDUSTRIES, INC.
By:
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By: /s/ Gerald R. Allard, Trustee
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By:
----------------------------
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<PAGE>
THE ALLARD CHILDREN'S TRUST
f/b/o MICHAEL E. ALLARD
By: /s/ Michael E. Allard
----------------------------
THE NAZARIAN FAMILY TRUST
By:
----------------------------
David Nazarian, Trustee
By:
----------------------------
Angela Nazarian, Trustee
-------------------------------
Younes Nazarian
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<PAGE>
THE ALLARD CHILDREN'S TRUST
f/b/o MICHAEL E. ALLARD
By:
----------------------------
THE NAZARIAN FAMILY TRUST
By: /s/ David Nazarian
----------------------------
David Nazarian, Trustee
By: /s/ Angela Nazarian
----------------------------
Angela Nazarian, Trustee
/s/ Younes Nazarian
-------------------------------
Younes Nazarian
42
<PAGE>
Exhibit 10.19 ASSET PURCHASE AND SALE AGREEMENT, DATED DECEMBER 4, 1996
AMONG REGISTRANT, EE ACQUISITION, INC. WILLIAM LYON AND ELSINORE LP
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is made and entered
into as of December 4, 1996 by and among DeCrane Aircraft Holdings, Inc., an
Ohio Corporation ("DAH"), EE Acquisition, Inc., a Delaware corporation and
wholly-owned subsidiary of DAH ("Buyer"), William Lyon, an individual ("Lyon"),
and Elsinore LP, a California Limited Partnership ("ELP") based on the following
facts:
ELP and Lyon (collectively referred to herein as the "Sellers") are the
owner of and desires to sell (i) the stock of Elsinore Aerospace Services, Inc.,
a California corporation ("EAS") and (ii) the Elsinore Engineering Services
division of ELP ("Elsinore Engineering"); Buyer desires to purchase the assets
of Elsinore Engineering (the "EE Assets") and the stock of EAS;
Based on the foregoing facts and circumstances, the parties hereby agree
as follows:
1. ASSETS TO BE PURCHASED AND SOLD.
1.1 THE EE ASSETS. On the Closing Date, ELP shall transfer to Buyer
all of the assets, properties, rights (contractual or otherwise) and business of
Elsinore Engineering (including but not limited to goodwill), whether such
assets and business is in the nature of real, personal, or mixed property and
whether such assets are tangible or intangible or known or unknown, provided,
however, that the business and assets of Elsinore Engineering located at Grand
Prairie, Texas, including, but not limited to, leasehold interests, facility,
furniture, fixtures and equipment (the "Grand Prairie Facility") are not being
transferred and the liabilities resulting from the Grand Prairie Facility are
not being assumed pursuant to this Agreement. Without limiting the generality of
the foregoing, the assets of Elsinore Engineering to be transferred include:
1.1.1 REAL PROPERTY LEASES. Any and all rights under leases
of real property and improvements, including that real property listed on
Schedule 1.1.1, (which leased property (including that listed on Schedule 1.1.1)
is referred to as "the Real Property Leases");
1.1.2 PERSONAL PROPERTY
(a) All machinery and equipment, including that listed
on Schedule 1.1.2(a), (which machinery and
equipment (including that listed on Schedule
1.1.2(a) is referred to as the "Machinery and
Equipment");
(b) All tooling (including that listed on Schedule
1.1.2(b)), (which tooling (including that
listed on Schedule 1.1.2(b)) is referred to as
the
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"Tooling");
(c) All parts and furniture ("Parts and Furniture");
(d) All rights under leases of equipment, vehicles or
other tangible personal property, including
that listed on Schedule 1.1.2(d), (all of
which (including that which is listed on
Schedule 1.1.2(d)) is referred to as the
"Leased Personal Property" or "Personal
Property Leases").
All of the Machinery and Equipment, Tooling and Parts and
Furniture are referred to collectively as "Personal Property."
1.1.3 VEHICLES. All automobiles and other motor vehicles,
including without limitation those listed on Schedule 1.1.3 (all of which
(including those listed on Schedule 1.1.3) are referred to as the "Vehicles").
1.1.4 APPROVALS. All licenses, permits, consents,
authorizations, approvals, certificates and franchises of any regulatory,
administrative or other government agency including those matters listed in
Schedule 1.1.4 (all of which items are referred to as "Approvals").
1.1.5 PROPRIETARY RIGHTS.
(a) Except as provided in Section 6.1.2, all patents,
inventions, STC's, trademarks, names, service
marks, trade names, copyrights, marks,
symbols, logos, franchises and permits and all
applications therefor, registrations thereof
and licenses, sublicenses or agreements in
respect thereof, which ELP owns and Elsinore
Engineering uses or has the right to use or
that ELP is a party to any filing,
registration with any federal, foregoing,
state local or regulatory authority, including
those listed on Schedule 1.1.5(a), (all of
which (including those described on Schedule
1.1.5(a)) are referred to as "Protectable
Proprietary Rights").
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(b) All trade secrets, processes, proprietary
knowledge, know-how, and other processes which
are not filed or registered but which
constitute the confidential proprietary
information of ELP and Elsinore Engineering
uses or has used or has the right to use,
including those described in Schedule
1.1.5(b), (all of which (including those
described on Schedule 1.1.5(b)) are referred
to as "Confidential Proprietary Rights").
1.1.6 CONTRACTS. All rights under contracts and
agreements and specifically including, but not limited to, purchase and sales
orders, quotations, executory commitments, instruments, guaranties,
indemnifications, arrangements or other understandings of Elsinore Engineering,
including without limitation those matters listed on Schedule 1.1.6, (all of
which matters (including those listed on Schedule 1.1.6) are referred to as
"Contracts").
1.1.7 RECEIVABLES. All accounts and notes receivable,
including those listed on Schedule 1.1.7, (all of which are referred to as
"Receivables").
1.1.8 DEPOSITS AND PREPAID EXPENSES. All of the deposits
and prepaid expenses of ELP which relate to or are used in the business of
Elsinore Engineering, including without limitation those deposits and prepaid
expenses listed on Schedule 1.1.8, (all of which deposits and prepaid expenses
(including those listed on Schedule 1.1.8) are referred to as "Deposits" and
"Prepaid Expenses").
1.1.9 TERMINATION CLAIMS. To the full extent legally possible
with respect to contracts for which Buyer assumes any liability pursuant to this
Agreement, all claims for termination for convenience or other claims against
prime contractors, government agencies, or others with respect to the
termination of contracts prior to the complete performance by Elsinore
Engineering of any such contract, including without limitation such claims as
are listed on Schedule 1.1.9, (all of such matters (including those listed on
Schedule 1.1.9) are referred to as "Termination Claims").
1.1.10 [Intentionally left blank.]
1.1.11 OTHER CLAIMS. To the full extent legally possible with
respect to contracts for which Buyer assumes any liability pursuant to this
Agreement, all claims, causes of action, demands and pending litigation in which
ELP on behalf of Elsinore Engineering is seeking the recovery of money or
equitable relief, including those matters listed on Schedule 1.1.11, (all of
such matters (including those listed on Schedule 1.1.11) are referred to as
"Other Claims").
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1.1.12 BOOKS AND RECORDS. All books of account, customer
lists, files, papers and records normally maintained by Elsinore Engineering and
a copy of all of the books of account and records of ELP which relate to
Elsinore Engineering.
1.1.13 TELEPHONE NUMBERS. All telephone, fax, email and other
numbers for communication with Elsinore Engineering, including without
limitation those numbers listed on Schedule 1.1.13.
1.1.14 All goodwill of ELP which in any way relates to
Elsinore Engineering or the business of Elsinore Engineering except as provided
in Section 6.1.2.
1.2 EAS. On the Closing Date, Lyon will transfer to Buyer 100% of all
of the classes of stock of EAS and all securities which may be converted into
the stock of EAS.
1.3 NON-ASSIGNMENT OF ASSETS. To the extent that any Asset
described in Section 1.1, may not be assigned or may only be assigned with the
consent of a third party, notwithstanding anything to the contrary in this
Agreement, neither this Agreement nor any action taken shall constitute an
assignment or an agreement to assign.
2. PURCHASE PRICE.
2.1 The purchase price shall be $2.25 million (the "Purchase Price"),
of which $1.0 million is payable in immediately available funds (cash) on the
Closing Date and the balance of $1.25 million together with interest at the rate
of 15% per annum on the unpaid portion of the Purchase Price or the maximum rate
allowed under applicable law, if less, in the form of a Promissory Note in the
form of Exhibit F attached hereto, subject to adjustment for working capital, as
provided in Section 2.2, will be payable on the earlier of (i) three business
days following the funding of an initial public offering of the common stock
of DAH (the "IPO") or (ii) February 15, 1997. If the Board of Directors of DAH
takes action to abandon the IPO on or before January 31, 1997 the balance of the
Purchase Price will be due and payable two weeks following such action by the
DAH Board of Directors, however, in no event shall the balance of the Purchase
Price be paid prior to the reduction, if any, for the Working Capital
Adjustment, contemplated by Section 2.2. Notwithstanding the foregoing sentence,
Seller acknowledges that pursuant to an agreement with a senior lender, DAH and
Buyer are prevented from making any payment pursuant to this Agreement or the
Note delivered pursuant hereto at any time during which DAH is in payment
default to such senior lender.
2.2 "Required Working Capital Percentage" shall be the average of
Elsinore Engineering's working capital (as determined pursuant to GAAP as
defined below) as a percentage of monthly sales measured at the end of each
month for the 12 calendar months ended September 30, 1996. This computation
shall be accomplished as soon as practical after the Closing Date.
4
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"Required Working Capital" is the dollar amount equal to the net
sales for the three month period ended September 30, 1996 divided by three,
multiplied by the Required Working Capital Percentage.
To the extent that working capital on the Closing Date is an
amount less than Required Working Capital, such amount shall be deducted from
the amount due Seller pursuant to the Promissory Note delivered pursuant to
Section 2.2.
2.3 DAH will cause Buyer to pay to Seller 15% of any fees earned for
purchases ("Purchasing Fees") made by Buyer or any direct or indirect affiliate
of DAH or Buyer between the Closing Date and December 31, 1997, from purchasing
by Elsinore Engineering for Daimler-Benz Aerospace Airbus GmbH ("Daimler-Benz")
in the passenger to freighter conversion of A300-B2, A300-B4 and A300-600
Aircraft. Within 30 days after the month in which each Purchasing Fee is
received, an accounting and payment shall be made to Seller.
2.4 DAH will cause Buyer to pay to Seller an amount equal to a
commission of 5% on any Kits purchased by Daimler-Benz from DAH or Buyer or
any direct or indirect affiliate of DAH or Buyer between the Closing Date and
December 31, 1999 for use in the passenger to freighter conversion of
A300-B2, A300-B4 and A300-600 Aircraft. Within 30 days after the month in
which each such payment in respect of Kit purchase price is received, an
accounting and payment shall be made to Seller.
3. REPRESENTATIONS AND WARRANTIES.
3.1 JOINTLY BY BUYER AND DAH. Buyer and DAH hereby jointly and
severally represent and warrant to Sellers that, except as set forth on Schedule
3.1, the representations and warranties of Buyer and DAH, and either of them,
contained in this Agreement, including those contained in this Section 3, are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date. Buyer and DAH hereby jointly and severally
represent and warrant to Sellers the following:
3.1.1 ORGANIZATION. Buyer and DAH are both Corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Ohio, respectively, and each have all requisite corporate power and
authority to own, lease and operate their respective properties and conduct
their respective businesses as now being conducted. Buyer and DAH are each duly
qualified, or will be duly qualified prior to the Closing Date, to do business
and in good standing in each jurisdiction listed on Schedule 3.1.1, are not
qualified to do business in any other jurisdiction and neither the nature of the
business conducted by either of them nor the property either of them owns,
leases or operates requires either of them to qualify to do business as a
foreign corporation in any other jurisdiction. Buyer and DAH have previously
delivered to Sellers complete and correct copies of Buyer's and DAH's articles
of incorporation and bylaws as in effect on the date hereof.
3.1.2 AUTHORIZATION. Buyer and DAH each have all requisite
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corporate power and authority to enter into this Agreement and the other
Transaction Documents to which either of them is a party, perform their
respective obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. All necessary corporate action has been taken
by Buyer and DAH with respect to the execution and delivery of this Agreement,
and the other Transaction Documents to which either of them is a party, and this
Agreement and the other Transaction Documents to which either of them is a
party, constitute valid and binding obligations of Buyer and DAH, enforceable
against Buyer and DAH, as the case may be, in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
the enforcement of creditors' rights generally.
3.1.3 BROKERS AND FINDERS. Except as disclosed in
Schedule 3.1.3, neither Buyer, DAH nor any of their officers, directors or
employees, has engaged any broker or finder or incurred any liability for any
brokerage fees, commissions, finders' fees or similar fees or expenses and no
broker or finder has acted directly or indirectly for Buyer or DAH in connection
with this Agreement or the transactions contemplated hereby.
3.2 JOINTLY BY SELLERS. Sellers hereby jointly and severally
represent and warrant to Buyer and DAH that, except as set forth on Schedule
3.2, the representations and warranties of Sellers, and either of them,
contained in this Agreement, including those contained in this Section 3.2, are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date. As used in this Section 3.2. To the "Senior
Management's Knowledge" means to the knowledge of William Lyon and Denis
Kalscheur. Sellers hereby jointly and severally represent and warrant to Buyer
and DAH the following:
3.2.1 CORPORATE ORGANIZATION. EAS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. EAS is presently an "S Corporation" as such term is defined under
the Internal Revenue Code of 1986, as amended (the "Code"). ELP is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of California. Each of EAS and ELP has all requisite corporate
power and authority to own, lease and operate its respective properties and
conduct its respective business as now being conducted. Each of EAS and ELP is
duly qualified to do business and in good standing in the State of California.
Sellers have previously delivered to Buyer complete and correct copies of the
articles of incorporation and by-laws of EAS and the limited partnership
agreement of ELP, as in effect on the date hereof, and EAS and ELP are not in
default in the performance, observation or fulfillment of any provision of their
respective organizational documents.
3.2.2 CAPITALIZATION AND SECURITY HOLDERS. The
authorized capital stock of EAS consists solely of 1,000 shares of Common Stock,
no par value ("EAS Common Shares"); EAS has issued 1,000 EAS Common Shares, of
which 1,000 EAS Common Shares are outstanding, constituting all of the issued
and outstanding shares of capital stock of any class of EAS. 100% of the
outstanding EAS Common
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Shares are owned by William Lyon. All outstanding EAS Common Shares have been
validly issued and are fully paid and non-assessable and free of preemptive
rights; there are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, or other commitments or rights of any type relating
to the issuance, sale or transfer by EAS of any securities of EAS, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of EAS; and EAS has no obligation of any kind to issue
any additional securities. All of the ownership interests in ELP are owned by
the persons listed in Schedule 3.2.2. All of such outstanding EAS Common Shares
and ownership interests in ELP are owned free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, equities and restrictions
whatsoever.
3.2.3 AUTHORIZATION OF SELLERS. EAS has full corporate
power and authority to enter into this Agreement, and the other Transaction
Documents to which it is a party, perform its obligations hereunder and
thereunder and consummate the transactions contemplated hereby and thereby. ELP,
and EAS as its general partner, has all requisite power, authority and legal
capacity and is competent to execute and deliver this agreement, and the other
Transaction Documents to which ELP is a party, perform its obligations hereunder
and thereunder and consummate the transactions contemplated hereby. All
necessary and appropriate corporate action has been taken by each Seller and EAS
with respect to the execution and delivery of this Agreement, and the other
Transaction Documents to which they are respectively a party. This Agreement
constitutes, and the other Transaction Documents to which each Seller and EAS
are parties when executed and delivered will constitute, valid and binding
obligations of each such party, enforceable against each such party in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting the enforcement of creditors' rights
generally.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as Schedule
3.2.4(a) are (i) the balance sheets of Elsinore Engineering (excluding the Grand
Prairie Facility) as at December 31, 1995 and as at September 30, 1996, and (ii)
the related statements of income for the year ended December 31, 1995 and the 9
months ended September 30, 1996 (all of such documents referred to collectively
as the "Financial Statements"). The Financial Statements dated as of September
30, 1996 either (a) reflect the equivalent of any adjustments made in the
Financial Statements dated as of December 31, 1995 or (b) have footnote
disclosure to reflect the absence of such adjustments and the dollar amount of
such adjustments had they been made. The Financial Statements (i) are true,
correct and complete, subject to the qualifications (if any) explicitly set
forth therein and in Schedule 3.2.4(b) (ii) have been prepared from and are in
accordance with the books and records of Elsinore Engineering, (iii) have been
prepared using an accrual basis method and average cost inventory cost flow
assumptions, (iv) are in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis for such periods subject to
the qualifications (if any) explicitly set forth therein and in Schedule
3.2.4(b), and (v) fairly present in all material respects the financial position
of Elsinore Engineering as of the dates stated and the results of operations of
Elsinore Engineering for the periods then ended in
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accordance with such practice subject to the qualifications (if any) explicitly
set forth therein and in Schedule 3.2.4(b); but EXCLUDING, in each case, the
Grand Prairie Facility. On the date of this Agreement and on the Closing Date,
neither EAS nor Elsinore Engineering has any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except in the case of the
contract between ELP and Daimler-Benz described at Section 5.2.9, as previously
disclosed to Buyer and DAH, and as reflected or provided for in the balance
sheets in the Financial Statements, subject to the qualifications (if any)
explicitly set forth therein and in Schedule 3.2.4(b) or, if not required by
GAAP to be so reflected, in Schedule 3.2.4(b). Since September 30, 1996, except
as described on Schedule 3.2.4, there has been no material adverse change in the
financial condition, operations, business or prospects taken as a whole of
Elsinore Engineering from that set forth in the Financial Statements dated as of
September 30, 1996.
3.2.5 COMPLIANCE WITH LAW.
(a) Each of Elsinore Engineering, EAS, and ELP (with
respect to the business of Elsinore
Engineering) is in compliance in all material
respects with all applicable laws, statutes,
orders, rules, regulations, policies or
guidelines promulgated, or judgments,
decisions or orders entered, by any federal,
state, local or foreign court or governmental
authority or instrumentality the violation of
which would be materially adverse to Elsinore
Engineering, EAS and ELP or any of their
respective businesses or properties.
(b) EAS and Elsinore Engineering are each in
compliance in all material respects with all
applicable federal, state and local laws,
ordinances, rules and regulations pertaining
to environmental matters, including solid
waste disposal, toxic substances, hazardous
substances, hazardous materials, hazardous
waste, toxic chemicals, pollutants,
contaminants and air or water pollution and to
the storage, use, handling, transportation,
discharge and disposal (including spills and
leaks) of gaseous, liquid, semi-solid or solid
materials. Neither EAS nor Elsinore
Engineering has, and to the Senior
Management's Knowledge, no third party has,
disposed or discharged any chemicals, oil or
solid wastes on any part of the Real Property
or any other any property owned, operated,
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leased or used by EAS or Elsinore Engineering
except in compliance in all material respects
with applicable laws. There are no underground
storage tanks located on any part of the Real
Property or any other property owned,
operated, leased or used by EAS or Elsinore
Engineering, except as disclosed on Schedule
3.2.5(b).
(c) Schedule 3.2.5(c) contains a complete and
accurate list of all material Permits. Each of
such Permits is currently valid and in full
force and effect and assignable to Buyer. Such
Permits constitute all material franchises,
licenses, permits, consents, authorization,
approvals, and certificates of any regulatory,
administrative or other agency or body
necessary for the conduct of the business of
Elsinore Engineering and the DAS held by EAS.
Neither EAS nor Elsinore Engineering are in
material violation of any of such Permits and
there is no pending or threatened proceeding
which could result in the revocation,
cancellation or inability of EAS, Elsinore
Engineering or any Seller to renew or transfer
any such Permit which is material to its
business.
(d) To Senior Management's Knowledge, except as
set forth in. Schedule 3.2.5(d), with respect
to the business of Elsinore Engineering,
neither ELP, EAS nor any Seller is under
investigation with respect to, or is currently
subject to a charge of or under notice of any
violation of, any applicable law.
3.2.6 PROPRIETARY RIGHTS. The sale by Sellers contemplated
hereby, ownership by Buyer of any of the Property and, to Senior Management's
Knowledge, the business of Elsinore Engineering as conducted prior to the
Closing Date, except as disclosed on Schedule 3.2.6, was not, is not and will
not infringe or be in contravention of any trade name, service mark, patent,
trademark, copyright or other proprietary right of any third party. Schedule
3.2.6 sets forth all of the Proprietary Rights and Registrations owned or used
by Elsinore Engineering. Other than those Proprietary Rights listed on Schedule
3.2.6, and other than Seller's proprietary rights as set forth in Section 6.1.2,
no patent, invention, trade secret, process, proprietary right, proprietary
knowledge, know-how, computer software, trademark, name, service mark, trade
name, copyright, mark, symbol, logos, franchise, permit, license, sublicense or
other such right
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is necessary for the operation of the business of Elsinore Engineering as the
same is currently conducted. None of the Proprietary Rights are registered with
any governmental or regulatory authority except as set forth on Schedule 3.2.6.
The amount of each of the royalties and license fees
presently paid by or on behalf of Elsinore Engineering in the ordinary course of
its business is listed in Schedule 3.2.6.
3.2.7 RESTRICTIVE DOCUMENTS OR LAWS. With the exception
of the matters listed on Schedule 3.2.7, with respect to the business of
Elsinore Engineering, neither of EAS or the Sellers is a party to or bound under
any (and, to Senior Management's Knowledge, there is no) pending, proposed or
threatened regulation, certificate, mortgage, lien, lease, agreement, contract,
instrument, law, vote, order, judgment or decree, or any similar restriction not
of general application which materially restricts or otherwise adversely
affects, or reasonably could be expected to materially restrict or otherwise
adversely to affect (a) the consummation of the transfers of the property to
Buyer and the other transactions contemplated in this Agreement or (b) in any
material respect: (i) the condition, financial or otherwise, of EAS or the
Property; or (ii) the continued operation by Buyer of the business of Elsinore
Engineering after the Closing Date on substantially the same basis as said
business was theretofore operated.
3.2.8 REAL PROPERTY. Except as set forth in Schedule 3.2.8,
neither EAS nor Elsinore Engineering owns, leases, or licenses any real property
interests. The property which constitutes Real Property interests includes all
such interests now owned or used by Elsinore Engineering and material to the
operation of its business as presently conducted (excluding the Grand Prairie
Facility). All such properties are held free and clear of all material
mortgages, pledges, liens, security interests and encumbrances, and material
restrictions of any nature whatsoever, except as listed on Schedule 3.2.8.
Except as set forth in Schedule 3.2.8, all real
property and each building and structure owned or used by Elsinore
Engineering (excluding the Grand Prairie Facility), and material to the
operation of its business as presently conducted, is suitable for the purpose
or purposes for which it is being used, and is in all material respects in
such condition and repair as to permit the continued operation of said
business. To Senior Management's Knowledge, none of such real property,
buildings or structures is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs. To Senior Management's Knowledge,
there are no material structural defects in the exterior walls or the
interior bearing walls, the foundation or the roof of any plant, building,
garage or other such structure owned, leased or used by Elsinore Engineering
and the electrical, plumbing and heating systems, and the air conditioning
system, if any, of any such plant, building, garage or structure are in
reasonable operating condition in light of their age and prior use. To Senior
Management's Knowledge, the utilities servicing the real property owned,
leased or used by Elsinore Engineering are adequate to permit the continued
operation of the business of Elsinore Engineering and to Senior Management's
Knowledge, there are no pending
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zoning, condemnation or eminent domain proceedings, building, utility or other
moratoria, or injunctions or court orders which would materially affect such
continued operation. Schedule 3.2.8 lists, and Sellers have furnished or made
available to Buyer copies of, all engineering, geologic and environmental
reports prepared by or for either Seller with respect to the real property
owned, leased or used by Elsinore Engineering.
3.2.9 PERSONAL PROPERTY. Schedule 3.2.9 contains complete
and accurate descriptions of, Elsinore Engineering's Machinery, Equipment,
Tooling and Vehicles. Except as set forth in Schedule 3.2.9, and except with
respect to personal property leased pursuant to the Personal Property Leases,
ELP has good, valid and marketable title to all of its property which is
personal property of every kind, nature and description, tangible or intangible,
and wherever located, including all property and assets which are personal
property shown or reflected on the September 30, 1996 Balance Sheet. Schedule
3.2.9 contains a complete and accurate description of all Personal Property
Leases to which Elsinore Engineering is party or which Elsinore Engineering,
uses in its business (in each case excluding the Grand Prairie Facility). The
Property which is personal property constitutes all material personal property
now used in and necessary for the conduct of the business of Elsinore
Engineering as presently conducted (excluding the Grand Prairie Facility), all
of which is held free and clear of all mortgages, pledges, liens, security
interests, encumbrances and material restrictions of any nature whatsoever,
except as listed on Schedule 3.2.9.
Except as listed on Schedule 3.2.9, no financing
statement under the Uniform Commercial Code or similar law naming ELP (with
respect to the Property), EAS or Elsinore Engineering as debtor has been
filed in any jurisdiction, and neither ELP, EAS nor Elsinore Engineering is a
party to or bound under any agreement or legal obligation authorizing any
party to file any such financing statement. Except as set forth on
Schedule 3.2.9, all Machinery and Equipment and other tangible personal
property owned or used by Elsinore Engineering and material to the operation
of the business as presently conducted (excluding the Grand Prairie Facility)
is suitable for the purpose or purposes for which it is being used, and is in
all material respects in such condition and repair as to permit the continued
operation of said business. None of the Machinery or Equipment is in need of
maintenance or repairs in any material respect except for ordinary, routine
maintenance and repairs necessary to permit the operation of said business.
3.2.10 ENVIRONMENTAL MATTERS. Except as set forth on
Schedule 3.2.10, the operations of Elsinore Engineering and EAS comply in all
material respects with all occupational health and safety acts and all
environmental laws and regulations of all federal, state and local governmental
or regulatory bodies having jurisdiction over Elsinore Engineering and EAS.
Without limiting the generality of the foregoing, and by way of example only,
except as set forth on Schedule 3.2.10:
(a) There has not been, and is not occurring, any
Release of any Hazardous Substance on any real
property owned, operated, leased or used by
Elsinore Engineering or EAS during Elsinore
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Engineering's or EAS' ownership, operation,
lease or use of such property except in
compliance in all material respects with
applicable laws. For purposes of this
Agreement, the terms "Release" and "Hazardous
Substance" shall have the same meanings as
those terms are given in the Comprehensive
Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601
ET SEQ. ("CERCLA"), except that for purposes
of this Agreement petroleum (including crude
oil or any fraction thereof) shall be deemed a
Hazardous Substance.
(b) Neither Elsinore Engineering nor EAS has ever
received notice that either has sent a
Hazardous Substance to a site which, pursuant
to CERCLA or any similar state law, (A) has
been placed, (or to Senior Management's
Knowledge, is proposed to be placed, or may in
the future be placed,) on the "National
Priorities List" of hazardous waste sites or
on any similar list of any federal, state or
local governmental agency, including the
Comprehensive Environmental Response,
Compensation and Liability System list for
potential hazardous waste sites, or (B) is
subject to a claim, an administrative order or
other request to take "removal" or "remedial"
action (as defined under CERCLA) or to pay for
any costs relating to such site.
(c) Neither Elsinore Engineering nor EAS has ever
been or is currently in material violation of
any provision of the Toxic Substances Control
Act or the regulations promulgated thereunder.
(d) Neither Elsinore Engineering nor EAS is involved
in any suit or has received notice of any
claim relating to personal injuries from
exposure to Hazardous Substances.
3.2.11 BROKERS, FINDERS. The transactions contemplated herein
were not submitted to Sellers by any broker or other person entitled to a
commission or finder's fee thereon, and were not with the consent of Sellers
submitted to DAH by any such broker or other person. Neither of Sellers nor any
of its officers, directors or employees has engaged any broker or finder or
incurred or taken any action which may
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give rise to any liability against itself or the Property for any brokerage
fees, commissions, finders fees or similar fees or expenses and no broker or
finder has acted directly or indirectly for Sellers in connection with this
Agreement or the transactions contemplated hereby. No investment banking,
financial advisory or similar fees have been incurred or are or will be payable
by Sellers in connection with this Agreement or the transactions contemplated
hereby.
3.2.12 LEGAL PROCEEDINGS, ETC. Except as set forth on
Schedule 3.2.12, there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending, or to Senior Management's Knowledge,
threatened against Elsinore Engineering, EAS or with respect to the business of
Elsinore Engineering, Sellers, or involving the Property, this Agreement or the
transactions contemplated hereby, at law or in equity, before any federal, state
or local court or regulatory agency, or other governmental authority, including
any unfair labor practice or grievance, proceedings or claim which matter
although disclosed on Schedule 3.2.12 would have a material adverse effect on
the business or assets of EAS or Elsinore Engineering. To Senior Management's
knowledge, there is no basis upon which such claim, litigation, action, suit or
proceeding would reasonably be brought or initiated. Except as set forth in
Schedule 3.2.12, with respect to the business of Elsinore Engineering, neither
EAS, ELP nor Elsinore Engineering is subject to any judgment, order or decree,
or, to Senior Management's Knowledge, any governmental restriction applicable to
EAS, ELP or Elsinore Engineering which has a reasonable probability of having a
Material Adverse Effect. As used herein, "Material Adverse Effect" means any
material adverse change in the business operations (as presently conducted or
proposed to be conducted), assets, properties or rights, prospects or condition
(financial or otherwise) of Elsinore Engineering (excluding the Grand Prairie
Facility), or any occurrence, circumstance, or combination thereof which
reasonably could be expected to result in any such material adverse change, or
which materially adversely affects the ability of Elsinore Engineering to
conduct business in any area, or of Buyer to continue the business of Elsinore
Engineering as presently conducted.
3.2.13 NO CONFLICT OR DEFAULT. Neither the execution and
delivery of this Agreement or any other Transaction Document, nor compliance
with the terms and provisions hereof or thereof, including the consummation of
the transactions contemplated hereby and thereby, will (a) violate in any
material respect any statute, regulation or ordinance of any governmental
authority, or (b) conflict with or result in the breach of any term, condition
or provision of the articles of incorporation or bylaws of EAS or the limited
partnership agreement of ELP, or (c) to Senior Management's Knowledge, conflict
with or result in the breach of any term, condition or provision of any
agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation or instrument, to which EAS, ELP or (with respect to the business of
Elsinore Engineering) any of the Sellers, is a party or by which any such party
or any part of the Property is or may be bound, or (d) constitute a material
default (or an event which with the lapse of time or the giving of notice, or
both, would constitute a material default) under any such agreement, deed,
contract, mortgage, indenture, writ, order, decree, legal obligation or
instrument thereunder, or (e) result in the creation or imposition of any
material lien, charge or encumbrance, or to Senior Management's Knowledge, any
other material
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restriction of any nature whatsoever with respect to any part of the Property,
or (f) give to others any interest or rights, including rights of termination,
acceleration or cancellation in or with respect to any part of the Property or
the business of Elsinore Engineering which would have a Material Adverse Effect
thereon.
3.2.14 LABOR RELATIONS. Schedule 3.2.14 sets forth all
collective bargaining or other labor agreements to which Elsinore Engineering is
bound and which covers Elsinore Engineering employees. ELP has previously
delivered to Buyer true, correct and complete copies of each such agreement.
There is no labor strike, dispute, slowdown or stoppage, or petition for
certification actually pending or, to Senior Management's Knowledge, threatened
against or involving Elsinore Engineering, nor, to Senior Management's
Knowledge, any union organizing campaign pending or threatened. Schedule 3.2.14
sets forth all pending grievances and arbitration proceedings against Elsinore
Engineering arising out of or under a collective bargaining or other labor
agreement. No collective bargaining or other labor agreement is currently being
negotiated by ELP by or on behalf of Elsinore Engineering. With respect to the
business of Elsinore Engineering, neither Elsinore Engineering, EAS nor ELP has
experienced any work stoppage or other material labor difficulty over the past
three years. No agreement which is binding on Elsinore Engineering, EAS or EAP
restricts it from relocating or closing any or all of its operations.
3.2.15 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 3.2.15, neither
EAS nor Elsinore Engineering currently
sponsors, maintains or contributes, or has
within the past 3 years sponsored, maintained
or contributed, to any pension, retirement,
profit-sharing, deferred compensation, bonus,
stock option or other incentive plan, or any
other employee benefit program, arrangement,
agreement or understanding, or medical,
vision, dental or other health plan, or life
insurance or disability plan, or any other
employee benefit plan as defined in Section
3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
whether or not any such employee benefit plan
is otherwise exempt from the provisions of
ERISA, and whether or not formal or informal,
written or oral, and whether or not legally
binding. All such plans, funds or programs
sponsored, maintained or contributed to by
Elsinore Engineering currently or within the
past 3 years, whether or not listed on
Schedule 3.2.15, are hereinafter referred to
as the "Employee Benefit Plans").
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(b) As of the Closing Date, no entity that may be
regarded as under common control with Elsinore
Engineering or EAS pursuant to Section 414 of
the Internal Revenue Code of 1986, as amended
(the "Code"), shall have incurred any
unsatisfied liability under Title IV of ERISA
or Section 4980 of the Code, nor shall any
such entity have become subject to a lien
pursuant to Section 412(n) of the Code.
(c) Full payment has been made of all amounts which
Elsinore Engineering or EAS is required, under
applicable law or under any Employee Benefit
Plan or any agreement relating to any Employee
Benefit Plan to which it is a party, to have
paid as contributions to or benefits under any
Employee Benefit Plan as of the last day of
the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof.
Elsinore Engineering has made adequate
provision in its financial statements for
liabilities to meet current contributions or
benefit payments.
(d) Elsinore Engineering and EAS have each performed
all obligations required to be performed by it
under the Employee Benefit Plans. Neither
Elsinore Engineering nor EAS has engaged in
any transaction with respect to the Employee
Benefit Plans which would subject either of
them, Buyer or DAH to a tax, penalty or
liability for a prohibited transaction under
section 406, 407 or 502(i) of ERISA or Section
4975 of the Code, nor have either of EAS's or
Elsinore Engineering's directors, officers,
partners, employees or agents, to the extent
they or any of them are fiduciaries with
respect to such Employee Benefit Plans,
breached any of their responsibilities or
obligations imposed upon fiduciaries under
Title I of ERISA or which would result in any
claim being made under or by or on behalf of
any such Employee Benefit Plans by any party
with standing to make such claim. Neither
Elsinore Engineering nor EAS will have any
plan or commitment, whether formal or
informal, written or oral, and whether or not
legally binding, to modify or change any
Employee Benefit Plan in
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any material manner prior to the Closing Date.
EAS, Elsinore Engineering and any
"administrator(s)" (as described in Section
3(16)(A) of ERISA) of the Employee Benefits
Plans have complied in all material respects
with the applicable requirements of ERISA, the
Code and all other statutes, orders, rules or
regulations, specifically including material
compliance with all reporting and disclosure
requirements of Part 1 of Title 1 of ERISA and
of the Code in a timely and accurate manner,
and no penalties have been or will be imposed,
nor is EAS, Elsinore Engineering or any
administrator liable for any penalties
imposed, under ERISA, the Code or otherwise
with respect to the Employee Benefit Plans or
any related trusts. Neither Elsinore
Engineering nor EAS is delinquent in the
payment of any federal, state or local taxes
with respect to the Employee Benefit Plans.
There is no pending litigation, arbitration,
or disputed claim, settlement adjudication or
proceeding with respect to the Employee
Benefit Plans, and none of EAS, Elsinore
Engineering or any administrator is aware of
any threatened litigation, arbitration or
disputed claim, adjudication proceeding, or
any governmental or other proceeding, or
investigation with respect to the Employee
Benefit Plans or with respect to any fiduciary
or administrator thereof (in their capacities
as such), or any party-in-interest thereto
(with respect to their relationship as such).
There is no "defined benefit plan" within the
meaning of Section 414(j) of the Code or
Section 3(35) of ERISA to which either
Elsinore Engineering or EAS has been a party
or has been required to make any contributions
at any time during the last ten years. There
is no "multiemployer plan" within the meaning
of Section 3(37) of ERISA to which either
Elsinore Engineering or EAS has been a party
or has been required to make any contributions
at any time during the last ten years.
(e) Seller has delivered or caused to be delivered
to Buyer and DAH prior to the Closing Date,
true, accurate and complete copies of (A) all
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Employee Benefit Plans and any related trust
agreements, custodial agreements, investment
management agreements, insurance contracts or
policies, and administrative service
contracts, all as in effect, together with all
amendments thereto which will become effective
at a later date; (B) the latest Summary Plan
Description and any modifications thereto for
each Employee Benefit Plan requiring same
under ERISA; (C) the Summary Annual Report for
the current and prior fiscal years for each
Employee Benefit Plan requiring same under
ERISA; (D) each Form 5500 and/or Form 990
series filing (including required schedules
and financial statements) for the current and
the prior fiscal year for each Employee
Benefit Plan required to file such form; and
(E) the most recent actuarial evaluation,
analysis or other report issued with respect
to any Employee Benefit Plan. None of EAS,
Elsinore Engineering or any officer, partner,
employee, representative or agent of either of
them, has made any written or oral
representations or statements to any current
or former employees, dependents, participants
or beneficiaries or other persons which are
inconsistent in any material manner with the
provisions of these documents.
(f) With respect to any of Elsinore Engineering's,
or EAS's employee welfare plans (as defined in
Section 3(1) of ERISA and including those
Employee Benefits Plans which qualify as such)
which are "group health plans" under Section
4980B of the Code and Section 607(1) of ERISA
and related regulations (relating to the
benefit continuation rights imposed by the
Consolidated Omnibus Budget Reconciliation Act
of 1986 ("COBRA"), as amended to date), there
has been timely compliance in all material
respects with all requirements imposed
thereunder, as and when applicable to such
plans, so that Elsinore Engineering and EAS
have not (nor will incur any) loss,
assessment, penalty, loss of federal income
tax deduction or other sanction, arising on
account of or in respect of any failure to
comply with any COBRA benefit continuation
requirement, which
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is capable of being assessed or asserted
directly or indirectly against such party, or
against Buyer or DAH or any of their
respective subsidiaries or other member of
Buyer's corporate control group, with respect
to any such plan.
(g) No Employee Benefit Plan maintained by EAS or
Elsinore Engineering which is a "welfare plan"
within the meaning of Section 3(1) of ERISA
provides benefits to employees after
termination of employment, except as required
by Section 4980B of the Code.
3.2.16 CONTRACTS AND COMMITMENTS. Schedule 3.2.16 is a list
of all of the Contracts to which Elsinore Engineering is a party and which
involve the payment by or to Elsinore Engineering in the aggregate of $50,000 or
more (per contract) during any year. Sellers have previously delivered to Buyer
correct and complete copies of each such Contract. The Real Property Leases, the
Personal Property Leases and the Contracts listed on Schedule 3.2.16, taken
together, constitute all of the contracts, agreements, contract rights, leases,
license agreements, franchise rights and agreements, policies, purchase and
sales orders, quotations and executory commitments, instruments, guaranties,
indemnifications, arrangements, obligations and understandings (written or
oral), involving the payment by or to Elsinore Engineering (excluding the Grand
Prairie Facility), in the aggregate of $50,000 or more (per contract) during any
year, necessary to the conduct of the business of Elsinore Engineering as
presently conducted (excluding the Grand Prairie Facility).
All of the Real Property Leases, the Personal Property
Leases and the Contracts are valid and binding, in full force and effect and
enforceable against Elsinore Engineering in accordance with their respective
provisions. Except as disclosed on Schedule 3.2.16, neither EAS nor Elsinore
Engineering has assigned, mortgaged, pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any Real Property Lease,
any Personal Property Lease, or any Contract. Neither EAS nor Elsinore
Engineering (nor, to Senior Management's Knowledge, any other party thereto) is
in material violation of, in default in respect of, nor has there occurred an
event or condition which, with the passage of time giving of notice (or both)
would constitute a material violation or default of, any Real Property Lease,
any Personal Property Lease, or any Contract; and, to Senior Management's
Knowledge, there are no facts or circumstances which would reasonably indicate
that Elsinore Engineering (or any other party) will be or may be in material
violation of or in default in respect of any Real Property Lease, any Personal
Property Lease, or any Contract, subsequent to the date hereof. No notice has
been received by EAS or Elsinore Engineering claiming any such default or
indicating the desire or intention of any other party thereto to amend, modify,
rescind or terminate the same to the extent that it would have a Material
Adverse Effect on the business or assets of Elsinore Engineering.
3.2.17 ACCOUNTS RECEIVABLE, ETC. All of the Receivables of
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Elsinore Engineering are set forth on Schedule 3.2.17, together with the value
thereof. All such Receivables and Prepaid Expenses, together with any additional
Receivables and Prepaid Expenses arising between the date hereof and the Closing
Date (in each case net only of such allowances for doubtful accounts as
disclosed on the September 30, 1996 Balance Sheet), (a) are or will be valid and
subsisting, (b) represent or will represent sales actually made, (c) arose or
will arise in the ordinary and usual course of the business of Elsinore
Engineering, (d) except as set forth on Schedule 3.2.17, to the extent not
collected prior to the Closing Date, will be due and enforceable according to
their terms within 90 days after the date of the initial invoice therefor, and
(e) are not and (except as may be caused by Buyer) will not be subject to any
material counterclaim, set-off, defense, lien, charge or encumbrance of any
nature. There has not been any material adverse change in the collectibility of
the Receivables of Elsinore Engineering since September 30, 1996. Buyer will use
its best efforts (as defined in Section 6.1.4) to collect the Receivables.
3.2.18 INVENTORIES. [No Rep.]
3.2.19 BACKLOG. All unfilled orders as of September 30,
1996 to purchase goods and services of Elsinore Engineering are set forth in
Schedule 3.2.19 and all unfilled orders as of the Closing Date to purchase goods
and services of Elsinore Engineering shall be set forth in a disclosure document
provided by Seller to Buyer within thirty days of the Closing Date, and are firm
and binding commitments (subject to cancellation rights set forth therein) of
the respective purchasers (assuming that such purchaser has properly authorized
by all requisite corporate or, if not a corporation, by all other requisite
action and has properly executed and delivered such purchase order, which, to
Senior Management's Knowledge, is the case) to purchase the goods indicated.
3.2.20 BOOKS OF ACCOUNT: RECORDS. Except for the
qualifications (if any) explicitly set forth therein or in Schedule 3.2.20 the
general ledgers, books of account and other financial records of Elsinore
Engineering are complete and correct, have been maintained in accordance with
good business practices and the matters contained therein are appropriately and
accurately reflected in the Financial Statements.
3.2.21 MANAGERS, EMPLOYEES AND COMPENSATION. Schedule 3.2.21
sets forth the name of all managers and engineers of Elsinore Engineering, their
respective terms of office, the total salary, bonus payments, fringe benefits
and perquisites each received in each of the last 3 calendar years ended
December 31, 1995 (or, if briefer, during their tenure of employment with
Elsinore Engineering and any affiliate thereof), and changes to the foregoing
which have occurred since December 31, 1995, together with the professional
background of each manager and engineer for the last 5 years (as disclosed to
Elsinore Engineering by such employee and, to Senior Management's Knowledge,
correctly and completely); such Schedule also lists and described the current
base salary, bonus payments, fringe benefits and perquisites of any other
employee, agent or representative of Elsinore Engineering whose total current
salary, bonus or other compensation exceeds $50,000 annually during any of the
last
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3 calendar years ended December 31, 1995, and changes to the foregoing since
December 31, 1995. There are no other material forms of compensation paid to any
such director, officer or employee of Elsinore Engineering. The provisions for
wages and salaries accrued on the September 30, 1996 Balance Sheet are adequate
for salaries and wages, including accrued vacation pay, for the period up
through the date thereof, and Elsinore Engineering has accrued on its books and
records all obligations to pay wages and salaries and other compensation to its
employees, including, but not limited to, vacation pay and sick pay, and all
commissions and other fees payable to agents, salesmen and representatives. ELP
and EAS has filed any and all payroll tax returns, and paid all payroll taxes
due for any and all Elsinore Engineering employees, due through the Closing
Date.
Except as set forth on Schedule 3.2.21, Elsinore
Engineering has not become obligated, directly or indirectly, to any
shareholder, director, officer or partner of ELP, EAS or any Seller or any
member of their families, except for current liability for employment
compensation. Except as set forth on Schedule 3.2.21, no shareholder,
director, officer, partner, agent or employee of ELP, EAS or any Seller holds
any position or office with or has any financial interest, direct or
indirect, in any supplier, customer or account of, or other outside business
which has transactions with Elsinore Engineering. Neither ELP, EAS nor
Elsinore Engineering, nor, to Senior Management's Knowledge, any third party,
has taken any action with respect to any shareholder, director, officer,
partner, employee or representative of ELP, EAS or Elsinore Engineering to
attempt to induce or which would influence any such person not to become
associated with Buyer from and after the Closing Date or from serving Buyer
in a capacity similar to the capacity presently held. Except to the extent as
may have been previously disclosed to DAH by Sellers in writing, no employee
of Elsinore Engineering, to Senior Management's knowledge, has a present
intention to leave the employ of Elsinore Engineering or has taken any action
directed towards leaving the employ of Elsinore Engineering. Except as set
forth on Schedule 3.2.21, to Senior Management's Knowledge, no former
employee of ELP, EAS is currently or intends to enter into competition with
the business of Elsinore Engineering.
3.2.22 CREDIT TERMS: PRODUCT WARRANTIES. Schedule 3.2.22
sets forth all of the standard terms and conditions of credit and discounts
given by Elsinore Engineering to its customers in the usual and ordinary course
of its business and a list of all transactions pending where there is a material
departure therefrom.
3.2.23 CONTRACTS WITH AFFILIATES. Any contract, commitment,
lease, permit or other instrument, agreement, understanding or obligation
(written or oral) between Elsinore Engineering and any affiliate of EAS or
any Seller is described on Schedule 3.2.23 hereto, and is the equivalent of
an "arms-length" transaction with a third party (except to the extent
otherwise described in Schedule 3.2.23).
3.2.24 GOVERNMENT CONTRACTS.
(a) For purposes of this Section 3.2.24, the term
"Government" means any agency, division,
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subdivision, audit group, or procuring office
of the federal government, including the
employees or agents thereof; the term
"Government Contract" means any prime
contract, subcontract, basic ordering
agreement, letter contract, purchase order or
delivery order of any kind, including all
amendments, modifications and options
thereunder or relating thereto, between the
Elsinore Engineering and any of the
Government, any prime contractor of the
Government, any subcontractor of such a prime
contractor or any subcontractor of another
subcontractor, however far removed from the
prime contractor such subcontractor may be,
(A) currently in force; (B) which, within the
three years preceding the date of this
Agreement, expired or were terminated; or (C)
for which final payment was received within
the three years preceding the date of this
Agreement; and the term "Bid" means any
outstanding quotation, bid or proposal
submitted by Elsinore Engineering to the
Government, any proposed prime contractor of
the Government, or any proposed subcontractor.
(b) Elsinore Engineering is not a party to any
Government Contract and has not submitted any
Bids [which have not expired].
(c) Except as set forth in Schedule 3.2.24,
(A) no show cause notices, cure notices, or
terminations have been issued against the
Elsinore Engineering with respect to any
Government Contract; (B) no negative
determinations of responsibility have been
issued against the Elsinore Engineering with
respect to any Bid and (C) none of the
Government, any prime contractor nor any
subcontractor has notified the Elsinore
Engineering, either orally or in writing, that
it is in breach or violation of any provision
of any Government Contract, any certification
or representations with respect thereto or any
statutes and regulations applicable thereto.
(d) Elsinore Engineering is not undergoing and has
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not undergone any audit, and has no knowledge
or reason to know of any basis for impending
audits in the future, arising under or
relating to any Government Contract except as
set forth in Schedule 3.2.24.
3.2.25 SOLVENCY. The total assets of ELP and each of the
Sellers exceed their respective total liabilities (excluding, in the case of
ELP, liabilities to or guaranteed by its affiliates); and ELP and each of the
Sellers generally are able to perform their respective financial obligations
as performance thereof becomes due.
3.2.26 ALLOCATIONS. Except as noted in the Financial
Statements, all payments in respect of administrative overhead or similar
allocative costs which Elsinore Engineering has made or is obligated to make
to ELP have been omitted from the Financial Statements.
3.2.27 COMPLETE DISCLOSURE. No representation or warranty
made by ELP or any of the Sellers in this Agreement, and no exhibit,
schedule, statement, certificate or other information furnished to Buyer by
or on behalf of ELP or any Seller pursuant to this Agreement or in connection
with the transactions contemplated hereby or thereby, contains or will
contain, any untrue statement of a material fact or omits or will omit to
state a material fact necessary in light of the circumstances to make the
statements contained herein and therein not misleading.
4. INDEMNIFICATION.
4.1 Lyon and ELP, with full recourse, jointly and severally,
hereby indemnify and hold harmless DAH and Buyer from any claims loss,
damages or expenses as a result of any breach of any representation made in
this Agreement by ELP or Lyon. The indemnification made in this Section 4
shall continue until (i) with respect to any Materially Misleading statement
or information (as defined below), the end of the applicable statute of
limitations from actual discovery or (ii) otherwise, the second anniversary
of the Closing Date. For the purposes of this Section 4, a statement,
representation, warranty or other information is "Materially Misleading" when
it contains any untrue statement of material fact or omits to state a
material fact necessary in light of the circumstances to make the statements
or other information contained therein not misleading.
4.2 Without limiting the generality of the foregoing, ELP and
Lyon, jointly and severally, agree to pay to DAH in immediately available
funds (cash) within 5 days of receipt of notice from DAH (i) an amount equal
to the difference between (a) the Accounts Receivable on the Closing Date
Balance Sheet (less the stated allowance for doubtful accounts and less the
amount of any billed Accounts Receivable for which payment arrangements which
Buyer has designated to such obligor as satisfactory to it have. been made)
and (b) such of the Accounts Receivable described in clause (a) have been
collected by Buyer (which Buyer agrees to use diligent efforts to collect)
between the Closing Date and the date 120 days following the Closing Date,
and (ii) in the event
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of the cancellation of any item of backlog specified in Schedule 3.2.19 hereto,
an amount equal to 10% of the dollar amount of the goods and services canceled.
Buyer's obligations with respect to collection shall be deemed satisfied if it
continues the collection practices of Elsinore.
5. ASSUMPTION OF CERTAIN LIABILITIES: NO ASSUMPTION OF OTHER LIABILITIES.
5.1 On the Closing Date, Buyer will assume:
5.1.1 ACCOUNTS PAYABLE. All accounts payable for current
liabilities by Elsinore Engineering as of September 30, 1996 and as incurred
in the ordinary course of business from September 30, 1996 through the
Closing Date. A schedule of the Accounts Payable of Elsinore Engineering as
of September 30, 1996 is attached as Schedule 5.1.1;
5.1.2 ACCRUED OPERATING EXPENSES. All accrued operating
expenses which were incurred by Elsinore Engineering as of September 30, 1996
and as incurred in the ordinary course of business from September 30, 1996
through the Closing Date and which are reflected as a liability on the
balance sheets for Elsinore Engineering as of September 30, 1996 and as of
the Closing Date, respectively. Attached as Schedule 5.1.2 is a balance sheet
as at September 30, 1996;
5.1.3 LEASE(S). The leases specified on Schedule 1.1.1
and Schedule 1.1.2; prior to the Closing, ELP shall have obtained the written
consents of the lessors named on Schedule 1.1.1;
5.1.4 OPEN PURCHASE CONTRACTS. The obligation of ELP to
perform those purchase contracts and related purchase orders in existence on
the Closing Date which were incurred by ELP in the ordinary course of
business and.are disclosed in Schedule 1.1.6 at "List of Agreements" Part I;
provided, however, that only the obligations to deliver goods and services
(including warranties) are being assumed and Buyer does not assume any other
liability, risk or exposure of Elsinore Engineering or ELP; Buyer does not
assume the risk of any claim for any loss, damage, or exposure asserted by
any party to any contract for occurrences prior to the Closing Date.
5.1.5 CURRENT LIABILITIES FROM OPERATIONS IN THE ORDINARY
COURSE. Those obligations of Elsinore Engineering which have been incurred
from and after September 30, 1996, in the ordinary course of business and
which are expressly permitted by the affirmative covenants and not prohibited
by the negative covenants set forth in Section 6.2 of this Agreement;
5.1.6 WARRANTY AND RELATED OBLIGATIONS. To the extent
that work is requested and ELP grants prior written approval to Buyer to do
such work, and subject to the provisions of Section 6.2.12, the obligation to
provide warranty and related work in any agreement of Elsinore Engineering as
disclosed on Schedule 1.1.6 and which are hereby assumed, it being
acknowledged by Buyer that included in such work is the work relating to the
Crew Rest Program licensed from Qantas performed for Virgin
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Atlantic, as to which Buyer hereby agrees to retain all data provided by Seller.
5.1.7 ROYALTIES AND LICENSE FEES. To the extent of
Royalties for Patents and License Fees specified in Schedule 5.1.7, the
Royalties and License Fees which appear on the Schedule.
5.1.8 VACATION, SICK LEAVE AND PENSION BENEFITS. To the
extent reserved for in the balance sheet as of September 30, 1996 and as
incurred in the ordinary course of business from September 30, 1996 through
the Closing Date, to pay for vacation time, sick leave and to provide pension
benefits as specified on Schedule 5.1.8.
5.1.9 DAIMLER-BENZ CONTRACT. Buyer will assume all
obligations, including those of performance, and liabilities under, and the
risk of profit or loss and the risk of completion of, that certain STC
Development Agreement by and between Elsinore LP and Daimler-Benz Aerospace
Airbus GmbH dated as of June 7, 1996 (the "Daimler-Benz Contract"), a copy of
which is attached hereto as Schedule 5.1.9.
5.1.10 STC's. All obligations in connection with the
ownership and maintenance of the STC's transferred pursuant to Section 1.1.5
hereof.
5.2. LIABILITIES NOT ASSUMED. With the exception of the
liabilities assumed pursuant to Section 5.1, Buyer shall not by the execution
or performance of this Agreement, or otherwise, assume or otherwise be
responsible for any liability or other obligation of Elsinore Engineering or
ELP of any kind, nature or description, whether such liability or obligation
is mature or not, liquidated or unliquidated, fixed or contingent, known or
unknown, whether arising out of occurrences prior to, at or after the date of
this Agreement, including without limitation, those rising from breach of
contract, breach of any warranty, infringement, fraud, violation of any law,
rule or regulation, or out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim or other demand. Without limiting
the foregoing, no liabilities related to the Grand Prairie Facility are being
assumed pursuant to this Agreement.
6. COVENANTS.
6.1 COVENANTS OF BUYER
6.1.1 PAYMENT AND PERFORMANCE OF ASSUMED LIABILITIES.
From and after the Closing Date, Buyer shall pay and perform the liabilities
assumed pursuant to Section 5.1 in the ordinary course of its business in
accordance with Buyer's standard business practices.
6.1.2 USE OF NAME. Seller owns the name "Elsinore" and
gives DAH the right to use the name Elsinore Aerospace Services, Inc.,
Elsinore LP, EAS and ELP only so long as reasonably necessary for EAS to
maintain its DAS with the FAA. At such time as the FAA agrees that a change
of name will have no adverse
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effect on the DAS, DAH will cause EAS to change its name to a name which does
not include the name "Elsinore." DAH will diligently pursue such name change.
DAH agrees not to use the Elsinore logo and acknowledges the exclusive ownership
of such logo by Sellers. Sellers and their affiliates shall have the right to
continue to use the name "Elsinore Aerospace Services, Inc." in connection with
normal post closing matters arising after the consummation of the Agreement,
including but not limited to, settlement of disputes, documentation, etc.
Elsinore may use the name "Elsinore LP" for any purpose.
6.1.3 HOLD HARMLESS. DAH and Buyer agree to indemnify and
hold harmless Seller from any liabilities to third parties arising from the
operations or business of Elsinore Engineering on and after the consummation
of the transactions contemplated herein on the Closing Date, except to the
extent caused by the gross negligence or willful misfeasance of Seller.
6.1.4 DUTY TO COLLECT ACCOUNTS RECEIVABLE. Buyer and DAH
shall use their best efforts to collect accounts receivable outstanding at
the Closing Date. As used in this Section 6.1.4, "best efforts" shall be
deemed to have been used so long as Buyer continues the accounts receivable
collection practices used by Elsinore Engineering prior to the date of this
Agreement.
6.1.5 EMPLOYEES. From and after the Closing Date, Buyer
and DAH shall employ substantially all of the current employees of Elsinore
Engineering, subject to normal management prerogatives to review performance
and terminate employment as necessary or appropriate for the business. The
Buyer and DAH shall compensate such employees at substantially the same level
of compensation in effect for such employees and shall continue to recognize
each employee's seniority status as under current Elsinore Engineering
practice. Buyer and DAH will continue normal fringe benefits for such
employees subject to the integration of such fringe benefits with Buyer's and
DAH's current programs.
6.1.6 BUYER'S WORKING CAPITAL. DAH covenants that it will
(i) initially provide and (ii) continue to provide for a period of 5 years
from the Closing Date sufficient working capital for Buyer to (i) perform the
obligations assumed by Buyer pursuant to Section 5 of this Agreement and (ii)
for any business activities other than the performance of obligations assumed
pursuant to Section 5 of this Agreement. The forgoing are the only purposes
for which DAH shall have obligations to provide working capital to Buyer.
6.1.7 KITTING. On the Closing Date, Buyer and ELP will
enter into a Kitting Subcontract Agreement in the form of EXHIBIT A-1 to the
Agreement and a Warranty Subcontract Agreement in the form of EXHIBIT A-2 to
the Agreement.
6.2 COVENANTS OF ELP AND LYON.
6.2.1 COVENANT AGAINST HIRING. Each of ELP and Lyon
understand that it is essential to the successful operation of the business
to be acquired
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hereunder that Buyer retain substantially unimpaired Elsinore Engineering's
operating organization. Each of ELP and Lyon agrees that neither he nor it
shall purposefully take any action which would induce any employee or
representative of ELP not to become or continue as an employee or
representative of Buyer. Without limiting the generality of the foregoing,
neither Elsinore Engineering nor Lyon shall, whether directly or indirectly
through any subsidiary or affiliate, for a three (3) year period from the
Closing Date solicit to employ (whether as an employee, officer, director,
agent, consultant or independent contractor), or enter into any partnership,
joint venture or other business association with, any person who was an
employee of ELP at any time from January 1, 1996, until the Closing Date as
listed on Schedule 6.2.1; provided, however that ELP and Lyon may solicit to
employ (whether as an employee, officer, director, agent, consultant or
independent contractor), or enter into any partnership, joint venture or
other business association with, William B. Ashworth, David Lagger and T.J.
Moran for any purpose not competitive with the business of Elsinore
Engineering or Hollingsead International, Inc. as they exist on the Closing
Date.
6.2.2 INJUNCTIVE RELIEF. Each of ELP and Lyon
acknowledges and agrees that Buyer's remedy at law for any breach of any of
ELP's or Lyon's obligations under Subsections 6.2.1 or 6.2.3 hereof would be
inadequate, and agrees and consents that temporary and permanent injunctive
relief may be granted in a proceeding which may be brought to enforce any
provision of Subsections 6.2.1 or 6.2.3 Seller recognizes that damages would
not be an adequate remedy. The rights and remedies conferred upon Buyer under
this Section 6.2.2, elsewhere in this Agreement, or by any instrument or law
shall be cumulative and may be exercised singularly or concurrently.
6.2.3 CONDUCT OF BUSINESS OF ELP PRIOR TO CLOSING DATE.
Each of ELP and Lyon agrees that on and after the date hereof and prior to
the Closing Date:
(a) The business and operations, activities and
practices of Elsinore Engineering shall be
conducted only in the ordinary course of
business and consistent with past practice;
(b) No change shall be made in the articles of
incorporation or bylaws of EAS, except as is
necessary to comply with Section 6.1.2 hereof;
(c) No change shall be made in the number of shares
of authorized or issued capital stock of EAS;
nor shall any option, warrant, call, right,
commitment or agreement of any character be
granted or made with respect to a general
partnership interest in ELP, except
immediately prior to the Closing, but after
the execution of this Agreement, ELP will
remove EAS as its
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general partner and substitute Elsinore
Services Corporation as its general partner;
(d) Neither ELP nor Lyon shall, directly or
indirectly, solicit or encourage (including by
way of furnishing any non-public information
concerning the business, properties or assets
of Elsinore Engineering), or enter into any
negotiations or discussions concerning, any
Acquisition Proposal (as defined below). ELP
and Lyon will notify Buyer promptly by
telephone, and thereafter promptly confirm in
writing, if any such information is requested
from, or any Acquisition Proposal is received
by ELP or Lyon. As used in this Agreement,
"Acquisition Proposal" shall mean any proposal
received by ELP or Lyon prior to the Closing
Date for a merger or other business
combination involving Elsinore Engineering or
for the acquisition of, or the acquisition of
a substantial equity interest in, or any
material part of the assets of, Elsinore
Engineering other than the one contemplated by
this Agreement.
(e) Except as set forth in Schedule 6.2.3(e),
Elsinore Engineering will not, and ELP will
not cause or permit Elsinore Engineering to:
(i) incur, become subject to, or suffer, or
agree to incur, become subject to or
suffer, any obligation or liability
(absolute or contingent) except
current liabilities incurred, and
obligations under contracts entered
into, in the ordinary course of
business;
(ii) discharge or satisfy any lien or
encumbrance or pay any obligation or
liability (absolute or contingent)
other than liabilities payable in the
ordinary course of business;
(iii) mortgage, pledge or subject to lien,
charge or any other encumbrance, any
of the Property or agree so to do;
(iv) sell or transfer or agree to sell or
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transfer any of its assets, or cancel
or agree to cancel any debt or claim,
except in each case in the ordinary
course of business;
(v) consent or agree to a waiver of any
right of substantial value;
(vi) enter into any transaction other than
in the ordinary course of its
business;
(vii) without the express written consent of
Buyer, increase the rate of
compensation payable or to become
payable by it to any Restricted
Employee over the rate being paid to
such Restricted Employee at September
30, 1996;
(viii) increase the rate of compensation
payable or to become payable by it
to any Non-Restricted Employee over
the rate being paid to such
Non-Restricted Employee at September
30, 1996, other than in the ordinary
course of business and in accordance
with Elsinore Engineering's past
practice;
(ix) except in the ordinary course of
business, terminate any contract,
agreement, license or other
instrument to which it is a party;
(x) through negotiation or otherwise, make
any commitment or incur any liability
or obligation to any labor
organization;
(xi) without the express written consent of
Buyer, make or agree to make any
accrual or arrangement for or payment
of bonuses or special compensation of
any kind to any Restricted Employee;
(xii) make or agree to make any accrual or
arrangement for or payment of bonuses
or special compensation of any kind
to any Non-Restricted Employee, other
than in the ordinary course of
business
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and in accordance with Elsinore
Engineering's practice;
(xiii) without the express written consent of
Buyer, directly or indirectly pay or
make a commitment to pay any
severance or termination pay to any
Restricted Employee;
(xiv) directly or indirectly pay or make a
commitment to pay any severance or
termination pay to any Non-Restricted
Employee, other than in the ordinary
course of business and in accordance
with Elsinore Engineering's past
practice;
(xv) introduce any new method of management,
operation or accounting with respect
to its business or any of the assets,
properties or rights applicable
thereto;
(xvi) offer or extend more favorable prices,
discounts or allowances than were
offered or extended regularly on and
prior to September 30, 1996, other
than in the ordinary course of
business;
(xvii) make capital expenditures or
commitments therefor without the
express written consent of Buyer; and
(xviii) hire any employee earning a wage or salary
of more than $30,000 per year.
(f) ELP and Lyon will use their respective best
efforts to preserve Elsinore Engineering's
business organization intact, to keep
available to Elsinore Engineering the present
service of Elsinore Engineering's employees,
and to preserve for Elsinore Engineering the
goodwill of its suppliers, customers and
others with whom business relationship exist;
and
(g) Neither ELP nor Lyon will take, agree to take
or permit to be taken any action or do or
permit to be done anything in the conduct of
the
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business of Elsinore Engineering, or
otherwise, which would be contrary to or in
breach of any of the terms or provisions of
this Agreement or which would cause any of the
representations or warranties of ELP or Lyon
contained herein to be or become untrue in any
material respect.
6.2.4 INSPECTION OF BOOKS AND RECORDS. From the date of
this Agreement until the Closing Date, ELP shall make or cause to be made
available to Buyer for examination the property and other materials such as
books of account, contract, agreements, commitments, records and its
documents directly relating to Elsinore Engineering and its business and
shall permit Buyer and its representatives, attorneys, accountants and agents
to have access to and to copy, at Buyer's expense, the same at all reasonable
times. In addition, ELP shall make, or cause to be made, available to Buyer
and its representatives, attorneys, accountants and agents the property and
all of the above described records for any environmental compliance audit,
any environmental site assessment (including soil, groundwater and/or other
testing) and any other physical inspection which Buyer may elect to conduct
at its own expense.
6.2.5 FURTHER ASSURANCES. On and after the Closing Date,
Elsinore Engineering and Lyon shall prepare, execute and deliver, at their
expense, such further instruments of conveyance, sale, assignment or
transfer, and shall take or cause to be taken such other or further action as
Buyer shall reasonably request at any time or from time to time in order to
perfect, confirm or evidence in Buyer title to all or any part of the
property or to consummate, in any other manner, the terms and conditions of
this Agreement.
6.2.6 PRESS RELEASES AND ANNOUNCEMENTS. Neither Elsinore
Engineering, Lyon, Buyer nor DAH shall issue any press release or
announcement relating to the subject matter of this Agreement without the
prior written approval of the other parties hereto; PROVIDED, HOWEVER that
Elsinore Engineering, Lyon, Buyer or DAH may make any public disclosure he or
it believes in good faith is required by law (in which case he or it will
advise the other parties hereto prior to making the disclosure). On the
Closing Date, ELP, the Buyer and DAH will issue public announcements and/or
press releases previously mutually agreed to by Seller, DAH and Buyer as to
form and content, announcing the transaction contemplated by this Agreement.
6.2.7 [Intentionally left blank.]
6.2.8 DELIVERY OF FINANCIAL STATEMENTS. No later than 30
days after the Closing Date, ELP and Lyon shall deliver to Buyer and DAH the
balance sheet of Elsinore Engineering as at the Closing Date and the related
statements of income, retained earnings and cash flows for the year to date
then ended (the "Closing Date Financial Statements") and which shall be true,
correct and complete, shall have been prepared from and are in accordance
with the books and records of Elsinore Engineering and ELP and, except as
disclosed in the Schedules to this Agreement or in the Financial Statements
or related notes by Seller, shall have been prepared in conformity with
30
<PAGE>
generally accepted accounting principles applied on a consistent basis
for such periods using an accrual basis method, reflect sufficient reserves
for asserted and potential products liability claims, and fairly present the
financial condition of Elsinore Engineering as of the dates stated and the
results of operations of Elsinore Engineering for the periods then ended in
accordance with such practices. The Financial Statements (including all notes
accompanying such statements) shall not disclose any event or circumstance
materially adversely affecting Elsinore Engineering or its businesses. The
Closing Date Financial Statements shall upon delivery to Buyer become part of
the Financial Statements as defined herein for all purposes hereof.
6.2.9 TRADE SECRETS AND CONFIDENTIAL KNOW-HOW. Between
the date hereof and the Closing Date, ELP and Lyon and their representatives
shall, upon request by Buyer, reduce to writing all trade secret information
or other know-how of a business or technical nature which is now used in or
which is useful for the present or anticipated future business of Elsinore
Engineering, such writing to be confidential and afforded such protection and
confidential treatment as Buyer shall reasonably request.
6.2.10 SALES TAXES, UNEMPLOYMENT INSURANCE, ETC. Without
limiting any other term hereof, ELP shall pay all sales taxes and
unemployment insurance premiums to be paid in respect of Elsinore Engineering
and the Property through the Closing Date.
6.2.11 INDEMNITY REGARDING BULK SALES, ETC. Lyon and ELP
jointly and severally hereby agree to indemnify and hold harmless DAH and
Buyer from any claims, costs or losses incurred as a result of the failure of
ELP or Elsinore Engineering to comply with any and all requirements of sales
tax and bulk sales laws and regulations arising under California law in
connection with the transactions contemplated by this Agreement.
6.2.12 WARRANTY AND RELATED WORK AFTER CLOSING DATE. To
the extent that Elsinore Engineering has not adequately reserved on its
balance sheet as of the Closing Date for the following costs under this
Section 6.2.12, ELP shall reimburse Buyer for Buyer's actual direct cost of
material and labor incurred in respect of any warranty or related work
completed by Buyer pursuant to its liabilities assumed under Section 5. No
SG&A or overhead charge is to be applied.
6.2.13 HOLD HARMLESS. ELP and Lyon agree to indemnify and
hold harmless DAH and Buyer from any liabilities to third parties arising
from the operations or business of Elsinore Engineering at any time prior to
the consummation of the transactions contemplated herein on the Closing Date,
except to the extent caused by the actions, gross negligence or willful
misfeasance of DAH or Buyer.
7. CLOSING AND CONDITIONS PRECEDENT.
7.1 CLOSING DATE. The date upon which the transactions
contemplated hereby shall become effective December 5, 1996 (the "Closing
Date") upon which each of the conditions precedent set forth in Sections 7.2
and 7.3 shall have been satisfied
31
<PAGE>
or waived pursuant to the respective terms thereof.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH AND BUYER. Each and
every obligation of DAH and Buyer to be performed on the Closing Date shall
be subject to the satisfaction on or before the Closing Date of each of the
following conditions (unless waived in writing by DAH and Buyer): ELP shall
have delivered to Buyer each of the following, in each case duly and properly
executed (if appropriate) and in form and substance reasonably satisfactory
to the Buyer:
7.2.1 DAH in its sole and absolute discretion shall be
satisfied that the transactions contemplated by this Agreement and the
changes in ownership of EAS and Elsinore Engineering will not result in the
termination or restriction of the Designated Alternation Station Certificate
("DAS") owned by EAS. The rights of DAH in this Section 7.2.1 shall terminate
on November 14, 1996 (the "Termination Date"); at any time on or prior to the
Termination Date, DAH may terminate its obligations to purchase as provided
in this Agreement by giving notice to Lyon and ELP in the event that DAH in
its sole and absolute discretion determines that as a result of this
Agreement or the transactions contemplated by it, or any provision of it,
including, without limitation, the transfer of the stock of EAS or the assets
of Elsinore Engineering, the FAA might terminate or restrict the DAS of EAS.
7.2.2 Good and sufficient assignments of each Real
Property Lease, conveying all of ELP's right, title and interest in and to
such Real Property Lease, free and clear of all mortgages, pledges, liens,
security interest, encumbrances, restrictions and claims of any nature
whatsoever, except those listed on Schedule 1.1.1.
7.2.3 Written consents of the lessors under each Real
Property Leases to the assignment of such Real Property Leases, with no
adverse condition attached.
7.2.4 A good and sufficient General Conveyance, Assignment
and Bill of Sale in the form of EXHIBIT G, conveying, selling, transferring
and assigning to Buyer title to all of the Personal Property free and clear
of all security interests, liens, charges, encumbrances or equities
whatsoever.
7.2.5 Motor Vehicle Certificates of Title to each of the
Vehicles, endorsed for transfer to Buyer.
7.2.6 The Closing Date may be extended by DAH in the event
that on or before the Closing Date any party to any contract of which consent
is required as a provision of such contract in which there is consideration
of $250,000, or parties to any group of contacts in which there is
consideration of $400,000 in the aggregate, have not consented to the
assignment to Buyer, provided, however, that in no event shall the Closing
Date be extended beyond November 30, 1996.
7.2.7 Copies of each of the Permits, together with
evidence satisfactory to Buyer that the same are in full force and effect,
and (to the extent
32
<PAGE>
requested by Buyer) evidence that such permits are eligible for immediate
transfer to Buyer.
7.2.8 The books and records described in Section 3.2.20;
each of the Financial Statements described in Section 3.2.4; the Closing Date
Financial Statements to be delivered pursuant to Section 6.2.8, together with
evidence satisfactory to the Buyer of the payment by EAS of all amounts due
to the relevant taxing authorities pursuant thereto.
7.2.9 Evidence satisfactory to DAH and Buyer and their
counsel that the execution and delivery of this Agreement has been authorized
by ELP.
7.2.10 A favorable opinion of Irell & Manella, counsel for
ELP and Lyon, addressed to Buyer and DAH and dated the Closing Date, in the
form of EXHIBIT B attached hereto.
7.2.11 The Articles of Incorporation of EAS, certified as
of a recent date by the Secretary of State of California.
7.2.12 The Bylaws of EAS, certified as true and complete by
the Corporate Secretary of ELP.
7.2.13 A certificate of the California Secretary of State,
each dated as of a date not earlier than ten days prior to the Closing Date,
as to the good standing of EAS and the payment of all corporate franchise
taxes), together with facsimile confirmation of such good standing on the
Closing Date.
7.2.14 An affidavit of the Chief Executive Officer or Chief
Financial Officer of ELP stating that ELP is not a foreign seller within the
meaning of the Internal Revenue Code of 1986, as amended.
7.2.15 Such other consents as Buyer deems necessary in
order to consummate the transactions contemplated herein.
7.2.16 Such other separate instruments of sale, assignment
or transfer that Buyer may reasonably deem necessary or appropriate in order
to perfect, confirm or evidence title to all or any part of the Property.
7.2.17 In its reasonable judgment, DAH shall be satisfied
with the completion of its due diligence and [shall have obtained the consent
of its senior lender and of its subordinated lender of the transaction
contemplated by this agreement].
7.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF ELP AND LYON. Each and
every obligation of ELP and Lyon to be performed on or before the Closing
Date shall be subject to the satisfaction on or before the Closing Date of
each of the following conditions (unless waived in writing by ELP and Lyon):
The Buyer shall have delivered to ELP each of the following, in each case
duly and properly executed (if appropriate)
33
<PAGE>
and in form and substance reasonably satisfactory to ELP:
7.3.1 Payment of an amount equal to $1 million in
immediately available funds (cash) on the Closing Date.
7.3.2 Resolutions of the directors of Buyer and DAH
authorizing the execution and delivery of this Agreement by Buyer and DAH
respectively and the performance of their respective obligations hereunder,
certified by the Corporate Secretaries of Buyer and DAH, respectively.
7.3.3 An opinion of Spolin & Silverman, counsel for Buyer
and DAH, addressed to ELP and Lyon and dated the Closing Date, in the form of
EXHIBIT C attached hereto.
7.3.4 The Assumption Agreement with respect to the Assumed
Liabilities, in the form of EXHIBIT D attached hereto.
7.3.5 A termination of the guaranty of Air/Lyon
Associates, L.P. in favor of Daimler-Benz in the form of EXHIBIT E attached
hereto.
7.3.6 Execution of a promissory note (the "Note") by DAH
in favor of Seller in the form of EXHIBIT F attached hereto.
8. MISCELLANEOUS PROVISIONS.
8.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be effective
upon receipt and shall be delivered by commercial courier providing proof of
delivery to such address as may be designated from time to time pursuant to
this Section 8.1 by the parties hereto and which addresses will initially be
as set forth below:
If to DAH
or Buyer: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R. Jack DeCrane
Fax No. (310) 536-0257
with a copy to: DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, Ohio 44321
Fax No. (216) 668-2518
If such notice
asserts a breach
of this Agreement,
a copy to: Spolin & Silverman
34
<PAGE>
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman
Fax No. (310) 576-4844
If to Lyon: William Lyon
4490 Von Karmen Avenue
Newport Beach, California 92660
Fax No. (714) 476-8121
If to ELP: Elsinore LP
John Wayne/Orange County Airport
19300 Ike Jones Road
Santa Ana, California 92707
Attention: Denis P. Kalscheur
Fax No. (714) 261-6917
If such notice
asserts a breach
of this Agreement,
a copy to: Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Attention: Louis M. Castruccio, Esq.
Fax No. (310) 203-7199
8.2 ARBITRATION OF DISPUTES. Except for actions seeking injunctive
relief, which may be brought before any court having jurisdiction, any claim
arising out of or relating to (i) this Agreement, including, but not limited
to, its validity, interpretation, enforceability or breach, or (ii) the
relationship between the parties (including its commencement and termination)
which are not settled by agreement between the parties, shall be settled by
arbitration conducted exclusively in Los Angeles, California before a retired
Judge of the Superior Court in an arbitration proceeding conducted in
accordance with the rules then in effect of the Judicial Arbitration and
Mediation Services ("JAMS"). The decision of the Arbitrator shall be final
and binding on the parties, and such decision shall be enforceable as a
judgment in any court of competent jurisdiction. The parties hereby consent
to the in personam jurisdiction of the courts of the State of California for
the purposes of confirming any such award and entering judgment thereon. In
any arbitration proceedings hereunder, (a) all testimony of witnesses shall
be taken under oath; (b) discovery will be allowed to the same extent as
available under the rules then applicable to civil actions under California
law; (c) upon conclusion of any arbitration, the arbitrator shall render
findings of fact and conclusions of law in a written opinion setting forth
the basis and reasons for any decision reached and deliver such documents
to-each party to this Agreement along with a signed copy of the award; and
35
<PAGE>
(d) the rules of evidence as then applicable to civil actions under
California law shall be applied in the arbitration. Each party agrees that
the arbitration provisions of this Agreement are its exclusive damage remedy
and expressly waives any right to seek redress in another forum.
8.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, and the documents referred to herein and therein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
8.4 BINDING EFFECT; ASSIGNMENT. This Agreement and the rights and
obligations arising hereunder shall inure to the benefit of and be binding
upon ELP, its successors and permitted assigns, Buyer and DAH, their
respective successors and permitted assigns, and Lyon, his heirs, legal
representative and permitted assigns. Neither this Agreement nor any of the
rights, interest or obligations hereunder shall be transferred or assigned
(by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other party or parties except that Buyer shall
have the right to assign, in whole or in part, its rights hereunder to one or
more affiliates of Buyer, which in each case shall be a wholly-owned
subsidiary of Buyer. Any transfer or assignment of any of the rights,
interests or obligations hereunder in violation of the terms hereof shall be
void and of no force or effect; it being acknowledged and agreed however,
that notwithstanding any such agreement, DAH and Buyer shall remain primarily
liable hereunder.
8.5 CAPTIONS. This Agreement and Section headings of this
Agreement are inserted for convenience only and shall not constitute a part
of this Agreement in construing or interpreting any provision hereof.
8.6 WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance),
in whole or in part, except by a writing executed by the parties hereto, and
no waiver of any of the provisions or conditions of this Agreement or any of
the rights of a party hereto shall be effective or binding unless such waiver
shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have
otherwise agreed in writing, no waiver by that party of any condition of this
Agreement or breach by the other party of any of its obligations or
representations hereunder or thereunder shall be deemed to be a waiver of any
other condition or subsequent or prior breach of the same or any other
obligation or representation by the other party, nor shall any forbearance by
the first party to seek a remedy for any noncompliance or breach by the other
party be deemed to be a waiver by the first party of its rights and remedies
with respect to such noncompliance or breach.
8.7 NO THIRD PARTY BENEFICIARIES. Subject to Section 7.3, nothing
herein, expressed or implied, is intended or shall be construed to confer
upon or give to any person, firm, corporation or legal entity, other than the
parties hereto, any rights, remedies or other benefits under or by reason of
this Agreement.
36
<PAGE>
8.8 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
8.9 SEVERABILITY. With respect to any provision of this Agreement
finally determined to be unenforceable, ELP, Lyon, DAH and Buyer hereby agree
that such court or arbitrator(s) shall have jurisdiction to reform such
provision so that it is enforceable to the maximum extent permitted by law,
and the parties agree to abide by such court's or arbitrator(s)'
determination. In the event that any such provision [of this Agreement]
cannot be reformed, such provision shall be deemed to be severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
8.10 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the State of
California.
8.11 EXPENSES. Whether or not the transactions are consummated,
none of the parties hereto shall have any obligation to pay any of the fees
and expenses of any other party incident to the negotiation, preparation and
execution of this Agreement or any related agreements, including the fees and
expenses of counsel, accountants, investment bankers and other experts.
DeCrane Aircraft Holdings, Inc.,
an Ohio corporation
/s/ R G MacDonald
- ---------------------------------------
By: R G MacDonald
Its President
EE Acquisition, Inc.,
a Delaware corporation
/s/ R G MacDonald
- ---------------------------------------
By: R G MacDonald
Its President
- ---------------------------------------
William Lyon, individually
Elsinore LP,
a California Limited Partnership
37
<PAGE>
8.8 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument
8.9 SEVERABILITY. With respect to any provision of this Agreement
finally determined to be unenforceable, ELP, Lyon, DAH and Buyer hereby agree
that such court or arbitrator(s) shall have jurisdiction to reform such
provision so that it is enforceable to the maximum extent permitted by law.
and the parties agree to abide by such court's or arbitrator(s)'
determination. In the event that any such provision [of this Agreement]
cannot be reformed, Such provision shall be deemed to be severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
8.10 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the taws of the State of
California.
8.11 EXPENSES. Whether or not the transactions are consummated,
none of the parties hereto shall have any obligation to pay any of the fees
and expenses of any ether party incident to the negotiation, preparation and
execution of this Agreement or any related agreements, including the fees and
expense of counsel, accountants, investment bankers and ether experts.
DeCrane Aircraft Holdings. Inc.,
an Ohio corporation
/s/ R G MacDonald
- ---------------------------------------
By: R G MacDonald
Its President
EE Acquisition, Inc.,
a Delaware corporation
/s/ R G MacDonald
- ---------------------------------------
By: R G MacDonald
Its President
/s/ William Lyon
- ---------------------------------------
William Lyon, individually
Elsinore LP,
a California Limited Partnership
37
<PAGE>
By: ELSINORE AEROSPACE SERVICES, INC.
Its General Partner
/s/ Denis P. Kalscheur
- ---------------------------------------
By: Denis P. Kalscheur
President
38
<PAGE>
SCHEDULE A TO
ASSET PURCHASE AND SALE AGREEMENT
DEFINITIONS
"Acquisition Proposal" .............................................. 6.2.3(d)
"Elsinore Engineering" .............................................. Preamble
"Agreement" ......................................................... Preamble
"ELP" ............................................................... Preamble
"EAS Common Shares" .................................................... 3.2.2
"Approvals" ............................................................ 1.1.4
"Bid" ................................................................. 3.2.24
"Buyer" ............................................................. Preamble
"CERCLA" .............................................................. 3.2.10
"COBRA" ............................................................... 3.2.15
"Commitment" .......................................................... 3.2.23
"Closing Date" ........................................................... 7.1
"Closing Date Financial Statements" .................................... 6.2.8
"Contracts" ............................................................ 1.1.6
"DAH" ............................................................... Preamble
"Deposits" ............................................................. 1.1.8
"Employee Benefit Plan" ............................................... 3.2.15
"ERISA" ............................................................... 3.2.15
"Financial Statements" ................................................. 3.2.4
"Government" .......................................................... 3.2.24
"Government Contract" ................................................. 3.2.24
"Hazardous substance" ................................................. 3.2.10
"Machinery and Equipment" .............................................. 1.1.2
"Material Adverse Effect" ............................................. 3.2.12
"Non-Restricted Employees" ................................................. ?
"Other Claims" ........................................................ 1.1.11
"Parts and Furniture" .................................................. 1.1.2
"Permits" .............................................................. 3.2.5
"Personal Property Leases" ............................................. 1.1.2
"Prepaid Expenses" ..................................................... 1.1.8
"Lyon" .............................................................. Preamble
"Proprietary Rights" ....................................................... ?
"Real Property" ............................................................ 2
"Purchase Price" ........................................................... 4
"Real Property Leases" ................................................. 1.1.1
"Receivables" .......................................................... 1.1.7
"Registrations" ............................................................ ?
"Release" ............................................................. 3.2.10
"Restricted Employee ....................................................... ?
"Termination Claims" ................................................... 1.1.9
39
<PAGE>
"Tooling" .............................................................. 1.1.2
"Transferor" .......................................................... 3.2.24
"Vehicles" ............................................................. 1.1.3
40
<PAGE>
10.20 ASSET PURCHASE AND SALE AGREEMENT, DATED NOVEMBER 25, 1996 AMONG AMP
INCORPORATED, THE WHITAKER CORPORATION AND REGISTRANT
- ------------------------------------------------------------------------------
ASSET PURCHASE AND SALE AGREEMENT
DATED AS OF
NOVEMBER 25, 1996
AMONG
AMP INCORPORATED,
THE WHITAKER CORPORATION
AND
DECRANE AIRCRAFT HOLDINGS, INC.
- ------------------------------------------------------------------------------
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
ACQUISITION OF ASSETS OF MANUFACTURING ACTIVITIES OF AMP INCORPORATED
COMMONLY REFERRED TO AS QUALITRONIX
BY
DECRANE AIRCRAFT HOLDINGS, INC.
This Asset Purchase and Sale Agreement ("Agreement") is made and entered
into by and among AMP Incorporated ("AMP"); The Whitaker Corporation
("Whitaker") only with respect to certain specific provisions of this
Agreement pertaining to proprietary rights and intellectual property; and
DeCrane Aircraft Holdings, Inc. ("DAH"), based on the following facts:
AMP is the owner of and desires to sell all of the assets as relate to
its cold heading and contact fabrication operations (the "Contact Products")
conducted at its facility located at 45-C Parker Street, Irvine, California,
92718-1606 (the "Irvine Facility") and as necessary to build and manufacture
such Contact Products and operate the Irvine Facility as it is currently
being operated, all of which is commonly referred to as the QUALITRONIX
activities. (Hereinafter for purposes of convenience referred to as
"Qualitronix"). Whitaker is the owner of certain proprietary rights and
intellectual property with respect to Qualitronix. Wherever the context shall
require, reference to Qualitronix shall mean "AMP with respect to the
manufacturing activities commonly identified as Qualitronix and the Assets to
be acquired pursuant to this Agreement", or its equivalent as appropriate).
Wherever the context requires a covenant, agreement or warranty and
representation is made or required by Whitaker, such shall also mean AMP
shall cause Whitaker to perform such covenant or agreement and make such
warranty and representation, whether or not specifically stated.
DAH desires to purchase the assets, proprietary rights and intellectual
property of Qualitronix;
The parties desire to enter into certain supply contracts whereby (i)
AMP shall agree to purchase from DAH and DAH shall agree to sell to AMP all
of AMP's 1997 requirements for Contact Products to be used in kits and
internal assemblies for cylindrical connectors ("Cylindrical Supply
Contract") and (ii) AMP shall agree to purchase from DAH and DAH shall agree
to sell to AMP all of AMP'S 1997 and 1998 requirements for Contact Products
to be used for non-cylindrical connectors (which AMP either resells or uses
in its internal assembly as part of other products) (the "Non-Cylindrical
Supply Contract") according to the terms and conditions set forth therein,
(the "Cylindrical Supply Contract" and "Non-Cylindrical Supply Contract" may
sometimes collectively be referred to as the "Supply Contracts"). For the
purposes of provisions relating only to the Supply Contracts, AMP shall mean
the Aerospace Government Systems Sector of AMP.
Terms set forth herein with quotation marks " " are defined terms and
shall have the meaning set forth wherever located.
The term "Agreement" shall mean this Asset Purchase and Sale Agreement
and any schedules, exhibits or other documents, including the Supply
Contracts, referred to herein as being a part of the agreements among the
parties.
References herein to "financial statements", "balance sheet", "income
statement" or "books and records" shall mean and refer to one or more
schedules prepared by AMP, containing the
<PAGE>
information specified, prepared to the extent reasonably possible, in such a
manner as if Qualitronix were a stand alone, separate entity for which
separate books, records and accounts were maintained in accordance with the
customary practices of AMP consistently applied.
The preamble, definitions and references hereinabove shall be deemed an
integral part of the Agreement.
Based on the foregoing preamble, facts and circumstances, the parties
hereby agree as follows
1. ASSETS TO BE PURCHASED AND SOLD.
1.1 THE QUALITRONIX ASSETS. On the Closing Date, subject to any exclusions
provided for in Section 1.3, AMP and Whitaker shall transfer to DAH all of the
assets, properties, rights (contractual or otherwise) used in the activities of,
by or in connection with Qualitronix, wherever located, in each case whether in
the nature of real, personal, or mixed property and whether tangible or
intangible and known or unknown, whether or not set forth with particularity in
this Agreement (collectively, the "Assets"). Without limiting the generality of
the foregoing, the assets of Qualitronix to be transferred include:
1.1.1 REAL PROPERTY. Any and all real property (the "Real Property") which
shall relate solely to Qualitronix, including that listed on Schedule 1.1.1;
1.1.2 REAL PROPERTY LEASES. Any and all rights under leases of real
property and improvements (the "Real Property Leases"), relating to the Irvine
Facility and any others, all as listed on Schedule 1.1.2;
1.1.3 PERSONAL PROPERTY.
(a) All machinery and equipment (the "Machinery and Equipment"), including
that listed on Schedule 1.1.3(a);
(b) All tooling (the "Tooling"), including that listed on Schedule
1.1.3(b);
(c) All furnishings, fixtures, computers and related equipment and
furniture ("Furnishings & Fixtures"), including that listed on Schedule
1.1.3 (c);
(d) All rights under leases of equipment or other tangible personal
property ("Personal Property Leases"), including that listed on Schedule
1.1.3(d);
1.1.4 INVENTORY AND BACKLOG.
(a) All raw materials, supplies, component parts, work-in-process and
finished goods inventory, and other inventory (collectively the
"Inventory"), including that listed on Schedule 1.1.4(a);
(b) All backlogs of unfilled orders as of the date of this Agreement (the
"Backlog") as listed on Schedule 1.1.4(b) (the "Opening Backlog
Schedule"), which schedule shall set forth in detail; dates of orders,
quantity, price, customer information, shipping dates and such other
information as shall be deemed relevant to a determination of the
scope, extent and accuracy of the Backlog. Schedule 1.1.4(b) shall
also set forth the Backlog which AMP projects will exist at the
Closing (the "Projected Backlog").
Page 2
<PAGE>
1.1.5 RESERVED.
1.1.6 PERMITS. All material licenses, permits, consents, authorizations,
approvals, certificates and franchises of any regulatory,
administrative or other agency or body, issued to or held by AMP
with respect to the Assets or the activities of Qualitronix
(collectively, the "Permits"), as listed in Schedule 1.1.6;
1.1.7 PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY
(a) All rights in patents, patent applications, inventions, invention
disclosures copyrights, mask sets, computer programs, trade secrets,
know-how, techniques, designs and other forms of intellectual property
identified in Schedule 1.1.7(a);
(b) All trademarks, names, service marks, trade names, marks, symbols and
logos owned by AMP or Whitaker and used in connection with Qualitronix
which are not otherwise used in any other business or activity of AMP.
Without regard to any other use, the name "Qualitronix" or any
derivative thereof, shall be transferred without restriction, all as
shown in Schedule 1.1.7(b); (The interests set forth in Sections
1.1.7(a) and 1.1.7(b) shall collectively be referred to as the
"Proprietary Rights")
1.1.8 CONTRACTS.
(a) All rights under Material Contracts, (as defined and
described in Section 3.2.22) not otherwise described in this Section
1.1, to the extent assignable, as listed on Schedule 1.1.8(a);
(b) A separate list of those contracts which are Material
Contracts, but which are not assignable shall be set forth as
Schedule 1.1.8(b).
1.1.9 RESERVED.
1.1.10 RESERVED.
1.1.11 DEPOSITS AND PREPAID EXPENSES. All of the deposits and prepaid
expenses, other than tax refunds, of AMP as relates to the Assets (respectively,
the "Deposits" and the "Prepaid Expenses") as set forth in Schedule 1.1.11.
1.1.12 RESERVED.
1.1.13 RESERVED.
1.1.14 CUSTOMER LISTS. A complete listing of all customers and
distributors, setting forth the names and addresses, all as set forth on
Schedule 1.1.14.
1.1.15 BOOKS AND RECORDS. All books of account, files, papers and records
maintained by AMP with respect to Qualitronix;
1.1.16 TELEPHONE NUMBERS. All telephone, fax, e-mail and other numbers used
by Qualitronix, including those numbers listed on Schedule 1.1.16;
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1.2 NON-ASSIGNMENT OF ASSETS. To the extent that any asset described in
Section 1.1 may not be assigned to DAH, or may only be assigned to DAH with
the consent of a third party (collectively "Non-assignable Assets"), then
NOTWITHSTANDING anything to the contrary in this Agreement, neither this
Agreement nor any action taken shall constitute an assignment or an agreement
to assign; PROVIDED, HOWEVER, that in such case the parties shall act in
accordance with the provisions of Section 1.4 below. A complete list of such
Non-assignable Assets shall, be set forth in Schedule 1.2.
1.3 EXCLUDED ASSETS.
1.3.1 Notwithstanding Section 1.1, the assets (if any) listed on
Schedules 1.3 and 1.1.8(b) shall be excluded from the "Assets" for all purposes.
1.3.2 Such exclusions shall include that portion of the management
information systems utilized by AMP in connection with the activities of
Qualitronix, which reside on the management information systems of AMP (the "AMP
System") and which cannot be segregated without impairing the integrity of the
data or systems of AMP or disclosing to DAH confidential or proprietary
information of AMP which is not applicable to Qualitronix or the Assets.
However, any data which is currently recorded or stored on the AMP System,
applicable to the activities of Qualitronix and which is capable of being
segregated, shall be included in the Books and Records set forth in Schedule
1.1.15.
1.3.3 Such exclusions shall include the "routers" used in connection
with the local area network server.
1.3.4 Such exclusions shall include the plating lines located at the
facility in Ontario, California.
1.4 THIRD PARTY CONSENTS
1.4.1 AMP shall use all reasonable efforts to obtain the consents to
the assignment of the Material Contracts and Permits, which consents shall be
referred to as the "Material Consents". AMP shall not agree to make any
unreasonable financial accommodations to obtain such Material Consents.
1.4.2 In the event that any Permit which is to be assigned to DAH is
not assignable, and DAH needs such permit in order to operate the business of
Qualitronix, AMP and DAH shall use their best efforts and make every good
further attempt to obtain such Permit.
1.4.3 Promptly following the execution and delivery of this
Agreement, DAH and AMP shall cooperate with each other in obtaining consents to
the sale of the Assets, and the consummation of the other transactions
contemplated by this Agreement. The forms of consent shall be mutually
acceptable to AMP and DAH.
1.4.4 Notwithstanding any provision to the contrary contained herein,
AMP shall not be obligated to assign to DAH any contract, license, purchase
order, sales order, lease, claim or right or any benefit therefrom, or other
instrument which provides that it may not be assigned without the consent of the
other party thereto and for which such consent is not obtained, other than
Material Consents, or which is subject to a preferential right held by the other
party, but in any such event, AMP shall cooperate with DAH in all reasonable
respects for a period of one (1) year from the Closing Date in any reasonable
arrangement designed to provide the benefits thereof to DAH.
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2. PAYMENT OF PURCHASE PRICE ASSUMPTION OF CERTAIN LIABILITIES: CLOSING.
2.1 THE PURCHASE PRICE In consideration for the transfer and assignment by
AMP of the Assets, the entry into the Supply Contracts and in consideration of
the representations, warranties and covenants of AMP and Whitaker herein, DAH
agrees to pay at the Closing:
2.1.1 An amount equal to the lesser of (i) Six million five hundred
thousand dollars ($6,500,000) or (ii) the sum of:
(a) The net book value of the tangible fixed assets as
currently used to build the Contact Products located at the Irvine Facility
or at any other location, such as at the facility of a Distributor, and as
necessary and currently utilized to operate said facility, including the
leasehold improvements as of September 30, 1996, all as set forth in Schedule
2.1.1(a) (the "Tangible Fixed Assets") multiplied by a factor of 1.5 (the
"Tangible Asset Purchase Price") and
(b) The value of the Inventory as determined in accordance
with the provisions of Section 2.5 as of October 31, 1996, (the "Initial
Inventory Value"), but excluding the value of any excess (meaning any
inventory exceeding the usage in the past 12 months) or obsolete inventory
(meaning any inventory with zero usage in the past 12 months) (collectively
"Excess and Obsolete Inventory") as of the Inventory Date, multiplied by a
factor of 1.5 (the "Initial Inventory Purchase Price") For the purposes of
the determination of Excess and Obsolete Inventory, AMP shall set forth on
Schedule 2.1.1(b) the quantity, total value, and Excess and Obsolete value by
part number and the activity by part number. The activity for such
calculations will be as defined in AMP Inventory Valuation Policy 09.04.02,
revised 04/94. Upon receipt and review by DAH of the calculations used by AMP
to determine the Excess and Obsolete Inventory, DAH will determine whether an
adjustment can be made, taking into consideration DAH's then existing
requirements for inventory classified as excess or obsolete. To the extent
that DAH determines that its usage history indicates that it can use any
portion of the Excess and Obsolete Inventory, DAH shall notify AMP that it
may exclude such portion from the Excess and Obsolete Inventory calculation.
Upon inquiry by AMP, DAH shall provide to AMP its data supporting its
determinations pursuant to this paragraph.
(c) less any obligations for accrual items or other prorations
as provided for in Sections 2.6.2 and 3.2.2, which shall be subtracted from
the Purchase Price if not previously discharged by AMP. If any such item is
or would be included in the Inventory or Tangible Fixed Assets as to which
the Tangible Asset Purchase Price or Inventory Purchase Price has been
determined, then such reduction shall be multiplied by a factor of 1.5.
2.1.2 RESERVED.
2.1.3 There shall be withheld from the Purchase Price payable at the
Closing an amount equal to ten percent (10%) of the Initial Inventory Value (the
"Holdback Amount"), subject to the provisions of Section 2.5.2.
2.1.4 The Purchase Price shall be decreased by an amount equal to
three percent (3%) of the total value of contact inventory held by Distributors
on November 15, 1996.
2.2 THE CLOSING The closing of the purchase and sale of the Assets by AMP
and Whitaker to DAH (the "Closing") shall take place at 11:00 AM, local time on
December 13, 1996, but not later than December 27, 1997, or such other time
and/or place as the parties hereto shall agree upon in writing (the "Closing
Date"). The time set forth for Closing shall be extended as set forth in Section
5.2.9. The parties
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need not be physically present in the same location in order to accomplish
the Closing. The exchange of signed documents by facsimile transmission shall
be deemed to be the exchange of the original signed documents, provided that
the actual original documents are exchanged by appropriate means within three
business days following the Closing.
2.3 RESERVED
2.4 RESERVED
2.5 INVENTORIES AND POST CLOSING ADJUSTMENT
2.5.1 For the purpose of determining the amount to be paid pursuant
to Section 2.1.1(b) hereof (the "Initial Inventory Purchase Price), the value
of the inventory (the "Initial Inventory Value") shall be determined from the
Inventory schedule to be provided by AMP based upon its books and records
maintained for Qualitronix as of October 31, 1996 (the "Initial Inventory
Date") utilizing costs at the lower of "standard cost" or market value.
2.5.2 Within three (3) days following the Closing (the "Final
Inventory Date"), the parties shall make a joint physical count and
determination of the value of the Inventories for the purpose of determining
the actual amount payable with respect to the Inventory pursuant to Section
2.1 (the "Final Inventory Value"). The Final Inventory Purchase Price shall
be the amount determined by multiplying the Final Inventory Value by a factor
of 1.5. In the event the Final Inventory Purchase Price shall be greater than
the Initial Inventory Purchase Price, DAH shall within 10 days from such
determination pay to AMP such differential and the Holdback Amount. In no
event shall the amount so paid result in a total Purchase Price exceeding
$6,500,000.
2.5.3 In the event that the Final Inventory Purchase Price shall be
less than the Initial Inventory Purchase Price, but such differential is less
the Holdback Amount, then DAH shall, within 10 days from such determination
pay to AMP such portion of the Holdback Amount remaining.
2.5.4 In the event that the Final Inventory Purchase Price shall be
less than the Initial Inventory Purchase Price by an amount exceeding the
Holdback Amount, then AMP shall, within ten days from such determination pay
to DAH such differential.
2.5.5 In the event of a dispute between the parties pertaining to
any aspect of the determination of the Final Inventory Value or Final
Inventory Purchase Price, such dispute shall be resolved by submission to and
determination by a mutually agreed upon "Big Six" or "National" accounting
firm with the costs of such determination borne equally by the parties.
2.6 ASSUMPTION OF CERTAIN LIABILITIES: NO ASSUMPTION OF OTHER LIABILITIES
On the Closing Date, DAH will assume
2.6.1 RESERVED.
2.6.2 ACCRUED EMPLOYEE EXPENSES. All accrued employee expenses in
the ordinary course which are (i) reflected as a liability as set forth on
the books and records of Qualitronix and shown on Schedule 2.6.2, (the
"October 31, 1996 Schedule of Liabilities") or (ii) if incurred after October
31, 1996, are (x) completely and accurately reflected in all material
respects on the schedules required by Section 3.2.21 and to be delivered to
DAH on the Closing Date and (y) are of the kind expressly permitted by the
affirmative covenants, and not prohibited by the negative covenants, set
forth in Section 4 hereof.
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2.6.3 REAL PROPERTY LEASES: PERSONAL PROPERTY LEASES. The
obligations of Qualitronix or AMP arising under the Real Property Leases
listed on Schedule 1.1.2 and the Personal Property Leases listed on Schedule
1.1.3(c).
2.6.4 DISTRIBUTOR RETURNS OBLIGATIONS The obligation to accept any
return of Contact Products from any Distributor, pursuant to any return
provisions, including contractual Distributor inventory adjustments with
respect to Distributor inventory of Contact Products as of the Closing Date,
except for returns made for a period of three (3) months from the Closing
Date pursuant to termination provisions in such Distributor Agreements, as to
which AMP shall reimburse DAH an amount equal to the credit required to be
given to the Distributor pursuant to the termination provisions of such
Distributor Agreement. In the event that DAH shall notify AMP within such
three month period that it has received any form of indication from a
Distributor that it intends to terminate its Distributor Agreement, such
three month period shall be extended for an additional three (3) months,
provided that DAH demonstrates it is making a good faith effort to continue
the trial period with the Distributor.
2.6.5 RESERVED
2.6.6 ROYALTIES AND LICENSE FEES. The royalties and license fees
owing by Qualitronix, but ONLY TO the extent specified in Schedule 2.6.6.
2.6.7 CONTRACT OBLIGATIONS: Liabilities and obligations under any
unfilled purchase order, sales order, lease, agreement or commitment of any
kind by which AMP is bound on the Closing Date and which are assigned to DAH
pursuant to this Agreement, and which were entered into in the ordinary
course or are set forth in Schedule 1.1.8;
2.6.8 PERMIT OBLIGATIONS: Liabilities and obligations under permits,
registrations,licenses, governmental approvals, orders and directives which
are assigned to DAH pursuant to this Agreement and which were obtained or
entered into in the ordinary course or are set forth on Schedule 1.1.6;
2.6.9 PRODUCT LIABILITIES Product liabilities of every kind and
nature, relating to products constituting finished goods inventory of
Qualitronix as of the Closing Date.
2.7 LIABILITIES NOT ASSUMED.
2.7.1 With the exception of the liabilities assumed pursuant to
Section 2.6, DAH shall not by the execution or performance of this Agreement,
or otherwise, assume or otherwise be responsible for any liability or other
obligation of Qualitronix or AMP of any kind, nature or description, whether
such liability or obligation is mature or not, liquidated or unliquidated,
fixed or contingent, known or unknown, whether arising out of occurrences
prior to, at or after the date of this Agreement, including those rising from
breach of contract, breach of any warranty, except as specifically set forth,
infringement, fraud, violation of any law, rule or regulation, or out of any
charge, complaint, action, suit, proceeding, hearing, investigation, claim or
other demand.
2.7.2 AMP shall be solely responsible for warranty claims made with
respect to Contact Products shipped on or prior to the Closing Date and DAH
shall be solely responsible for warranty claims made with respect to Contact
Products shipped by Qualitronix subsequent to the Closing Date
2.7.3. Without limiting the foregoing, DAH shall not assume any
other obligations of Qualitronix or AMP except to the extent set forth in
Schedule 2.7.3 and reflected as a reduction to the Purchase Price.
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3. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES BY DAH. DAH hereby represents and
warrants to AMP that, except as set forth on Schedule 3.1, the
representations and warranties of DAH contained in this Agreement, including
those contained in this Section 3.1, are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date.
DAH hereby represents and warrants to AMP the following:
3.1.1 ORGANIZATION. DAH is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, and has
all requisite corporate power and authority to own, lease and operate its
properties and conduct its businesses as now being conducted. DAH is duly
qualified, or will be duly qualified prior to the Closing Date, to do
business and is in good standing in each jurisdiction in which the nature of
its business or of its properties makes such qualification necessary
3.1.2 RESERVED.
3.1.3 AUTHORIZATION. DAH has all requisite corporate power and
authority to enter into this Agreement and the Supply Contracts, perform its
obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. All necessary corporate action has been
taken by DAH with respect to the execution and delivery of this Agreement,
and the Supply Contracts, and this Agreement and the Supply Contracts
constitute valid and binding obligations of DAH, enforceable against DAH, in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and
other laws of general application affecting the enforcement of creditors'
rights generally.
3.1.4 LITIGATION. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial, pending or,
to the knowledge of DAH, threatened against DAH, at law or in equity, before
any federal, state or local court or regulatory agency, or other governmental
authority, which might have an adverse effect on their ability to perform any
of their obligations under this agreement or upon the consummation of the
transactions contemplated by this Agreement.
3.1.5 BROKERS. FINDERS. Except as disclosed in Schedule 3.1.5, the
transactions contemplated herein were not submitted to DAH by any broker or
other person entitled to a commission or finder's fee thereon, and were not
with the consent of DAH submitted to DAH by any such broker or other person.
Neither DAH nor any of its officers, directors or employees has engaged any
broker or finder or incurred or taken any action which may give rise to any
liability against itself or the Assets for any brokerage fees, commissions,
finders fees or similar fees or expenses and no broker or finder has acted
directly or indirectly for DAH in connection with this Agreement or the
transactions contemplated hereby. No investment banking, financial advisory
or similar fees have been incurred or are or will be payable by DAH in
connection with this Agreement or the transactions contemplated hereby. DAH
shall be solely responsible for the fees so incurred.
3.1.6 NO CONFLICT OR DEFAULT Except as pertains to the requirement
of DAH to obtain the approval of its senior and subordinated lender as set
forth in Section 5.2.9, neither the execution and delivery of this Agreement,
nor compliance with the terms and provisions hereof, including the
consummation of the transactions contemplated hereby and thereby, will (a)
violate in any material respect any statute, regulation or ordinance of any
governmental authority, or (b) conflict with or result in the breach of any
term, condition or provision of the articles of incorporation or bylaws of
DAH or of any agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation or instrument to which DAH is a
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party or by which DAH maybe bound, or (c) constitute a material default (or an
event which with the lapse of time or the giving of notice, or both, would
constitute a material default) thereunder.
3.2 REPRESENTATION AND WARRANTIES BY AMP. AMP hereby represents and
warrants to DAH that, except as set forth on Schedule 3.2, the
representations and warranties of AMP contained in this Agreement, including
those contained in this Section 3.2, are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date. As
used in this Section 3.2,(i)unless stated to the contrary, all
representations and warranties which are made to the "Knowledge of AMP" or
similar terms, relate only to Qualitronix, its activities, assets and
liabilities; (ii) except with respect to Environmental Matters as set forth
in Section 3.2.16, all representations and warranties relate only to the
period from the time that AMP acquired Qualitronix to the date of this
Agreement when Qualitronix, its activities, assets and liabilities were owned
by AMP and (iii) when reference is made to Qualitronix as if it were a legal
entity, the representation is meant to be with respect to the activities of
AMP, as to which the term "Qualitronix" has been applied merely for
convenience, as if Qualitronix were a separate legal entity, although the
parties specifically agree and understand that Qualitronix is not such a
separate legal entity, nor is it a specific defined line of business on a
stand alone basis. AMP hereby represents and warrants to DAH the following:
3.2.1 CORPORATE ORGANIZATION.
(a) AMP is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania, and has
all requisite corporate power and authority to own, lease and operate its
properties and conduct its business as now being conducted. AMP is duly
qualified to do business and in good standing in each jurisdiction wherein
the activities of Qualitronix would require such qualification as listed on
Schedule 3.2.1. Except as set forth on Schedule 3.2.1, AMP has not received
any written notice or assertion within the last three years from any
governmental official of any jurisdiction to the effect that AMP, solely as
it pertains to the activities conducted as Qualitronix, is required to be
qualified or otherwise authorized to do business therein, in which AMP has
not qualified or obtained such authorization.
(b) Whitaker is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite corporate power and authority to own, lease and operate its
properties and conduct its business as now being conducted. Whitaker is duly
qualified to do business and in good standing in each jurisdiction wherein
the activities of Whitaker would require such qualification as listed on
Schedule 3.2.1. Except as set forth on Schedule 3.2.1, Whitaker has not
received any written notice or assertion within the last three years from any
governmental official of any jurisdiction to the effect that Whitaker is
required to be qualified or otherwise authorized to do business therein, in
which Whitaker has not qualified or obtained such authorization.
3.22 RESERVED.
3.23 AUTHORIZATION OF AMP . AMP or Whitaker, as the case may be, has
full corporate power and authority to enter into this Agreement, and the
Supply Contracts to which it is a party, perform its obligations hereunder
and thereunder and consummate the transactions contemplated hereby and
thereby. All necessary and appropriate corporate action has been taken by AMP
and Whitaker, as the case may be, with respect to the execution and delivery
of this Agreement, and the Supply Contracts to which it, is a party. This
Agreement constitutes, and the Supply Contracts to which AMP is a party, when
executed, and delivered by AMP will constitute, valid and binding obligations
of AMP or Whitaker, as the case may be, enforceable against AMP or Whitaker
in accordance with their respective terms, subject to applicable
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bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other laws of general application affecting the enforcement of
creditors' rights generally.
3.2.4 HISTORIC PERFORMANCE. Schedule 3.2.4 sets forth in full detail
the historic volume of Contact Products produced by Qualitronix and/or
consumed by AMP in the Cylindrical and Non-Cylindrical product, for the, nine
months ended September 30, 1996, including all sales direct to customers of
AMP and delivery of Contact Products manufactures by Qualitronix to AMP for
resale or inclusion as a component in or portion of a higher tier product or
assembly, except that direct sales volume on all Cylindrical Product shall
also include 1995. Such schedule shall specify the part number, quantity
delivered by part number, sales price, customer name for all Cylindrical
Products and the part numbers, quantity and purchase price for all
Non-Cylindrical Products and Inventory totals only for 1995 and the first
nine months of 1996 shall be provided. Such Inventory schedule shall also
show the Activity determined in the manner set forth in Section 2.1.1(b).
3.2.5 RESERVED.
3.2.6 ABSENCE OF CERTAIN CHANGES IN EVENTS. Except as set forth on
Schedule 3.2.6, since October 31, 1996, there has not been:
(a) Any material adverse change in the operations (as now
conducted or as presently proposed to be conducted), assets,
properties or rights, condition (financial or otherwise) or to the
best knowledge of AMP prospects, including, but not limited to any
indication by any customer or distributor of a material reduction
in anticipated volumes of Contact Products to be acquired, of AMP as
it pertains to the activities of Qualitronix or, any occurrence,
circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change (a "Material
Adverse Effect");
(b) Any material increase in amounts payable by AMP for the
benefit of, or committed to be paid by Qualitronix to or for the
benefit of any person listed on Schedule 3.2.6(b) (each a "Key
Employee") or in any benefits granted under any bonus, stock option,
profit sharing, pension, retirement, deferred compensation, insurance,
or other direct or indirect benefit plan, payment or arrangement made
to, for the benefit of any Key Employee;
(c) Any material transaction entered into or carried out by
AMP with respect to the activities of Qualitronix other than in the
ordinary and usual course;
(d) Any borrowing or agreement to borrow funds; any incurring
of any other obligation or liability, contingent or otherwise except
current liabilities incurred in the usual and ordinary course of
business not exceeding at any one time outstanding $10,000; or any
endorsement, assumption or guarantee of payment or performance of any
loan or obligation of any other individual, firm, corporation or other
entity by AMP with respect to Qualitronix;
(e) Any material change made by AMP in the methods of doing
business with respect to Qualitronix;
(f) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance imposed or agreed to be
imposed on or with respect to the Assets;
(g) Any current liabilities incurred or obligations under
contracts entered into after such date other than in the usual and
ordinary course of business;
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(h) Any sale, lease or other disposition of or any agreement
to sell, lease or otherwise dispose of any material portion of the
Assets, other than sales of finished goods in the usual and ordinary
course at the regularly scheduled prices;.
(i) Any purchase of or any agreement to purchase capital
assets for an amount in excess of $5,000 for any one such purchase or
$20,000 for all such purchases made by AMP with respect to Qualitronix
or any lease or any agreement to lease, as lessee, any capital assets
with payments over the term thereof to be made by AMP with respect
to Qualitronix exceeding an aggregate of $10,000;
(j) Reserved;
(k) Any modification, waiver, change, amendment, release,
rescission or termination of, or accord and satisfaction with respect
to, any material term, condition or provision of any material
contract, agreement, license or other instrument to which AMP is a
party as pertains to the Assets, other than any satisfaction by
performance in accordance with the terms thereof in the usual and
ordinary course of business;
(l) Any labor disputes or disturbances materially adversely
affecting the business or financial prospects of AMP as it pertains
to the activities of Qualitronix including the filing of any petition
or charge of unfair labor practices with the National Labor Relations
Board or efforts to effect a union representation election, actual or
threatened employee strikes, work stoppages or slow downs;
(m) Any delay or postponement (beyond normal practice) by AMP
with respect to Qualitronix of the payment of any accounts payable or
other liabilities of Qualitronix;
(n) To the best of the knowledge of AMP, any other event or
condition of any character which has had a Material Adverse Effect or
may reasonably be expected to result in a Material Adverse Effect; or
(o) To the best of the knowledge of AMP, there have been no
adverse events pertaining to environmental matters.
3.2.7 UNDISCLOSED LIABILITIES. To the best knowledge of AMP, except as
disclosed on Schedule 3.2.7, AMP has no liability or obligation of any nature
(whether liquidated, unliquidated, accrued, absolute, contingent or otherwise
and whether due or to become due) with respect to the Assets, except those
arising under agreements or other commitments expressly identified in any
Schedule hereto; and
3.2.8 TAXES. Except as set forth on Schedule 3.2.8, AMP has filed all
applicable Federal, State and local tax returns relating to the Assets and with
respect to the activities of Qualitronix.
3.2.9 COMPLIANCE WITH LAW.
(a) Subject to the provisions of Section 3.2.16, AMP is in
compliance in all material respects (with respect to the activities
of Qualitronix) with all applicable laws, statutes, orders, rules,
regulations, policies or guidelines promulgated, or judgments,
decisions or orders entered, by any federal, state, local or foreign
court or governmental authority or instrumentality with respect to the
activities of Qualitronix or relating to any of the Assets.
(b) [Reserved]
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(c) Schedule 1.1.6 contains a complete and accurate list of the
"Permits". Each of the Permits is currently valid and in full force
and effect. The Permits constitute all franchises, licenses, permits,
consents, authorization, approvals, and certificates of any
regulatory, administrative or other agency or body necessary for the
conduct of the activities of Qualitronix. AMP is not in material
violation of any of the Permits and there is not now pending nor, to
the best knowledge of AMP, any threatened proceeding which could
result in the revocation, cancellation or inability of AMP to renew
or transfer any Permit with respect to the activities of Qualitronix.
(d) To the best knowledge of AMP, except as set forth in
Schedule 3.2.9, AMP is not under investigation (with respect to the
activities of Qualitronix) with respect to, or has been charged with
or given notice of any violation of, any applicable law with respect
to the activities of Qualitronix or any of the Assets.
3.2.10 PROPRIETARY RIGHTS.
(a) AMP or Whitaker owns, free from encumbrances, the patents
and trademarks issued by the United States Patent and Trademark Office
and applications therefor, as well as any other Proprietary Rights set
forth in Schedules 1.1.7(a) and 1.1.7(b). No proceeding has been
filed, of which AMP or Whitaker has been notified, or to the best
knowledge of AMP or Whitaker is threatened to be filed, charging AMP
or Whitaker, with respect to the activities of Qualitronix as the same
is currently conducted, with infringement of any patent, trademark,
copyright, copyright registration or any other type of intellectual
property right or other proprietary rights of a third party.
(b) Schedules 1.1.7(a) and 1.1.17(b) set forth all of the
Proprietary Rights in respect thereof. Other than those Proprietary
Rights listed on Schedules 1.1.7(a) and 1.1.7(b), to the best of the
knowledge of AMP or Whitaker, no other Proprietary Rights are
necessary for the operation of the activities of Qualitronix as the
same is currently conducted and all such Proprietary Rights have been
reduced to writing. If Proprietary Rights other than as listed are
required for the operation of the activities of Qualitronix as the
same is currently conducted, AMP or Whitaker shall grant to DAH, a
royalty free license to the worldwide use of all such Proprietary
Rights currently used by Qualitronix and necessary to carry on the
operation of the activities of Qualitronix as the same is currently
conducted. Such license may not be sublicensed by DAH, except on an
intra-company basis nor may it be transferred except pursuant to a
merger, consolidation or transfer of substantially all of the Assets
of Qualitronix.
3.2.11 RESTRICTIVE DOCUMENTS OR LAWS. With the exception of the
matters listed on Schedule 3.2.11, AMP (with respect solely to the activities
of Qualitronix) is not a party to or bound under any and, to the best
knowledge of AMP, there is no pending, proposed or threatened regulation,
certificate, mortgage, lien, lease, agreement, contract, instrument, law,
vote, order, judgment or decree, or any similar restriction not of general
application which materially adversely affects, or reasonably could be
expected to materially adversely affect (i) the condition, financial or
otherwise, of the Assets or properties which are the subject of this
Agreement; (ii) the continued operation by DAH of the activities of
Qualitronix after the Closing Date on substantially the same basis as
said activities were theretofore operated; or (iii) the consummation of the
transactions contemplated in this Agreement.
3.2.12 INSURANCE. To the best of the knowledge of AMP, the
activities of Qualitronix and the Assets to be transferred herein are insured
with respect to such property and the conduct of such activities in such
amounts and against such risks as are sufficient for compliance with law, and
for compliance with the terms of each of its contractual commitments
(including under each of the Real Property Leases, Personal Property Leases
and Contracts). Schedule 3.2.12 is a true, correct and complete list of all
insurance policies and bonds
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in force in which AMP or Qualitronix is named as an insured party, in respect
of the activities of Qualitronix, or for which Qualitronix has been charged
or has paid any premiums. Except as disclosed in Schedule 3.2.12, all such
policies or bonds are currently in full force and effect. Neither AMP nor
Qualitronix has received any notice from any such insurer with respect to the
cancellation of any such insurance. AMP will continue all of such insurance
in full force and effect up to and including the Closing Date. All premiums
due and payable on such policies have been paid.
3.2.13 RESERVED
3.2.14 REAL PROPERTY. Except as set forth in Schedule 1.1.1, and except
with respect to real property leased pursuant to the Real Property Leases listed
on Schedule 1.1.2, Qualitronix has no real property. The real property leased
pursuant to the Real Property Leases constitutes all of the real property now
used in and necessary for the conduct of the activities of Qualitronix as
presently conducted. All such Real Property Leases are held free and clear of
all, pledges, liens, security interests, encumbrances and restrictions of any
nature whatsoever, except as listed on Schedule 3.2.14. Schedules 1.1.1 and
1.1.2 set forth a complete and accurate legal description of each parcel of real
property owned by AMP and used in connection with activities of Qualitronix.
Except as set forth in Schedule 3.2.14, all real property,
buildings and structures owned or used by AMP in connection with the
activities of Qualitronix and material to such activities is suitable for the
purpose or purposes for which it is being used, and to the best of the
knowledge of AMP is in such condition and repair as to permit the continued
operation of said activities. To the best of the knowledge of AMP, and except
as set forth in Schedule 3.2.14, none of such real property, buildings or
structures is in need of maintenance or repairs except for ordinary; routine
maintenance and repairs. To the best of AMP's knowledge, and except as set
forth in Schedule 3.2.14, there are no material structural defects in the
exterior walls or the interior bearing walls, the foundation or the roof of
any plant, building, garage or other such structure owned, leased or used by
AMP, and except as set forth in Schedule 3.2.14, in connection with the
activities of Qualitronix and the electrical, plumbing and heating systems,
and the air conditioning system, if any, of any such plant, building, garage
or structure are in reasonable operating condition in light of their age and
prior use. To the best of the knowledge of AMP, and except as set forth in
Schedule 3.2.14, the utilities servicing the real property owned, leased or
used in connection therewith are adequate to permit the continued activities
of Qualitronix and there are no pending or threatened zoning, condemnation or
eminent domain proceedings, building, utility or other moratoria, or
injunctions or court orders which would materially effect such continued
operation. Schedule 3.2.14 lists, and AMP has furnished or made available to
DAH copies of, all engineering, geologic and environmental reports prepared
by or for either AMP or Qualitronix with respect to the Real Property and the
real property leased pursuant to the Real Property Leases.
3.2.15 PERSONAL PROPERTY. The schedules provided for under Section
1.1.3 contain complete and accurate descriptions of the Personal Property.
Except as set forth in Schedule 3.2.15, and except with respect to personal
property leased pursuant to the material Personal Property Leases, AMP has
good, valid and marketable title to all of the Personal Property. Schedule
3.2.22 contains a complete and accurate description of all Personal Property
Leases to which AMP is a party and which are used in connection with the
activities of Qualitronix. Such portion of the Assets which is personal
property constitutes all of the personal property now used in or necessary
for the conduct of the activities of Qualitronix as presently conducted,
wherever located, and is held free and clear of all mortgages, pledges,
liens, security interests, encumbrances and restrictions of any nature
whatsoever, except as listed on Schedule 3.2.15.
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To the best knowledge of AMP, none of the Machinery or Equipment or
Tooling is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs.
3.2.16 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.2.16
and described in the reports listed on Schedule 3.2.14, to AMP's knowledge the
operations of Qualitronix is in compliance in all material respects with all
occupational health and safety acts and all environmental laws and regulations
of all federal, state and local governmental or regulatory bodies having
jurisdiction over AMP with respect to the activities of Qualitronix. Without
limiting the generality of the foregoing, and by way of example only, except as
set forth on Schedule 3.2.16, all as to AMP's knowledge:
(a) There has not been, and is not now occurring, any Release
of any Hazardous Substance on any real property owned, operated, leased or
used by AMP in connection with the activities of Qualitronix. For purposes
of this Agreement, the terms "Release" and "Hazardous Substance" shall
have the same meanings as those terms are given in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA"), except that for purposes of this
Agreement petroleum (including crude oil or any fraction thereof) shall be
deemed a Hazardous Substance.
(b) With respect to the activities of Qualitronix, AMP has
never sent a Hazardous Substance to a site which, pursuant to CERCLA or
any similar state law, (A) has been placed, or is proposed to be placed,
or, to the best knowledge of AMP, may in the future be placed, on the
"National Priorities List" of hazardous waste sites or on any similar list
of any federal, state or local governmental agency, including the
Comprehensive Environmental Response, Compensation and Liability System
list for potential hazardous waste sites, or (B) is subject to a claim, an
administrative order or other request to take "removal" or "remedial"
action (as defined under CERCLA) or to pay for any costs relating to
such site.
(c) With respect to the activities of Qualitronix, AMP has
never been nor is currently in violation of any provision of the Toxic
Substances Control Act or the regulations promulgated thereunder.
(d) With respect to the activities of Qualitronix, AMP is not
involved in any suit or has received notice of any claim relating to
personal injuries from exposure to Hazardous Substances.
3.2.17 BROKERS. FINDERS. The transactions contemplated herein were
not submitted to AMP by any broker or other person entitled to a commission
or finder's fee thereon, and were not with the consent of AMP submitted to
DAH by any such broker or other person. Neither AMP nor any of its officers,
directors or employees has engaged any broker or finder or incurred or taken
any action which may give rise to any liability against itself or the Assets
for any brokerage fees, commissions, finders fees or similar fees or expenses
and no broker or finder has acted directly or indirectly for AMP in
connection with this Agreement or the transactions contemplated hereby. No
investment banking, financial advisory or similar fees have been incurred or
are or will be payable by AMP in connection with this Agreement or the
transactions contemplated hereby.
3.2.18 LEGAL PROCEEDINGS. ETC. Except as set forth on Schedule
3.2.18, there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending or to the best knowledge of AMP,
threatened against AMP, (with respect solely to the activities of
Qualitronix), or involving the Assets, this Agreement or the transactions
contemplated hereby, at law or in equity, before any federal, state or local
court or regulatory agency, or other governmental authority, including any
unfair labor practice or grievance,
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proceedings or claim which could have a Material Adverse Effect upon
Qualitronix Except as disclosed in Schedules 1.1.6 and 3.2.18, AMP (with
respect to the activities of Qualitronix) is not subject to any judgment,
order or decree, or, to the best knowledge of AMP, any governmental
restriction applicable to AMP (with respect to the activities of Qualitronix)
which has a reasonable probability of having a Material Adverse Effect, or
which materially adversely affects the ability of AMP to continue the
activities of Qualitronix as currently being conducted, or of DAH to continue
the activities of Qualitronix as presently conducted.
3.2.19 NO CONFLICT OR DEFAULT. Neither the execution and delivery of
this Agreement, nor compliance with the terms and provisions hereof, including
the consummation of the transactions contemplated hereby and thereby, will (a)
violate in any material respect any statute, regulation or ordinance of any
governmental authority, or (b) conflict with or result in the breach of any
term, condition or provision of the articles of incorporation or bylaws of AMP
or of any agreement, deed, contract, mortgage, indenture, writ, order, decree,
legal obligation or instrument (with respect to the activities of Qualitronix)
to which AMP is a party or by which AMP or any part of the Assets is or may be
bound, or (c) constitute a material default (or an event which with the lapse of
time or the giving of notice, or both, would constitute a material default)
thereunder, or (d) result in the creation or imposition of any lien, charge or
encumbrance, or restriction of any nature whatsoever with respect to any part of
the Assets, or (e) except as set forth on Schedule 3.2.19, give to others any
interest or rights, including rights of termination, acceleration or
cancellation in or with respect to any part of the Assets or the activities of
Qualitronix
3.2.20 LABOR RELATIONS. Schedule 3.2.20 sets forth all collective
bargaining or other labor agreements to which AMP is bound and which covers
employees engaged in the activities of Qualitronix. There is no labor strike,
dispute, slowdown or stoppage, or any union organizing campaign, or petition for
certification actually pending or, to the best knowledge of AMP, threatened
against or involving the activities related to Qualitronix. Schedule 3.2.20 sets
forth all pending grievances and arbitration proceedings against AMP as relates
to the activities of Qualitronix arising out of or under a collective bargaining
or other labor agreement No collective bargaining or other labor agreement is
currently being negotiated by AMP which would affect employees engaged in the
activities of Qualitronix. AMP has not experienced any work stoppage or other
material labor difficulty over the past three years with respect to the
activities of Qualitronix. No agreement which is binding on AMP as pertains to
the activities of Qualitronix restricts it from relocating or closing any or all
of its operations.
3.2.21 EMPLOYEE BENEFIT PLANS.
(a) To the best of the knowledge of AMP, except as set forth in
Schedule 3.2.21, AMP does not currently sponsor, maintain or contribute
to, and has not, within the past 3 years, sponsored, maintained or
contributed to, any pension, retirement, profit-sharing, deferred
compensation, bonus, stock option or other incentive plan, or any other
employee benefit program, arrangement, agreement or understanding, or
medical, vision, dental or other health plan, or life insurance or
disability plan, or any other employee benefit plan as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not any such employee benefit plan is otherwise
exempt from the provisions of ERISA, and whether or not formal
or informal, written or oral, and whether or not legally binding all as
pertains to the activities of Qualitronix. (All such plans, funds or
programs sponsored, maintained or contributed to by AMP currently or within
the past 3 years, whether or not listed on Schedule 3.2.21, are hereinafter
referred to as the "Employee Benefit Plans"). For the purpose of this
Section 3.2.21, the term "AMP" shall include all "entities" of AMP, whether
or not incorporated, with which it would be treated as a single employer
for purposes of Sections 414(b), (c) or (m) of the Internal Revenue Code
(the "Code");
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(b) Qualitronix maintains, sponsors or contributes only to those
employee pension benefit plans (as defined in Section 3(2) of ERISA, whether or
not excluded from coverage under specific Titles or Subtitles of ERISA) for the
benefit of employees or former employees of AMP which are described in Schedule
3.2.21, none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA);
(c) Qualitronix maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Subtitles of ERISA) for the
benefit of employees or former employees of AMP which are described in Schedule
3.2.21, none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA);
(d) Except as set forth on Schedule 3.2.21, each Employee Benefit
Plan is in compliance in all material respects with, and has been administered
in all material respects in compliance with, the applicable provisions of ERISA,
the Code and any other federal or state law. On the Closing Date, AMP will have
no liabilities on account of or in connection with any Employee Benefit Plan.
AMP has adequately accrued for liabilities to meet current contributions or
benefit payments which remain unfunded as of the Closing Date as set forth in
Schedule 3.2.21 (d) and which accrued amount shall be reflected as a reduction
in the Purchase Price as set forth in Section 2 to the extent that such unfunded
amount is assumed by DAH at the Closing.
3.2.22 CONTRACTS AND COMMITMENTS.
(a) The Schedules submitted in connection with Section 1.1 contain
a list of all of the contracts or agreements of any kind and type to which AMP
is a party with respect to the activities of Qualitronix and the Assets which
involve the payment by or to AMP with respect to the activities of Qualitronix
in the aggregate of $10,000 or more during any year (collectively the "Material
Contracts"), and AMP shall deliver to DAH correct and complete copies of each
such Material Contract. The Material Contracts so listed, taken together,
constitute all of the contracts, real estate leases, personal property leases,
agreements, contract rights, leases, license agreements, franchise rights and
agreements, policies, purchase and sales orders, quotations and executory
commitments, instruments, guaranties, indemnifications, arrangements,
obligations and understandings (written or oral), involving the payment by or to
AMP with respect to the activities of Qualitronix, in the aggregate of $10,000
or more during any year, necessary to the conduct of the
activities of Qualitronix as conducted by AMP.
(b) [Reserved]
(c) All of the Material Contracts are valid and binding, in full
force and effect and enforceable against AMP in accordance with their respective
provisions. AMP has not assigned, mortgaged, pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any Material Contract. To
the best knowledge of AMP, AMP is not in violation of, in default in respect of,
nor has there occurred an event or condition which, with the passage of time of
giving of notice (or both) would constitute a violation or default of, any
Material Contract; and, to the best knowledge of AMP, there are no facts or
circumstances which would reasonably indicate that AMP (or any other party) will
be or may be in violation of or in default in respect of any Material Contract,
subsequent to the date hereof. No notice has been received by AMP claiming any
such default or indicating the desire or intention of any other party thereto to
amend, modify, rescind or terminate the same.
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3.2.23 RESERVED.
3.2.24 INVENTORIES. Schedule 1.1.4(a) completely and accurately lists all
of the Inventory owned by AMP with respect to the activities of Qualitronix, and
the value thereof as of the date thereof. Except as set forth in Schedule
3.2.24, in all material respects all of the Inventory consists of a quality
usable and saleable in the ordinary and usual course of business. All Inventory
not written off has been priced at the lower of "standard cost" or market on a
LIFO basis. The quantities of each type of Inventory (whether raw materials,
work-in-process, or finished goods) are reasonable and warranted in the present
circumstances of Qualitronix. To the best knowledge of AMP and based upon its
compliance with quality specifications AMP Specifications: 102-55010 Rev. E;
102-55015 Rev.A and 102-55033 Rev. D, all work-in-process and finished goods
Inventory is free of any defect or other deficiency.
3.2.25 BACKLOG. All unfilled orders to purchase goods of AMP as it relates
to the activities of Qualitronix are set forth in Schedule 1.1.4(b) and are firm
and binding commitments having delivery schedule commitments (subject to
cancellation rights set forth therein) of the respective purchasers (assuming
that such purchaser has properly authorized by all requisite corporate or, if
not a corporation, by all other requisite action and has properly executed and
delivered such purchase order, which, to the best knowledge of AMP is the case)
to purchase the goods indicated at the prices specified.
3.2.26 PERSONNEL RECORDS. The Personnel Records submitted pursuant to
Section 1.1.15 constitute the full and complete personnel records with respect
to all Employees employed by AMP who will be employed by DAH subsequent to the
Closing. Such Personnel Records were kept in accordance with all applicable laws
and regulations and the personnel practices of AMP in the ordinary course.
3.2.27 MANAGERS, EMPLOYEES AND COMPENSATION.
(a) Schedule 3.2.27 sets forth the name of all managers of AMP with
respect to the activities of Qualitronix, their respective terms of office,
the total salary, bonus payments, fringe benefits and perquisites each
received in each of the last 3 fiscal years ended December 31, 1995, and
changes to the foregoing which have occurred since December 31, 1995; such
Schedule also lists and describes the current base salary, bonus payments,
fringe benefits and perquisites of any other employee, agent or
representative of AMP with respect to the activities of Qualitronix whose
total current salary, bonus or other compensation exceeds $50,000 annually
during any of the last 3 fiscal years ended December 31, 1995, and changes
to the foregoing since December 31, 1995. There are no other material forms
of compensation paid to any such manager or employee of AMP with respect to
the activities of Qualitronix. The provisions for wages and salaries
accrued and set forth on the October 31, 1996 Schedule of Liabilities are
adequate for salaries and wages, including accrued vacation pay, for the
period up through the date thereof, and such schedule sets forth all
obligations for wages and salaries and other compensation to its employees,
including, but not limited to, vacation pay and sick pay, and all
commissions and other fees payable to agents, salesmen and representatives.
AMP has filed any and all payroll tax returns, and paid all payroll taxes
due for any and all employees engaged in the activities of Qualitronix, due
through the Closing Date ("Payroll Expenses"). To the extent that there
shall be any unpaid Payroll Expenses as of the Closing, such amount shall
be a reduction in the purchase price as set forth in Section 2.
(b) To the best knowledge of AMP, no Key Employee has a present
intention to leave the employ of Qualitronix or has taken any action
directed towards leaving the employ of Qualitronix.
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3.2.28 CREDIT TERMS: PRODUCT WARRANTIES. Schedule 3.2.28 sets forth all the
terms and conditions of credit and discounts given by AMP to its customers in
the usual and ordinary course of its business with respect to the activities of
Qualitronix and a list of all transactions pending where there is a material
departure therefrom. Also set forth on such Schedule are the terms and
conditions of the standard product or service warranties and guarantees given by
AMP in the usual and ordinary course of its business with respect to the
activities of Qualitronix and a list of all transactions pending as to which
there is a material departure therefrom. Except as set forth on such Schedule,
AMP has conducted all qualification inspections and quality conformance
inspections required by the specifications for Contact Products of Qualitronix
included on qualified products lists in accordance with the requirements of such
specifications, and all Contact Products shipped have been in conformance with
such specifications.
3.2.29 RESERVED.
3.2.30 GOVERNMENT CONTRACTS.
(a) For purposes of this Section 3.2.30, the term "Government"
means any agency, division, subdivision, audit group, or procuring office
of the federal government, including the employees or agents thereof; the
term "Transferor" means AMP solely with respect to the activities of
Qualitronix; the term "Government Contract" means any prime contract,
subcontract, basic ordering agreement, letter contract, purchase order or
delivery order of any kind, including all amendments, modifications and
options thereunder or relating thereto, between the Transferor and any of
the Government, any prime contractor of the Government, any subcontractor
of such a prime contractor or any subcontractor of another subcontractor,
however far removed from the prime contractor such subcontractor may be,
(A) currently in force; (B) which, within the three years preceding the
date of this Agreement, expired or were terminated; or (C) for which final
payment was received within the three years preceding the date of this
Agreement; and the term "Bid" means any outstanding quotation, bid or
proposal submitted by Transferor to the Government, any proposed prime
contractor of the Government, or any proposed subcontractor.
(b) Schedule 3.2.30 contains a true and complete list of all
Bids which involve or can be expected to involve aggregate consideration in
excess of $100,000.
(c) Except as set forth in Schedule 3.2.30, with respect to any
Government Contract or Bid, to the best of the knowledge of AMP, the
Transferor has complied with and expects to comply with all material terms
thereof, all certifications and representations of Transferor with respect
thereto, and all statutes and regulations applicable thereto.
(d) Except as set forth in Schedule 3.2.30, (A) no show cause
notices, cure notices, or terminations have been issued against the
Transferor with respect to any Government Contract; (B) no negative
determinations of responsibility have been issued against the Transferor
with respect to any Bid and (C) none of the Government, any prime
contractor nor any subcontractor has notified the Transferor, either orally
or in writing, that it is in breach or violation of any provision of any
Government Contract, any certification or any QPL or representations with
respect thereto or any statutes and regulations applicable thereto.
(e) The Transferor possesses all necessary security
clearances and permits for the execution of its obligations under any
Government Contracts and Bids. To the best knowledge of AMP, none of the
Key Employees and other employees currently employed by the Transferor
have ever been denied a security clearance.
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(f) The Transferor is not undergoing and has not undergone
any audit, other than in the ordinary course of such business, the
results of which Audit did not have a Material Adverse Effect, and has
no knowledge or reason to know of any basis for impending audits in the
future, arising under or relating to any Government Contract except as
set forth in Schedule 3.2.30.
(g) The Transferor has entered into no financing
arrangements with respect to the performance of any current
Government Contract except as set forth in Schedule 3.2.30.
3.2.31 SOLVENCY. The total assets of AMP exceeds its total liabilities; and
AMP is able to perform its financial obligations as performance thereof becomes
due.
3.2.32 ALLOCATIONS. Those costs which, during the period January 1, 1995
through September 30, 1996, have been allocated by AMP to the activities of
Qualitronix, as set forth in Schedule 3.2.32, equal or exceed the true cost to
AMP, and all such identifiable costs have been allocated to Qualitronix.
Schedule 3.2.32 sets forth such allocations for 1995, and for the 9 months ended
September 30,1996.
3.2.33 COMPLETE DISCLOSURE. To the best knowledge of AMP, no representation
or warranty made by AMP in this Agreement, and no exhibit, schedule, statement,
certificate or other writing furnished to DAH by or on behalf of AMP pursuant to
this Agreement or in connection with the transactions contemplated hereby or
thereby, contains or will contain, any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein and therein not misleading.
3.2.34 REPETITIVE DISCLOSURE. To the extent that DAH, AMP or Whitaker have
made any disclosure on any schedule to this Agreement, such disclosure shall be
considered to be made for purposes of this Agreement notwithstanding that such
disclosure is not made on all applicable schedules.
3.2.35 NO REPRESENTATION REGARDING FUTURE BUSINESS. Notwithstanding any
other provision in this Agreement to the contrary, including any express or
implied representation contained herein, AMP makes no representation regarding
its present or future intent to continue in the business of manufacturing,
distributing or selling cylindrical or non-cylindrical connectors.
3.3 RESERVED.
3.4 CLAIMS BASED ON REPRESENTATIONS AND WARRANTIES. The recourse by DAH
against AMP or Whitaker or by AMP or Whitaker against DAH for any breach of the
representations and warranties set forth in Sections 3.1 and 3.2 shall be
limited to a two (2) year period from the Closing Date, except for matters as to
which notification of a potential claim has been given prior to the expiration
of the two (2) year period, in which instance the period in which to assert such
claim shall be extended for six months.
3.5 DUE DILIGENCE. The due diligence conducted by DAH will not affect,
qualify, or modify (i) any of the representations or warranties of AMP or (ii)
any indemnification or similar obligations of AMP.
4. COVENANTS.
4.1 COVENANTS OF DAH.
4.1.1 PAYMENT AND PERFORMANCE OF ASSUMED LIABILITIES. From and after
the Closing Date, DAH shall pay and perform the liabilities assumed pursuant to
Section 2.1 in the ordinary course of its business in accordance with DAH's
standard business practices.
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4.1.2 RESERVED.
4.1.3 USE OF NAME. After the Closing Date, DAH shall not use the name
"AMP" in connection with the activities of Qualitronix.
4.1.4 COVENANT AGAINST DISCLOSURE. Except to the extent provided by
Section 4.2.8, DAH agrees not to (a) disclose to any person, association, firm,
corporation or other entity (other than AMP or those designated in writing by
AMP) in any manner, directly or indirectly, any information or data relevant to
the business of AMP (other than Qualitronix), whether of a technical or
commercial nature, or (b) by use, or permit or assist, by acquiescence or
otherwise, any person, association, firm corporation or other entity (other than
AMP or those designated in writing by AMP) to use, in any manner, directly or
indirectly, any such information or data, excepting only use of such data or
information as is at the time generally known to the public other than by any
breach of any provision of this Section 4.1.4.
4.1.5 RESERVED.
4.1.6 HOLD HARMLESS. For a period of two years from the Closing, DAH
agrees to indemnify and hold harmless AMP (the "DAH Indemnification") from any
claims, costs or liabilities, which exceeds $10,000 for each claim of DAH
Indemnification arising from the breach of any of the warranties or
representations of DAH herein (the "AMP Claims"). AMP Claims relating to matters
of like or similar kind shall be aggregated and each shall not be considered a
separate claim. In connection therewith, DAH shall undertake to defend AMP with
respect to any such AMP Claims asserted at its sole cost and expense upon
receipt of notice of such AMP Claims.
4.1.7 COVENANT AGAINST HIRING. DAH agrees that it shall not
purposefully take any action which would induce any employee or representative
of AMP not to continue as an employee or representative of AMP. Without limiting
the generality of the foregoing, DAH shall not, either directly or indirectly
through its Tri-Star subsidiary, for a three (3) year period from the Closing
Date solicit to employ (whether as an employee, officer, director, agent,
consultant or independent contractor), or enter into any partnership, joint
venture or other business association with, any person who was at the Closing
Date an employee, partner, representative, or manager of the Aerospace and
Government Systems Sector of AMP.
4.1.8 EMPLOYEES. Except as set forth on Schedule 4.1.8, which shall be
delivered not later than three days preceding the Closing, from and after the
Closing Date, DAH shall employ all of the current employees of AMP engaged in
the activities of Qualitronix, subject to normal management prerogatives to
adjust the work force, review performance and terminate employment as DAH shall
deem necessary or appropriate. DAH shall compensate such employees at
substantially the same level of compensation in effect for such employees
immediately prior to the Closing Date. DAH will provide fringe benefits for such
employees which are consistent with fringe benefits provided to employees of the
TriStar subsidiary of DAH.
4.2 COVENANTS OF AMP.
4.2.1 CHANGE OF NAME: USE OF NAME. AMP or Whitaker shall grant any
consents and take any other and further action, all at its own expense,
requested by DAH to enable DAH to use, reserve or register the name
"Qualitronix" and any other trademark or trade style or name presently used by
Qualitronix, for the exclusive use of DAH. After the Closing Date, AMP shall
discontinue use of the names "Qualitronix".
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4.2.2 COVENANT AGAINST DISCLOSURE. Except to the extent provided in
Section 4.2.8, AMP agrees not to (a) disclose to any person, association, firm,
corporation or other entity (other than DAH or those designated in writing by
DAH) in any manner, directly or indirectly, any information or data relevant to
the activities of Qualitronix, or whether of a technical or commercial nature,
or (b) by use, or permit or assist, by acquiescence or otherwise, any person,
association, firm corporation or other entity (other than DAH or those
designated in writing by DAH) to use, in any manner, directly or indirectly, any
such information or data, excepting only use of such data or information as is
at the time generally known to the public other than by any breach of any
provision of this Section 4.2.2.
4.2.3 COVENANT AGAINST HIRING. AMP understands that it is essential to
the successful operation of the activities of Qualitronix to be acquired
hereunder that DAH retain substantially unimpaired Qualitronix's personnel. AMP
agrees that it shall not purposefully take any action which would induce any
employee or representative of AMP not to become or continue as an employee or
representative of DAH. Without limiting the generality of the foregoing, AMP,
solely as to its Aerospace and Government Systems Sector, shall not, for a three
(3) year period from the Closing Date solicit to employ (whether as an employee,
officer, director, agent, consultant or independent contractor), or enter into
any partnership, joint venture or other business association with, any person
who was at the Closing Date an employee, partner, representative, or manager of
AMP engaged in the activities of Qualitronix. Similarly for such three year
Period, AMP, solely as to its Aerospace and Government Systems Sector, shall not
solicit to employ any person who is then employed by DAH or any of its
affiliates or subsidiaries.
4.2.4 INJUNCTIVE RELIEF. AMP acknowledges and agrees that DAH's remedy
at law for any breach of any of AMP's obligations under Subsections 4.2.2, 4.2.3
or 4.2.9 hereof would be inadequate, and agrees and consents that temporary and
permanent injunctive relief may be granted in a proceeding which may be brought
to enforce any provision of Subsections 4.2.2, 4.2.3 or 4.2.9 without the
necessity of proof of actual damage. The rights and remedies conferred upon DAH
under this Section 4.2.4, elsewhere in this Agreement, or by any instrument or
law shall be cumulative and may be exercised singularly or concurrently.
4.2.5 CONDUCT OF BUSINESS OF AMP PRIOR TO CLOSING DATE. AMP agrees
that on and after the date hereof and prior to the Closing Date:
(a) The operations, practices and activities related to Qualitronix
shall be conducted only in the ordinary course of business and consistent
with past practice;
(b) Reserved;
(c) Reserved;
(d) Reserved
(e) Reserved
(f) Except as set forth in Schedule 4.2.5(f), AMP, shall not, with
respect to the activities of Qualitronix or any of the Assets:
(i) incur, become subject to, or suffer, or agree to incur,
become subject to or suffer, any obligation or liability (absolute or
contingent) except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business;
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(ii) discharge or satisfy any lien or encumbrance or pay any
obligation or liability (absolute or contingent) other than liabilities
payable in the ordinary course of business;
(iii) mortgage, pledge or subject to lien, charge or any other
encumbrance, any of the Assets or agree so to do;
(iv) sell or transfer or agree to sell or transfer any of its
assets, or cancel or agree to cancel any debt or claim, except in each case
in the ordinary course of business;
(v) consent or agree to a waiver of any right of substantial
value;
(vi) enter into any transaction other than in the ordinary
course of its business;
(vii) without the express written consent of DAH, increase the
rate of compensation payable or to become payable by it to any Key Employee
over the rate being paid to such Key Employee at October 31, 1996;
(viii) Reserved;
(ix) terminate any contract, agreement, license or other
instrument to which it is a party;
(x) through negotiation or otherwise, make any commitment or
incur any liability or obligation to any labor organization;
(xi) without the express written consent of DAH, make or
agree to make any accrual or arrangement for or payment of bonuses or special
compensation of any kind to any Employee;
(xii) Reserved;
(xiii) without the express written consent of DAH, directly or
indirectly pay or make a commitment to pay any severance or termination pay
to any Employee;
(xiv) Reserved;
(xv) introduce any new method of management, operation or
accounting with respect to its business or any of the assets, properties or
rights applicable thereto;
(xvi) offer or extend more favorable prices, discounts or
allowances than were offered or extended regularly on and prior to November 7,
1996, other than in the ordinary course of business;
(xvii) make capital expenditures or commitments therefor
without the express written consent of DAH; and
(xviii) hire any employee earning a wage or salary of more than
$30,000 per year.
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(xix) except as may be specifically requested, ship any
Contact Products other than pursuant to the delivery schedule set forth
in any purchase order or contract, nor build up inventory inconsistent
with past practices
(g) AMP shall use its best efforts to preserve Qualitronix's
activities intact, to keep available to Qualitronix its present
employees, and to preserve the good will of its suppliers, customers and
others with whom business relationship exist; and
(h) AMP shall not take, agree to take or permit to be taken any
action or do or permit to be done anything in the conduct of the
Qualitronix' activities, or otherwise, which would be contrary to or in
breach of any of the terms or provisions of this Agreement or which would
cause any of the representations or warranties of AMP contained herein to
be or become untrue in any material respect.
4.2.6 INSPECTION OF BOOKS AND RECORDS. From the date of this Agreement
until the Closing Date, upon reasonable request by DAH, AMP shall make or cause
to be made available to DAH for examination those documents, records and
information as set forth in Section 1.1 including, but not limited to those
related to the Assets and other materials such as books of account, contracts,
agreements, commitments, records and its documents directly to subject matter of
this Agreement and shall permit DAH and its representatives, attorneys,
accountants and agents to have access to and to copy the same at all reasonable
times. In addition, AMP shall make, or cause to be made, available to DAH and
its representatives, attorneys, accountants and agents the Assets and all of the
above described records for any environmental compliance audit, any
environmental site assessment (including soil, groundwater and/or other testing)
and any other physical inspection which DAH may elect to conduct at its own
expense.
4.2.7 FURTHER ASSURANCES. On and after the Closing Date, AMP shall
prepare, execute and deliver, at their expense, such further instruments of
conveyance, sale, assignment or transfer, and shall take or cause to be taken
such other or further action as DAH shall reasonably request at any time or from
time to time in order to perfect, confirm or evidence in DAH title to all or any
part of the Assets or to consummate, in any other manner, the terms and
conditions of this Agreement.
4.2.8 PRESS RELEASES, ANNOUNCEMENTS AND INTRODUCTIONS.
(a) Neither AMP nor DAH shall issue any press release or
announcement, including announcements to employees, relating to the
subject matter of this Agreement without the prior written approval of
the other parties hereto; PROVIDED, HOWEVER that any party may make any
public disclosure it believes in good faith is required by law (in
which case it will advise the other parties hereto prior to making the
disclosure). On the Closing Date, AMP and DAH will issue mutual public
announcements and/or press releases announcing the transaction contemplated
by this Agreement.
(b) At a mutually agreeable time prior to the Closing, but not
earlier than one week prior to the Closing, AMP shall introduce
representatives of DAH to Customers, Distributors and Key Employees of
Qualitronix for the purpose of facilitating transition or otherwise assist
DAH in accomplishing such transition.
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4.2.9 COVENANT NOT TO COMPETE AMP shall enter into and observe,
according to its terms that Covenant Not to Compete as set forth in EXHIBIT B
hereto, pursuant to which AMP shall agree to not, directly or indirectly,
engage, anywhere in the United States in the business of manufacturing,
distributing or selling Contact Products for Cylindrical Connectors for military
and aerospace applications for a period of four years following the Closing
Date.
4.2.10 DELIVERY OF HISTORIC PERFORMANCE SCHEDULES. AMP shall deliver
the Historic Performance Schedule required by Section 3.2.4 not later than five
days following the execution of this Agreement for review by DAH.
4.2.11 PAYMENT OF SEVERANCE In the event that DAH shall terminate any
employee of AMP employed by DAH pursuant to Section 4.1.8(a) at any time during
the sixty (60) days following the Closing Date, AMP shall pay to any such
terminated employee such severance benefits as would have been paid had such
employee still been employed by AMP. DAH shall promptly notify AMP of its intent
to make such termination and AMP shall thereupon pay such severance benefits in
accordance with its policies and procedures.
4.2.12 RESERVED..
4.2.13 INDEMNITY REGARDING BULK SALES, ETC. AMP hereby agrees to
indemnify and hold harmless DAH from any claims, costs or liabilities incurred
as a result of the failure of AMP to comply with any and all requirements of
sales tax and bulk sales laws and regulations arising under Pennsylvania,
California and any other jurisdiction in connection with the transactions
contemplated herein, including all pre-closing notice, payment and receipt
requirements in connection with the transactions contemplated by this Agreement.
4.2.14 DISTRIBUTOR TERMINATIONS AFTER CLOSING DATE. AMP shall
indemnify and save DAH harmless from any and all costs or expenses related to
returns of Contract Products from any Distributor as set forth in Section 2.6.4.
4.2.15 USE OF NAME. After the Closing Date, DAH shall not use the name
"AMP" in connection with the activities of Qualitronix.
4.2.16 HOLD HARMLESS. Except for the assumed liabilities set forth in
Section 2.6, for a period of two years from the Closing Date, AMP agrees to
indemnify and hold harmless DAH (the "AMP Indemnification") from any claims,
costs or liabilities, which in exceeds $10,000 for each claim of
Indemnification, arising from a breach of any of the warranties and
representations of AMP set forth herein (the "DAH Claims"). DAH Claims relating
to matters of like or similar kind shall be aggregated and each shall not be
considered a separate claim. In connection therewith, AMP shall undertake to
defend DAH with respect to any such DAH Claims asserted at its sole cost and
expense upon receipt of notice of such DAH Claims.
4.2.17 ACCESS TO AMP SYSTEM-TRANSITION For such period as DAH shall
deem reasonably necessary, but not to exceed one year from the Closing Date, AMP
shall provide to DAH access to the AMP System for the purposes of facilitating a
transition by DAH from the AMP System to its own management information system.
Included in such access shall be utilization of the installed routers connecting
the Local Area Network to the main AMP System. The parties shall establish such
systems and procedures to assure that neither party shall have access to any
confidential or proprietary information of the other during this transition
period. DAH shall use its best efforts to conclude this transition as quickly as
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possible. For the first 120 days following the Closing Date, such access shall
be without charge. Thereafter DAH shall pay a monthly fee of $8,500 for such
access.
4.2.18 RESERVED
5. CONDITIONS PRECEDENT TO CLOSING.
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH AND AMP The Parties shall
have entered into the Supply Contracts, which Supply Contracts shall be
effective as of the Closing Date.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH. The obligation of DAH to
close the transactions contemplated by this Agreement is subject to the
fulfillment of all of the following conditions precedent on or prior to the
Closing Date:
5.2.1 Except for such breaches as would not have a Material Adverse
Effect, each and every representation and warranty made by AMP or Whitaker in
this Agreement shall be true in all respects when made and shall be true in all
material respects as if originally made on and as of the Closing Date.
5.2.2 All obligations and covenants of AMP to be performed under this
Agreement through, and including on, the Closing Date (including, without
limitation, all obligations which AMP would be required to perform at the
Closing if the transactions contemplated by this Agreement were consummated),
including obtaining the Material Consents pertaining to the matters set forth in
Section 1.1.8(a), shall have been performed in all material respects.
5.2.3 No injunction shall have been entered by a court of competent
jurisdiction and remain in effect which would restrain or prohibit the
transactions contemplated by this Agreement.
5.2.4 Reserved.
5.2.5 DAH's Board of Directors shall have approved the transactions
contemplated by this Agreement.
5.2.6 Since the date of this Agreement, there shall have been no
change in the financial condition, business or operations of Qualitronix and
there shall have been no damage or loss having, or reasonably expected to have a
Material Adverse Effect on the Assets.
5.2.7 AMP or Whitaker, as the case may be, shall have delivered, to
DAH each of the following, in each case duly and properly executed (if
appropriate) and in form and substance reasonably satisfactory to DAH:
(a) A good and sufficient General Conveyance, Assignment and Bill of
Sale, conveying, selling, transferring and assigning to DAH title to
all of the Assets free and clear of all security interests, liens,
charges, encumbrances or equities whatsoever, except those listed on
Schedules 3.2.14 and 3.2.15.
(b) The books and records described in Section 1.1.15; and
certificates of each policy of insurance described in Section 3.2.12,
together with evidence that such policies are in force on the Closing
Date.
(c) The covenant not to compete as provided in Section 4.2.9
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(d) The Historic Performance Schedule described in Section 3.2.4.
(e) Resolutions of the directors of AMP and Whitaker authorizing
the execution and delivery of this Agreement by AMP and Whitaker
and the performance of its obligations hereunder, certified by the
Corporate Secretary of AMP and Whitaker or an opinion of counsel
to AMP, that such is not required.
(f) AMP shall have delivered to DAH, in form suitable for filing,
such certificates, consents and other documents as are necessary
or desirable to effect the transfer of the registration of any
name conveyed to DAH pursuant to this Agreement, in Pennsylvania,
California, Delaware and in each other state where AMP or Whitaker
is qualified to do business with respect to the activities of
Qualitronix or has registered any such name under a "trade name" or
"fictitious name" statute or similar law or has taken any other
action in order to obtain or protect rights in such name.
(g) A favorable opinion of counsel for AMP, addressed to DAH and
dated the Closing Date, substantially in the form of EXHIBIT C
attached hereto.
(h) A certificate of the Pennsylvania, California and Delaware
Secretaries of State, each dated as of a date not earlier than ten
days prior to the Closing Date, as to the good standing of AMP or
Whitaker in such States, as applicable.
(i) Such other separate instruments of sale, assignment or
transfer that DAH may reasonably deem necessary or appropriate in
order to perfect, confirm or evidence title to all or any part of
the Assets.
5.2.8 DAH shall have approved, in writing, the Due Diligence as
set forth in Schedule 5.2.8 on or before 5:30 pm Pacific Time of the 10th
business day following receipt by DAH of all of the schedules and related
information to be furnished pursuant to Schedules 3.2.4 and 5.2.8 (the
"Diligence Schedules").
5.2.9 DAH shall use its best efforts to obtain the consent of its
senior lender and of its subordinated lender of the transaction to the
Closing of this Agreement on or before 5:30pm Pacific Time of the 7th day
following receipt by DAH of the Diligence Schedules. Such time for consent
shall be continued day to day until the time scheduled for Closing. In the
event that such consent has not been obtained by the Closing Date, the
Closing Date shall be extended day to day until December 27, 1996.
5.2.10 In the event that DAH shall have failed to provide its Due
Diligence Approval as specified in Section 5.2.8 or has failed to obtain the
approvals required by Section 5.2.9 by the times specified therein, this
Agreement shall thereupon be deemed a nullity and VOID AB INITIO without
further action by any party without any further liability by any party hereto
to any other party.
5.2.11 No Key Employee shall have indicated an intention to
terminate such Key Employee's employment with DAH subsequent to the Closing
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF AMP OR WHITAKER. Each and
every obligation of AMP or Whitaker, as the case may be, to be performed on
or before the Closing Date shall be subject to the satisfaction on or before
the Closing Date of each of the following conditions.
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5.3.1 Except for such breaches as would not have a Material Adverse
Effect, each and every representation and warranty made by DAH shall have been
true in all respects when made and shall be true in all material respects as if
originally made on and as of the Closing Date.
5.3.2 All obligations and covenants of DAH to be performed under this
Agreement through, and including on, the Closing Date (including, without
limitation, all obligations which DAH would be required to perform at the
Closing if the transactions contemplated by this Agreement were consummated)
shall have been performed in all material respects.
5.3.3 No injunction shall have been entered by a court of competent
jurisdiction and be in effect which would restrain or prohibit the consummation
of the transactions contemplated by this Agreement.
5.3.4 A certificate of the Ohio and California Secretaries of State,
each dated as of a date not earlier than ten days prior to the Closing Date, as
to the good standing of DAH in such States.
5.3.5 AMP's Board of Directors shall have approved the transactions
contemplated by this Agreement.
5.3.6 Payment of the Initial Purchase Price on the Closing Date, by
wire transfer of immediate available funds, as determined in accordance with
Section 2.
5.3.7 An opinion of counsel for DAH, addressed to AMP and dated the
Closing Date, in the form of EXHIBIT D attached hereto.
5.3.8 The Assumption Agreement with respect to the Assumed
Liabilities, in the form of EXHIBIT E attached hereto.
5.4 ALLOCATION. For purposes of income tax reporting, the parties shall,
within one year following the Closing, enter into an agreement setting forth
that portion of the total purchase price which shall be allocated to each
portion thereof and agree that they shall report such allocation for all
purposes including for federal and state taxing purposes.
6. RESERVED
7. MISCELLANEOUS PROVISIONS.
7.1 NOTICE. All notices and other communications required or permitted
under this Agreement shall be deemed to have been duly given and made, if in
writing, and (i) if served by personal delivery to the party for whom intended
(which shall include overnight delivery by Federal Express or similar service),
(ii) or 3 business days after being deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail bearing the
address shown in this Agreement for, or such other address as may be designated
by writing hereafter by, such party, or (iii) if sent by telecopier to the
number showing in this Agreement for, or such other number as may be designated
in writing hereafter by, such party and immediately confirmed by sending a copy
of such notice by either method described in clause (i) or (ii) above.
7.2 POST-CLOSING ACCESS. At the earlier of (i) such time as there shall
have been a change in control of DAH or (ii) the expiration of seven (7) years
commencing on the Closing Date, or for such longer period as may be required by
applicable law, DAH shall retain all books, records and other data delivered to
it relating to the activities of Qualitronix prior to the Closing Date. DAH
shall grant access to such books,
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records and other data to AMP and its representatives during regular business
hours upon reasonable prior notice to the extent that such access is required by
AMP in connection with tax, regulatory or contractual matters, or otherwise in
order to permit AMP to comply with applicable law, or in order to defend against
any claim brought against AMP.
7.3 ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement or breach thereof shall be decided by Arbitration
conducted in Los Angeles, California before a single arbitrator chosen by mutual
agreement of the parties. In the event that the parties are unable to agree upon
a single arbitrator after three submissions of proposed arbitrators, each party
shall select an arbitrator and such arbitrators shall choose a third arbitrator
and the matter shall then be heard and resolved by a panel of three arbitrators.
The arbitration proceeding shall be otherwise conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and which
arbitration provides for reasonable discovery, including depositions,
interrogatories and production of documents. The decision of the arbitrator(s)
shall be final and binding on the parties and such decision shall be enforceable
as a judgment in any court of competent jurisdiction. The cost of arbitration
shall be shared equally between the parties.
7.4 ENTIRE AGREEMENT. This Agreement, the Supply Contracts, the Exhibits
and Schedules hereto, and the documents referred to herein and therein embody
the entire agreement and understanding of the parties hereto with respect to the
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings, oral or written, relative to said subject matter.
7.5 BINDING EFFECT: ASSIGNMENT. This Agreement and the rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
AMP or Whitaker, as the case may be, its successors and permitted assigns, and
DAH, its respective successors and permitted assigns. Neither this Agreement nor
any of the rights, interest or obligations hereunder shall be transferred or
assigned (by operation of law or otherwise) by any of the parties hereto without
the prior written consent of the other party or parties except that DAH shall
have the right to assign, in whole or in part, its rights hereunder to one or
more affiliates of DAH, which in each case shall be a wholly-owned subsidiary of
DAH. Any transfer or assignment of any of the rights, interests or obligations
hereunder in violation of the terms hereof shall be void and of no force or
effect.
7.6 CAPTIONS. This Agreement and Section headings of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement
in construing or interpreting any provision hereof.
7.7 WAIVER: CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
7.8 NO THIRD PARTY BENEFICIARIES. Subject to Section 7.3, nothing herein,
expressed or implied, is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the parties hereto,
any rights, remedies or other benefits under or by reason of this Agreement.
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7.9 COUNTERPARTS. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
7.10 SEVERABILITY. With respect to any provision of this Agreement finally
determined by a court of competent jurisdiction to be unenforceable, AMP,
Whitaker and DAH hereby agree that such court or arbitrator(s) shall have
jurisdiction to reform such provision so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's or
arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.11 GOVERNING LAW. This Agreement shall in all respects be constructed in
accordance with and governed by the laws of the State of California.
7.12 CLOSING COSTS AND TRANSFER TAXES.
7.12.1 DAH shall be responsible for all sales, use or other taxes
imposed by reason of the transfers of the Assets provided hereunder and any
deficiency, interest or penalty asserted with respect thereto; provided however,
DAH shall not be responsible for any taxes imposed on income or capital gain
assessed as a result of the transactions contemplated by this Agreement.
7.12.2 DAH shall pay all the fees and costs of recording or filing
all applicable conveyancing instruments.
7.12.3 EXPENSES. Each party shall, except as otherwise expressly
provided herein, bear all of the costs and expenses of such party's execution,
delivery and performance of this Agreement.
AGREED and entered into as of the last date set forth below:
AMP INCORPORATED DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ J. Emay By: /s/ R. Jack DeCrane
---------------------------- ----------------------------
Title: Chairman of the Board Title: CEO
------------------------ ------------------------
Date: 11/27/96 Date: 11/24/96
------------------------ ------------------------
THE WHITAKER CORPORATION
SOLELY WITH RESPECT TO SECTIONS 1.1.7 AND
3.2.10 AND PROVISIONS RELATING TO WHITAKER
By:
----------------------------
Title:-------------------------
Date:--------------------------
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7.9 COUNTERPARTS. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
7.10 SEVERABILITY. With respect to any provision of this Agreement finally
determined by a court of competent jurisdiction to be unenforceable, AMP,
Whitaker and DAH hereby agree that such court or arbitrator(s) shall have
jurisdiction to reform such provision so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's or
arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.11 GOVERNING LAW. This Agreement shall in all respects be constructed in
accordance with and governed by the laws of the State of California.
7.12 CLOSING COSTS AND TRANSFER TAXES.
7.12.1 DAH shall be responsible for all sales, use or other taxes
imposed by reason of the transfers of the Assets provided hereunder and any
deficiency, interest or penalty asserted with respect thereto; provided however,
DAH shall not be responsible for any taxes imposed on income or capital gain
assessed as a result of the transactions contemplated by this Agreement.
7.12.2 DAH shall pay all the fees and costs of recording or filing
all applicable conveyancing instruments.
7.12.3 EXPENSES. Each party shall, except as otherwise expressly
provided herein, bear all of the costs and expenses of such party's execution,
delivery and performance of this Agreement.
AGREED and entered into as of the last date set forth below:
AMP INCORPORATED DeCRANE AIRCRAFT HOLDINGS, INC.
By: By:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
---------------------------- ----------------------------
THE WHITAKER CORPORATION
SOLELY WITH RESPECT TO SECTIONS 1.1.7 AND
3.2.10 AND PROVISIONS RELATING TO WHITAKER
By: /s/ [illegible]
----------------------------
Title: President
-------------------------
Date: November 29, 1996
-------------------------
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10.21 STOCK PURCHASE AGREEMENT, DATED JANUARY 1, 1995 AMONG REGISTRANT, CORY
COMPONENTS, INC. AND BRIAN GAMBERG
STOCK PURCHASE AGREEMENT
This agreement (Agreement) is made and entered into effective January 1,
1995 by and between DECRANE AIRCRAFT HOLDINGS, INC., AN OHIO CORPORATION
("DAH") and CORY COMPONENTS, INC., A CALIFORNIA CORPORATION ("Cory") and BRIAN
GAMBERG ("Gamberg") based on the following facts:
A. DAH is the ultimate parent which presently owns seven hundred fifty
(750) shares of the common stock, without par value ("Common Stock")
of CORY.
B. Gamberg owns two hundred fifty (250) shares of the Cory Common Stock.
C. Gamberg desires to sell and DAH desires to buy the two hundred fifty
(250) shares of Cory Common Stock
Based on the foregoing, DAH and Gamberg agree as follows:
1. TRANSFER OF SHARES.
Subject to the satisfaction or waiver of the conditions to the
performance of the obligations of the parties to this Agreement, effective as of
January 1, 1995, DAH shall purchase from Gamberg and Gamberg shall transfer to
DAH, free and clear of all liens, charges or encumbrances, voluntary or
involuntary, two hundred fifty (250) shares of the Cory Common Stock. The
delivery of the two hundred fifty (250) shares of Cory Common Stock shall be
made at the Closing (as herein defined) conditioned upon the satisfaction or
waiver of the Conditions specified in Section 4 of this Agreement.
2. PURCHASE PRICE.
At the Closing, DAH shall pay in immediately available funds, the sum
of Five Million Five Hundred Twenty Five Thousand Dollars ($5,525,000.00) (the
Purchase Price).
3. REPRESENTATIONS AND WARRANTIES.
3.1 DAH and Cory hereby represent and warrant to Gamberg that
except as set forth on the schedules and exhibits to this Agreement, the
representations and warranties of DAH and Cory contained in this Agreement are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing:
3.1.1 DAH is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio, and has the requisite
corporate power and authority to own, lease and operate its properties and to
conduct its business as now being conducted. DAH is qualified to do business in
Ohio. Cory is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and has the requisite
corporate power and authority to own, lease and operate its properties and to
conduct its business as now being conducted. Cory is qualified to do business in
California.
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3.1.2 DAH and Cory have the requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and consummate the transactions contemplated hereby. This Agreement constitutes
the valid and binding obligation of DAH and Cory, enforceable against DAH and
Cory, in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting the enforcement of creditors' rights
generally.
3.1.3 DAH nor Cory have employed a broker or finder or
incurred any liability for any brokerage fees, commissions, finders' fees or
similar fees or expenses and no broker or finder has acted directly or
indirectly for DAH or Cory in connection with this Agreement or the transactions
contemplated hereby.
3.1.4 No representation or warranty made by DAH or Cory in
this Agreement or Exhibit hereto or other writing furnished to Gamberg pursuant
to this Agreement, contains or will contain, any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
3.1.5 Except as disclosed on Exhibit 3.1.5., since
December 31, 1994 (i) there has been no material effect or fact known to DAH or
Cory Holdings which adds significant value to the company which material
effect, is not known to Gamberg: (ii) there have been no offers, negotiations or
interest expressed to purchase Cory, its business or its stock; (iii) Cory's
profits have been and are expected to be within the 1995 budget heretofore
provided to Gamberg.
3.1.6 The Closing of the transaction contemplated by this
Agreement, will not render DAH, Cory or Cory Holdings insolvent.
3.2 To the best of his knowledge, without investigation, Gamberg
hereby represents and warrants to DAH that except as set forth on the schedules
and exhibits to this Agreement, and except as is known to or by any officer or
attorney of DAH or Cory Holdings, Inc., the representations and warranties of
Gamberg contained in this Agreement are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing:
3.2.1 Subject to spousal consent, Gamberg has all requisite
power, authority and legal capacity and is competent to execute and deliver this
Agreement and the documents referred to herein and to perform the obligations
contemplated hereby and thereby. This Agreement constitutes the valid and
binding obligation of Gamberg, enforceable against Gamberg in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance and moratorium laws and other laws of general application
affecting the enforcement of creditors' rights generally.
2
<PAGE>
3.2.2 Since December 31, 1994, except as disclosed on
Exhibit 3.2.2 or as otherwise alleged in the Actions, there has not been any
adverse change in any customer or supplier relationship or the business
operations, assets, properties or rights prospects or condition of Cory, or, any
occurrence, circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change (a "Material Adverse
Effect") or any other event or condition of any character which has had a
Material Adverse Effect or may reasonably be expected to result in a Material
Adverse Effect.
3.2.3 [Intentionally Left Blank].
3.2.4 [Intentionally Left Blank].
3.2.5 Neither Cory nor Gamberg is under investigation with
respect to, or has been charged with or given notice of any violation of any
applicable law.
3.2.6 Except as set forth on Exhibit 3.2.6, there is no
patent, invention, trade secret, process, proprietary right, proprietary
knowledge, know how, computer software, trademark, name, service mark, trade
name, copyright, mark, symbol, logos, franchise, permit license, sublicense or
other such right necessary for the operation of the business of Cory which is
not in the possession of and owned by Cory.
3.2.7 Gamberg has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions, finders' fees or
similar fees or expenses and no broker or finder has acted directly or
indirectly for Gamberg in connection with this Agreement or the transactions
contemplated hereby.
3.2.8 No representation or warranty made by Gamberg in
this Agreement or Exhibit hereto or other writing furnished to DAH pursuant
to this Agreement, contains or will contain, any untrue statement of a
material fact or omits or will omit to state a material fact necessary to
make the statements contained herein and therein not misleading.
Except for the representations and warranties of Gamberg set forth in
Sections 3.2.1 through 3.2.8, DAH is making the purchase contemplated herein
based on its own investigation, knowledge and understanding of Cory; the
representations and warranties of Gamberg made in such sections are necessary
based upon the circumstance that as president of Cory, Gamberg may be in a
position to have knowledge of facts and events not known to Cory Holdings or
DAH.
3
<PAGE>
4. CONDITIONS PRECEDENT TO DAH'S OBLIGATION TO CLOSE.
Each and every obligation of DAH to be performed at the Closing
shall be subject to the satisfaction as of or before the Closing of the
following conditions, unless any such condition is waived by DAH:
4.1 Gamberg's representations and warranties contained in this
Agreement and the other documents executed pursuant to this Agreement, shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing as if such
representations and warranties were made as of the Closing;
4.2 DAH shall have obtained the consents listed on Exhibit 4.2; DAH
shall use its best efforts to obtain such consents.
4.3 There shall have been no material adverse change in the
financial or business condition of the business, operations or prospects of Cory
between the date of this Agreement and the Closing;
4.4 Except for Gamberg v. Cory Components, Inc., et al., Case
No. BC095184 and Gamberg v. Cory Holdings, Inc., Case No. BC115269, the actions
brought by Gamberg being dismissed at the Closing (collectively the "Actions")
or any other actions which have been served on Cory on or before the date
hereof, there shall be no pending or threatened material: claim, action,
litigation or proceeding, judicial or administrative, or governmental
investigation against Cory;
4.5 Gamberg shall have executed and delivered to Cory an Employment
Agreement in the form of Exhibit 4.5;
4.6 On the dates specified in a notice to be given to Gamberg by
Cory not less than 10 days before an international trip or 7 days before a
domestic trip outside of California, Gamberg will arrange and attend meetings
with the customers and vendors identified on Exhibit 4.6. Notwithstanding the
foregoing notice requirement, Gamberg shall use his best efforts to
accommodate DAH in the scheduling of such trips. At each such meeting,
Gamberg will describe to the representatives of the customers or vendors
present the fact that Gamberg is selling his stock in Cory to DAH and that
Gamberg is entering into an employment agreement through December 31, 1997
with Cory and that he will continue to function as the head operating officer
of Cory. At such meetings, Gamberg will advise such representatives that he
is pleased with this transaction, is supportive of DAH and plans to continue
working with Cory for a period of at least 2 years.
4.7 Gamberg shall have delivered a certificate to Cory in the form
of Exhibit 4.7, that the conditions to Closing have occurred.
4.8 Gamberg shall have delivered to Cory a Consent of Spouse
executed by Gamberg's estranged spouse in a form and content reasonably
acceptable to Cory and its counsel.
4
<PAGE>
4.9 Gamberg shall have executed and delivered to DAH a release in
the form of Exhibit 4.9.
4.10 Gamberg shall have executed and delivered to DAH a Restrictive
Covenant Agreement in the form of Exhibit 4.10.
4.11 A dismissal of the Actions with prejudice as against all
parties.
5. CONDITIONS PRECEDENT TO GAMBERG'S OBLIGATION TO CLOSE.
Each and every obligation of Gamberg to be performed at the Closing
shall be subject to the satisfaction as of or before the Closing of the
following conditions, unless any such condition is waived by Gamberg:
5.1 Cory shall have executed and delivered to Gamberg the Employment
Agreement in the form of Exhibit 4.5 and a guaranty of the Restrictive Covenant
Agreement in the form of Exhibit 5.1.
5.2 DAH shall have executed and delivered a release to Gamberg in
the form of Exhibit 5.1.
5.3 DAH shall have executed and delivered a certificate to
Gamberg in the form of Exhibit 5.3, that the conditions to Closing have
occurred.
5.4 An indemnification executed by Cory in the form of Exhibit 5.4.
5.5 Gamberg shall have received payment of the Purchase Price in
immediately available funds.
5.6 DAH and Cory shall have delivered a certified copy of the
Resolution of the DAH Board of Directors and the Cory Board of Directors
approving this Stock Purchase Agreement and related agreements.
5.7 A dismissal of the Actions with prejudice as against all
parties.
6. INDEMNIFICATION.
DAH hereby indemnifies and holds Gamberg harmless from any liability,
loss, claim damage or expense incurred by Gamberg as a result of any acts or
omissions to act by (i) DAH, Cory or the 75% shareholder of Cory (ii) as a
result of Gamberg having performed any act known to and authorized by Cory's
board of Directors during the period from the date of acquisition of Cory by
Cory Holdings, Inc. until the Closing Date or as a result of conduct performed
by Gamberg in the course and scope of his employment; provided, however that the
indemnification provided in this Section 6 excludes any matter which is: (i) a
breach of a warranty or representation by Gamberg in the Agreement, and (ii)
intentional and illegal acts performed by Gamberg. As a condition to DAH's
liability under this Section 6 in the event any third party asserts a claim
against Gamberg of which DAH or Cory Holdings is not otherwise
5
<PAGE>
specifically on notice, for which Gamberg seeks indemnity pursuant to this
Section 6, Gamberg shall within such time as under the circumstances is prompt
and reasonable and not prejudicial to DAH or Cory, give notice to DAH of the
claim and immediately deliver to DAH any and all documents, in the possession or
under the control of Gamberg, or other information reasonably needed to evaluate
and defend the claim. At its expense, DAH shall have the right to select and
appoint counsel (which counsel shall be subject to the reasonable approval but
not selection by Gamberg) or other experts to defend Gamberg in any such claim.
Nothing in this Section 6 shall prevent Gamberg, at his expense, from having his
own counsel to monitor the defense provided by DAH and DAH's counsel shall
cooperate with and provide such information to Gamberg's counsel as is
reasonable to assist such counsel in monitoring the defense of such claim.
7. TERMINATION.
Without limiting any remedy of any party, which rights are specifically
reserved, this Agreement may be terminated and canceled at any time prior to the
Closing only as follows:
7.1 By Gamberg, if any of the representations or warranties of DAH
contained in this Agreement or any Exhibit are untrue in any material respect;
7.2 By DAH if any of the representations or warranties of Gamberg
contained in this Agreement or any Exhibit are untrue in any material respect;
7.3 On or after February 21, 1996 by either party if the Closing
shall not have occurred on or before February 20, 1996.
8. CLOSING.
The Closing of the transaction contemplated by this Agreement shall
take place at the offices of Spolin & Silverman, 100 Wilshire Boulevard, Suite
940, at 10 a.m., on the 3rd business day after DAH gives notice to Gamberg that
all of the conditions to the Closing have been satisfied or waived. At the
Closing, the parties shall make the transfers, deliver the documents and make
the payments specified below (which deliveries and payments shall be deemed to
have occurred concurrently):
8.1 Deliveries by or on behalf of DAH:
8.1.1 Payment of the Purchase Price;
8.1.2 Delivery of the Employment Agreement, in the form of
Exhibit 4.5, executed by Cory;
8.1.3 Delivery of the Release, in the form of Exhibit 4.9,
executed by DAH, Cory, Tri Star, Cory Holdings, Inc, R.G. MacDonald, R. Jack
DeCrane, Robert Rankin, Judith Baker and Barbara DeCrane;
8.1.4 Delivery of the Restrictive Covenant Agreement, in the
form of Exhibit 4.10 executed by DAH; and
6
<PAGE>
8.1.5 Delivery of the Cory Indemnification in the form of
Exhibit 5.4;
8.1.6 Delivery of a certificate in the form of Exhibit 5.3;
8.1.7 Delivery of the certified copy of the Resolutions of
DAH's and Cory's Boards of Directors;
8.1.8 Delivery of the executed dismissal with prejudice of
the Actions.
8.1.9 Delivery of the Guaranty of Restrictive Covenant in
Section 5.1.
8.2 Deliveries by or on behalf of Gamberg:
8.2.1 A stock certificate or stock certificates duly
endorsed with signatures guaranteed by a national bank or member firm of the
New York Stock Exchange for 250 shares of Cory stock;
8.2.2 Delivery of a the Employment Agreement, in the form
of Exhibit 4.5 executed by Gamberg;
8.2.3 [intentionally Left Blank].
8.2.4 Delivery of a certificate executed by Gamberg in the
form of Exhibit 4.7;
8.2.5 Delivery of a release executed by Gamberg, in the
form of Exhibit 4.9;
8.2.6 Delivery of a Restrictive Covenant Agreement
executed by Gamberg in the form of Exhibit 4.10; and Actions.
8.2.7 Delivery of the executed dismissal with prejudice of
the Actions.
8.2.8 Delivery of a Consent of Spouse executed by Gamberg's
estranged spouse in a form and content reasonably acceptable to Cory and its
counsel.
7
<PAGE>
9. NOTICES.
All notices and other communications required or permitted under this
Agreement shall be deemed to have been duly given and made, in writing, (i) if
served by personal delivery to the party for whom intended (which shall include
overnight delivery by Federal Express or similar service), (ii) 3 business days
after being deposited, postage prepaid, certified or registered mail, return
receipt requested, in the United States mail bearing the address shown in this
Agreement for, or such other address as may be designated in writing hereafter
by, such party, or (iii) if sent by telecopy to the numbers shown in this
Agreement, or such other numbers as may be designated in writing hereafter by,
such party and immediately confirmed by sending a copy of such notice by either
method described in clause (i) or (ii) above:
If to DAH DeCrane Aircraft Holdings, Inc.
or to Cory: Cory Components, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R Jack DeCrane
Fax No. (310) 536-0257
with a copy to: DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
with a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman
Fax No. (310) 576-4844
If to Gamberg: Brian Gamberg
3230 Overland, No. 335
Los Angeles, California 90034
Fax No. (310) 536-0206
With a copy to: Silver & Freedman
1925 Century Park East, Suite 2100 .
Los Angeles, California 90067
Attention: Perry S. Silver, Esq.
Fax No. (310) 556-0832
8
<PAGE>
10. ENTIRE AGREEMENT
This Agreement, the Exhibits and Schedules hereto and thereto, and
the documents referred to herein and therein embody the entire Agreement and
the understanding of the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, oral and written, relative to said subject matter.
11. BINDING EFFECT: ASSIGNMENT.
This Agreement and the rights and obligations arising hereunder shall
inure to the benefit of and be binding upon DAH, their respective successors and
permitted assigns, and Gamberg, his heirs, legal representativeS AND permitted
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be transferred or assigned (by operation of law or otherwise) by
any of the parties hereto without the prior written consent of the other party
or parties except that DAH shall have the right to assign its rights hereunder
to an affiliate of DAH. Any transfer or assignment of any of the rights,
interest or obligations hereunder in violation of the terms hereof shall be void
and of no force or effect.
12. CAPTIONS.
The Article and Section headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement in
construing or interpreting any provision hereof.
13. EXPENSES OF TRANSACTION.
Except as otherwise provided herein, neither party shall be liable
for any of the costs and expenses incurred by the other party in connection with
the transactions contemplated hereby.
14. COUNTERPARTS.
This Agreement may be executed simultaneously in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
15. GOVERNING LAW.
This Agreement shall in all respects be construed in accordance with
and governed by the laws of the State of California.
16. COSTS AND ATTORNEYS' FEES.
If any action, suit or other proceeding is instituted concerning or
arising out of this Agreement, the party in whose favor judgment is rendered
shall recover such party's reasonable costs and attorneys' fees incurred.
9
<PAGE>
17. BOND EXONERATION.
Within 5 days after the execution of this Agreement, and
notwithstanding any termination of this Agreement, the Bond posted by Gamberg,
in the Actions, at Gamberg's sole option, shall be either (i) limited to a sum
not to exceed $5,000 or (ii) exonerated.
18. COOPERATION IN THE ACTIONS.
The parties will cause their respective counsel of record in the
Actions to advise the court (i) of the pendency of the settlement of the Actions
and (ii) shall require a further status conference from the court or, if the
court requires that a trial date be set, the parties shall use their best
efforts to cause the court to set a date for the commencement of a trial in the
actions which commencement date is not prior to June 1, 1996, and the parties
shall execute all documents to effectuate the purposes of Sections 17 and 18.
"DAH"
DeCrane Aircraft Holdings, Inc.,
an Ohio Corporation
/s/ R. Jack DeCrane
- ----------------------------------------------
By: R. Jack DeCrane,
Chief Executive Officer
Cory Components, Inc.,
a California Corporation
/s/ R. Jack DeCrane
- ----------------------------------------------
By: R. Jack DeCrane,
Chairman
"Gamberg"
/s/ Brian Gamberg
- ----------------------------------------------
Brian Gamberg
10
<PAGE>
EXHIBIT 10.22 SECURITIES PURCHASE AGREEMENT, DATED SEPTEMBER 18, 1996 AMONG
REGISTRANT, NASSAU CAPITAL PARTNERS L.P., NAS PARTNERS I L.L.C AND ELECTRA
INVESTMENT TRUST P.L.C.
[67]
SECURITIES PURCHASE AGREEMENT
among
DECRANE AIRCRAFT HOLDINGS, INC.
NASSAU CAPITAL PARTNERS L.P.
NAS PARTNERS I L.L.C.
AND
ELECTRA INVESTMENT TRUST P.L.C.
[68]
dated as of
September [69] 18, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. TRANSACTIONS AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 SALE AND PURCHASE OF THE SECURITIES . . . . . . . . . . . . . 3
1.2 PURCHASE PRICE FOR SECURITIES . . . . . . . . . . . . . . . . 3
1.3 PLACEMENT FEE. . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . .[70] 3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . 4
2.1 ORGANIZATION, STANDING, ETC. . . . . . . . . . . . . . . . . 4
2.2 CORPORATE ACTS AND PROCEEDINGS; ENFORCEABILITY OF
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 DUE AUTHORIZATION, ISSUANCE, ETC. . . . . . . . . . . . . . . 5
2.4 CERTIFICATE OF INCORPORATION AND CODE OF
REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES. . . . . . . . 6
2.7 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 7
2.9 CHANGES, DIVIDENDS, ETC.. . . . . . . . . . . . . . . . . . . 8
2.10 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . 8
2.11 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 PRODUCTS LIABILITY . . . . . . . . . . . . . . . . . . . . . . 9
2.13 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . 10
2.14 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.15 AFFILIATE TRANSACTIONS; NO SEPARATE CONSIDERATION . . . . . . 10
2.16 MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 10
2.17 ABSENCE OF UNDISCLOSED LIABILITIES. . . . . . . . . . . [71] 10
2.18 OUTSTANDING DEBT. . . . . . . . . . . . . . . . . . . . . . . 11
2.19 TITLE TO AND CONDITION OF PROPERTY. . . . . . . . . . . . . . 11
2.20 ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . . . . 12
2.21 EMPLOYEE PLANS. . . . . . . . . . . . . . . . . . . . . . . . 16
2.22 PATENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.23 FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . . [72] 19
3. REPRESENTATIONS AND WARRANTIES OF NASSAU CAPITAL . . . . . . . . . . . 20
3.1 ORGANIZATION, STANDING, ETC.. . . . . . . . . . . . . . . . . 20
3.2 PARTNERSHIP ACTS AND PROCEEDINGS; ENFORCEABILITY
OF AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 20
3.3 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES . . . . . . . 20
4. REPRESENTATIONS AND WARRANTIES OF EIT . . . . . . . . . . . . . [73] 21
4.1 ORGANIZATION, STANDING, ETC . . . . . . . . . . . . . . . . . 21
4.2 CORPORATE ACTS AND PROCEEDINGS; ENFORCEABILITY OF
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES . . . . [74] 21
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. . . . . . . . . . . . 22
5.1 RESTRICTED SECURITIES . . . . . . . . . . . . . . . . . . . . 22
5.2 INVESTMENT INTENT . . . . . . . . . . . . . . . . . . . . . . 22
5.3 SOPHISTICATED INVESTOR. . . . . . . . . . . . . . . . . [75] 22
- i -
<PAGE>
Page
----
5.4 ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . [76] 22
5.5 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . 23
6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
INVESTORS. . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 CONDITION PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1 FINANCIAL STATEMENTS AND OTHER REPORTS. . . . . . . . . . . . 26
7.2 BOARD MEMBER; ATTENDANCE AT BOARD MEETINGS. . . . . . . . . . 28
7.3 RESERVATION OF SHARES . . . . . . . . . . . . . . . . . [77] 28
7.4 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . [78] 28
8. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 CERTAIN PROCEDURES. . . . . . . . . . . . . . . . . . . . . . 29
9. WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 TERM; EXERCISE . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 SERIES OF WARRANTS AND TRIGGERING EVENT. . . . . . . . . . . 30
9.3 PUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.4 ANTIDILUTION PROVISIONS. . . . . . . . . . . . . . . . . . . 32
9.5 REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 32
9.6 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . [79] 32
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . [80] 32
10.2 COSTS AND EXPENSES; TRANSFER TAXES . . . . . . . . . . . . . 33
10.3 CONFIDENTIALITY; PRESS RELEASES. . . . . . . . . . . . . . . 33
10.4 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . .33
10.5 EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . [81] 33
10.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.7 AMENDMENTS, WAIVERS, ETC . . . . . . . . . . . . . . . . . . 34
10.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 34
10.9 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 36
10.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 36
- ii -
<PAGE>
EXHIBITS
Exhibit A Second Amended and Restated Certificate of Incorporation
Exhibit B Form of Series H Warrant
Exhibit C-1 Form of Nassau Note
Exhibit C-2 Form of Electra Note
Exhibit D Form of Series I Warrant
Exhibit E Shareholders Agreement
Exhibit F Registration Rights Agreement
Exhibit G Form of Opinion of Spolin & Silverman
SCHEDULES
Schedule 1.5 ADS Asset Purchase Documents
2.4(a) Certificate of Incorporation of the Company
2.4(b) Code of Regulations of the Company
2.4(c) Resolutions
2.5(a) Capital Stock - Company
2.5(b) Subscriptions, Options, Warrants, etc. - Company
2.5(c) Voting Trusts, Proxies, etc. - Company
2.5(d) Registration Rights - Company
2.6 Consents, Authorization, Approvals, etc.
2.7(a) Subsidiaries; Capital Stock
2.7(b) Subscriptions, Options, Warrants, etc. - Subsidiaries
2.7(c) Voting Trust, Proxies, etc. - Subsidiaries
2.8 Financial Statements
2.9 Changes, Dividends, etc.
2.10 Compliance, Citations, etc.
2.11 Litigation
2.15 Affiliate Transactions; No Separate Consideration
2.16 Material Conflicts
2.17 Undisclosed Liabilities
2.18 Outstanding Debt
2.19 Real Property
2.20 Environmental Matters
2.21(a) Employee Benefit Plans
2.21(h) Present Value of Benefit Payable Presently
2.21(i) Payments, etc.
2.21(k) Labor Matters
2.22 Intangible Rights
- iii -
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of September [1] 18,
1996 (this "Agreement"), is by and among DeCrane Aircraft Holdings, Inc., an
Ohio corporation (the "Company"), Nassau Capital Partners L.P., a Delaware
limited partnership located at 22 Chambers Street, Princeton, New Jersey
("Nassau Capital"), NAS Partners I L.L.C., a Delaware limited liability
company also located at 22 Chambers Street, Princeton, New Jersey ("NAS" and,
collectively with Nassau Capital, "Nassau") [2] AND Electra Investment Trust
P.L.C., a corporation organized under the laws of the United Kingdom, located
at 65 Kings Way, London, England ("EIT") [3] (NASSAU AND EIT are hereinafter
sometimes referred to collectively as the "Investors", or individually as an
"Investor").
W I T N E S S E T H:
WHEREAS, the Company currently is authorized to issue 8,000,000
shares of Common Stock, without par value (the "Common Stock"), 167,702
shares of Series A Convertible Preferred Stock, without par value (the
"Series A Stock"), 1,636,316 shares of Series B Convertible Preferred Stock,
without par value (the "Series B Stock"), 3,000,000 shares of Series C
Convertible Preferred Stock, without par value (the "Series C Stock"), and
2,000,000 shares of Series D Convertible Preferred Stock, without par value
(the "Series D Stock,"), having the rights set forth in the Amended and
Restated Certificate of Incorporation of the Company, included as Schedule
2.4(a) hereto (the "Certificate of Incorporation");
WHEREAS, the Company desires to further amend the Certificate of
Incorporation to authorize 1,500,000 shares of Series E Convertible Preferred
Stock, without par value (the "Series E Stock", and, together with the Series
A Stock, Series B Stock, Series C Stock, and Series D Stock, the "Preferred
Stock"), having the rights set forth in the Second Amended and Restated
Certificate of Incorporation of the Company attached as Exhibit A hereto;
WHEREAS, at the Closing (as hereinafter defined), the Company
desires to sell 500,000 shares of newly-issued Series E Stock to Nassau for
an aggregate purchase price of $2,000,000 (the "Nassau Shares") and 250,000
shares of newly issued Series E Stock to [4] EIT for an aggregate purchase
price of $1,000,000 (the " [5] EIT Shares" and, collectively with the Nassau
Shares, the "Shares"), and each of Nassau and [6] EIT wishes to acquire its
respective Shares, all in accordance with the terms and conditions of this
Agreement;
WHEREAS, the Company desires to authorize the issuance of certain
warrants, substantially in the form of Exhibit B hereto (together with any
such warrants which may be issued
<PAGE>
2
pursuant to any provision hereof or any provision contained in the warrants and
any such warrants which may be issued in addition to or in substitution or
exchange therefor, and including the Nassau Series H Warrants and the [7] EIT
Series H Warrants (each as defined below), the "Series H Warrants"; and,
together with the Shares, the "Equity Securities"), to purchase for a price of
$0.01 per share certain shares of the Company's Common Stock;
WHEREAS, at the Closing, the Company desires to sell Series H Warrants,
initially equal to an aggregate of [8] 115,373 shares of Common Stock, subject
to adjustment as set forth therein, to Nassau (the "Nassau Series H Warrants"),
and Series H Warrants, initially equal to an aggregate of [9] 57,704 shares of
Common Stock, subject to adjustment as set forth therein, to [10] EIT (the
" [11] EIT Series H Warrants") and each of Nassau and [12] EIT wishes to acquire
its respective Series H Warrant, all in accordance with the terms and conditions
of this Agreement;
WHEREAS, Nassau [13] will provide $2,000,000 to the Company in
exchange for a promissory note, OR NOTES, in the aggregate principal amount
of $2,000,000, substantially in the form attached hereto as Exhibit C-1,
having the terms set forth therein (the "Nassau Note"); and [14] EIT will
provide $1,000,000 to the Company in exchange for a promissory note in the
aggregate principal amount of $1,000,000, substantially in the form attached
hereto as Exhibit C-2, having the terms set forth therein (the " [15] EIT
Note" and, collectively with the Nassau Note, the "Note");
WHEREAS, the Company desires to authorize the issuance of certain
warrants, substantially in the form of Exhibit D hereto (together with any
such warrants which may be issued pursuant to any provision hereof or any
provision contained in the warrants and any such warrants which may be issued
in addition to or in substitution or exchange therefor, including the Nassau
Series I Warrants and the [16] EIT Series I Warrants (each as defined below),
the "Series i Warrants"; and, together with the Note, the "Debt Securities")
(the Equity Securities and the Debt Securities are collectively referred to
herein as the "Securities"), to purchase for a price of $0.01 per share
certain shares of the Company's Common Stock; and
WHEREAS, at the Closing, the Company desires to sell Series I
Warrants, initially equal to an aggregate of [17] 115,373 shares of Common
Stock, subject to adjustment as set forth therein, to Nassau (the "Nassau
Series I Warrants"), and Series I Warrants, initially equal to an aggregate
of 57,704 shares of Common Stock, subject to adjustment as set forth therein,
to [19] EIT (the " [20]EIT Series I Warrants") and each of Nassau and [21] EIT
wishes to acquire its respective Series I Warrant, all in accordance with the
terms and conditions of this Agreement.
<PAGE>
3
NOW, THEREFORE, in consideration of the mutual promises and subject
to the terms and conditions set forth herein, the Company and the Investors,
intending to be legally bound, hereby agree as follows:
1. TRANSACTIONS AND CLOSING
1.1 SALE AND PURCHASE OF THE SECURITIES. Upon the terms hereof and
subject to the conditions set forth herein, the Company shall sell to Nassau
and [22] EIT and Nassau and [23] EIT shall purchase from the Company, at the
Closing, the Securities.
1.2 PURCHASE PRICE FOR SECURITIES. The aggregate purchase price to
be paid by the Investors to the Company for the Securities shall be
$6,000,000 (the "Subscription Price").
1.3 PLACEMENT FEE. Upon the terms and subject to the conditions
set forth herein, on the Closing Date (as hereinafter defined), the Company
will pay by wire transfer to (i) Nassau Capital L.L.C. (an affiliate of
Nassau Capital) a placement fee in the amount of $40,000 and (ii) to [24]
Electra [25] Inc. (an affiliate of EIT) a placement fee in the amount of
$20,000.
1.4 CLOSING. The closing of the purchase and sale of the
Securities (the "Closing") will take place at the offices of Simpson Thacher
& Bartlett, 425 Lexington Avenue, New York, New York 10017, two Business
Days after the date on which all the conditions specified in Section 4 hereof
shall have been satisfied, or on such other date or at such other place as
the Investors and the Company may agree (the "Closing Date"). The Company
will give the Investors five days' notice of the Closing Date and the time of
Closing. At the Closing, the Company will deliver to the Investors (a) the
Shares, registered in the Investors' names and in such denominations as the
Investors shall request, (b) the Note, issued to the Investors in such
denominations as the Investors shall request and, (c) the Series H Warrants
and the Series I Warrants (collectively, the "Warrants"), registered in the
Investors' names or those of the Investors' nominees, against payment of the
Subscription Price by transfer in lawful money of the United States of
America in immediately available funds to such bank and account as the
Company may direct in writing. If at the Closing the Company shall fail to
(w) tender to the Investors any of the Shares, (x) issue to the Investors any
Note, (y) tender to the Investors any of the Warrants, or (z) have satisfied
any of the closing conditions specified herein, or if such closing conditions
shall not have been waived by the Investors, the Investors shall, at the
Investors' election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights the Investors may have by
reason of such failure.
<PAGE>
4
1.5 USE OF PROCEEDS. The Company shall use the proceeds which it
receives from the sale of the Securities hereunder solely for the
consummation of the purchase by the Company of 100% of the assets of the
Aerospace Display Systems Division of Allard Industries, Inc. (the "ADS Asset
Purchase") pursuant to the terms and conditions of the ADS Asset Purchase
Documents, set forth on Schedule 1.5 hereto, and for the payment of certain
fees and expenses incurred by the Company in connection therewith AND
HEREWITH.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors as
follows:
2.1 ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Ohio, and each Subsidiary (as hereinafter defined) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Company and each Subsidiary have all
requisite corporate power and authority to own and operate its material
properties and assets and to carry on its business as now conducted. The
Company and each Subsidiary are duly qualified to do business as foreign
corporations and are in good standing in the State of Ohio and in each other
jurisdiction in which the character or location of the properties and assets
owned or operated by it or the nature of the material business conducted by
it makes such qualification necessary, except to the extent that the failure
to be so qualified could not reasonably be expected to have a material
adverse effect on business, assets, liabilities, results of operations,
financial condition or prospects of the Company and its Subsidiaries, taken
as a whole (a "Material Adverse Effect").
2.2 CORPORATE ACTS AND PROCEEDINGS; ENFORCEABILITY OF AGREEMENTS.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement, the Shareholders Agreement (as hereinafter defined), the
Registration Rights Agreement (as hereinafter defined) and such documents
necessary or advisable to consummate the ADS Asset Purchase (the "ADS Asset
Purchase Documents") and to perform its obligations contemplated hereunder
and thereunder.
(b) Within a reasonable period of time after the Closing Date, the
Company will deliver to each of Nassau and [26] EIT a set of closing binders
containing true and complete copies of the final, executed ADS Asset Purchase
Documents.
(c) All corporate action on the part of the Company and its
subsidiaries, officers, directors and stockholders necessary for the
authorization, execution and delivery by the Company of this Agreement, the
Shareholders Agreement, the Registration Rights Agreement and the ADS Asset
Purchase
<PAGE>
5
Documents, the performance of all obligations of the Company hereunder and
thereunder (including the authorization, issuance, sale and delivery of the
Securities to be issued hereunder), has been taken.
(d) This Agreement has been, and the Shareholders Agreement, the
Registration Rights Agreement and the ADS Asset Purchase Documents when
executed and delivered by the parties thereto will be, duly executed and
delivered by authorized officers of the Company and constitutes, or when
executed and delivered by the parties thereto will constitute, a valid and
binding obligation of the Company and is, or when executed and delivered by
the parties thereto will be, enforceable against the Company in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to general principles of equity (whether considered in a
proceeding in equity or at law).
2.3 DUE AUTHORIZATION, ISSUANCE. ETC. The Securities being
issued hereunder, when issued and delivered in accordance with the terms of
this Agreement for the consideration expressed herein, will be duly
authorized and validly issued, fully paid and nonassessable.
2.4 CERTIFICATE OF INCORPORATION AND CODE OF REGULATIONS.
Schedule 2.4(a) hereto is a complete and correct copy of the Certificate of
Incorporation as currently in effect and on file with the Secretary of State
of the State of Ohio. Schedule 2.4(b) hereto is a complete and correct copy
of the Code of Regulations of the Company (the "Code of Regulations") as
currently in effect. Schedule 2.4(c) hereto contains complete and correct
copies of all resolutions of the Board of Directors of the Company,
authorizing the execution, delivery and performance of this Agreement, the
Shareholders Agreement, the Registration Rights Agreement and the ADS Asset
Purchase Documents and the performance of all the obligations of the Company
contemplated hereunder and thereunder and such resolutions are currently in
full force and effect.
2.5 CAPITALIZATION. (a) The authorized capital stock of the
Company consists of [27] 15,000,000 shares of Common Stock and 167,702 shares
of Series A Stock, 1,636,316 shares of Series B Stock, 3,000,000 shares of
Series C Stock and 2,000,000 shares of Series D Stock. The rights,
preferences, convertibility and other characteristics of the shares of Common
Stock and Preferred Stock (not including the Series E Stock) of the Company
are as set forth in the Certificate of Incorporation and the Code of
Regulations, subject to the terms of the Third Amended and Restated
Shareholders Agreement. As of the date of this Agreement, [301,840] shares
of Common Stock have been issued and are outstanding, and the beneficial and
record ownership of such shares is as set forth on Schedule 2.5(a). All of
such shares of Common Stock have been duly authorized and validly issued and
are
<PAGE>
6
fully paid and non assessable. As of the date of this Agreement, [167,702]
shares of Series A Stock, [1,583,537] shares of Series B Stock, [2,346,471]
shares of Series C Stock and [2,000,000] of the Series D Stock have been
issued and are outstanding and the beneficial and record ownership of each
such series is as set forth on Schedule 2.5(a). All of such shares of
Preferred Stock (not including the Series E Stock) have been duly authorized
and validly issued and are fully paid and non-assessable.
(b) Except as set forth on Schedule 2.5(b) and except for the
transactions contemplated by this Agreement, the Shareholders Agreement and
the Registration Rights Agreement, there are no outstanding subscriptions,
options, warrants, calls, contracts, preemptive rights, demands, commitments,
conversion rights or other agreements or arrangements of any character or
nature whatsoever under which the Company is or may be obligated to issue or
acquire its capital stock.
(c) Except as set forth on Schedule 2.5(c), Company is not a party
to, and the Company has no knowledge of any, voting trusts, proxies or any
other agreements or understandings with respect to the voting of any capital
stock of the Company.
(d) Except as set forth in Schedule 2.5(d), the Company has not
granted or agreed to grant any rights relating to the registration of its
securities under applicable federal and state securities laws, including
piggyback rights.
(e) Except as set forth on Schedule 2.5(b), the consummation of the
transactions contemplated by this Agreement will not trigger the anti-dilution
provisions or other price adjustment mechanisms of any outstanding
subscriptions, options, warrants, calls, contracts, preemptive rights,
demands, commitments, conversion rights or other agreements or arrangements
of any character or nature whatsoever under which the Company is or may be
obligated to issue or acquire its capital stock.
2.6 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES. The execution
and delivery of this Agreement as of the date hereof, and the Shareholders
Agreement, the Registration Rights Agreement and the ADS Asset Purchase
Documents, as of the Closing Date (collectively, the "Closing Documents"),
and the consummation of the transactions contemplated by any of the Closing
Documents will not (i) violate the Certificate of Incorporation or Code of
Regulations of the Company or any Subsidiary, (ii) conflict with or
constitute a violation of any law, statute, judgment, order, decree or
regulation applicable or relating to the Company or any of its Subsidiaries
or to which any of its assets or properties is subject, or (iii) result in a
breach of, or constitute a default under, or result in the imposition of any
lien or encumbrance upon any asset or property of the Company or any
Subsidiary pursuant to, any agreement or
<PAGE>
7
other instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any portion of their respective
properties, assets or rights are bound or affected, except for those
breaches, defaults, liens and encumbrances which in the aggregate could not
reasonably be expected to have a Material Adverse Effect. No consent,
authorization, approval, permit or order of, or notice to or filing with, any
governmental authority is required in connection with the execution, delivery
and performance of any of the Closing Documents by the Company and except for
(x) consents, authorizations, approvals, permits and orders which have been
obtained and filings which have been made as of the date hereof, (y)
consents, authorizations, approvals, permits, orders and filings set forth on
Schedule 2.6.
2.7 SUBSIDIARIES. (a) As used herein, "Subsidiary" shall mean (i)
any corporation of which a majority of the securities entitled to vote
generally in the election of directors thereof, at the time as of which any
determination is being made, are owned by the Company, either directly or
indirectly and (ii) any joint venture, general or limited partnership or
other legal entity in which the Company is the record or beneficial owner,
directly or indirectly, of a majority of the equity interests. Schedule
2.7(a) accurately sets forth each Subsidiary, including its name, place of
incorporation or formation, the number of shares authorized for each class of
the capital stock thereof, the number of shares issued and outstanding for
each class of the capital stock thereof, and the record ownership of all
capital stock issued thereby. All shares of capital stock of any Subsidiary
directly or indirectly owned by the Company have been duly authorized and
validly issued, are fully paid, non-assessable and, except as set forth on
Schedule 2.7(a), are directly or indirectly owned by the Company free of any
security interest, lien, pledge or other encumbrance.
(b) Except as set forth on Schedule 2.7(b), there are no
outstanding subscriptions, options, warrants, calls, contracts, preemptive
rights, demands, commitments, conversion rights or other agreements or
arrangements of any character or nature whatsoever under which any Subsidiary
is or may be obligated to issue or acquire its capital stock.
(c) Except as set forth on Schedule 2.7(c), there are no voting
trusts, proxies or any other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary.
2.8 FINANCIAL STATEMENTS. Schedule 2.8 includes true and complete
copies of (i) the audited balance sheets of the Company as at December 31,
1993, 1994 and 1995 and the related audited statements of operations and of
cash flows of the Company for the fiscal years then ended, including the
auditors' opinions thereon and all notes thereto, and (ii) the unaudited
balance sheet of the Company as at June 30, 1996, and the related
<PAGE>
8
unaudited statement of operations of the Company for the period January 1, 1996
through June 30, 1996. Each of the foregoing financial statements (the
"Financial Statements") was prepared in accordance with generally accepted
accounting principles consistently applied (except, with respect to unaudited
statements, for the omission of footnote disclosures and normal year end audit
adjustments). Such balance sheets present fairly the financial position of the
Company as of the dates stated thereon, and such statements of operations
present fairly the results of the operations of the Company for the periods
stated on such statements of operations.
2.9 CHANGES, DIVIDENDS, ETC. Except as set forth on Schedule 2.9,
since December 31, 1995, (i) neither the Company nor any of its Subsidiaries
has paid any management fee or declared or made any payment, loan, advance,
dividend or other distribution to its affiliates or stockholders as such, or
purchased or redeemed any shares of its capital stock, or obligated itself to
do so; (ii) neither the Company nor any of its Subsidiaries has sold,
transferred, encumbered or leased any of its assets except in the usual and
ordinary course of business, or merged or consolidated with or into any other
person, firm or entity; (iii) neither the Company nor any of its Subsidiaries
has issued or sold any shares of its capital stock or other securities or
granted any options or other rights with respect thereto; (iv) neither the
Company nor any of its Subsidiaries has incurred any material obligation or
liability except in the ordinary course of business; (v) there has not been
any termination, discontinuation, closing or disposition of any material
business operation of the Company or any of its Subsidiaries; and (vi) there
has not been any change in the method of accounting or accounting practice or
policy of the Company or any of its Subsidiaries; nor, except as set forth on
Schedule 2.9, has the Company or any of its Subsidiaries (A) agreed to do any
of the foregoing, other than pursuant to this Agreement, or (B) suffered any
physical damage, destruction or other loss (whether or not covered by
insurance) which has had or may have a Material Adverse Effect. Except as
set forth on Schedule 2.9 hereto or in the Financial Statements, since
December 31, 1995, there has been no Material Adverse Effect, nor is the
Company aware of the occurrence of any event which constitutes or which
would, with the giving of notice or the passage of time, constitute a default
under any material agreement entered into by the Company or any of its
Subsidiaries.
2.10 COMPLIANCE WITH LAWS. (a) Except as set forth in Schedule
2.10 attached hereto, the Company has not received notice of, or citation or
summons for, and no complaint has been filed, no penalty has been assessed
and no investigation or review is in process or', to the best knowledge of
the Company, threatened by any governmental authority with respect to, any
violation or alleged violation of any law, regulation, order or other legal
requirement, or failure by the Company to have any permit, certificate,
license, approval, registration or
<PAGE>
9
authorization (including industry certificates and approvals and including,
without limitation, FAA Supplemental Type Certificates ("STCs") required in
connection with the operation of its business. The Company is not in default
with respect to any order, writ, judgment, award, injunction or decree of any
federal, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to or in connection with its
business or any of its assets, properties or operations.
(b) Except as set forth in Schedule 2.10 attached hereto, with
respect to the operation of its business, the Company possesses and is in
compliance with all material permits, certificates, licenses, approvals,
registrations and authorizations (including industry certificates and
approvals and including, without limitation, STCs) required under all
applicable laws, rules and regulations, all of which are in full force and
effect, and the business has been conducted and is now being conducted in
compliance with all applicable laws, rules, regulations, judgments and orders
of the United States and states, counties, municipalities and agencies
thereof, including, without limitation, laws, rules and regulations relating
to pollution and environmental control, equal employment opportunity, health
and safety and zoning.
2.11 LITIGATION. Except as set forth in Schedule 2.11 attached
hereto, there are no claims, actions, suits, proceedings, labor disputes or
investigations in process by or against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened either by a
written communication directed to the Company or by an oral communication
directed to the Company by a stockholder of the Company, before any federal
or state court, arbitrator or governmental authority by or against the
Company which, if adversely determined, may reasonably be expected to have a
Material Adverse Effect or in any liability on the part of the Company which
would be material to the Company or which to the best knowledge of the
Company, includes a claim against or involving the Company in excess of
$100,000 or which questions the validity or legality of or seeks damages in
connection with this Agreement or any action taken or to be taken pursuant to
this Agreement. Except as set forth in Schedule 2.11 attached hereto, there
are no outstanding judgments, decrees or orders of any court or governmental
authority against the Company.
2.12 PRODUCTS LIABILITY. Except for lawsuits, claims (asserted or
unasserted), damages and expenses adequately covered by the Company's
insurance, there are no (i) liabilities of the Company, fixed or contingent,
asserted or, to the best knowledge of the Company, unasserted, with respect
to any product liability or any similar claim that relates to any product
sold by the Company to others prior to the Closing Date, or (ii) liabilities
of the Company, fixed or contingent, asserted or, to the best knowledge of
the Company, unasserted, with respect to any claim
<PAGE>
10
for the breach of any express or implied product warranty or any other similar
claim with respect to any product sold by the Company to others prior to the
Closing Date, other than standard warranty obligations (to replace, repair or
refund) made by the Company in the ordinary course of the conduct of its
business to purchasers of its products, and except, in each case, where such
liabilities do not or would not reasonably be expected to have a Material
Adverse Effect.
2.13 NO BROKERS OR FINDERS. No person, firm or entity has or will
have, as a result of any act or omission of the Company, any right, interest
or valid claim against the Company or the Investors for any commission, fee
or other compensation as a finder or broker in connection with the
transactions contemplated by this Agreement.
2.14 TAXES. The Company and its Subsidiaries have timely filed
with all appropriate governmental authorities all material tax returns and
reports which are required to be filed prior to the date hereof. Subject to
any extensions duly requested and granted, the Company and its Subsidiaries
have duly and timely paid in full all taxes shown as due on such returns and
reports or, to the extent such taxes are accrued but not yet due, have
adequately reserved for the timely payment of any and all such taxes when
due. No issue has been raised by any taxing authority which could result in
a deficiency in the amount of taxes shown as due and owing on any tax return
or report required to be filed by the Company or any of its Subsidiaries.
2.15 AFFILIATE TRANSACTIONS; NO SEPARATE CONSIDERATION. Except as
set forth on Schedule 2.15 hereto, there are no existing agreements,
understandings or arrangements between the Company or any of its
Subsidiaries, on one hand, and any shareholder set forth on Schedule 2.5(a)
or any affiliate of any such shareholder, on the other hand, relating to the
properties, assets or conduct of the business and operations of the Company
or any of its Subsidiaries.
2.16 MATERIAL CONTRACTS. All contracts material to the business of
the Company and its Subsidiaries, including all contracts involving payments
of, or the provision of services valued at, amounts in excess of $100,000 per
year (the "Material Contracts") are set forth on Schedule 2.16 and are valid
and binding and enforceable in accordance with their respective terms subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the rights of creditors generally and to general principles of
equity (whether considered in a proceeding in equity or at law). Except as
set forth on Schedule 2.16, to the knowledge of the Company, there are no
existing defaults, nor have any events or circumstances occurred which, with
or without notice or the lapse of time or both, would constitute defaults,
under any of the Material Contracts.
<PAGE>
11
2.17 ABSENCE OF UNDISCLOSED LIABILITIES. Except for (a)
liabilities reflected or reserved against in full in the Financial Statements
or incurred after the date thereof in the ordinary course of business in an
amount not exceeding $100,000 in the aggregate, (b) liabilities not yet due
and payable or obligations to be performed or satisfied after the date hereof
under the Material Contracts, (c) liabilities incurred in the ordinary course
of business and not required to be reflected in the Financial Statements, and
(d) as set forth on Schedule 2.17, neither the Company nor any of its
Subsidiaries has, or will have upon consummation of the ADS Asset Purchase,
any material liability or obligation of any nature, whether accrued, absolute
or contingent. [PLEASE [28] ADD ASI WRITE-OFF TO SCHEDULE 2.17.]
2.18 OUTSTANDING DEBT. Except as set forth in Schedule 2.18, the
Company does not, and each of its Subsidiaries do not, have any outstanding
secured or unsecured Debt or commitments for any Debt, and as of the Closing
Date there will exist no default or event of default by the Company or any of
its Subsidiaries under the provisions of any instrument evidencing such Debt
or of any agreement relating thereto that has or would be expected to have a
Material Adverse Effect. As used in this Agreement, "Debt" shall mean, as to
any person (calculated for any person without duplication): (i) all
liabilities, whether recourse is limited or otherwise, for borrowed money or
for the deferred purchase price of property or services (but excluding trade
expenses and accounts payable incurred in the ordinary course of business and
which are not overdue by more than 90 days unless being contested in good
faith), including obligations under leases which would be treated as capital
leases; (ii) reimbursement obligations with respect to letters of credit;
(iii) any obligation secured by any property or asset of such person; (iv)
any obligation with respect to currency or hedging agreements; and (v) any of
the foregoing liabilities which such person has guaranteed.
2.19 TITLE TO AND CONDITION OF PROPERTY. The Company and its
Subsidiaries have good and marketable title to all material property and
assets (real, personal or mixed) reflected on the Financial Statements, free
and clear of any security interest, mortgage, pledge, or other lien or
encumbrance, except for (i) liens, mortgages and security interests securing
indebtedness reflected on the Financial Statements, and (ii) security
interests, mortgages, pledges and other liens and encumbrances which do not
materially interfere with the operation of the business of the Company and
its Subsidiaries. Such property and assets include all property and assets
necessary to conduct the business and operations of the Company as now
conducted. The Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all leases necessary in any material respect for
the operation of its properties and businesses; and none of such leases
contain any unusual or burdensome provisions which might materially affect or
impair the
<PAGE>
12
operation of such properties and businesses. Schedule 2.19 sets forth a
description of all real property owned or leased by the Company or any
Subsidiary.
2.20 ENVIRONMENTAL COMPLIANCE. Except as set forth on Schedule 2.20
attached hereto:
(a) The Company and each of its Subsidiaries have obtained all
environmental, health and safety permits, licenses and other
authorizations required under any and all Environmental Laws the
absence of which permit, license or other authorization would have
a material adverse effect to the Company ("Environmental
Permits") to carry on their respective business as now
being or as proposed to be conducted. No modification, revocation,
reissuance, alteration, transfer, or amendment of the Environmental
Permits, or any review by, or approval of, any third party of the
Environmental Permits is required in connection with the execution of
this Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business of the Company following such
consummation. Each Environmental Permit is in full force and effect and
the Company and each of its Subsidiaries are in compliance with the
terms and conditions thereof, and is, and has been, also in compliance
with all other limitations, restrictions, conditions, standards,
prohibitions, provisions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder,
including, without limitation, the requirement to have obtained in the
past then applicable Environmental Permits except as would not
reasonably be expected to result in liability under Environmental Laws.
To the best knowledge of the Company, there is no condition that could
be reasonably expected to prevent or interfere with future compliance
with Environmental Laws, including but not limited to compliance with
required Environmental Permits.
(b) To the best knowledge of the Company, no notice, notification,
demand, request for information, citation, summons or order has been
issued, no complaint has been filed, no penalty has been assessed and no
investigation, litigation, arbitration, administrative proceeding or
review is pending or threatened by any governmental or other entity with
respect to any past or present actual or alleged noncompliance with any
Environmental Law, any Hazardous Material, or any alleged or actual
failure by the Company or any of its Subsidiaries to have or to have had
when necessary, any Environmental Permit.
(c) Neither the Company nor any of its Subsidiaries now or
previously owns, operates or leases a treatment,
<PAGE>
13
storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and, except as would not reasonably
be expected to result in liability under any Environmental law,
(i) no polychlorinated biphenyls (PCBs) are or have been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
(ii) no asbestos or asbestos-containing material is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
(iii) there are no landfills, underground storage tanks or surface
impoundments, in each case either active or abandoned, at any site
or facility now or previously owned, operated or leased by the
Company or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or under
any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries in a reportable quantity
established by statute, ordinance, rule, regulation or order; and
(v) no Hazardous Materials are present, have been otherwise
Released or threatened to be Released, at, on, under, from or about
any site or facility now or previously owned, operated, leased or
otherwise used by the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has disposed of,
transported or arranged for the transportation of any Hazardous Material
to any location that is listed on the National Priorities List ("NPL")
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), listed for possible
inclusion on the NPL by the Environmental Protection Agency in the
Comprehensive Environmental Response and Liability Information System,
as provided for by 40 C.F.R. Section 300.5 ("CERCLIS"), or on any
similar state or local list or that is the subject of Federal, state or
local enforcement actions or other investigations that may lead to
environmental liability against any Company or any of its Subsidiaries,
or to any other location in a manner that could be expected to result in
liability under any Environmental Law.
(e) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored disposed of or Released
by the Company or any of its<PAGE>
<PAGE>
14
Subsidiaries at any location other than those listed in Schedule 2.20.
(f) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any of its
Subsidiaries and no site or facility now or previously owned,
operated or leased by any Company and each of its Subsidiaries is
listed or proposed for listing on the NPL, CERCLIS or any similar
state list of sites requiring investigation or clean up.
(g) No liens have arisen under or pursuant to any Environmental
Laws on any site or facility owned, operated or leased by the
Company or any of its Subsidiaries, and no government action has
been taken or is in process that could subject any such site or
facility to such liens and none of the Company or any of its
Subsidiaries would be required to place any notice or restriction
relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such
site or facility is located.
(h) All environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or that are in the
possession of the Company or any of its Subsidiaries in relation
to facts, circumstances or conditions at or affecting any site or
facility now or previously owned, operated or leased by the
Company or any of its Subsidiaries and that could result in
liability under any Environmental Law have been made available
to the Investors.
(i) There are no past or present actions, activities,
events, conditions or circumstances, including without limitation the
Release, threatened Release, emission, discharge, generation, treatment,
storage or disposal of Hazardous Materials, in regard to any property
currently or formerly owned, operated, leased or otherwise used by the
Company or any of its Subsidiaries or the past and present operations or
business of the Company or any of its Subsidiaries that would reasonably
be expected to give rise to liability under any Environmental Laws or
any contract or agreement.
(j) Neither the Company nor any of its Subsidiaries
has assumed, contractually or by operation of law, any liabilities,
potential liabilities or obligations under any Environmental Laws.
(k) Neither the Company nor any of its Subsidiaries
has entered into, has agreed to, or is subject to any judgment, decree,
order or other similar requirement of any governmental authority under
any Environmental Laws, including without limitation those relating to
compliance
<PAGE>
15
with Environmental Laws or to investigation, cleanup, remediation or
removal of Hazardous Substances.
(l) No submission to or filing with, or any review or approval by,
any third party is required under any Environmental Law, including without
limitation the New Jersey Industrial Site Recovery Act, the Connecticut
Transfer Act, the Illinois Responsible Property Transfer Act, and the
Indiana Responsible Property Transfer Act, in connection with the
execution of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of the Company
or its Subsidiaries following such consummation.
(m) No matter or item referenced in Schedule 2.20 could reasonably
be expected to result in a Material Adverse Effect.
For purposes of this Section 2.20, the following definitions shall apply:
"Environmental Laws" means any and all federal, state,
and local laws, ordinances, rules, regulations, codes, duties under the
common law or orders, including, without limitation, any requirements
imposed under any permits, licenses, judgments, decrees, agreements or
recorded covenants, conditions, restrictions or easements, the purpose
of which is to protect the environment, human health, public safety or
welfare, or which pertain to Hazardous Materials.
"Hazardous Materials" means any product, substance, chemical,
force, material or waste, whose presence, nature, quantity and/or
intensity of existence, use, manufacture, processing, treatment,
storage, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the
property owned or leased by the Company or any of its Subsidiaries (the
"Property") is either (A) potentially injurious to public health,
safety, welfare, or the environment, or to the Property; (B) regulated,
monitored or subject to reporting by any governmental agency; or (C) a
basis for potential liability to any governmental agency or a third
party under any applicable statute or common law theory. Without
limiting the foregoing, the term, "Hazardous Materials," includes but is
not limited to any material, waste or substance which is or contains (A)
petroleum or petroleum products, including crude oil or any fraction
thereof, natural gas, or synthetic gas or any mixture thereof, (B)
asbestos, (C) polychlorinated biphenyls, (D) flammable explosives; (E)
radioactive materials; (F) radon in excess of EPA recommended exposure
limits or (G) paint containing concentrations of lead or mercury.
<PAGE>
16
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Materials through ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata.
2.21 EMPLOYEE PLANS. (a) Schedule 2.21(a) contains a
true and complete list of each "employee benefit plan" (within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (including, without limitation, multiemployer plans within
the meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change in control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject
to ERISA (including any funding mechanism therefor now in effect or required
in the future as a result of the transaction contemplated by this Agreement
or otherwise), whether formal or informal, oral or written, legally binding
or not under which any employee or former employee of the Company has any
present or future right to benefits or under which the Company has any
present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "Company Plans".
(b) With respect to each Company Plan, the Company has delivered
to the Investors a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable, (i) any related trust agreement, annuity contract or other
funding instrument; (ii) the most recent determination letter; (iii) any
summary plan description and other written communications (or a description
of any oral communications) by the Company to its employees concerning the
extent of the benefits provided under a Company Plan; and (iv) for the three
most recent years (A) the Form 5500 and attached schedules; (B) audited
financial statements; (C) actuarial valuation reports; and (D) attorney's
response to an auditor's request for information.
c) (i) Each Company Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations; (ii)
each Company Plan which is intended to be qualified within the meaning of
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
is so qualified and has received a favorable determination letter as to its
qualification and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification; (iii) with respect to any
Company Plan, no actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or threatened, no facts or
circumstances exist which could give rise to any such actions, suits or
claims
<PAGE>
17
and the Company will promptly notify the Investors in writing of any
pending or threatened claims arising between the date hereof and the Closing
Date; (iv) neither the Company nor any other party has engaged in a
prohibited transaction, as such term is defined under Code section 4975 or
ERISA section 406, which would subject the Company or the Investors to any
taxes, penalties or other liabilities under Code section 4975 or ERISA
sections 409 or 502(i); (v) no event has occurred and no condition exists
that would subject the Company, either directly or by reason of its
affiliation with any member of its Controlled Group (as hereinafter defined),
to any tax, fine or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations including, but not limited to the taxes imposed
by Code sections 4971, 4972, 4977, 4979, 4980B, 4976(a) or the fine imposed
by ERISA section 502(c); (vi) all insurance premiums required to be paid with
respect to Company Plans as of the Closing Date have been or will be paid
prior thereto and adequate reserves have been provided for on the Company's
balance sheet for any premiums (or portions thereof) attributable to service
on or prior to the Closing Date; (vii) for each Company Plan with respect to
which a Form 5500 has been filed, no material change has occurred with
respect to the matters covered by the most recent Form since the date
thereof; (viii) all contributions required to be made prior to the Closing
Date under the terms of any Company Plan, the Code, ERISA or other applicable
laws, rules and regulations have been or will be timely made and adequate
reserves have been provided for on the Company's balance sheet for all
benefits attributable to service on or prior to the Closing Date; (ix) no
Company Plan provides for an increase in benefits on or after the Closing
Date; and (x) each Company Plan may be amended or terminated without
obligation or liability (other than those obligations and liabilities for
which specific assets have been set aside in a trust or other funding vehicle
or reserved for on the Company's balance sheet). "Controlled Group" shall
mean any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o).
(d) (i) No Company Plan has incurred any "accumulated funding
deficiency" as such term is defined in ERISA section 302 and Code section 412
(whether or not waived); (ii) no event or condition exists which could be
deemed a reportable event within the meaning of ERISA section 4043 which
could result in a liability to the Company or any member of its Controlled
Group and no condition exists which could subject the Company or any member
of its Controlled Group to a fine under ERISA section 4071; (iii) as of the
Closing Date, the Company and each member of its Controlled Group have made
all required premium payments when due to the Pension Benefit Guaranty
Corporation (the "PBGC"); (iv) neither the Company nor any member of its
Controlled Group is subject to any liability to the PBGC for any plan
termination occurring on or prior to the Closing Date; (v) no amendment has
occurred which has required or could require the Company or any member of its
Controlled Group to provide
<PAGE>
18
security pursuant to Code section 401(a)(29); and (vi) neither the Company
nor any member of its Controlled Group has engaged in a transaction which
could subject it to liability under ERISA section 4069.
(e) With respect to each of the Company Plans which is not a
multiemployer plan within the meaning of section 4001(a)(3) of ERISA but is
subject to Title IV of ERISA, as of the Closing Date, the assets of each such
Company Plan are at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Company Plan on a
termination and projected basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
(f) With respect to any multiemployer plan (within the meaning of
section 4001(a)(3) of ERISA) to which the Company or any member of its
Controlled Group has any liability or contributes (or has at any time
contributed or had an obligation to contribute): (i) the Company and each
member of its Controlled Group has or will have, as of the Closing Date, made
all contributions to each such multiemployer plan required by the terms of
such multiemployer plan or any collective bargaining agreement; (ii) neither
the Company nor any member of its Controlled Group has incurred any
withdrawal liability under Title IV of ERISA or would be subject to such
liability if, as of the Closing Date, the Company or any member of its
Controlled Group were to engage in a complete withdrawal (as defined in ERISA
section 4203) or partial withdrawal (as defined in ERISA section 4205) from
any such multiemployer plan; (iii) no such multiemployer plan is in
reorganization or insolvent (as those terms are defined in ERISA sections
4241 and 4245, respectively); and (iv) neither the Company nor any member of
its Controlled Group has engaged in a transaction which could subject it to
liability under ERISA section 4212(c).
(g) (i) Each Company Plan which is intended to meet the
requirements for tax favored treatment under Subchapter B of Chapter 1 of
Subtitle A of the Code meets such requirements; and (ii) the Company has
received a favorable determination from the Internal Revenue Service with
respect to any trust intended to be qualified within the meaning of Code
section 501(c)(9).
(h) Schedule 2.21(h) sets forth, on a plan by plan basis, the
present value of benefits payable presently or in the future to present or
former employees of the Company under each unfunded Company Plan.
(i) Except as set forth on Schedule 2.21(i), no Company Plan
exists which could result in the payment to any Company employee of any money
or other property or rights or accelerate or provide any other rights or
benefits to any Company employee as a result of the transaction contemplated
by this
<PAGE>
19
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
(j) The transaction contemplated by this Agreement does not
constitute a change in the ownership or effective control of a corporation or
the ownership of a substantial portion of the assets of a corporation for
purposes of Code section 280G or the regulations thereunder.
(k) Except as set forth in Schedule 2.21(k) attached hereto, (a)
there are no open National Labor Relations Board claims, petitions,
proceedings, charges, complaints or notices with respect to the Company, (b)
the Company has no labor negotiations in process with any labor union or
other labor organization, (c) no labor disputes, including, but not limited
to, strikes, slowdowns, picketing or work stoppages or other labor difficulty
exist or to the best of the Company's knowledge are threatened, with respect
to any employees of the Company, (d) no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement relating to the
employees of the Company is in process, and to the best knowledge of the
Company, no claim thereunder exists, (e) the Company is not experiencing any
labor disputes, including but not limited to strikes, slowdowns, picketing or
work stoppages with respect to the employees of the Company and (f) no "plant
closing" or "mass layoff" has been effectuated by the Company (in each case
as defined in the Worker Adjustment and Retraining Notification Act (29 U.S.C.
Section 2101, ET SEQ.), as amended). To the best knowledge of the Company,
there are no efforts in process by unions to organize any employees or the
Company who are not now represented by recognized collective bargaining
agents.
2.22 PATENTS, ETC. All patents, trademarks, service-marks, trade
names, permits, licenses, franchises or other rights (including industry
certificates and approvals and including, without limitation, STC approvals)
(collectively, "Intangible Rights") owned or held by the Company or any of
its Subsidiaries that are material to the business of the Company or any of
its Subsidiaries are described on Schedule 2.22 attached hereto. Except as
described on Schedule 2.22, all such Intangible Rights are free and clear of
any lien. Nothing has come to the attention of the Company to the effect
that (i) any activity in operating the business of the Company or any of its
Subsidiaries as presently conducted or as proposed to be conducted may
infringe any patent, trademark, service-mark, trade name, copyright, permit,
license, franchise or other right owned by any other person, (ii) there is
pending or threatened any claim or litigation against or affecting the
Company or any of its Subsidiaries contesting its right to carry on such
activities or (iii) there is, or there is pending or proposed, any statute,
law, rule, regulation, standard or code which would prevent or inhibit, or
substantially reduce the projected revenues of, or otherwise adversely affect
the business, condition (financial or otherwise), or operations of, the
Company.
<PAGE>
20
2.23 FULL DISCLOSURE. No representation or warranty made by the
Company herein nor any certificate, schedule, or instrument furnished or to
be furnished by the Company pursuant hereto or in connection herewith,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF NASSAU CAPITAL AND NAS
Nassau Capital and NAS hereby jointly and severally represent and
warrant to the Company as follows:
3.1 ORGANIZATION, STANDING, ETC. Nassau Capital is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware. NAS is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
3.2 PARTNERSHIP ACTS AND PROCEEDINGS; ENFORCEABILITY OF
AGREEMENTS. Each of Nassau Capital and NAS has all requisite power and
authority to enter into this Agreement, the Shareholders Agreement and the
Registration Rights Agreement and to perform its obligations hereunder and
thereunder. All action on the part of Nassau Capital and its partners and by
NAS and its members, officers and managers necessary for the authorization,
execution and delivery of this Agreement, the Shareholders Agreement and the
Registration Rights Agreement by Nassau Capital and NAS, and the performance
of all obligations of Nassau Capital and NAS hereunder and thereunder, has
been taken. This Agreement has been, and the Shareholders Agreement and the
Registration Rights Agreement when executed will be, duly executed and
delivered by each of Nassau Capital and NAS and constitutes or when executed
will constitute a valid and binding obligation of each of Nassau Capital and
NAS, and is or when executed will be enforceable against each of Nassau
Capital and NAS in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and to general principles of equity
(whether considered in a proceeding in equity or at law).
3.3 NO CONFLICT: GOVERNMENTAL APPROVALS AND NOTICES. Neither the
execution and delivery of this Agreement, the Shareholders Agreement and the
Registration Rights Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) violate the partnership agreement of
Nassau Capital, (ii) conflict with or constitute a violation of any law,
statute, judgment, order, decree or regulation applicable or relating to
Nassau Capital or NAS, or (iii) result in a breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon
any asset or property of Nassau Capital or NAS pursuant to, any agreement or
other instrument to which Nassau Capital or NAS is a party or by which either
or any
<PAGE>
21
portion of their properties, assets or rights are bound or affected which
could reasonably be expected to have a material adverse effect on the
transactions contemplated hereunder. No consent, authorization, approval,
permit or order of, or notice to or filing with, any governmental authority
is required in connection with Nassau Capital's and NAS's execution, delivery
and performance of this Agreement, the Shareholders Agreement or the
Registration Rights Agreement, except to the extent that the failure to
obtain any such Governmental Consent could not reasonably be expected to have
a material adverse effect on the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF EIT
[29] EIT HEREBY REPRESENTS AND WARRANTS to the Company as follows:
4.1 ORGANIZATION, STANDING, ETC. EIT is a [30] corporation duly
organized, validly existing and in good standing under the laws of the United
Kingdom.[31]
4.2 CORPORATE ACTS AND PROCEEDINGS: ENFORCEABILITY OF AGREEMENTS.
[32] EIT [33] has all requisite corporate power and authority to enter into
this Agreement, the Shareholders Agreement and the Registration Rights
Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by [34] EIT [35] of this Agreement, the
Shareholders Agreement and the Registration Rights Agreement and the
consummation by [36] IT of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action by [37] EIT [38],
and no other corporate action on the part of EIT [39] is necessary for the
execution, delivery and performance by [40] IT of this Agreement, the
Shareholders Agreement or the Registration Rights Agreement and the
consummation by [41] EIT of the transactions contemplated hereby or thereby.
This Agreement has been, and the Shareholders Agreement and the Registration
Rights Agreement when executed will be, duly executed and delivered by [42]
EIT [43] and constitutes or when executed will constitute a valid and binding
obligation [44] of EIT and [45] is or when executed will be enforceable
against [46] EIT [47] in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and to general principles of equity
(whether considered in a proceeding in equity or at law).
4.3 NO CONFLICT: GOVERNMENTAL APPROVALS AND NOTICES. Neither the
execution and delivery of this Agreement, the Shareholders Agreement and the
Registration Rights Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) violate the organizational documents
of [48] EIT [49], (ii) conflict with or constitute a violation of any law,
statute, judgment, order, decree or regulation applicable or relating to EIT
[50], or (iii) result in a breach of, or
<PAGE>
22
constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of EIT [51] pursuant to, any agreement
or other instrument to which EIT [52] is a party or by which [53] any portion
of [54] ITS properties, assets or rights are bound or affected which could
reasonably be expected to have a material adverse effect on the transactions
contemplated hereunder. No consent, authorization, approval, permit or order
of, or notice to or filing with, any governmental authority is required in
connection with EIT's [55] execution, delivery and performance of this
Agreement, the Shareholders Agreement or the Registration Rights Agreement,
except to the extent that the failure to obtain any such Governmental Consent
could not reasonably be expected to have a material adverse effect on the
transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants to the Company as
follows:
5.1 RESTRICTED SECURITIES. Each Investor understands that none of
the Shares has been registered under the Securities Act of 1933, as amended
(the "1933 Act"), or registered or qualified under any state securities laws,
and, in addition to the restrictions on transfer set forth in the
Shareholders Agreement, that they may not transfer the Shares in a manner
inconsistent with their status as restricted securities.
5.2 INVESTMENT INTENT. The Securities are being purchased for each
Investor's own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
1933 Act. Each Investor understands that the Shares have not been registered
under the 1933 Act by reason of their contemplated issuance in transactions
exempt from the registration and prospectus delivery requirements of the 1933
Act pursuant to Section 4(2) thereof, that certificates representing the
Shares shall bear the legend provided under the Shareholders Agreement (which
legends shall be removed by the Company at the request of the Investors when
appropriate) and that the reliance of the Company and others upon this
exemption is predicated in part upon this representation and warranty by such
Investor. None of the Investors was formed for the specific purpose of
purchasing the Securities.
5.3 SOPHISTICATED INVESTOR. Each Investor has such knowledge and
experience in financial and business matters and in investments of this type
that it is capable of evaluating the merits and risks of its investment in
the Securities and of making an informed investment decision. Each Investor
is capable of bearing the economic risk inherent in ownership of the
Securities and retaining the Securities for an indefinite period.
5.4 ACCESS TO INFORMATION. Each Investor has been given the
opportunity to ask questions of, and receive and
<PAGE>
23
evaluate answers and information from, the Company concerning the Company and
its Subsidiaries and the terms and conditions of its investment in the
Securities, and been provided with, or had access to, such documents and
other information as it deems necessary or useful in its evaluation of the
merits and risks of an investment in the Securities. Each Investor has
received such advice as to the federal and state tax consequences of the
transactions contemplated by this Agreement from its own tax advisors as it
deems necessary.
5.5 NO BROKERS OR FINDERS. No person, firm or entity has or will
have, as a result of any act or omission by any Investor, any right, interest
or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement.
6. CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INVESTORS. The
obligations of the Investors to consummate the purchase of the Securities is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company and any of its Subsidiaries
contained herein, shall be true and correct in all material respects on
and as of the Closing Date, with the same force and effect as though
made on and as of the Closing Date, except to the extent that any
representation or warranty is made as of a specified date, in which case
such representation or warranty shall be true and correct as of such
date. Each Investor shall receive at Closing a certificate of the
Secretary or Assistant Secretary of the Company, dated the Closing Date,
certifying the foregoing.
(b) NO MATERIAL ADVERSE CHANGE. There shall not have
occurred or been threatened any event which could have a Material Adverse
Effect.
(c) SHAREHOLDERS AGREEMENT. The Company shall have entered
into the Fourth Amended and Restated Shareholders Agreement with the
Investors and certain of its other shareholders, substantially in the
form of Exhibit E hereto (the "Shareholders Agreement").
(d) REGISTRATION RIGHTS AGREEMENT. The Company shall
have entered into the Fourth Amended and Restated Registration Rights
Agreement with the Investors and certain of its other shareholders,
substantially in the form of Exhibit F hereto (the "Registration Rights
Agreement").
(e) CERTIFICATE OF INCORPORATION. The Company shall
have duly adopted and filed the Second Amended and Restated
<PAGE>
24
Certificate of Incorporation, in the form of Exhibit A attached hereto.
(f) ADS ASSET PURCHASE. Consummation of the ADS Asset
Purchase shall occur simultaneously with the Closing on the terms and
conditions set forth on Schedule 1.5 hereto and the Investors shall have
received copies of the ADS Asset Purchase Documents, certified by the
Secretary or Assistant Secretary of the Company as true and complete
copies thereof together with evidence of authorization by the Company of
each ADS Asset Purchase Document, and the transactions contemplated
therein.
(g) NO LITIGATION. No action, suit, investigation, arbitration,
or administrative or governmental proceeding shall be pending,
seeking to restrain, prohibit or invalidate the transactions
contemplated by this Agreement, the Shareholders Agreement the
Registration Rights Agreement or the ADS Asset Purchase Documents.
(h) LEGAL OPINION. The Investors shall have received from Spolin &
Silverman, counsel for the Company, an opinion in the form of
Exhibit G hereto, addressed to the Investors.
(i) APPROVALS AND CONSENTS. The Company shall have
duly received all authorizations, waivers, consents, approvals, licenses,
franchises, permits and certificates (collectively, the "Approvals") by
or of all federal, state and local governmental authorities, and all
material Approvals by or of all other persons, necessary or advisable
for the issuance of the Shares, and all such Approvals shall be in full
force and effect at the time of the Closing. The Company shall have
delivered to the Investors an Officers' Certificate, dated the Closing
Date, to such effect.
(j) PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Securities shall not, to the knowledge of the Company,
violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the 1933 Act) and shall not as a result
of any act or omission by Company subject the Investors to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation. The Investors shall have
received such certificates or other evidence of compliance as the
Investors may request.
(k) COMPLIANCE WITH SECURITIES LAWS. The issuance, offering and
sale of the Securities under this Agreement shall have complied with all
applicable requirements of federal and state securities laws, and the
Investors shall have received such evidence of compliance as the
Investors may request.
<PAGE>
25
(1) INFORMATION AND MATERIALS. The Investors shall have received
such other information, as the Investors or their counsel may reasonably
request including, but not limited to, an environmental audit report in
form and substance satisfactory to the Investors with respect to any
environmental hazards, conditions, liabilities or potential liabilities
to which the Company and its Subsidiaries may be subject.
(m) AMENDMENTS, WAIVERS, CONSENTS, ETC. The Investors
and their counsel shall have received evidence satisfactory to them that
any and all amendments or waivers of, or consents to, any agreement,
instrument, or document to which the Company is party or by which the
Company is bound, necessary or advisable, in the sole opinion of the
Investors, to effectuate the transactions contemplated hereby shall have
been obtained by the Company, including, without limitation, (i) a
waiver of Sections 2.10(c) and 9.24 of the Amended and Restated Credit
Agreement, dated as of [56] September 18, 1996 among the Company, the
Subsidiary Guarantors parties thereto, the Lenders parties thereto, and
Internationale Nederlanden (U.S.) Capital Corporation, as Agent
thereunder, [57](ii) a waiver of Sections 7K and 16F of the Securities
Purchase Agreement, dated as of November 2, 1994, among the Company, EIT
and Electra Associates, Inc. ("Electra") (the "Electra Securities
Agreement"), and (iii) all necessary anti-dilution waivers, in each and
every case on terms satisfactory to the Investors[58].
(n) COMPLIANCE WITH AGREEMENTS. The Company and each
of its Subsidiaries shall be in compliance with all of the material
covenants, terms and conditions of all loan documents, shareholder
agreements and other material agreements of the Company (including all
existing or proposed credit facilities, loan agreements and the like)
which will remain or be outstanding immediately after the Closing Date,
and such agreements shall permit the performance by the Company and its
Subsidiaries of all of the obligations and transactions contemplated by
this Agreement. The Company shall have delivered to the Investors an
Officers' Certificate, dated the Closing Date, to such effect.
6.2 CONDITION PRECEDENT TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the issuance and sale
of the Securities is subject to the condition that the representations
and warranties of each Investor contained herein shall be true and
correct in all material respects on and as of the Closing Date, with the
same force and effect as though made on and as of the Closing Date,
except to the extent that any representation or warranty is made as of a
specified date, in which case such representation or warranty shall be
true and correct as of such date. The Company shall receive at Closing
a certificate from each of the General Partner
<PAGE>
26
of Nassau Capital, the Manager of NAS, and the Secretary or Assistant
Secretary of [59] EIT [60], each dated the Closing Date, certifying the
foregoing.
7. AFFIRMATIVE COVENANTS
The Company covenants that from and after the date of this Agreement
through the Closing and thereafter (unless otherwise provided below):
7.1 FINANCIAL STATEMENTS AND OTHER REPORTS. For so long as the
Company does not have any class of securities registered under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Company will deliver,
or cause to be delivered to each Investor:
(a) within 30 days prior to the end of each fiscal year, but no
earlier than 60 days prior to the end of such fiscal year, a budget (on a
monthly basis) for the Company and its Subsidiaries for the following
fiscal year (including consolidating and consolidated statements of
income, cash flow and balance sheets prepared in accordance with GAAP),
in form heretofore provided to the Investors; PROVIDED, HOWEVER, that
notwithstanding the registration by the Company of any class of
securities under the 1934 Act, the Company will deliver such budgets to
each Investor if the Investors are not entitled at such time to a
Designee on the Board (each, as defined in Section 5.2(a) hereof);
(b) as soon as available and in any event within 30 days after
the end of each month, consolidating and consolidated statements of income
and cash flow of the Company and its Subsidiaries for such month and for
the period from the beginning of the current fiscal year to the end of
such month and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period and, beginning in fiscal year
1996, setting forth, in each case, in comparative form, figures for the
corresponding month and period in the preceding fiscal year and the
budget for such month and for the period from the beginning of the
current fiscal year to the end of such month, all in reasonable detail
and reasonably satisfactory in form and scope to the Investors and
certified by an authorized financial officer of the Company as fairly
presenting in all material respects the financial condition and results
of operations of the Company and its Subsidiaries on a consolidated
basis in accordance with GAAP;
(c) as soon as practicable and in any event within 45 days after
the end of each fiscal quarter of the Company, consolidating and
consolidated statements of income and cash flow of the Company and
its Subsidiaries for such quarter and for the period from the
beginning of the current fiscal year to the end of such quarter
and a consolidated balance
<PAGE>
27
sheet of the Company and its Subsidiaries as at the end of such quarter,
setting forth, in each case, in comparative form, figures for the
corresponding quarter in the preceding fiscal year and the budget for
such quarter, all in reasonable detail and satisfactory in form and
scope to the Investors, and certified by an authorized financial officer
of the Company as fairly presenting in all material respects the
financial condition and results of operations of the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP;
(d) as soon as available and in any event within [61] 90 days after
the end of each fiscal year, consolidating and consolidated statements
of income, stockholders' equity and cash flow of the Company and its
Subsidiaries for such fiscal year, and the related consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at
the end of such fiscal year, setting forth, in each case, in comparative
form, corresponding consolidated and consolidating figures from the
preceding fiscal year, all in reasonable detail and reasonably
satisfactory in form and scope to the Investors, and accompanied (i) in
the case of said consolidated statements and balance sheet of the
Company, by an opinion thereon of independent certified public
accountants of recognized national standing (which shall be generally
recognized as one of the "Big Six" independent public accounting firms),
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Subsidiaries as at the end of, and
for, such fiscal year in accordance with GAAP, and (ii) in the case of
said consolidating statements and balance sheets, by a certificate of an
authorized financial officer of the Company, which certificate shall
state that said consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at the end of, and
for, such fiscal year;
(e) promptly upon transmission thereof to the shareholders of
the Company generally or to any other security holder of the Company,
including, without limitation, any holder of Debt, copies of all
financial statements, financial analyses, notices, certificates
(including, without limitation, the compliance certificate to be
furnished under the Credit Agreement, dated November 2, 1994, between
the Company, the Subsidiary Guarantors named therein, the Lenders named
therein, The Provident Bank ("Provident") and Internationale Nederlanden
(U.S.) Capital Corporation ("ING"), as the same has been, or may be,
amended, modified or supplemented (the "Credit
<PAGE>
28
Agreement")), annual reports and proxy statements so transmitted;
(f) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit of the
books of the Company or any of its Subsidiaries made by such accountants,
or any management letters or similar document submitted to the Company or
any of its Subsidiaries by such accountants;
(g) promptly upon any material revision to the budgets referred to
in paragraph (a) above, such monthly budgets, as revised;
(h) promptly upon any officer of the Company obtaining knowledge of
any event of default under any credit agreement, loan agreement or
indenture that the Company is party to; and
(i) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as such Investor may
reasonably request.
7.2 BOARD MEMBER; ATTENDANCE AT BOARD MEETINGS.
(a) For so long as the Investors hold not less than 5% of the Common
Equivalent Shares (as defined in the Shareholders Agreement), at the Investors'
request, the Company will cause one person designated by the Investors (the
"Designee") to be included in any list of persons nominated by management of
the Company for election as members of the Board of Directors of the Company
(the "Board") and will take all actions reasonably within its power to cause
the Designee to be elected a member of the Board. The Designee, as a director,
will have the right to be a member of the Audit Committee and the Compensation
Committee of the Board, or such other committees of the Board performing the
functions typically performed by such committees.
(b) The Company will reimburse such director for all costs and
expenses (including travel expenses) incurred in connection with such
director's attendance at meetings of the Board or any committee of the Board
upon which such director serves. The Company will pay such director annual
fees and fees for attending Board or committee meetings, if any such fees are
paid to directors.
7.3 RESERVATION OF SHARES. The Company will reserve and keep
reserved at all times sufficient shares of its Common Stock for issuance upon
conversion of the Securities and, upon such conversion, the Company will
promptly issue and deliver the shares of Common Stock required to be delivered,
and such shares, when issued and delivered, will be validly issued, fully paid
and nonassessable.
<PAGE>
29
7.4 USE OF PROCEEDS. The Company will use the proceeds from the
sale and issuance of the Securities for the purpose described in Section 1.5
hereof.
8. INDEMNIFICATION
8.1 INDEMNIFICATION.
(a) From and after the Closing, the Company shall indemnify and save
harmless the Investors and their respective officers, directors, members,
stockholders, partners and employees (as applicable) (the "Investor
Indemnitees") from and against any and all loss, cost, damage or expense
(including court costs and reasonable attorneys' fees) whatsoever asserted
against or incurred by such Investor Indemnitee resulting from or arising out
of any breach of any representation, warranty or covenant of the Company
contained in this Agreement.
(b) From and after the Closing, each Investor shall severally
indemnify and save harmless the Company and its officers, directors,
stockholders and employees (the "Company Indemnitees") from and against any and
all loss, cost, damage or expense (including court costs and reasonable
attorneys' fees) whatsoever asserted against or incurred by such Company
Indemnitee resulting from or arising out of any breach of any representation or
warranty made by such Investor in this Agreement.
8.2 CERTAIN PROCEDURES. In the event that a claim is made by a
third party against any Investor Indemnitee or Company Indemnitee (the
"Claimant") which, if successful, would entitle such Claimant to
indemnification hereunder, or any Claimant desires to make a claim against any
party to this Agreement (the "Indemnitor") under this Section 8, the Claimant
shall give prompt notice to the Indemnitor of any actions, suits, proceedings
and demands at any time instituted against or made upon Claimant and for which
the Claimant claims a right to indemnification hereunder (including the amount
and circumstances surrounding any claim); PROVIDED that the failure of a
Claimant to give notice as provided in this Section 8.2 shall not relieve the
Indemnitor of its obligations hereunder, except to the extent that the
Indemnitor is actually prejudiced by such failure to give notice. The
Indemnitor shall within 30 days after receipt of notice undertake to defend,
adjust, compromise or settle the action, suit, proceeding or demand on which
such notice is based, in the name of the Claimant or otherwise as the
Indemnitor shall elect. Notwithstanding the foregoing, the Claimant shall have
the right to defend, adjust, compromise or settle any action, suit, proceeding
or demand on its own behalf and to be indemnified therefor if (a) the
Indemnitor does not provide the undertaking referred to in the previous
sentence, (b) the Indemnitor has not employed counsel reasonably satisfactory
to the Claimant, or (c) in the sole discretion of the Claimant, there is a
conflict or potential conflict of interest between the
<PAGE>
30
Claimant and the Indemnitor or a legal defense available to it which differs
from or is additional to those available to Indemnitor, in such action, suit or
proceeding. The Indemnitor shall not, except with the consent of the Claimant,
enter into any settlement that does not include as a term thereof an
unconditional release of the Claimant from all liability with respect to the
applicable claim.
9. WARRANTS
9.1 TERM; EXERCISE. Subject to the terms and conditions contained
in this Agreement and in the Warrants, the Warrants are exercisable, in the
manner set forth in the Warrants, in whole or in part, at any time and from
time to time during the period commencing on the Effective Date (as defined in
each such Warrant) and ending at 5:00 p.m. New York City time on December 31,
2006, (the "Expiration Date"), and shall be void thereafter.
9.2 SERIES OF WARRANTS AND TRIGGERING EVENT. (a) At the Closing,
the Investors will receive Series H Warrants and Series I Warrants, in each
case exercisable into such number of shares of Common Stock as determined
pursuant to Section 2.1 of such Warrant.
The Series H Warrants and Series I Warrants will be essentially
identical in all respects, including in the respect that the occurrence of
either of a Registered Public Offering (as defined below) or a Private
Financing (as defined below) will determine the Warrant Value (as defined in
each of the Series H Warrants and the Series I Warrants), except that (i) the
Series I Warrants shall be terminated upon the repayment in full of the Note,
PROVIDED that a Registered Public Offering shall have occurred prior to such
repayment and (ii) the aggregate amount of the accrued and unpaid interest on
the Note will be included in the calculation of the Warrant Value of the Series
I Warrant.
(b) For purposes hereof, the following terms shall have the
following meanings:
"Fully Diluted" shall mean, at any point in time, the number of
common shares outstanding, increased by all common equivalent shares (stock
options, warrants, convertible securities and any other security or instrument,
whether in or out of the money, that could result in additional common shares
being issued at any time in the future) at the time outstanding.
"Private Financing" shall mean any disposition by the Company,
whether by sale or indirect sale, issuance or other transfer, of any capital
stock of the Company, or any warrant, security or other instrument convertible
into capital stock of the Company, other than pursuant to a Registered Public
Offering.
<PAGE>
31
"Registered Public Offering" shall mean the closing of an
underwritten public offering for shares of Common Stock of the Company pursuant
to a registration statement under the 1933 Act.
9.3 PUT. (a)(i) If a Registered Public Offering shall not have
occurred by December 31, 2000, then, the Investors or other holder of the
Warrants may, at any time thereafter, by giving written notice to the Company
(the "Put Notice"), require the Company to repurchase (the "Put") all or any
portion of the Warrants held by the Investors or other holder of the Warrants
for an amount equal to the Put Amount (as defined in the Electra Securities
Agreement) and corresponding to that number of shares of Common Stock then
issuable upon exercise of the Warrants designated in the Put Notice. The
Company shall pay to the Investors, subject to Section 9.3(a)(iii) hereof such
Put Amount within 30 days of the date of the Put, or, if sooner, at the same
time that ING, Provident, Banc One or Electra is required to be paid pursuant
to the terms of the ING Warrant, the Provident Warrant, the Banc One Warrant
and the Electra Warrants (each as defined in the Electra Securities Agreement),
respectively, and shall execute and deliver to the Investors a promissory note
evidencing such Put Amount; any unpaid balance of the Put Amount shall bear
interest, which interest shall be paid together with any payment of the Put
Amount, at a rate of 14% per annum.
(ii) Immediately upon receipt of (A) a Put Notice or (B) notice,
whether prior to or after December 31, 2000, from the holders of any of the ING
Warrant, the Provident Warrant, the Banc One Warrant or the Electra Warrants
(such holders being referred to herein collectively as the "Put Holders") that
the Investors or such Put Holders intend to exercise put rights in connection
with the repurchase of any of their warrants by the Company, the Company shall,
before repurchasing any such warrants, give written notice thereof to the
Investors and/or all other Put Holders, as the case may be. For a period of
twenty (20) days following receipt of such notice, the Investors and each Put
Holder shall be entitled, by written notice to the Company, the Investors
and/or each Put Holder, as the case may be, to elect to require the Company to
repurchase for cash its pro rata share (on the basis of the number of shares of
Common Stock then issuable upon exercise of all of the warrants held by the
Investors and each such Put Holder) of the warrants held by the Investors and
each such Put Holder. If, at the expiration of such twenty-day period the
Investors or any Put Holders have not elected to have the Company repurchase
their warrants, the Company shall repurchase only those warrants for which
notice has been received.
(iii) If the Company shall not have funds legally available in the
amount necessary to repurchase all warrants of the Investors and Put Holders
with respect to which notice has been received, then such warrants shall be
repurchased by the Company (A) first, on a pro rata basis in accordance with
the number of shares of Common Stock then issuable upon exercise of
<PAGE>
32
all of the warrants held the Put Holders, and (B) second, to the extent of
funds legally available therefor, on a pro rata basis in accordance with the
number of shares of Common Stock then issuable upon exercise of all of the
warrants held by the Investors. Any Put not satisfied in full in cash shall
remain an obligation of the Company and shall be evidenced by a promissory note
due within 366 days and bearing interest at a rate of 14% per annum, which
interest shall be paid together with the Put Amount.
9.4 ANTIDILUTION PROVISIONS. The percentage of Common Stock for
which the Warrants may be exercised shall be adjusted as set forth in the
Warrants in order to preserve the relative position of the holder of the
Warrants vis-a-vis the percentage of the issued and outstanding shares of
Common Stock which such holder may acquire upon exercise of the Warrants.
9.5 REGISTRATION. Pursuant to the terms of the Registration Rights
Agreement, the Investors shall have and be entitled to (i) three demand and
(ii) unlimited piggyback registrations for shares of Common Stock issuable upon
exercise of the Warrants. The Investors' demand registration rights will have
preference over other demand registration rights granted by the Company (with
the exception of any such right granted to (A) Electra pursuant to the Electra
Securities Agreement, with which the right of the Investors hereunder shall
rank pari passu; PROVIDED that Electra shall have amended the Electra
Securities Agreement to provide that such right of Electra shall rank pari
passu with that of the Investors hereunder and (B) Nassau pursuant to the
Securities Purchase Agreement dated as of February 20, 1996, with which the
right of the Investors hereunder shall rank pari passu; PROVIDED that Nassau
shall have amended such agreement to provide that such right of Nassau shall
rank pari passu with that of the Investors hereunder), and the Investors'
piggyback registration rights will be pro rata with any other holders of
capital stock of the Company participating in such registration, to the extent
and as provided in the Registration Rights Agreement.
9.6 VOTING. To the extent permitted by applicable law, the Warrants
shall entitle the holders thereof to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable
from time to time upon exercise of the Warrants on any matters upon which the
holders of Common Stock are entitled to vote.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made herein shall survive the Closing (i) with
respect to the representations and warranties of the Company set forth in
Section 2.20, until the closing of an underwritten public offering, (ii) with
respect to the representations and warranties of the Company set forth in
<PAGE>
33
Section 2.14, until three months after the expiration of the applicable statute
of limitations with respect to the subject matter thereof, and (iii) with
respect to all other representations and warranties of any party hereunder, for
a period of two (2) years after the Closing Date.
10.2 COSTS AND EXPENSES; TRANSFER TAXES. Whether or not the
transactions contemplated by this Agreement are consummated, (a) the Company
shall pay all fees and expenses incurred by, or on behalf of, it and (b) the
Company shall promptly reimburse the Investors for their reasonable
out-of-pocket expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including without limitation, the reasonable
fees and expenses of their legal counsel, accountants and advisors. The Company
shall pay all transfer taxes and charges attributable to the transfer of the
Securities to the Investors.
10.3 CONFIDENTIALITY; PRESS RELEASES.
(a) Each Investor severally agrees that all information and
documents gained by such Investor and its directors, officers, employees,
agents, representatives, consultants or affiliates pursuant to such Investor's
investigations of the Company and its Subsidiaries have been and shall be kept
confidential by such Investor and will not be used by such Investor or its
directors, officers, employees, agents, representatives, consultants or
affiliates for any purpose other than in connection with such Investor's
investment in the Company or as required by law.
(b) The parties hereto agree that no party shall issue or cause
publication of any press release or other announcement or public communication
with respect to this Agreement, the Shareholders Agreement, the Registration
Rights Agreement or the transactions contemplated hereby or thereby without the
consent of the others, which consent shall not unreasonably be withheld;
provided that nothing herein shall prohibit any party from issuing or causing
publication of any such press release, announcement or public communication to
the extent that such action is required by law.
10.4 PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon, and inure to the benefit of, and be
enforceable by, only the parties hereto; PROVIDED, HOWEVER, that the parties
hereto may enforce the provisions of Section 8 hereof on behalf of their
respective Investor Indemnitees and Company Indemnitees. In no event may
either party assign either its rights or obligations hereunder without the
written agreement of the other party.
10.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules to this
Agreement are part of the Agreement and shall
<PAGE>
34
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth in full herein.
10.6 HEADINGS. The headings of the Sections of this Agreement have
been inserted for convenience of reference only and will not affect the meaning
or interpretation of this Agreement.
10.7 AMENDMENTS, WAIVERS, ETC. Neither this Agreement nor any term
hereof may be amended except by an instrument in writing which refers to this
Agreement and is executed by the Company and each Investor whose rights are
affected thereby, and neither this Agreement nor any term hereof may be
released, waived or discharged in any manner except by an instrument in writing
which refers to this Agreement and is executed by the party against which such
release, waiver or discharge is asserted.
10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE STATE OF NEW YORK.
10.9 NOTICES. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given on the earlier of (a) the date actually
received by the party in question, by whatever means and however addressed, or
(b) the date received if sent by telecopy, or on the date of personal delivery
if delivered by hand, or on the date signed for if sent by an overnight
delivery service, to the following addresses, or to such other address as any
party may request by notifying the other parties hereto:
(a) If to the Company:
DeCrane Aircraft Holdings, Inc.
Attention: President
2201 Rosecrans Avenue
El Segundo, California 90245
Telephone: (310) 536-0444
Telecopy: (310) 536-0257
DeCrane Aircraft Holdings, Inc.
Attention: Chief Executive Officer
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Telephone: (216) 668-3061
Telecopy: (216) 668-2518
<PAGE>
35
with a copy to:
Spolin & Silverman
Attention: Stephen A. Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Telecopy: (310) 576-1221
Telephone: (310) 576-4844
(b) If to Nassau Capital:
c/o Nassau Capital L.L.C.
Attn: Jonathan Sweemer
22 Chambers Street
Princeton, New Jersey 08542
Telephone: (609) 924-3555
Telecopy: (609) 924-8887
with a copy to:
Simpson Thacher & Bartlett
Attention: George R. Krouse, Jr., Esq.
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2000
Telecopy: (212) 455-2502
(b) If to [62] EIT:
c/o Electra Associates, Inc.
Attn: [63] SCOTT D. STEELE
70 East 55th Street
New York, New York 10022
Telephone: (212) [64] 319-0081
Telecopy: (212) 319-3069
With a copy to:
[65] WILKIE FARR & GALLAGHER
[66] ATTN: PETER J. HANLON
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
Telephone: (212) 935-8000
Telecopy: (212) 821-8111
The failure of any party to deliver any notice to any of the above
persons specified to receive copies of notices, demands or requests shall not
limit the effectiveness of any notice given in accordance herewith to the
Company or any Investor. The foregoing shall not preclude the effectiveness of
actual written notice actually received by any party delivered by any means
other than those specified above.
<PAGE>
36
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances will not be
affected thereby and may be enforced to the greatest extent permitted by law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
DECRANE AIRCRAFT HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
NASSAU CAPITAL PARTNERS L.P.
By: NASSAU CAPITAL L.L.C.
General Partner
By:
--------------------------------
Name:
Title:
NAS PARTNERS I L.L.C.
By:
-------------------------------------
Name:
Title:
ELECTRA INVESTMENT TRUST P.L.C.
By:
-------------------------------------
Name:
Title:
<PAGE>
DELETIONS
[1] __
[2] ,
[3] , and Electra Associates, Inc., a Delaware corporation, located at 70 East
55th Street, New York, NY ("Electra Associates" and, collectively with EIT,
"Electra") (Nassau and Electra
[4] Electra
[5] Electra
[6] Electra
[7] Electra
[8] 115,385
[9] 57,692
[10] Electra
[11] Electra
[12] Electra
[13] Capital
[14] Electra
[15] Electra
[16] Electra
[17] 115,384.67
[18] 57,692.33
[19] Electra
[20] Electra
[21] Electra
[22] Electra
[23] Electra
[24] [
[25] - which entity?]
-iv-
<PAGE>
[26] Electra
[27] 8,000,000
[28] provide information with respect to all amounts due and not yet paid by
ASI, and the magnitude of any planned write-off associated with ASI
[29] AND ELECTRA ASSOCIATES
EIT and Electra Associates hereby jointly and severally represent
and warrant
[30] limited liability company
[31] Electra Associates is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
[32] Each of
[33] and Electra Associates
[34] each of
[35] and Electra Associates
[36] each of them
[37] each of
[38] and Electra
[39] and Electra Associates
[40] them
[41] them
[42] each of
[43] and Electra Associates
[44] of each
[45] Electra Associates and
[46] each of
[47] and Electra Associates
[48] either
[49] or Electra Associates
-v-
<PAGE>
[50] or Electra Associates
[51] or Electra Associates
[52] or Electra Associates
[53] either or
[54] their
[55] or Electra Associates'
[56] November 2, 1994,
[57] and
[58] [new credit agreement; any others?]
[59] each of
[60] and Electra
[61] 120
[62] Electra
[63] ______________________
[64] ____________
[65] [NAME]
[66] [ADDRESS]
[67]
ELECTRA ASSOCIATES, INC.
By:
--------------------------------
Name:
Title:
[68]
and
ELECTRA ASSOCIATES, INC.
[69] __
[70] 4
[71] 11
[72] 20
-vi-
<PAGE>
[73] AND ELECTRA ASSOCIATES
[74] 22
[75] 23
[76] 23
[77] 29
[78] 29
[79] 33
[80] 33
[81] 34
-vii-
<PAGE>
EXHIBIT 10.23 SECURITIES PURCHASE AGREEMENT, DATED FEBRUARY 20, 1996 AMONG
REGISTRANT, NASSAU CAPITAL PARTNERS L.P. AND NAS PARTNERS I L.L.C.
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
among
DECRANE AIRCRAFT HOLDINGS, INC.
NASSAU CAPITAL PARTNERS L.P.
and
NAS PARTNERS I L.L.C.
dated as of
February 20, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. TRANSACTIONS AND CLOSING. . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 SALE AND PURCHASE OF THE SECURITIES . . . . . . . . . . . . . 2
1.2 PURCHASE PRICE FOR SECURITIES . . . . . . . . . . . . . . . . 2
1.3 PLACEMENT FEE . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 3
2.1 ORGANIZATION, STANDING, ETC. . . . . . . . . . . . . . . . . 3
2.2 CORPORATE ACTS AND PROCEEDINGS; ENFORCEABILITY OF AGREEMENTS 3
2.3 DUE AUTHORIZATION, ISSUANCE, ETC . . . . . . . . . . . . . . 3
2.4 CERTIFICATE OF INCORPORATION AND CODE OF REGULATIONS . . . . 4
2.5 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES. . . . . . . 5
2.7 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 6
2.9 CHANGES, DIVIDENDS, ETC. . . . . . . . . . . . . . . . . . . 7
2.10 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . 7
2.11 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.12 PRODUCTS LIABILITY . . . . . . . . . . . . . . . . . . . . . 8
2.13 NO BROKERS OR FINDERS. . . . . . . . . . . . . . . . . . . . 9
2.14 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.15 AFFILIATE TRANSACTIONS; NO SEPARATE CONSIDERATION. . . . . . 9
2.16 MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . 9
2.17 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . 10
2.18 OUTSTANDING DEBT . . . . . . . . . . . . . . . . . . . . . . 10
2.19 TITLE TO AND CONDITION OF PROPERTY . . . . . . . . . . . . . 11
2.20 ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . 11
2.21 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . . . . 15
2.22 PATENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . 18
2.23 FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . 19
3. REPRESENTATIONS AND WARRANTIES OF NASSAU CAPITAL AND NAS. . . . . . . . 19
3.1 ORGANIZATION, STANDING, ETC. . . . . . . . . . . . . . . . . 19
3.2 PARTNERSHIP ACTS AND PROCEEDINGS; ENFORCEABILITY
OF AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES. . . . . . . 20
3.4 RESTRICTED SECURITIES. . . . . . . . . . . . . . . . . . . . 20
3.5 INVESTMENT INTENT. . . . . . . . . . . . . . . . . . . . . . 20
3.6 SOPHISTICATED INVESTOR . . . . . . . . . . . . . . . . . . . 20
3.7 ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . 20
3.8 NO BROKERS OR FINDERS. . . . . . . . . . . . . . . . . . . . 21
4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INVESTORS . . 21
- i -
<PAGE>
PAGE
4.2 CONDITION PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. . . . 23
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS . . . . . . . . . . . 24
5.2 BOARD MEMBER; ATTENDANCE AT BOARD MEETINGS . . . . . . . . . 26
5.3 RESERVATION OF SHARES. . . . . . . . . . . . . . . . . . . . 26
5.4 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . 26
6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 27
6.2 CERTAIN PROCEDURES . . . . . . . . . . . . . . . . . . . . . 27
7. WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 TERM; EXERCISE . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 SERIES OF WARRANTS AND TRIGGERING EVENT. . . . . . . . . . . 28
7.3 PUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 ANTIDILUTION PROVISIONS. . . . . . . . . . . . . . . . . . . 31
7.5 REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 31
7.6 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . 32
8.2 COSTS AND EXPENSES; TRANSFER TAXES . . . . . . . . . . . . . 32
8.3 CONFIDENTIALITY; PRESS RELEASES. . . . . . . . . . . . . . . 32
8.4 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . . . 33
8.5 EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . . . . 33
8.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.7 AMENDMENTS, WAIVERS, ETC . . . . . . . . . . . . . . . . . . 33
8.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 33
8.9 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 35
8.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 35
-ii-
<PAGE>
EXHIBITS
Exhibit A Certificate of Incorporation
Exhibit B Warrant
Exhibit C Shareholders Agreement
Exhibit D Registration Rights Agreement
Exhibit E Form of Opinion of Spolin & Silverman
SCHEDULES
Schedule 1.5 Cory Repurchase Documents
2.4(a) Certificate of Incorporation of the Company
2.4(b) Code of Regulations of the Company
2.4(c) Resolutions
2.5(a) Capital Stock - Company
2.5(b) Subscriptions, Options, Warrants, etc. - Company
2.5(c) Voting Trusts, Proxies, etc. - Company
2.5(d) Registration Rights - Company
2.6 Consents, Authorization, Approvals, etc.
2.7(a) Subsidiaries; Capital Stock
2.7(b) Subscriptions, Options, Warrants, etc. -
Subsidiaries
2.7(c) Voting Trust, Proxies, etc. - Subsidiaries
2.8 Financial Statements
2.9 Changes, Dividends, etc.
2.10 Compliance, Citations, etc.
2.11 Litigation
2.15 Affiliate Transactions; No Separate Consideration
2.16 Material Conflicts
2.17 Undisclosed Liabilities
2.18 Outstanding Debt
2.19 Real Property
2.20 Environmental Matters
2.21(a) Employee Benefit Plans
2.21(h) Present Value of Benefit Payable Presently
2.21(i) Payments, etc.
2.21(k) Labor Matters
2.22 Intangible Rights
-iii-
<PAGE>
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of February 20, 1996 (this
"Agreement"), is by and among DeCrane Aircraft Holdings, Inc., an Ohio
corporation (the "Company"), Nassau Capital Partners L.P., a Delaware limited
partnership located at 22 Chambers Street, Princeton, New Jersey ("Nassau
Capital"), and NAS Partners I L.L.C., a Delaware limited liability company
also located at 22 Chambers Street, Princeton, New Jersey ("NAS") (Nassau
Capital and NAS are hereinafter sometimes referred to collectively as the
"Investors", or individually as an "Investor").
W I T N E S S E T H:
WHEREAS, the Company currently is authorized to issue 8,000,000 shares
of Common Stock, without par value (the "Common Stock"), 167,702 shares of
Series A Convertible Preferred Stock, without par value (the "Series A
Stock"), 1,636,316 shares of Series B Convertible Preferred Stock, without
par value (the "Series B Stock"), and 3,000,000 shares of Series C
Convertible Preferred Stock, without par value (the "Series C Stock") having
the rights set forth in the Certificate of Incorporation of the Company,
included as Schedule 2.4(a) hereto (the "Certificate of Incorporation");
WHEREAS, the Company desires to amend the Certificate of Incorporation
to authorize 2,000,000 shares of Series D Convertible Preferred Stock,
without par value (the "Series D Stock," and, together with the Series A
Stock, Series B Stock and Series C Stock, the "Preferred Stock"), having the
rights set forth in the Amended and Restated Certificate of Incorporation of
the Company attached as Exhibit A hereto;
WHEREAS, at the Closing (as hereinafter defined), the Company desires to
sell 1,989,114 shares of newly-issued Series D Stock to Nassau Capital and
10,886 shares of newly-issued Series D Stock to NAS (collectively, the
"Shares"), and each of Nassau Capital and NAS wishes to acquire its
respective Shares, all in accordance with the terms and conditions of this
Agreement;
WHEREAS, the Company desires to authorize the issuance of certain
warrants, substantially in the form of Exhibit B hereto (together with any
such warrants which may be issued pursuant to any provision hereof or, any
provision contained in the warrants and any such warrants which may be issued
in addition to or in substitution or exchange therefor, the "Warrants"; and,
together with the Shares, the "Securities"), to purchase for a price of $0.01
per share certain shares of the Company's Common Stock; and
WHEREAS, at the closing, the Company desires to sell Warrants, initially
equal to an aggregate of 682,580 shares of
<PAGE>
2
Common Stock, subject to adjustment as set forth therein, to Nassau Capital
and Warrants, initially equal to an aggregate of 3,735 shares of Common
Stock, subject to adjustment as set forth therein, to NAS, and each of Nassau
Capital and NAS wishes to acquire its respective Warrant, all in accordance
with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and subject to
the terms and conditions set forth herein, the Company and the Investors,
intending to be legally bound, hereby agree as follows:
1. TRANSACTIONS AND CLOSING
1.1 SALE AND PURCHASE OF THE SECURITIES. Upon the terms hereof and
subject to the conditions set forth herein, the Company shall sell to Nassau
Capital and NAS, and Nassau Capital and NAS shall purchase from the Company,
at the Closing, the Securities.
1.2 PURCHASE PRICE FOR SECURITIES. The aggregate purchase price to be
paid by the Investors to the Company for the Securities shall be $6,500,000
(the "Subscription Price").
1.3 PLACEMENT FEE. Upon the terms and subject to the conditions set
forth herein, on the Closing Date (as hereinafter defined), the Company will
pay to Nassau Capital L.L.C. (an affiliate of Nassau Capital), by wire
transfer, a placement fee equal to 1% of the Subscription Price.
1.4 CLOSING. The closing of the purchase and sale of the Securities
(the "Closing") will take place at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York 10017, two Business Days after the
date on which all the conditions specified in Section 4 hereof shall have
been satisfied, or on such other date or at such other place as the Investors
and the Company may agree (the "Closing Date"). The Company will give the
Investors five days' notice of the Closing Date and the time of Closing. At
the Closing, the Company will deliver to the Investors (a) the Shares,
registered in the Investors' names and in such denominations as the Investors
shall request and (b) the Warrants, registered in the Investors' names or
those of the Investors' nominees, against payment of the Subscription Price
by transfer in lawful money of the United States of America in immediately
available funds to such bank and account as the Company may direct in
writing. If at the Closing the Company shall fail to (x) tender to the
Investors any of the Shares (y) tender to the Investors any of the Warrants
or (z) have satisfied any of the Closing conditions specified herein, or if
such closing conditions shall not have been waived by the Investors, the
Investors shall, at the Investors' election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights
the Investors may have by reason of such failure.
<PAGE>
3
1.5 USE OF PROCEEDS. The Company shall use the proceeds which it
receives from the sale of the Securities hereunder solely for the
consummation of the repurchase by the Company of the 25% minority interest in
Cory Components, Inc., a subsidiary of the Company (the "Cory Repurchase")
pursuant to the terms and conditions of the Cory Repurchase Documents, set
forth on Schedule 1.5 hereto, and for the payment of certain fees and
expenses incurred by the Company in connection therewith.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors as follows:
2.1 ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Ohio, and each Subsidiary (as hereinafter defined) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Company and each Subsidiary have all
requisite corporate power and authority to own and operate its material
properties and assets and to carry on its business as now conducted. The
Company and each Subsidiary are duly qualified to do business as foreign
corporations and are in good standing in the State of Ohio and in each other
jurisdiction in which the character or location of the properties and assets
owned or operated by it or the nature of the material business conducted by
it makes such qualification necessary, except to the extent that the failure
to be so qualified could not reasonably be expected to have a material
adverse effect on business, assets, liabilities, results of operations,
financial condition or prospects of the Company and its Subsidiaries, taken
as a whole (a "Material Adverse Effect").
2.2 CORPORATE ACTS AND PROCEEDINGS; ENFORCEABILITY OF AGREEMENTS. (a)
The Company has all requisite corporate power and authority to enter into
this Agreement, the Shareholders Agreement (as hereinafter defined), the
Registration Rights Agreement (as hereinafter defined) and such documents
necessary or advisable to consummate the Cory Repurchase (the "Cory
Repurchase Documents") and to perform its obligations contemplated hereunder
and thereunder.
(b) Within a reasonable period of time after the Closing Date, the
Company will deliver to Nassau Capital a set of closing binders containing
true and complete copies of the final, executed Cory Repurchase Documents.
(c) All corporate action on the part of the Company and its
subsidiaries, officers, directors and stockholders necessary for the
authorization, execution and delivery by the Company of this Agreement, the
Shareholders Agreement, the Registration Rights Agreement and the Cory
Repurchase Documents,
<PAGE>
4
the performance of all obligations of the Company hereunder and thereunder
(including the authorization, issuance, sale and delivery of the Securities
to be issued hereunder), has been taken.
(d) This Agreement has been, and the Shareholders Agreement, the
Registration Rights Agreement and the Cory Repurchase Documents when executed
and delivered by the parties thereto will be, duly executed and delivered by
authorized officers of the Company and constitutes, or when executed and
delivered by the parties thereto will constitute, a valid and binding
obligation of the Company and is, or when executed and delivered by the
parties thereto will be, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to general principles of equity (whether considered in a
proceeding in equity or at law).
2.3 DUE AUTHORIZATION. ISSUANCE, ETC. The Securities being issued
hereunder, when issued and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly authorized and
validly issued, fully paid and nonassessable.
2.4 CERTIFICATE OF INCORPORATION AND CODE OF REGULATIONS. Schedule
2.4(a) hereto is a complete and correct copy of the Certificate of
Incorporation as currently in effect and on file with the Secretary of State
of the State of Ohio. Schedule 2.4(b) hereto is a complete and correct copy
of the Code of Regulations of the Company (the "Code of Regulations") as
currently in effect. Schedule 2.4(c) hereto contains complete and correct
copies of all resolutions of the Board of Directors of the Company,
authorizing the execution, delivery and performance of this Agreement, the
Shareholders Agreement, the Registration Rights Agreement and the Cory
Repurchase Documents and the performance of all the obligations of the
Company contemplated hereunder and thereunder and such resolutions are
currently in full force and effect.
2.5 CAPITALIZATION. (a). The authorized capital stock of the Company
consists of 8,000,000 shares of Common Stock and 167,702 shares of Series A
Stock, 1,636,316 shares of Series B Stock and 3,000,000 shares of Series C
Stock. The rights, preferences, convertibility and other characteristics of
the shares of Common Stock and Preferred Stock (not including the Series D
Stock) of the Company are as set forth in the Certificate of Incorporation
and the Code of Regulations, subject to the terms of the Second Amended and
Restated Shareholders Agreement. As of the date of this Agreement, 301,840
shares of Common Stock have been issued and are outstanding, and the
beneficial and record ownership of such shares is as set forth on Schedule
2.5(a). All of such shares of Common Stock have been duly authorized and
validly issued and are fully paid and
<PAGE>
5
non assessable. As of the date of this Agreement, 167,702 shares of Series A
Stock, 1,583,537 shares of Series B Stock and 2,346,471 shares of Series C
Stock have been issued and are outstanding and the beneficial and record
ownership of each such series is as set forth on Schedule 2.5(a). All of
such shares of Preferred Stock (not including the Series D Stock) have been
duly authorized and validly issued and are fully paid and non assessable.
(b) Except as set forth on Schedule 2.5(b) and except for the
transactions contemplated by this Agreement, the Shareholders Agreement and
the Registration Rights Agreement, there are no outstanding subscriptions,
options, warrants, calls, contracts, preemptive rights, demands, commitments,
conversion rights or other agreements or arrangements of any character or
nature whatsoever under which the Company is or may be obligated to issue or
acquire its capital stock.
(c) Except as set forth on Schedule 2.5(c), the Company is not a party
to, and the Company has no knowledge of any, voting trusts, proxies or any
other agreements or understandings with respect to the voting of any capital
stock of the Company.
(d) Except as set forth in Schedule 2.5(d), the Company has not granted
or agreed to grant any rights relating to the registration of its securities
under applicable federal and state securities laws, including piggyback
rights.
(e) Except as set forth on Schedule 2.5(b), the consummation of the
transactions contemplated by this Agreement will not trigger the anti-dilution
provisions or other price adjustment mechanisms of any outstanding
subscriptions, options, warrants, calls, contracts, preemptive rights,
demands, commitments, conversion rights or other agreements or arrangements
of any character or nature whatsoever under which the Company is or may be
obligated to issue or acquire its capital stock.
2.6 NO CONFLICT: GOVERNMENTAL APPROVALS AND NOTICES. The execution and
delivery of this Agreement as of the date hereof, and the Shareholders
Agreement, the Registration Rights Agreement and the Cory Repurchase
Documents, as of the Closing Date (collectively, the "Closing Documents"),
and the consummation of the transactions contemplated by any of the Closing
Documents will not (i) violate the Certificate of Incorporation or Code of
Regulations of the Company or any Subsidiary, (ii) conflict with or
constitute a violation of any law, statute, judgment, order, decree or
regulation applicable or relating to the Company or any of its Subsidiaries
or to which any of its assets or properties is subject, or (iii) result in a
breach of, or constitute a default under, or result in the imposition of any
lien or encumbrance upon any asset or property of the Company or any
Subsidiary pursuant to, any agreement or
<PAGE>
6
other instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any portion of their respective
properties, assets or rights are bound or affected, except for those
breaches, defaults, liens and encumbrances which in the aggregate could not
reasonably be expected to have a Material Adverse Effect. No consent,
authorization, approval, permit or order of, or notice to or filing with, any
governmental authority is required in connection with the execution, delivery
and performance of any of the Closing Documents by the Company and except for
(x) consents, authorizations, approvals, permits and orders which have been
obtained and filings which have been made as of the date hereof, (y)
consents, authorizations, approvals, permits, orders and filings set forth on
Schedule 2.6.
2.7 SUBSIDIARIES. (a) As used herein, "Subsidiary" shall mean (i) any
corporation of which a majority of the securities entitled to vote generally
in the election of directors thereof, at the time as of which any
determination is being made, are owned by the Company, either directly or
indirectly and (ii) any joint venture, general or limited partnership or
other legal entity in which the Company is the record or beneficial owner,
directly or indirectly, of a majority of the equity interests. Schedule
2.7(a) accurately sets forth each Subsidiary, including its name, place of
incorporation or formation, the number of shares authorized for each class of
the capital stock thereof, the number of shares issued and outstanding for
each class of the capital stock thereof, and the record ownership of all
capital stock issued thereby. All shares of capital stock of any Subsidiary
directly or indirectly owned by the Company have been duly authorized and
validly issued, are fully paid, non assessable and, except as set forth on
Schedule 2.7(a), are directly or indirectly owned by the Company free of any
security interest, lien, pledge or other encumbrance.
(b) Except as set forth on Schedule 2.7(b), there are no outstanding
subscriptions, options, warrants, calls, contracts, preemptive rights,
demands, commitments, conversion rights or other agreements or arrangements
of any character or nature whatsoever under which any Subsidiary is or may be
obligated to issue or acquire its capital stock.
(c) Except as set forth on Schedule 2.7(c), there are no voting trusts,
proxies or any other agreements or understandings with respect to the voting
of any capital stock of any Subsidiary.
2.8 FINANCIAL STATEMENTS. Schedule 2.8 includes true and complete
copies of (i) the audited balance sheets of the Company as at December 31,
1992, 1993 and 1994, and the related audited statements of operations and of
cash flows of the Company for the fiscal years then ended, including the
auditors' opinions thereon and all notes thereto, and (ii) the unaudited
balance sheet of the Company as at November 30, 1995, and the related
<PAGE>
7
unaudited statement of operations of the Company for the period January 1,
1995 through November 30, 1995. Each of the foregoing financial statements
(the "Financial Statements") was prepared in accordance with generally
accepted accounting principles consistently applied (except, with respect to
unaudited statements, for the omission of footnote disclosures and normal
year end audit adjustments). Such balance sheets present fairly the
financial position of the Company as of the dates stated thereon, and such
statements of operations present fairly the results of the operations of the
Company for the periods stated on such statements of operations.
2.9 CHANGES, DIVIDENDS, ETC. Except as set forth on Schedule 2.9,
since December 31, 1994, (i) neither the Company nor any of its Subsidiaries
has paid any management fee or declared or made any payment, loan, advance,
dividend or other distribution to its affiliates or stockholders as such, or
purchased or redeemed any shares of its capital stock, or obligated itself to
do so; (ii) neither the Company nor any of its Subsidiaries has sold,
transferred, encumbered or leased any of its assets except in the usual and
ordinary course of business, or merged or consolidated with or into any other
person, firm or entity; (iii) neither the Company nor any of its.
Subsidiaries has issued or sold any shares of its capital stock or other
securities or granted any options or other rights with respect thereto; (iv)
neither the Company nor any of its Subsidiaries has incurred any material
obligation or liability except in the ordinary course of business; (v) there
has not been any termination, discontinuation, closing or disposition of any
material business operation of the Company or any of its Subsidiaries; and
(vi) there has not been any change in the method of accounting or accounting
practice or policy of the Company or any of its Subsidiaries; nor, except as
set forth on Schedule 2.9, has the Company or any of its Subsidiaries (A)
agreed to do any of the foregoing, other than pursuant to this Agreement, or
(B) suffered any physical damage, destruction or other loss (whether or not
covered by insurance) which has had or may have a Material Adverse Effect.
Except as set forth on Schedule 2.9 hereto or in the Financial Statements,
since December 31, 1994, there has been no Material Adverse Effect, nor is
the Company aware of the occurrence of any event which constitutes or which
would, with the giving of notice or the passage of time, constitute a default
under any material agreement entered into by the Company or any of its
Subsidiaries.
2.10 COMPLIANCE WITH LAWS. (a) Except as set forth in Schedule 2.10
attached hereto, the Company has not received notice of, or citation or
summons for, and no complaint has been filed, no penalty has been assessed
and no investigation or review is in process or, to the best knowledge of the
Company, threatened by any governmental authority with respect to, any
violation or alleged violation of any law, regulation, order or other legal
requirement, or failure by the Company to have any permit, certificate,
license, approval, registration or
<PAGE>
8
authorization (including industry certificates and approvals and including,
without limitation, FAA Supplemental Type Certificates ("STCs") required in
connection with the operation of its business. The Company is not in default
with respect to any order, writ, judgment, award, injunction or decree of any
federal, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to or in connection with its
business or any of its assets, properties or operations.
(b) Except as set forth in Schedule 2.10 attached hereto, with respect
to the operation of its business, the Company possesses and is in compliance
with all material permits, certificates, licenses, approvals, registrations
and authorizations (including industry certificates and approvals and
including, without limitation, STCs) required under all applicable laws,
rules and regulations, all of which are in full force and effect, and the
business has been conducted and is now being conducted in compliance with all
applicable laws, rules, regulations, judgments and orders of the United
States and states, counties, municipalities and agencies thereof, including,
without limitation, laws, rules and regulations relating to pollution and
environmental control, equal employment opportunity, health and safety and
zoning.
2.11 LITIGATION. Except as set forth in Schedule 2.11 attached hereto,
there are no claims, actions, suits, proceedings, labor disputes or
investigations in process by or against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened either by a
written communication directed to the Company or by an oral communication
directed to the Company by a stockholder of the Company, before any federal
or state court, arbitrator or governmental authority by or against the
Company which, if adversely determined, may reasonably be expected to have a
Material Adverse Effect or in any liability on the part of the Company which
would be material to the Company or which to the best knowledge of the
Company, includes a claim against or involving the Company in excess of
$100,000 or which questions the validity or legality of or seeks damages in
connection with this Agreement or any action taken or to be taken pursuant to
this Agreement. Except as set forth in Schedule 2.11 attached hereto, there
are no outstanding judgments, decrees or orders of any court or governmental
authority against the Company.
2.12 PRODUCTS LIABILITY. Except for lawsuits, claims (asserted or
unasserted), damages and expenses adequately covered by the Company's
insurance, there are no (i) liabilities of the Company, fixed or contingent,
asserted or, to the best knowledge of the Company, unasserted, with respect
to any product liability or any similar claim that relates to any product
sold by the Company to others prior to the Closing Date, or (ii) liabilities
of the Company, fixed or contingent, asserted or, to the best knowledge of
the Company, unasserted, with respect to any claim
<PAGE>
9
for the breach of any express or implied product warranty or any other
similar claim with respect to any product sold by the Company to others prior
to the Closing Date, other than standard warranty obligations (to replace,
repair or refund) made by the Company in the ordinary course of the conduct
of its business to purchasers of its products, and except, in each case,
where such liabilities do not or would not reasonably be expected to have a
Material Adverse Effect.
2.13 NO BROKERS OR FINDERS. No person, firm or entity (other than
Alex. Brown & Sons Incorporated) has or will have, as a result of any act or
omission of the Company, any right, interest or valid claim against the
Company or the Investors for any commission, fee or other compensation as a
finder or broker in connection with the transactions contemplated by this
Agreement.
2.14 TAXES. The Company and its Subsidiaries have timely filed with
all appropriate governmental authorities all material tax returns and reports
which are required to be filed prior to the date hereof. Subject to any
extensions duly requested and granted, the Company and its Subsidiaries have
duly and timely paid in full all taxes shown as due on such returns and
reports or, to the extent such taxes are accrued but not yet due, have
adequately reserved for the timely payment of any and all such taxes when
due. No issue has been raised by any taxing authority which could result in
a deficiency in the amount of taxes shown as due and owing on any tax return
or report required to be filed by the Company or any of its Subsidiaries.
2.15 AFFILIATE TRANSACTIONS; NO SEPARATE CONSIDERATION. Except as set
forth on Schedule 2.15 hereto, there are no existing agreements,
understandings or arrangements between the Company or any of its
Subsidiaries, on one hand, and any shareholder set forth on Schedule 2.5(a)
or any affiliate of any such shareholder, on the other hand, relating to the
properties, assets or conduct of the business and operations of the Company
or any of its Subsidiaries.
2.16 MATERIAL CONTRACTS. All contracts material to the business of the
Company and its Subsidiaries, including all contracts involving payments of,
or the provision of services valued at, amounts in excess of $100,000 per
year (the "Material Contracts") are set forth on Schedule 2.16 and are valid
and binding and enforceable in accordance with their respective terms subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the rights of creditors generally and to general principles of
equity (whether considered in a proceeding in equity or at law). Except as
set forth on Schedule 2.16, to the knowledge of the Company, there are no
existing defaults, nor have any events or circumstances occurred which, with
or without notice or the lapse of time or both, would constitute defaults,
under any of the Material Contracts.
<PAGE>
10
2.17 ABSENCE OF UNDISCLOSED LIABILITIES. Except for (a) liabilities
reflected or reserved against in full in the Financial Statements or incurred
after the date thereof in the ordinary course of business in an amount not
exceeding $100,000 in the aggregate, (b) liabilities not yet due and payable
or obligations to be performed or satisfied after the date hereof under the
Material Contracts, (c) liabilities incurred in the ordinary course of
business and not required to be reflected in the Financial Statements, and
(d) as set forth on Schedule 2.17, neither the Company nor any of its
Subsidiaries has, or will have upon consummation of the Cory Repurchase, any
material liability or obligation of any nature, whether accrued, absolute or
contingent.
2.18 OUTSTANDING DEBT. Except as set forth in Schedule 2.18, the
Company does not, and each of its Subsidiaries do not, have any outstanding
secured or unsecured Debt or commitments for any Debt, and as of the Closing
Date there will exist no default or event of default by the Company or any of
its Subsidiaries under the provisions of any instrument evidencing such Debt
or of any agreement relating thereto that has or would be expected to have a
Material Adverse Effect. As used in this Agreement, "Debt" shall mean, as to
any person (calculated for any person without duplication): (i) all
liabilities, whether recourse is limited or otherwise, for borrowed money or
for the deferred purchase price of property or services (but excluding trade
expenses and accounts payable incurred in the ordinary course of business and
which are not overdue by more than 90 days unless being contested in good
faith), including obligations under leases which would be treated as capital
leases; (ii) reimbursement obligations with respect to letters of credit;
(iii) any obligation secured by any property or asset of such person; (iv)
any obligation with respect to currency or hedging agreements; and (v) any of
the foregoing liabilities which such person has guaranteed.
2.19 TITLE TO AND CONDITION OF PROPERTY. The Company and its
Subsidiaries have good and marketable title to all material property and
assets (real, personal or mixed) reflected on the Financial Statements, free
and clear of any security interest, mortgage, pledge, or other lien or
encumbrance, except for (i) liens, mortgages and security interests securing
indebtedness reflected on the Financial Statements, and (ii) security
interests, mortgages, pledges and other liens and encumbrances which do not
materially interfere with the operation of the business of the Company and
its Subsidiaries. Such property and assets include all property and assets
necessary to conduct the business and operations of the Company as now
conducted. The Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all leases necessary in any material respect for
the operation of its properties and businesses; and none of such leases
contain any unusual or burdensome provisions which might materially affect or
impair the operation of such properties and businesses. Schedule 2.19 sets
<PAGE>
11
forth a description of all real property owned or leased by the Company or
any Subsidiary.
2.20 ENVIRONMENTAL COMPLIANCE. Except as set forth on Schedule 2.20
attached hereto:
(a) The Company and each of its Subsidiaries have obtained all
environmental, health and safety permits, licenses and other authorizations
required under any and all Environmental Laws the absence of which permit,
license or other authorization would have a material adverse effect to the
Company ("Environmental Permits") to carry on their respective business as
now being or as proposed to be conducted. No modification, revocation,
reissuance, alteration, transfer, or amendment of the Environmental
Permits, or any review by, or approval of, any third party of the
Environmental Permits is required in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby or
the continuation of the business of the Company following such
consummation. Each Environmental Permit is in full force and effect and
the Company and each of its Subsidiaries are in compliance with the terms
and conditions thereof, and is, and has been, also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
provisions, requirements, obligations, schedules and timetables contained
in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, including, without limitation,
the requirement to have obtained in the past then applicable Environmental
Permits except as would not reasonably be expected to result in liability
under Environmental Laws. To the best knowledge of the Company, there is no
condition that could be reasonably expected to prevent or interfere with
future compliance with Environmental Laws, including but not limited to
compliance with required Environmental Permits.
(b) To the best knowledge of the Company, no notice, notification,
demand, request for information, citation, summons or order has been
issued, no complaint has been filed, no penalty has been assessed and no
investigation, litigation, arbitration, administrative proceeding or review
is pending or threatened by any governmental or other entity with respect
to any past or present actual or alleged noncompliance with any
Environmental Law, any Hazardous Material, or any alleged or actual failure
by the Company or any of its Subsidiaries to have or to have had when
necessary, any Environmental Permit.
(c) Neither the Company nor any of its Subsidiaries now or previously
owns, operates or leases a treatment, storage or disposal facility
requiring a permit under the
<PAGE>
12
Resource Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and, except as would not reasonably be
expected to result in liability under any Environmental law,
(i) no polychlorinated biphenyls (PCBs) are or have been present
at any site or facility now or previously owned, operated or leased
by the Company or any of its Subsidiaries;
(ii) no asbestos or asbestos-containing material is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
(iii) there are no landfills, underground storage tanks or surface
impoundments, in each case either active or abandoned, at any site or
facility now or previously owned, operated or leased by the Company
or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or under
any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries in a reportable quantity
established by statute, ordinance, rule, regulation or order; and
(v) no Hazardous Materials are present, have been otherwise
Released or threatened to be Released, at, on, under, from or about
any site or facility now or previously owned, operated, leased or
otherwise used by the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has disposed of,
transported or arranged for the transportation of any Hazardous Material to
any location that is listed on the National Priorities List ("NPL") under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by
the Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System, as provided for by 40 C.F.R.
Section 300.5 ("CERCLIS"), or on any similar state or local list or that
is the subject of Federal, state or local enforcement actions or other
investigations that may lead to environmental liability against any
Company or any of its Subsidiaries, or to any other location in a manner
that could be expected to result in liability under any Environmental
Law.
(e) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored disposed of or Released by
the Company or any of its
<PAGE>
13
Subsidiaries at any location other than those listed in Schedule 2.20.
(f) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any of its
Subsidiaries and no site or facility now or previously owned, operated or
leased by any Company and each of its Subsidiaries is listed or proposed
for listing on the NPL, CERCLIS or any similar state list of sites
requiring investigation or clean-up.
(g) No liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by the Company or any of
its Subsidiaries, and no government action has been taken or is in process
that could subject any such site or facility to such liens and none of the
Company or any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such site or
facility is located.
(h) All environmental investigations, studies, audits' tests, reviews
or other analyses conducted by or that are in the possession of the Company
or any of its Subsidiaries in relation to facts, circumstances or
conditions at or affecting any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries and that could
result in liability under any Environmental Law have been made available to
the Investors.
(i) There are no past or present actions, activities, events,
conditions or circumstances, including without limitation the Release,
threatened Release, emission, discharge, generation, treatment, storage or
disposal of Hazardous Materials, in regard to any property currently or
formerly owned, operated, leased or otherwise used by the Company or any
of its Subsidiaries or the past and present operations or business of the
Company or any of its Subsidiaries that would reasonably be expected to
give rise to liability under any Environmental Laws or any contract or
agreement.
(j) Neither the Company nor any of its Subsidiaries has assumed,
contractually or by operation of law, any liabilities, potential
liabilities or obligations under any Environmental Laws.
(k) Neither the Company nor any of its Subsidiaries has entered into,
has agreed to, or is subject to any judgment, decree, order or other
similar requirement of any governmental authority under any Environmental
Laws, including without limitation those relating to compliance
<PAGE>
14
with Environmental Laws or to investigation, cleanup, remediation or
removal of Hazardous Substances.
(l) No submission to or filing with, or any review or approval by,
any third party is required under any Environmental Law, including without
limitation the New Jersey Industrial Site Recovery Act, the Connecticut
Transfer Act, the Illinois Responsible Property Transfer Act, and the
Indiana Responsible Property Transfer Act, in connection with the
execution of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of the Company
or its Subsidiaries following such consummation.
(m) No matter or item referenced in Schedule 2.20 could reasonably be
expected to result in a Material Adverse Effect.
For purposes of this Section 2.20, the following definitions shall
apply:
"Environmental Laws" means any and all federal, state, and local laws,
ordinances, rules, regulations, codes, duties under the common law or
orders, including, without limitation, any requirements imposed under
any permits, licenses, judgments, decrees, agreements or recorded
covenants, conditions, restrictions or easements, the purpose of which
is to protect the environment, human health, public safety or welfare,
or which pertain to Hazardous Materials.
"Hazardous Materials" means any product, substance, chemical, force,
material or waste, whose presence, nature, quantity and/or intensity of
existence, use, manufacture, processing, treatment, storage, disposal,
transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the property owned or
leased by the Company or any of its Subsidiaries (the "Property") is
either (A) potentially injurious to public health, safety, welfare, or
the environment, or to the Property; (B) regulated, monitored or subject
to reporting by any governmental agency; or (C) a basis for potential
liability to any governmental agency or a third party under any
applicable statute or common law theory. Without limiting the
foregoing, the term, "Hazardous Materials," includes but is not limited
to any material, waste or substance which is or contains (A) petroleum
or petroleum products, including crude oil or any fraction thereof,
natural gas, or synthetic gas or any mixture thereof, (B) asbestos, (C)
polychlorinated biphenyls, (D) flammable explosives; (E) radioactive
materials; (F) radon in excess of EPA recommended exposure limits or (G)
paint containing concentrations of lead or mercury.
<PAGE>
15
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation, the
movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
2.21 EMPLOYEE PLANS. (a) Schedule 2.21(a) contains a true and
complete list of each "employee benefit plan" (within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including, without limitation, multiemployer plans within the
meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject
to ERISA (including any funding mechanism therefor now in effect or required
in the future as a result of the transaction contemplated by this Agreement
or otherwise), whether formal or informal, oral or written, legally binding
or not under which any employee or former employee of the Company has any
present or future right to benefits or under which the Company has any
present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "Company Plans".
(b) With respect to each Company Plan, the Company has delivered to the
Investors a current, accurate and complete copy (or, to the extent no such
copy exists, an accurate description) thereof and, to the extent applicable,
(i) any related trust agreement, annuity contract or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company to its employees concerning the extent of the
benefits provided under a Company Plan; and (iv) for the three most recent
years (A) the Form 5500 and attached schedules; (B) audited financial
statements; (C) actuarial valuation reports; and (D) attorney's response to
an auditor's request for information.
(c) (i) Each Company Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations; (ii)
each Company Plan which is intended to be qualified within the meaning of
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
is so qualified and has received a favorable determination letter as to its
qualification and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification; (iii) with respect to any
Company Plan, no actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or threatened, no facts or
circumstances exist which could give rise to any such actions, suits or claims
<PAGE>
16
and the Company will promptly notify the Investors in writing of any pending
or threatened claims arising between the date hereof and the Closing Date;
(iv) neither the Company nor any other party has engaged in a prohibited
transaction, as such term is defined under Code section 4975 or ERISA section
406, which would subject the Company or the Investors to any taxes, penalties
or other liabilities under Code section 4975 or ERISA sections 409 or 502(i);
(v) no event has occurred and no condition exists that would subject the
Company, either directly or by reason of its affiliation with any member of
its Controlled Group (as hereinafter defined), to any tax, fine or penalty
imposed by ERISA, the Code or other applicable laws, rules and regulations
including, but not limited to the taxes imposed by Code sections 4971, 4972,
4977, 4979, 4980B, 4976(a) or the fine imposed by ERISA section 502(c); (vi)
all insurance premiums required to be paid with respect to Company Plans as
of the Closing Date have been or will be paid prior thereto and adequate
reserves have been provided for on the Company's balance sheet for any
premiums (or portions thereof) attributable to service on or prior to the
Closing Date; (vii) for each Company Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; (viii) all
contributions required to be made prior to the Closing Date under the terms
of any Company Plan, the Code, ERISA or other applicable laws, rules and
regulations have been or will be timely made and adequate reserves have been
provided for on the Company's balance sheet for all benefits attributable to
service on or prior to the Closing Date; (ix) no Company Plan provides for an
increase in benefits on or after the Closing Date; and (x) each Company Plan
may be amended or terminated without obligation or liability (other than
those obligations and liabilities for which specific assets have been set
aside in a trust or other funding vehicle or reserved for on the Company's
balance sheet). "Controlled Group" shall mean any organization which is a
member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o).
(d) (i) No Company Plan has incurred any "accumulated funding
deficiency" as such term is defined in ERISA section 302 and Code section 412
(whether or not waived); (ii) no event or condition exists which could be
deemed a reportable event within the meaning of ERISA section 4043 which
could result in a liability to the Company or any member of its Controlled
Group and no condition exists which could subject the Company or any member
of its Controlled Group to a fine under ERISA section 4071; (iii) as of the
Closing Date, the Company and each member of its Controlled Group have made
all required premium payments when due to the Pension Benefit Guaranty
Corporation (the "PBGC"); (iv) neither the Company nor any member of its
Controlled Group is subject to any liability to the PBGC for any plan
termination occurring on or prior to the Closing Date; (v) no amendment has
occurred which has required or could require the Company or any member of its
Controlled Group to provide
<PAGE>
17
security pursuant to Code section 401(a)(29); and (vi) neither the Company
nor any member of its Controlled Group has engaged in a transaction which
could subject it to liability under ERISA section 4069.
(e) With respect to each of the Company Plans which is not a
multiemployer plan within the meaning of section 4001(a)(3) of ERISA but is
subject to Title IV of ERISA, as of the Closing Date, the assets of each such
Company Plan are at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Company Plan on a
termination and projected basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
(f) With respect to any multiemployer plan (within the meaning of
section 4001(a)(3) of ERISA) to which the Company or any member of its
Controlled Group has any liability or contributes (or has at any time
contributed or had an obligation to contribute): (i) the Company and each
member of its Controlled Group has or will have, as of the Closing Date, made
all contributions to each such multiemployer plan required by the terms of
such multiemployer plan or any collective bargaining agreement; (ii) neither
the Company nor any member of its Controlled Group has incurred any
withdrawal liability under Title IV of ERISA or would be subject to such
liability if, as of the Closing Date, the Company or any member of its
Controlled Group were to engage in a complete withdrawal (as defined in ERISA
section 4203) or partial withdrawal (as defined in ERISA section 4205) from
any such multiemployer plan; (iii) no such multiemployer plan is in
reorganization or insolvent (as those terms are defined in ERISA sections
4241 and 4245, respectively); and (iv) neither the Company nor any member of
its Controlled Group has engaged in a transaction which could subject it to
liability under ERISA section 4212(c).
(g) (i) Each Company Plan which is intended to meet the requirements
for tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of
the Code meets such requirements; and (ii) the Company has received a
favorable determination from the Internal Revenue Service with respect to any
trust intended to be qualified within the meaning of Code section 501(c)(9).
(h) Schedule 2.21(h) sets forth, on a plan by plan basis, the present
value of benefits payable presently or in the future to present or former
employees of the Company under each unfunded Company Plan.
(i) Except as set forth on Schedule 2.21(i), no Company Plan exists
which could result in the payment to any Company employee of any money or
other property or rights or accelerate or provide any other rights or
benefits to any Company employee as a result of the transaction contemplated
by this
<PAGE>
18
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
(j) The transaction contemplated by this Agreement does not constitute
a change in the ownership or effective control of a corporation or the
ownership of a substantial portion of the assets of a corporation for
purposes of Code section 280G or the regulations thereunder.
(k) Except as set forth in Schedule 2.21(k) attached hereto, (a) there
are no open National Labor Relations Board claims, petitions, proceedings,
charges, complaints or notices with respect to the Company, (b) the Company
has no labor negotiations in process with any labor union or other labor
organization, (c) no labor disputes, including, but not limited to, strikes,
slowdowns, picketing or work stoppages or other labor difficulty exist or to
the best of the Company's knowledge are threatened, with respect to any
employees of the Company, (d) no grievance or arbitration proceeding arising
out of or under any collective bargaining agreement relating to the employees
of the Company is in process, and to the best knowledge of the Company, no
claim thereunder exists, (e) the Company is not experiencing any labor
disputes, including but not limited to strikes, slowdowns, picketing or work
stoppages with respect to the employees of the Company and (f) no "plant
closing" or "mass layoff" has been effectuated by the Company (in each case
as defined in the Worker Adjustment and Retraining Notification Act (29
U.S.C. Section 2101, ET SEQ.), as amended). To the best knowledge of the
Company, there are no efforts in process by unions to organize any employees
of the Company who are not now represented by recognized collective
bargaining agents.
2.22 PATENTS, ETC. All patents, trademarks, service-marks, trade
names, permits, licenses, franchises or other rights (including industry
certificates and approvals and including, without limitation, STC approvals)
(collectively, "Intangible Rights") owned or held by the Company or any of
its Subsidiaries that are material to the business of the Company or any of
its Subsidiaries are described on Schedule 2.22 attached hereto. Except as
described on Schedule 2.22, all such Intangible Rights are free and clear of
any lien. Nothing has come to the attention of the Company to the effect
that (i) any activity in operating the business of the Company or any of its
Subsidiaries as presently conducted or as proposed to be conducted may
infringe any patent, trademark, service-mark, trade name, copyright, permit,
license, franchise or other right owned by any other person, (ii) there is
pending or threatened any claim or litigation against or affecting the
Company or any of its Subsidiaries contesting its right to carry on such
activities or (iii) there is, or there is pending or proposed, any statute,
law, rule, regulation, standard or code which would prevent or inhibit, or
substantially reduce the projected revenues of, or otherwise adversely affect
the business, condition (financial or otherwise), or operations of, the
Company.
<PAGE>
19
2.23 FULL DISCLOSURE. No representation or warranty made by the
Company herein nor any certificate, schedule, or instrument furnished or to
be furnished by the Company pursuant hereto or in connection herewith,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF NASSAU CAPITAL AND NAS
Nassau Capital and NAS hereby jointly and severally represent and
warrant to the Company as follows:
3.1 ORGANIZATION, STANDING, ETC. Nassau Capital is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware. NAS is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
3.2 PARTNERSHIP ACTS AND PROCEEDINGS; ENFORCEABILITY OF AGREEMENTS.
Each of Nassau Capital and NAS has all requisite power and authority to
enter into this Agreement, the Shareholders Agreement and the Registration
Rights Agreement and to perform its obligations hereunder and thereunder.
All action on the part of Nassau Capital and its partners and by NAS and its
members, officers and managers necessary for the authorization, execution and
delivery of this Agreement, the Shareholders Agreement and the Registration
Rights Agreement by Nassau Capital and NAS, and the performance of all
obligations of Nassau Capital and NAS hereunder and thereunder, has been
taken. This Agreement has been, and the Shareholders Agreement and the
Registration Rights Agreement when executed will be, duly executed and
delivered by each of Nassau Capital and NAS and constitutes or when executed
will constitute a valid and binding obligation of each of Nassau Capital and
NAS, and is or when executed will be enforceable against each of Nassau
Capital and NAS in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and to general principles of equity
(whether considered in a proceeding in equity or at law).
3.3 NO CONFLICT; GOVERNMENTAL APPROVALS AND NOTICES. Neither the
execution and delivery of this Agreement, the Shareholders Agreement and the
Registration Rights Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) violate the partnership agreement of
Nassau Capital, (ii) conflict with or constitute a violation of any law,
statute, judgment, order, decree or regulation applicable or relating to
Nassau Capital or NAS, or (iii) result in a breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon
any asset or property of Nassau Capital or NAS pursuant to, any agreement or
other instrument to
<PAGE>
20
which Nassau Capital or NAS is a party or by which either or any portion of
their properties, assets or rights are bound or affected which could
reasonably be expected to have a material adverse effect on the transactions
contemplated hereunder. No consent, authorization, approval, permit or order
of, or notice to or filing with, any governmental authority is required in
connection with Nassau Capital's and NAS's execution, delivery and
performance of this Agreement, the Shareholders Agreement or the Registration
Rights Agreement, except to the extent that the failure to obtain any such
Governmental Consent could not reasonably be expected to have a material
adverse effect on the transactions contemplated hereby.
3.4 RESTRICTED SECURITIES. Each of Nassau Capital and NAS understands
that none of the Shares has been registered under the Securities Act of 1933,
as amended (the "1933 Act"), or registered or qualified under any state
securities laws, and, in addition to the restrictions on transfer set forth
in the Shareholders Agreement, that they may not transfer the Shares in a
manner inconsistent with their status as restricted securities.
3.5 INVESTMENT INTENT. The Securities are being purchased for Nassau
Capital's and NAS's own account and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the
meaning of the 1933 Act. Each of Nassau Capital and NAS understands that the
Shares have not been registered under the 1933 Act by reason of their
contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the 1933 Act pursuant to Section 4(2)
thereof, that certificates representing the Shares shall bear the legend
provided under the Shareholders Agreement (which legends shall be removed by
the Company at the request of Nassau Capital or NAS when appropriate) and
that the reliance of the Company and others upon this exemption is predicated
in part upon this representation and warranty by Nassau Capital and NAS.
Neither Nassau Capital nor NAS was formed for the specific purpose of
purchasing the Securities.
3.6 SOPHISTICATED INVESTOR. Each of Nassau Capital and NAS has such
knowledge and experience in financial and business matters and in investments
of this type that it is capable of evaluating the merits and risks of its
investment in the Securities and of making an informed investment decision.
Each of Nassau Capital and NAS is capable of bearing the economic risk
inherent in ownership of the Securities and retaining the Securities for an
indefinite period.
3.7 ACCESS TO INFORMATION. Each of Nassau Capital and NAS has been
given the opportunity to ask questions of, and receive and evaluate answers
and information from, the Company concerning the Company and its Subsidiaries
and the terms and conditions of its investment in the Securities, and been
provided with, or had access to, such documents and other information as it
deems necessary or useful in its evaluation of the merits and
<PAGE>
21
risks of an investment in the Securities. Each of Nassau Capital and NAS has
received such advice as to the federal and state tax consequences of the
transactions contemplated by this Agreement from its own tax advisors as it
deems necessary.
3.8 NO BROKERS OR FINDERS. No person, firm or entity has or will
have, as a result of any act or omission by Nassau Capital or NAS, any right,
interest or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INVESTORS. The
obligations of the Investors to consummate the purchase of the Securities is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and any of its Subsidiaries contained herein,
shall be true and correct in all material respects on and as of the Closing
Date, with the same force and effect as though made on and as of the
Closing Date, except to the extent that any representation or warranty is
made as of a specified date, in which case such representation or warranty
shall be true and correct as of such date. Each Investor shall receive at
Closing a certificate of the Secretary or Assistant Secretary of the
Company, dated the Closing Date, certifying the foregoing.
(b) NO MATERIAL ADVERSE CHANGE. There shall not have occurred or
been threatened any event which could have a Material Adverse Effect.
(c) SHAREHOLDERS AGREEMENT. The Company shall have entered into the
Third Amended and Restated Shareholders Agreement with the Investors and
certain of its other shareholders, substantially in the form of Exhibit C
hereto (the "Shareholders Agreement").
(d) REGISTRATION RIGHTS AGREEMENT. The Company shall have entered
into the Third Amended and Restated Registration Rights Agreement with the
Investors and certain of its other shareholders, substantially in the form
of Exhibit D hereto (the "Registration Rights Agreement").
(e) CERTIFICATE OF INCORPORATION. The Company shall have duly
adopted and filed the Amended and Restated Certificate of Incorporation,
in the form of Exhibit A attached hereto.
<PAGE>
22
(f) CORY REPURCHASE. Consummation of the Cory Repurchase shall occur
simultaneously with the Closing on the terms and conditions set forth on
Schedule 1.5 hereto and the Investors shall have received copies of the
Cory Repurchase Documents, certified by the Secretary or Assistant
Secretary of the Company as true and complete copies thereof together with
evidence of authorization by the Company of each Cory Repurchase Document,
and the transactions contemplated therein.
(g) NO LITIGATION. No action, suit, investigation, arbitration, or
administrative or governmental proceeding shall be pending, seeking to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement, the Shareholders Agreement the Registration Rights Agreement
or the Cory Repurchase Documents.
(h) LEGAL OPINION. The Investors shall have received from Spolin &
Silverman, counsel for the Company, an opinion in the form of Exhibit E
hereto, addressed to the Investors.
(i) APPROVALS AND CONSENTS. The Company shall have duly received all
authorizations, waivers, consents, approvals, licenses, franchises, permits
and certificates (collectively, the "Approvals") by or of all federal,
state and local governmental authorities, and all material Approvals by or
of all other persons, necessary or advisable for the issuance of the
Shares, and all such Approvals shall be in full force and effect at the
time of the Closing. The Company shall have delivered to the Investors an
Officers' Certificate, dated the Closing Date, to such effect.
(j) PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Securities shall not, to the knowledge of the Company,
violate any applicable law or governmental regulation (including, without
limitation, Section 5 of the 1933 Act) and shall not as a result of any act
or omission by Company subject the Investors to any tax, penalty, liability
or other onerous condition under or pursuant to any applicable law or
governmental regulation. The Investors shall have received such
certificates or other evidence of compliance as the Investors may request.
(k) COMPLIANCE WITH SECURITIES LAWS. The issuance, offering and sale
of the Securities under this Agreement shall have complied with all
applicable requirements of federal and state securities laws, and the
Investors shall have received such evidence of compliance as the Investors
may request.
(l) INFORMATION AND MATERIALS. The Investors shall have received
such other information, as the Investors or their counsel may reasonably
request including, but not
<PAGE>
23
limited to, an environmental audit report in form and substance
satisfactory to the Investors with respect to any environmental hazards,
conditions, liabilities or potential liabilities to which the Company and
its Subsidiaries may be subject.
(m) AMENDMENTS, WAIVERS, CONSENTS, ETC. The Investors and their
counsel shall have received evidence satisfactory to them that any and all
amendments or waivers of, or consents to, any agreement, instrument, or
document to which the Company is party or by which the Company is bound,
necessary or advisable, in the sole opinion of the Investors, to effectuate
the transactions contemplated hereby shall have been obtained by the
Company, including, without limitation, (i) a waiver of Sections 2.10(c)
and 9.24 of the Credit Agreement, dated as of November 2, 1994, among the
Company, the Subsidiary Guarantors parties thereto, the Lenders parties
thereto, and Internationale Nederlanden (U.S.) Capital Corporation, as
Agent thereunder, and (ii) a waiver of Sections 7K and 16F of the
Securities Purchase Agreement, dated as of November 2, 1994, among the
Company, Electra Investment Trust P.L.C. and Electra Associates, Inc., in
each and every case on terms satisfactory to the Investors.
(n) COMPLIANCE WITH AGREEMENTS. The Company and each of its
Subsidiaries shall be in compliance with all of the material covenants,
terms and conditions of all loan documents, shareholder agreements and
other material agreements of the Company (including all existing or
proposed credit facilities, loan agreements and the like) which will
remain or be outstanding immediately after the Closing Date, and such
agreements shall permit the performance by the Company and its
Subsidiaries of all of the obligations and transactions contemplated by
this Agreement. The Company shall have delivered to the Investors an
Officers' Certificate, dated the Closing Date, to such effect.
4.2 CONDITION PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the issuance and sale of the
Securities is subject to the condition that the representations and
warranties of Nassau Capital and NAS contained herein shall be true and
correct in all material respects on and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date, except to the
extent that any representation or warranty is made as of a specified date, in
which case such representation or warranty shall be true and correct as of
such date. The Company shall receive at Closing a certificate from each of
the General Partner of Nassau Capital and the Manager of NAS, each dated the
Closing Date, certifying the foregoing.
<PAGE>
24
5. AFFIRMATIVE COVENANTS
The Company covenants that from and after the date of this
Agreement through the Closing and thereafter (unless otherwise provided
below):
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. For so long as the
Company does not have any class of securities registered under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Company will deliver,
or cause to be delivered to each Investor:
(a) within 30 days prior to the end of each fiscal year, but no
earlier than 60 days prior to the end of such fiscal year, a budget (on a
monthly basis) for the Company and its Subsidiaries for the following
fiscal year (including consolidating and consolidated statements of income,
cash flow and balance sheets prepared in accordance with GAAP), in form
heretofore provided to the Investors; PROVIDED, HOWEVER, that
notwithstanding the registration by the Company of any class of securities
under the 1934 Act, the Company will deliver such budgets to each Investor
if the Investors are not entitled at such time to a Designee on the Board
(each, as defined in Section 5.2(a) hereof);
(b) as soon as available and in any event within 30 days after the
end of each month, consolidating and consolidated statements of income and
cash flow of the Company and its Subsidiaries for such month and for the
period from the beginning of the current fiscal year to the end of such
month and a consolidated balance sheet of the Company and its Subsidiaries
as at the end of such period and, beginning in fiscal year 1996, setting
forth, in each case, in comparative form, figures for the corresponding
month and period in the preceding fiscal year and the budget for such
month and for the period from the beginning of the current fiscal year
to the end of such month, all in reasonable detail and reasonably
satisfactory in form and scope to the Investors and certified by an
authorized financial officer of the Company as fairly presenting in all
material respects the financial condition and results of operations of
the Company and its Subsidiaries on a consolidated basis in accordance
with GAAP;
(c) as soon as practicable and in any event within 45 days after
the end of each fiscal quarter of the Company, consolidating and
consolidated statements of income and cash flow of the Company and its
Subsidiaries for such quarter and for the period from the beginning of
the current fiscal year to the end of such quarter and a consolidated
balance sheet of the Company and its Subsidiaries as at the end of such
quarter, setting forth, in each case, in comparative form, figures for
the corresponding quarter in the preceding fiscal year and the budget for
such quarter, all in
<PAGE>
25
reasonable detail and satisfactory in form and scope to the Investors, and
certified by an authorized financial officer of the Company as fairly
presenting in all material respects the financial condition and results of
operations of the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP;
(d) as soon as available and in any event within 120 days after the end
of each fiscal year, consolidating and consolidated statements of income,
stockholders' equity and cash flow of the Company and its Subsidiaries for
such fiscal year, and the related consolidating and consolidated balance
sheets of the Company and its Subsidiaries as at the end of such fiscal
year, setting forth, in each case, in comparative form, corresponding
consolidated and consolidating figures from the preceding fiscal year, all
in reasonable detail and reasonably satisfactory in form and scope to the
Investors, and accompanied (i) in the case of said consolidated statements
and balance sheet of the Company, by an opinion thereon of independent
certified public accountants of recognized national standing (which shall
be generally recognized as one of the "Big Six" independent public
accounting firms), which opinion shall state that said consolidated
financial statements fairly present the consolidated financial condition
and results of operations of the Company and its Subsidiaries as at the end
of, and for, such fiscal year in accordance with GAAP, and (ii) in the case
of said consolidating statements and balance sheets, by a certificate of an
authorized financial officer of the Company, which certificate shall state
that said consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of operations of
the Company and of each of its Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and for, such fiscal
year;
(e) promptly upon transmission thereof to the shareholders of the
Company generally or to any other security holder of the Company,
including, without limitation, any holder of Debt, copies of all financial
statements, financial analyses, notices, certificates (including, without
limitation, the compliance certificate to be furnished under the Credit
Agreement, dated November 2, 1994, between the Company, the Subsidiary
Guarantors named therein, the Lenders named therein, The Provident Bank
("Provident") and Internationale Nederlanden (U.S.) Capital Corporation
("ING"), as the same has been, or may be, amended, modified or
supplemented (the "Credit Agreement")), annual reports and proxy
statements so transmitted;
(f) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with
<PAGE>
26
any annual, interim or special audit of the books of the Company or any of
its Subsidiaries made by such accountants, or any management letters or
similar document submitted to the Company or any of its Subsidiaries by
such accountants;
(g) promptly upon any material revision to the budgets referred to in
paragraph (a) above, such monthly budgets, as revised;
(h) promptly upon any officer of the Company obtaining knowledge of
any event of default under any credit agreement, loan agreement or
indenture that the Company is party to; and
(i) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as such Investor may
reasonably request.
5.2 BOARD MEMBER: ATTENDANCE AT BOARD MEETINGS.
(a) For so long as the Investors hold not less than 5% of the
Common Equivalent Shares (as defined in the Shareholders Agreement), at the
Investors' request, the Company will cause one person designated by the
Investors (the "Designee") to be included in any list of persons nominated by
management of the Company for election as members of the Board of Directors
of the Company (the "Board") and will take all actions reasonably within its
power to cause the Designee to be elected a member of the Board. The
Designee, as a director, will have the right to be a member of the Audit
Committee and the Compensation Committee of the Board, or such other
committees of the Board performing the functions typically performed by such
committees.
(b) The Company will reimburse such director for all costs and
expenses (including travel expenses) incurred in connection with such
director's attendance at meetings of the Board or any committee of the Board
upon which such director serves. The Company will pay such director annual
fees and fees for attending Board or committee meetings, if any such fees are
paid to directors.
5.3 RESERVATION OF SHARES. The Company will reserve and keep
reserved at all times sufficient shares of its Common Stock for issuance upon
conversion of the Securities and, upon such conversion, the Company will
promptly issue and deliver the shares of Common Stock required to be
delivered, and such shares, when issued and delivered, will be validly
issued, fully paid and nonassessable.
5.4 USE OF PROCEEDS. The Company will use the proceeds from the
sale and issuance of the Securities for the purpose described in Section 1.5
hereof.
<PAGE>
27
6. INDEMNIFICATION
6.1 INDEMNIFICATION.
(a) From and after the Closing, the Company shall indemnify and
save harmless the Investors and their respective officers, directors,
members, stockholders, partners and employees (as applicable) (the "Investor
Indemnitees") from and against any and all loss, cost, damage or expense
(including court costs and reasonable attorneys' fees) whatsoever asserted
against or incurred by such Investor Indemnitee resulting from or arising out
of any breach of any representation, warranty or covenant of the Company
contained in this Agreement.
(b) From and after the Closing, each Investor shall severally
indemnify and save harmless the Company and its officers, directors,
stockholders and employees (the "Company Indemnitees") from and against any
and all loss, cost, damage or expense (including court costs and reasonable
attorneys' fees) whatsoever asserted against or incurred by such Company
Indemnitee resulting from or arising out of any breach of any representation
or warranty made by such Investor in this Agreement.
6.2 CERTAIN PROCEDURES. In the event that a claim is made by a
third party against any Investor Indemnitee or Company Indemnitee (the
"Claimant") which, if successful, would entitle such Claimant to
indemnification hereunder, or any Claimant desires to make a claim against
any party to this Agreement (the "Indemnitor") under this Section 6, the
Claimant shall give prompt notice to the Indemnitor of any actions, suits,
proceedings and demands at any time instituted against or made upon Claimant
and for which the Claimant claims a right to indemnification hereunder
(including the amount and circumstances surrounding any claim); PROVIDED that
the failure of a Claimant to give notice as provided in this Section 6.2
shall not relieve the Indemnitor of its obligations hereunder, except to the
extent that the Indemnitor is actually prejudiced by such failure to give
notice. The Indemnitor shall within 30 days after receipt of notice
undertake to defend, adjust, compromise or settle the action, suit,
proceeding or demand on which such notice is based, in the name of the
Claimant or otherwise as the Indemnitor shall elect. Notwithstanding the
foregoing, the Claimant shall have the right to defend, adjust, compromise or
settle any action, suit, proceeding or demand on its own behalf and to be
indemnified therefor if (a) the Indemnitor does not provide the undertaking
referred to in the previous sentence, (b) the Indemnitor has not employed
counsel reasonably satisfactory to the Claimant, or (c) in the sole
discretion of the Claimant, there is a conflict or potential conflict of
interest between the Claimant and the Indemnitor or a legal defense available
to it which differs from or is additional to those available to Indemnitor,
in such action, suit or proceeding. The Indemnitor shall not, except with
the consent of the Claimant, enter into
<PAGE>
28
any settlement that does not include as a term thereof an unconditional
release of the Claimant from all liability with respect to the applicable
claim.
7. WARRANTS
7.1 TERM; EXERCISE. Subject to the terms and conditions contained
in this Agreement and in the Warrants, the Warrants are exercisable, in the
manner set forth in the Warrants, in whole or in part, at any time and from
time to time during the period commencing on the Effective Date (as defined
in each such Warrant) and ending at 5:00 p.m. New York City time on December 31,
2003, (the "Expiration Date"), and shall be void thereafter.
7.2 SERIES OF WARRANTS AND TRIGGERING EVENT. (a) At the Closing,
the Investors will receive the following Warrants exercisable into a maximum
of 7% of the Common Stock on a Fully Diluted basis (hereinafter defined):
Percentage of
Series Shares for Which
of Warrant Exercisable
---------- ----------------
Series E up to 2%
Series F 2%
Series G 3%
(b) The Series E Warrants will be essentially identical to the
Series F and Series G Warrants in all respects, except that, in contrast to
the Series F and Series G Warrants, the occurrence of one or more Registered
Public Offerings (hereinafter defined) prior to December 31, 1997 will
determine the Warrant Value (as defined in the Series E Warrant), and,
provided that a Triggering Event (hereinafter defined) shall not have
occurred prior to December 31, 1997, cause such Warrant to become exercisable
and freely transferable as of December 31, 1997. The Warrant Value shall be
determined in accordance with the terms of such Warrant. If a Triggering
Event occurs prior to December 31, 1997, whether or not a Registered Public
Offering shall have occurred prior to the occurrence of such Triggering
Event, the Series E Warrants, and all other Warrants not then exercisable,
shall be void as of the date of such Triggering Event.
(c)(i) The Series F and Series G Warrants will be identical in all
respects and will become exercisable and may only be transferred if not
terminated pursuant to paragraph (ii) below prior to the following
corresponding dates:
<PAGE>
29
Series of Warrant
If Not Terminated Becoming Exercisable
Prior To: and Freely Transferable
----------------- -----------------------
December 31, 1998 Series F
December 31, 1999 Series G
(ii) With respect to the Series F and Series G Warrants, (A) if one
or more Registered Public Offerings occurs prior to December 31, 1997, but no
Triggering Event shall have occurred, then the Series F and Series G Warrants
shall remain unaffected and shall not be void as a result of such Registered
Public Offering, and (B) if a Triggering Event occurs prior to the date any
series of Warrant would otherwise become exercisable or transferable, then
such series of Warrant, and all other series of Warrants not then
exercisable, shall be void as of the date of occurrence of such Triggering
Event.
(d) For purposes hereof, the following terms shall have the
following meanings:
"Fully Diluted" shall mean, at any point in time, the number of
common shares outstanding, increased by all common equivalent shares (stock
options, warrants, convertible securities and any other security or
instrument, whether in or out of the money, that could result in additional
common shares being issued at any time in the future) at the time outstanding.
"Registered Public Offering" shall mean the closing prior to
December 31, 1997 of an underwritten public offering for shares of Common
Stock of the Company pursuant to a registration statement under the 1933 Act,
with proceeds to the Company of $25,000,000 or more, and valuing the total
common equity of the Company, on a Fully Diluted basis, at an amount equal to
or greater than $60,000,000 but less than $75,000,000.
"Triggering Event" shall mean the occurrence of (i) the sale of all
or substantially all of the stock or assets of the Company for cash in an
amount equivalent to a common equity valuation of $60,000,000 or more or (ii)
a Nassau QPO.
"Nassau QPO" shall mean the closing of an underwritten public
offering for shares of Common Stock of the Company pursuant to a registration
statement under the 1933 Act, with proceeds to the Company of $25,000,000 or
more, and valuing, at closing, the total common equity of the Company, on a
Fully Diluted basis, at an amount equal to or greater than the Minimum Equity
Market Value applicable to the year in which such offering occurs.
<PAGE>
30
"Minimum Equity Market Value" shall mean for any period, the amount
set forth below opposite such period:
Period Minimum Equity Market Value
------ ---------------------------
From the Closing Date to
December 30, 1997 $75,000,000
December 31, 1997 to
December 30, 1998 $95,000,000
December 31, 1998 to
December 30, 1999 $120,000,000;
PROVIDED, HOWEVER, that as of the date of the closing of any underwritten
public offering (the "Calculation Date"), if there has been an increase from
the date hereof in the number of shares of Common Stock outstanding on a
Fully Diluted basis (without giving effect to the underwritten public
offering giving rise to such calculation), then the Minimum Equity Market
Value shall be adjusted and shall be equal to the product of (A) the
applicable Minimum Equity Market Value set forth above for the period in
question MULTIPLIED BY (B) a fraction (i) the numerator of which is the
number of shares of Common Stock outstanding on a Fully Diluted basis on such
Calculation Date and (ii) the denominator of which is the number of shares of
Common Stock outstanding on a Fully Diluted basis on the date hereof (after
giving effect to the purchase of Securities hereunder).
7.3 PUT. (a)(i) If no Triggering Event shall have occurred by
December 31, 2000, then, the Investors or other holder of the Warrants may,
at any time thereafter, by giving written notice to the Company (the "Put
Notice"), require the Company to repurchase (the "Put") all or any portion of
the Warrants held by the Investors or other holder of the Warrants for an
amount equal to the Put Amount (as defined in the Securities Purchase
Agreement dated as of November 2, 1994 among the Company, Electra Investment
Trust P.L.C. and Electra Associates, Inc. (the "Electra Securities
Agreement")) and corresponding to that number of shares of Common Stock then
issuable upon exercise of the Warrants designated in the Put Notice. The
Company shall pay to the Investors, subject to Section 7.3(a)(iii) hereof
such Put Amount within 30 days of the date of the Put, or, if sooner, at the
same time that ING, Provident, Banc One or Electra is required to be paid
pursuant to the terms of the ING Warrant, the Provident Warrant, the Banc One
Warrant and the Electra Warrants (each as defined in the Electra Securities
Agreement), respectively, and shall execute and deliver to the Investors a
promissory note evidencing such Put Amount; any unpaid balance of the Put
Amount shall bear interest, which interest shall be paid together with any
payment of the Put Amount, at a rate of 14% per annum.
<PAGE>
31
(ii) Immediately upon receipt of (i) a Put Notice or (ii) notice,
whether prior to or after December 31, 2000, from the holders of any of the
ING Warrant, the Provident Warrant, the Banc One Warrant or the Electra
Warrants (such holders being referred to herein collectively as the "Put
Holders") that the Investors or such Put Holders intend to exercise put
rights in connection with the repurchase of any of their warrants by the
Company, the Company shall, before repurchasing any such warrants, give
written notice thereof to the Investors and/or all other Put Holders, as the
case may be. For a period of twenty (20) days following receipt of such
notice, the Investors and each Put Holder shall be entitled, by written
notice to the Company, the Investors and/or each Put Holder, as the case may
be, to elect to require the Company to repurchase for cash its pro rata share
(on the basis of the number of shares of Common Stock then issuable upon
exercise of all of the warrants held by the Investors and each such Put
Holder) of the warrants held by the Investors and each such Put Holder. If,
at the expiration of such twenty day period the Investors or any Put Holders
have not elected to have the Company repurchase their warrants, the Company
shall repurchase only those warrants for which notice has been received.
(iii) If the Company shall not have funds legally available in the
amount necessary to repurchase all warrants of the Investors and Put Holders
with respect to which notice has been received, then such warrants shall be
repurchased by the Company (A) first, on a pro rata basis in accordance with
the number of shares of Common Stock then issuable upon exercise of all of
the warrants held the Put Holders, and (B) second, to the extent of funds
legally available therefor, on a pro rata basis in accordance with the number
of shares of Common Stock then issuable upon exercise of all of the warrants
held by the Investors. Any Put not satisfied in full in cash shall remain an
obligation of the Company and shall be evidenced by a promissory note due
within 366 days and hearing interest at a rate of 14% per annum, which
interest shall be paid together with the Put Amount.
7.4 ANTIDILUTION PROVISIONS. The percentage of Common Stock for
which the Warrants may be exercised shall be adjusted as set forth in the
Warrants in order to preserve the relative position of the holder of the
Warrants vis-a-vis the percentage of the issued and outstanding shares of
Common Stock which such holder may acquire upon exercise of the Warrants.
7.5 REGISTRATION. Pursuant to the terms of the Registration
Rights Agreement, the Investors shall have and be entitled to (i) three
demand and (ii) unlimited piggyback registrations for shares of Common Stock
issuable upon exercise of the Warrants. The Investors' demand registration
rights will have preference over other demand registration rights granted by
the Company (with the exception of any such right granted to Electra pursuant
to the Electra Securities Agreement, with which
<PAGE>
32
the right of the Investors hereunder shall rank pari passu; PROVIDED that
Electra shall have amended the Electra Securities Agreement to provide that
such right of Electra shall rank pari passu with that of the Investors
hereunder), and the Investors' piggyback registration rights will be pro rata
with any other holders of capital stock of the Company participating in such
registration, to the extent and as provided in the Registration Rights
Agreement.
7.6 VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the holders thereof to vote with the Common Stock of
the Company that number of votes equal to the number of shares of Common
Stock issuable from time to time upon exercise of the Warrants on any matters
upon which the holders of Common Stock are entitled to vote.
8. MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made herein shall survive the Closing (i) with
respect to the representations and warranties of the Company set forth in
Section 2.20, until the closing of an underwritten public offering, (ii) with
respect to the representations and warranties of the Company set forth in
Section 2.14, until three months after the expiration of the applicable
statute of limitations with respect to the subject matter thereof, and
(iii) with respect to all other representations and warranties of any party
hereunder, for a period of two (2) years after the Closing Date.
8.2 COSTS AND EXPENSES; TRANSFER TAXES. Whether or not the
transactions contemplated by this Agreement are consummated, (a) the Company
shall pay all fees and expenses incurred by, or on behalf of, it and (b) the
Company shall promptly reimburse the Investors for their reasonable
out-of-pocket expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including without limitation, the
reasonable fees and expenses of their legal counsel, accountants and
advisors. The Company shall pay all transfer taxes and charges attributable
to the transfer of the Securities to the Investors.
8.3 CONFIDENTIALITY; PRESS RELEASES.
(a) Each Investor severally agrees that all information and
documents gained by such Investor and its directors, officers, employees,
agents, representatives, consultants or affiliates pursuant to such
Investor's investigations of the Company and its Subsidiaries have been and
shall be kept confidential by such Investor and will not be used by such
Investor or its directors, officers, employees, agents, representatives,
consultants or affiliates for any purpose other
<PAGE>
33
than in connection with such Investor's investment in the Company or as
required by law.
(b) The parties hereto agree that no party shall issue or cause
publication of any press release or other announcement or public
communication with respect to this Agreement, the Shareholders Agreement, the
Registration Rights Agreement or the transactions contemplated hereby or
thereby without the consent of the others, which consent shall not
unreasonably be withheld; provided that nothing herein shall prohibit any
party from issuing or causing publication of any such press release,
announcement or public communication to the extent that such action is
required by law.
8.4 PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon, and inure to the benefit of, and be
enforceable by, only the parties hereto; PROVIDED, HOWEVER, that the parties
hereto may enforce the provisions of Section 6 hereof on behalf of their
respective Investor Indemnitees and Company Indemnitees. In no event may
either party assign either its rights or obligations hereunder without the
written agreement of the other party.
8.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules to this
Agreement are part of the Agreement and shall be construed with and as an
integral part of this Agreement to the same extent as if the same had been
set forth in full herein.
8.6 HEADINGS. The headings of the Sections of this Agreement have
been inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
8.7 AMENDMENTS, WAIVERS, ETC. Neither this Agreement nor any term
hereof may be amended except by an instrument in writing which refers to this
Agreement and is executed by the Company and each Investor whose rights are
affected thereby, and neither this Agreement nor any term hereof may be
released, waived or discharged in any manner except by an instrument in
writing which refers to this Agreement and is executed by the party against
which such release, waiver or discharge is asserted.
8.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE STATE OP NEW YORK.
8.9 NOTICES. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given on the earlier of (a) the date
actually received by the party in question, by whatever means and however
addressed, or (b) the date received if sent by telecopy, or on the date of
personal delivery if delivered by hand, or on the date signed for if sent
<PAGE>
34
by an overnight delivery service, to the following addresses, or to such
other address as any party may request by notifying the other parties hereto:
(a) If to the Company:
DeCrane Aircraft Holdings, Inc.
Attention: President
2201 Rosecrans Avenue
El Segundo, California 90245
Telephone: (310) 536-0444
Telecopy: (310) 536-0257
DeCrane Aircraft Holdings, Inc.
Attention: Chief Executive Officer
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Telephone: (216) 668-3061
Telecopy: (216) 668-2518
with a copy to:
Spolin & Silverman
Attention: Stephen A. Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Telecopy: (310) 576-1221
Telephone: (310) 576-4844
(b) If to Nassau Capital or NAS:
c/o Nassau Capital L.L.C.
Attn: Jonathan Sweemer
22 Chambers Street
Princeton, New Jersey 08542
Telephone: (609) 924-3555
Telecopy: (609) 924-8887
with a copy to:
Simpson Thacher & Bartlett
Attention: George R. Krouse, Jr., Esq.
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2000
Telecopy: (212) 455-2502
The failure of any party to deliver any notice to any of the above
persons specified to receive copies of notices, demands or requests shall not
limit the effectiveness of any notice given in accordance herewith to the
Company or any Investor. The foregoing shall not preclude the effectiveness
of actual written notice actually received by any party delivered by any
means other than those specified above.
<PAGE>
35
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances will not be
affected thereby and may be enforced to the greatest extent permitted by law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
DECRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
-------------------------------------
Name:
Title:
NASSAU CAPITAL PARTNERS L.P.
By: NASSAU CAPITAL L.L.C.
General Partner
By:
-------------------------------------
Name:
Title:
NAS PARTNERS I L.L.C.
By:
-------------------------------------
Name:
Title:
<PAGE>
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
DECRANE AIRCRAFT HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
NASSAU CAPITAL PARTNERS L.P.
By: NASSAU CAPITAL L.L.C.
General Partner
By: /s/ John G. Quigley
-------------------------------------
Name: John G. Quigley
Title: Member
NAS PARTNERS I L.L.C.
By: /s/ John G. Quigley
-------------------------------------
Name: John G. Quigley
Title: Member
<PAGE>
EXHIBIT 10.24 SECURITIES PURCHASE AGREEMENT, DATED NOVEMBER 2, 1994 AS
AMENDED ON FEBRUARY 20, 1996, AMONG REGISTRANT, ELECTRA INVESTMENT TRUST
P.L.C. AND ELECTRA ASSOCIATES, INC.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
DeCRANE AIRCRAFT HOLDINGS, INC.
-----------------------------
-----------------------------
SECURITIES PURCHASE AGREEMENT
-----------------------------
-----------------------------
12% Senior Subordinated Notes due December 31, 2001
($7,000,000)
Warrants to Purchase Shares of Common Stock
(Initially Equal on an Aggregate Basis to 15%
of the Fully-Diluted Common Stock,
Subject to Adjustment in Certain Events)
Dated as of November 2, 1994
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
----------------
PAGE
1. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . . 1
3. CLOSING OF SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . 2
4. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . 2
4A. OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . 2
4B. REPRESENTATIONS AND WARRANTIES; NO DEFAULT . . . . . . . . . . 3
4C. APPROVALS AND CONSENTS . . . . . . . . . . . . . . . . . . . . 3
4D. PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 3
4E. NO ADVERSE ACTION OR DECISION . . . . . . . . . . . . . . . . 3
4F. MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . 4
4G. PURCHASE PERMITTED BY APPLICABLE LAWS . . . . . . . . . . . . 4
4H. COMPLIANCE WITH SECURITIES LAWS . . . . . . . . . . . . . . . 4
4I. COMPLIANCE WITH AGREEMENTS . . . . . . . . . . . . . . . . . . 4
4J. FINANCING FEE AND OTHER FEES AND EXPENSES . . . . . . . . . . 5
4K. TERMS OF SENIOR FINANCING ACCEPTABLE . . . . . . . . . . . . . 5
4L. PREFERRED STOCK . . . . . . . . . . . . . . . . . . . . . . . 5
4M. INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . 5
4N. SHAREHOLDERS AGREEMENT . . . . . . . . . . . . . . . . . . . . 5
4O. REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . 5
4P. SUBORDINATION TO NOTES . . . . . . . . . . . . . . . . . . . . 5
4Q. MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . 5
4R. INFORMATION AND MATERIALS . . . . . . . . . . . . . . . . . . 5
5. PREPAYMENTS AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . 5
5A. REQUIRED PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . 6
5B. OPTIONAL PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . 6
5C. NOTICE OF OPTIONAL PREPAYMENTS . . . . . . . . . . . . . . . . 6
5D. PARTIAL PREPAYMENTS PRO RATA . . . . . . . . . . . . . . . . . 6
5E. RETIREMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . 6
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 7
6A. FINANCIAL STATEMENTS AND OTHER REPORTS . . . . . . . . . . . . 7
6B. INSPECTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . 10
6C. COVENANT TO SECURE NOTES EQUALLY . . . . . . . . . . . . . . . 11
6D. MAINTENANCE OF PROPERTIES; INSURANCE . . . . . . . . . . . . . 11
6E. CORPORATE EXISTENCE, ETC . . . . . . . . . . . . . . . . . . . 12
6F. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . 12
(i)
<PAGE>
6G. COMPLIANCE WITH LAWS, ETC . . . . . . . . . . . . . . . . . . 12
6H. BOARD MEMBER; ATTENDANCE AT BOARD MEETINGS . . . . . . . . . . 12
6I. SECURITIES MATTERS . . . . . . . . . . . . . . . . . . . . . . 13
6J. RESERVATION OF SHARES . . . . . . . . . . . . . . . . . . . . 13
6K. HART-SCOTT FILINGS . . . . . . . . . . . . . . . . . . . . . . 13
6L. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 13
6M. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6N. INTERCOMPANY NOTE . . . . . . . . . . . . . . . . . . . . . . 14
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
7A. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . 14
7B. RESTRICTIONS ON DEBT . . . . . . . . . . . . . . . . . . . . . 14
7C. RESTRICTIONS ON SALES, MERGERS AND CONSOLIDATIONS . . . . . . 15
7D. RESTRICTIONS ON LIENS . . . . . . . . . . . . . . . . . . . . 15
7E. RESTRICTIONS ON DIVIDENDS AND REPURCHASES . . . . . . . . . . 17
7F. RESTRICTIONS ON TRANSACTIONS WITH CERTAIN PARTIES . . . . . . 17
7G. RESTRICTIONS ON INVESTMENTS . . . . . . . . . . . . . . . . . 18
7H. RESTRICTIONS ON SALE AND LEASEBACK TRANSACTIONS . . . . . . . 18
7I. RESTRICTIONS ON SUBSIDIARIES . . . . . . . . . . . . . . . . . 18
7J. ACTION AFFECTING PAYMENTS ON NOTES . . . . . . . . . . . . . . 18
7K. NO AMENDMENT OF CHARTER OR BY-LAWS . . . . . . . . . . . . . . 18
7L. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . 19
8. SUBORDINATION OF THE NOTES . . . . . . . . . . . . . . . . . . . . 20
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9A. INDEMNIFICATION BY COMPANY . . . . . . . . . . . . . . . . . . 23
9B. INDEMNIFICATION BY PURCHASERS . . . . . . . . . . . . . . . . 23
9C. PROCEDURES UNDER INDEMNIFICATION . . . . . . . . . . . . . . . 23
10. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 24
10A. DEFAULT; ACCELERATION . . . . . . . . . . . . . . . . . . . . 24
10B. RESCISSION OF ACCELERATION . . . . . . . . . . . . . . . . . . 26
10C. NOTICE OF ACCELERATION OR RESCISSION . . . . . . . . . . . . . 27
10D. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 27
11. REPRESENTATIONS BY THE COMPANY . . . . . . . . . . . . . . . . . . 27
11A. ORGANIZATION; CORPORATE AUTHORITY . . . . . . . . . . . . . . 27
11B. BUSINESS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 28
11C. CAPITAL STOCK AND RELATED MATTERS . . . . . . . . . . . . . . 29
11D. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11E. OUTSTANDING DEBT . . . . . . . . . . . . . . . . . . . . . . . 29
11F. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . 30
11G. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11H. CONFLICTING AGREEMENTS AND OTHER MATTERS . . . . . . . . . . . 30
11I. PATENTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . 31
11J. OFFERING OF SECURITIES . . . . . . . . . . . . . . . . . . . . 31
(ii)
<PAGE>
11K. BROKER'S OR FINDER'S COMMISSIONS . . . . . . . . . . . . . . . 31
11L. COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 32
11M. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . . 32
11N. PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . . 32
11O. FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT . . . . . . . . . 33
11P. GOVERNMENTAL CONSENTS, ETC . . . . . . . . . . . . . . . . . . 33
11Q. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . 33
11R. EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . 35
11S. MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 35
11T. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 35
11U. PRODUCTS LIABILITY . . . . . . . . . . . . . . . . . . . . . . 38
11V. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12. REPRESENTATIONS BY THE PURCHASERS . . . . . . . . . . . . . . . . . 39
12A. ORGANIZATION, AUTHORIZATION, ETC . . . . . . . . . . . . . . . 39
12B. PURCHASE FOR INVESTMENT . . . . . . . . . . . . . . . . . . . 39
12C. SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . 39
13. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14. GUARANTEE OF NOTES AND OTHER OBLIGATIONS . . . . . . . . . . . . . 53
14A. OBLIGATIONS GUARANTEED . . . . . . . . . . . . . . . . . . . . 53
14B. OBLIGATIONS UNCONDITIONAL . . . . . . . . . . . . . . . . . . 54
14C. WAIVERS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . 55
14D. OBLIGATIONS UNIMPAIRED . . . . . . . . . . . . . . . . . . . . 55
14E. WAIVER OP SUBROGATION, ETC . . . . . . . . . . . . . . . . . . 56
14F. RESCISSION OF PAYMENT . . . . . . . . . . . . . . . . . . . . 56
14G. ELECTION TO PERFORM OBLIGATIONS . . . . . . . . . . . . . . . 56
14H. RIGHTS OF CONTRIBUTION . . . . . . . . . . . . . . . . . . . . 56
14I. LIMITATION ON CORY GUARANTEE . . . . . . . . . . . . . . . . . 58
14J. LIMITATION ON KERNER LIABILITY . . . . . . . . . . . . . . . . 58
14K. LIMITATION ON GUTERMANN LIABILITY . . . . . . . . . . . . . . 58
14L. GENERAL LIMITATION ON GUARANTEES . . . . . . . . . . . . . . . 58
14M. SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
15. ADVISORY FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
16. WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
16A. TERM; EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . 59
16B. SERIES OF WARRANTS AND TRIGGERING EVENT . . . . . . . . . . . 59
16C. PUT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
16D. PENALTY WARRANTS . . . . . . . . . . . . . . . . . . . . . . . 62
16E. ANTIDILUTION PROVISIONS . . . . . . . . . . . . . . . . . . . 62
16F. REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . 62
16G. VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
17A. PAYMENTS WITH RESPECT TO SECURITIES . . . . . . . . . . . . . 62
17B. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(iii)
<PAGE>
17C. AMENDMENTS, CONSENTS AND WAIVERS . . . . . . . . . . . . . . . 64
17D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF
NOTES AND WARRANTS . . . . . . . . . . . . . . . . . . . . . . 64
17E. PERSONS DEEMED OWNERS; PARTICIPATIONS . . . . . . . . . . . . 65
17F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 66
17G. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 66
17H. CERTAIN RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . 66
17I. DISCLOSURE TO OTHER PERSONS . . . . . . . . . . . . . . . . . 66
17J. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
17K. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . 67
17L. SATISFACTION REQUIREMENT . . . . . . . . . . . . . . . . . . . 67
17M. GOVERNING LAW; JURISDICTION . . . . . . . . . . . . . . . . . 68
17N. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 68
EXHIBITS:
EXHIBIT 1(a) -- Form of Notes
EXHIBIT 1(b) -- Form of Warrants
EXHIBIT 4A -- Form of Opinion of Baker & Hostetler
EXHIBIT 4L -- Form of Articles of Incorporation
EXHIBIT 4N -- Amended and Restated Shareholders Agreement
EXHIBIT 4O -- Amended and Restated Registration Rights Agreement
EXHIBIT 8(a) -- Form of Agent's Certificate
SCHEDULES:
SCHEDULE 4E -- Adverse Proceedings
SCHEDULE 7A(i) -- Leverage Ratio
SCHEDULE 7A(ii) -- EBITDA Ratio
SCHEDULE 7A(iii) -- Net Worth
SCHEDULE 7A(iv) -- Fixed Charges Ratio
SCHEDULE 7D -- Liens
SCHEDULE 7F -- Transactions With Certain Parties
SCHEDULE 11C -- Capital Stock and Registration Rights
SCHEDULE 11D -- Litigation
SCHEDULE 11E -- Debt
SCHEDULE 11H -- Conflicting Agreements
SCHEDULE 11I -- Intangible Rights
SCHEDULE 11J -- Offerings of Securities
SCHEDULE 11R -- Employee Matters
SCHEDULE 11S -- Material Agreements
SCHEDULE 11T -- Environmental Matters
SCHEDULE 17A -- Purchasers' Wire Transfer Instructions
(iv)
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of November 2, 1994 (this
"Agreement"), by and among DeCRANE AIRCRAFT HOLDINGS, INC., an Ohio
Corporation (the "Company"), ELECTRA INVESTMENT TRUST P.L.C., a corporation
organized under the laws of England ("EIT"), and ELECTRA ASSOCIATES, INC., a
Delaware corporation ("Associates" and, together with EIT, the "Purchasers").
Capitalized terms used in this Agreement are defined in paragraph 13 hereof.
WHEREAS, the Purchasers desire, upon the terms and subject to the
conditions set forth herein, to purchase from the Company the Securities (as
hereinafter defined); and
WHEREAS, the Company desires, upon the terms and subject to the
conditions set forth herein, to sell the Securities to the Purchasers.
NOW, THEREFORE, the parties hereto agree as follows:
1. BACKGROUND. In order to provide funds for the expansion and
operation of its business, the Company has authorized the issuance and
delivery of:
(i) its senior subordinated notes, substantially in the form of
Exhibit 1(a) hereto (herein, together with any such notes which may be
issued pursuant to any provision of this Agreement and any such notes which
may be issued in substitution or exchange therefor, the "Notes"), in the
aggregate principal amount of $7,000,000, to be dated the date of issue
thereof (the "Issue Date"), to mature December 31, 2001, and to bear interest
on the unpaid balance thereof from the Issue Date until the principal
thereof shall become due and payable at the rate of 12% per annum, payable
semi-annually in cash in arrears; and
(ii) warrants, substantially in the form of Exhibit 1(b) hereto
(herein, together with any such warrants which may be issued pursuant to any
provision of this Agreement or any provision contained in the warrants and
any such warrants which may be issued in addition to or in substitution or
exchange therefor, the "Warrants"), to purchase for a price of $0.01 per share
certain shares of the Company's common stock, without par value (the "Common
Stock").
The Notes and the Warrants, and any other security of the Company issued to
the Purchasers in addition to or in substitution or exchange therefor, are
referred to herein as the "Securities."
2. PURCHASE AND SALE OF SECURITIES. Upon the terms and subject to
the conditions set forth herein, the Company hereby agrees to sell to the
Purchasers, and the Purchasers hereby agree to purchase from the Company, the
following:
<PAGE>
(i) one or more Notes, registered in the Purchasers' names or
those of the Purchasers' nominees, as the Purchasers shall request, and,
subject to paragraph 17D hereof, in such denominations as the Purchasers
shall request, in an aggregate principal amount of $7,000,000, at a purchase
price of 100% of the aggregate principal amount thereof; and
(ii) one or more series of Warrants, registered in the
Purchasers' name or those of the Purchasers' nominees, as the Purchasers
shall request, to purchase for a price of $0.01 per share that number of
shares of Common Stock as shall be initially equal to 15% of the issued and
outstanding Common Stock on a Fully Diluted basis, which percentage is subject
to adjustment as set forth in this Agreement and in the Warrants.
3. CLOSING OF SALE OF SECURITIES. The closing of the
transactions contemplated hereby (the "Closing") shall take place at the
offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, New
York two Business Days after the date on which all the conditions specified
in paragraph 4 hereof shall have been satisfied, or on such other date or at
such other place as the Purchasers and the Company may agree (the "Closing
Date"). The Company will give the Purchasers five days' notice of the Closing
Date and the time of Closing. At the Closing, the Company will deliver to
the Purchasers the Notes and Warrants, against payment of the purchase price
therefor by transfer in lawful money of the United States of America in
immediately available funds to such bank and account as the Company may
direct in writing. At the Closing, the Company will pay to Electra Inc., a
Delaware corporation ("Electra"), by transfer in lawful money of the United
States of America in immediately available funds to such bank and account as
Electra may direct in writing, a financing fee in the amount of $140,000
(the "Financing Fee"). If at the Closing the Company shall fail to (i)
tender to the Purchasers any of the Securities, (ii) pay to Electra the
Financing Fee or (iii) have satisfied any of the closing conditions specified
herein, or if such closing conditions shall not have been waived by the
Purchasers, the Purchasers shall, at the Purchasers' election, be relieved
of all further obligations under this Agreement, without thereby waiving any
other rights the Purchasers may have by reason of such failure.
4. CONDITIONS OF CLOSING. The Purchasers' obligation to
purchase and pay for the Securities is subject to the satisfaction prior to
or at the Closing of the following conditions:
4A. OPINION OF COUNSEL. The Purchasers shall have received from
Baker & Hostetler, counsel for the Company, a
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favorable opinion substantially in the form attached hereto as Exhibit 4A,
and covering any other matters incident to the transactions contemplated
hereby as the Purchasers may reasonably request, addressed to the Purchasers
and dated the Closing Date. To the extent that the opinion referred to above
in this paragraph 4A is rendered in reliance upon the opinion of any other
counsel, the Purchasers shall have received a copy of such other opinion, or
a letter from such other counsel, dated the Closing Date and addressed to
the Purchasers, authorizing the Purchasers to rely on such other counsel's
opinion.
4B. REPRESENTATIONS AND WARRANTIES: NO DEFAULT. The
representations and warranties of the Company contained in this Agreement,
and those otherwise made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby, shall be true in all
material respects when made and at the time of the Closing, except as
affected by the consummation of the transactions contemplated hereby;
provided, however, that there shall exist at the time of the Closing and
after giving effect to such transactions no Default or Event of Default. The
Company shall have delivered to the Purchasers an Officers' Certificate,
dated the Closing Date, to all such effects.
4C. APPROVALS AND CONSENTS. The Company shall have duly received
all authorizations, waivers, consents, approvals, licenses, franchises,
permits and certificates (collectively, the "Approvals") by or of all federal,
state and local governmental authorities, and all material Approvals by or of
all other Persons, necessary or advisable for the issuance of the Securities,
and all such Approvals shall be in full force and effect at the time of the
Closing. The Company shall have delivered to the Purchasers an Officers'
Certificate, dated the Closing Date, to such effect.
4D. PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated hereby, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Purchasers and their special counsel, and the Purchasers
and their special counsel shall have received all counterpart originals or
certified or other copies of such documents as they may reasonably request.
4E. NO ADVERSE ACTION OR DECISION. Except as set forth in
Schedule 4E attached hereto, there shall be no action, suit, investigation
or proceeding pending, or, to the best of the Purchasers' or the Company's
knowledge, threatened, against or affecting the Purchasers or the Company,
any of the Purchasers' or the Company's properties or rights, or any of the
Purchasers'
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or the Company's Affiliates, officers or directors, before any court,
arbitrator or administrative or governmental body which (i) seeks to restrain,
enjoin, prevent the consummation of or otherwise affect the transactions
contemplated by this Agreement or (ii) questions the validity or legality of
any such transactions or seeks to recover damages or to obtain other relief in
connection with any such transactions, and, to the best of the Purchasers' or
the Company's knowledge, there shall be no valid basis for any such action,
proceeding or investigation.
4F. MATERIAL ADVERSE CHANGE. Since December 31, 1993, there has
not been or been threatened any material adverse change in the condition
(financial or otherwise), assets, properties, operations or prospects of the
Company or any of its Subsidiaries, or any condition, event or act which is
likely to lead to a material adverse change in the condition, assets,
properties, operations or prospects of the Company or any of its Subsidiaries,
or which would materially and adversely affect the Company's ability to repay
the Notes or the ability of the Subsidiary Guarantors to perform their
obligations hereunder.
4G. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Securities shall not violate any applicable law or governmental
regulation (including, without limitation, Section 5 of the Securities Act or
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and shall not subject the Purchasers to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or governmental
regulation. The Purchasers shall have received such certificates or other
evidence of compliance as the Purchasers may request.
4H. COMPLIANCE WITH SECURITIES LAWS. The issuance, offering and
sale of the Securities under this Agreement shall have complied with all
applicable requirements of federal and state securities laws, and the
Purchasers shall have received such evidence of compliance as the Purchasers
may request.
4I. COMPLIANCE WITH AGREEMENTS. The Company and each of its
Subsidiaries are in compliance with all of the material covenants, terms and
conditions of all loan documents, shareholder agreements and other material
agreements of the Company (including all existing or proposed credit
facilities, indentures and the like) which will remain or be outstanding
immediately after the Closing Date, and such agreements permit the
performance by the Company and its Subsidiaries of all of the obligations
and transactions contemplated by this Agreement. The Company shall have
delivered to the Purchasers an Officers' Certificate, dated the Closing Date,
to such effect.
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of the principal amount of the Notes being prepaid, together with all
accrued and unpaid interest thereon to the date of such prepayment (the
"Purchase Price").
5A. REQUIRED PREPAYMENTS. The Notes shall, at the option of a
Significant Holder, become immediately due and payable upon the occurrence
of (i) a Change of Control or (ii) an Initial Public Offering. Upon the
occurrence of a Change of Control or an Initial Public Offering and notice
by such Significant Holder, the Company will pay to each such holder an amount
in cash equal to the Purchase Price by transferring immediately available
funds to such bank and account therein as shall be designated by such holder,
against delivery of the Notes being prepaid.
5B. OPTIONAL PREPAYMENTS. The Notes may be prepaid at the option
of the Company, at any time or from time to time, in whole or in part (but,
if in part, only in integral multiples of $100,000), by paying to each
holder an amount in cash equal to the Purchase Price for the amount of Notes
being prepaid by transferring immediately available funds to such bank and
account therein as shall be designated by such holder, against delivery of
the Notes being prepaid.
5C. NOTICE OF OPTIONAL PREPAYMENTS. The Company shall give each
holder of Notes written notice of any prepayment to be made pursuant to
paragraph 5B hereof not less than 30 Business Days prior to the proposed
prepayment date, specifying such prepayment date and the principal amount of
the Notes to be prepaid. The Purchase Price for the Notes specified in such
notice shall become due and payable on such prepayment date.
5D. PARTIAL PREPAYMENTS PRO RATA. Upon any partial prepayment of
Notes, The principal amount so prepaid shall be allocated to all Notes at
the time outstanding in proportion to the respective outstanding principal
amounts thereof.
5E. RETIREMENT OF NOTES. The Company shall not prepay, purchase
or otherwise retire Notes held by any holder, in whole or in part, directly
or indirectly, prior to their stated final maturity, unless the Company
shall have offered to prepay, purchase or otherwise retire, as the case may
be, the same proportion of the aggregate principal amount of Notes held by each
other holder of such Notes at the time outstanding upon the same terms and
conditions. Any Notes so prepaid, purchased or otherwise retired by the
Company (or its Subsidiaries or Affiliates) shall not be deemed to be
outstanding for any purpose under this Agreement.
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6. AFFIRMATIVE COVENANTS. The Company covenants that from and after
the date of this Agreement through the Closing and thereafter so long as no
Triggering Event has occurred (unless otherwise provided below):
6A. FINANCIAL STATEMENTS AND OTHER REPORTS. For so long as the
Purchasers hold any Note, any Warrant exchangeable into at least 5% of the
issued and outstanding Common Stock on a Fully Diluted basis, or at least 5%
of the issued and outstanding Common Stock on a Fully Diluted basis, the
Company will deliver, or cause to be delivered to each Significant Holder:
(i) within 30 days prior to the end of each fiscal year,
but no earlier than 60 days prior to the end of such fiscal year, a budget
(on a monthly basis) for the Company and its Subsidiaries for the following
fiscal year (including consolidating and consolidated statements of income,
cash flow and balance sheets prepared in accordance with GAAP), in reasonable
detail and reasonably satisfactory in form and scope to the Significant
Holder;
(ii) as soon as available and in any event within 30 days
after the end of each month, consolidating and consolidated statements of
income and cash flow of the Company and its Subsidiaries for such month and
for the period from the beginning of the current fiscal year to the end of
such month and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period and, beginning in fiscal year 1995,
setting forth, in each case, in comparative form, figures for the
corresponding month and period in the preceding fiscal year and the budget
for such month and for the period from the beginning of the current fiscal
year to the end of such month, all in reasonable detail and reasonably
satisfactory in form and scope to the Significant Holder and certified by an
authorized financial officer of the Company as fairly presenting in all
material respects the financial condition and results of operation of the
Company and its Subsidiaries on a consolidated basis in accordance with GAAP;
(iii) only after the occurrence of an Initial Public
Offering, or if the Company prepares such statements in the ordinary course,
as soon as practicable and in any event within 45 days after the end of each
fiscal quarter of the Company, consolidating and consolidated statements of
income and cash flow of the Company and its Subsidiaries for such quarter and
for the period from the beginning of the current fiscal year to the end of
such quarter and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, setting forth, in each case, in
comparative form, figures for the
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corresponding quarter in the preceding fiscal year and the budget for such
quarter, all in reasonable detail and satisfactory in form and scope to the
Significant Holder, and certified by an authorized financial officer of the
Company as fairly presenting in all material respects the financial condition
and results of operations of the Company and its Subsidiaries on a
consolidated basis in accordance with GAAP;
(iv) as soon as available and in any event within 90 days
after the end of each fiscal year, consolidating and consolidated statements
of income, stockholders' equity and cash flow of the Company and its
Subsidiaries for such fiscal year, and the related consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at the end
of such fiscal year, setting forth, in each case, in comparative form,
corresponding consolidated and consolidating figures from the preceding
fiscal year, all in reasonable detail and reasonably satisfactory in form and
scope to the Significant Holder, and accompanied (i) in the case of said
consolidated statements and balance sheet of the Company, by an opinion
thereon of independent certified public accountants of recognized national
standing (which shall be generally recognized as one of the "Big Six"
independent public accounting firms), which opinion shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Company and its Subsidiaries as at
the end of, and for, such fiscal year in accordance with GAAP, and (ii) in
the case of said consolidating statements and balance sheets, by a
certificate of an authorized financial officer of the Company, which
certificate shall state that said consolidating financial statements fairly
present the respective individual unconsolidated financial condition and
results of operations of the Company and of each of its Subsidiaries, in each
case in accordance with GAAP, consistently applied, as at the end of, and
for, such fiscal year;
(v) promptly upon transmission thereof to the shareholders
of the Company generally or to any other security holder of the Company,
including, without limitation, any holder of Senior Debt, copies of all
financial statements, financial analyses, notices, certificates (including,
without limitation, the Compliance Certificate to be furnished under the
Credit Agreement), annual reports and proxy statements so transmitted;
(vi) promptly upon receipt thereof, a copy of each other
report submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit of the
books of the Company or
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any of its Subsidiaries made by such accountants, or any management letters
or similar document submitted to the Company or any of its Subsidiaries by
such accountants;
(vii) together with each delivery of financial statements
required by clauses (iii) and (iv) above, an Officers' Certificate stating
that the signers have reviewed the terms of this Agreement, the Notes and the
Warrants, and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of the Company
and its Subsidiaries during the fiscal period covered by such financial
statements, and that such review has not disclosed the existence, and that
the signers do not have knowledge of the existence, as at the date of such
Officers' Certificate, of any condition or event which would constitute a
Default or Event of Default or, if, any such condition or event exists,
specifying the nature and period of existence thereof and what action the
Company has taken or is taking or proposes to take with respect thereto;
(viii) together with each delivery of consolidated financial
statements required by clause (iv) above, a certificate of the independent
public accountants giving the report thereon, but only if, in making the
audit of such financial statements, such accountants have obtained knowledge
of any Default or Event of Default, specifying in such certificate the nature
and period of existence thereof; provided, that such accountants shall not be
liable by reason of their failure to obtain knowledge of any Default or Event
of Default which would not be disclosed in the course of an audit conducted
in accordance with generally accepted auditing standards;
(ix) promptly upon any Responsible Officer of the Company
obtaining knowledge (a) of any condition or event which constitutes a Default
or Event of Default, (b) that the holder of any Note has given any notice or
taken any other action with respect to a claimed Default or Event of Default
under this Agreement, (c) of any condition or event which, in the opinion of
management of the Company would have a material adverse effect on the
business, condition (financial or otherwise), assets, properties, operations
or prospects of the Company and its Subsidiaries, taken as a whole (other
than conditions or events applicable to the economy as a whole), (d) that any
Person has given any notice to the Company or any Subsidiary of the Company
or taken any other action with respect to a claimed Default or event or
condition of the type referred to in clause (ii) of paragraph 10A hereof, or
(e) of the institution of any litigation involving claims against the Company
in an amount equal to or greater than $100,000 with respect to any single
cause of action (unless the Company reasonably believes such litigation is
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without merit and will not be determined adversely to the Company) or of any
adverse determination in any litigation involving a potential liability to
the Company equal to or greater than $100,000 with respect to any single
cause of action (unless such litigation is defended by an insurance carrier
without any reservation of rights and is reasonably expected to be fully
covered by a creditworthy insurer), an Officers' Certificate specifying the
nature and period of existence of any such condition or event, or specifying
the notice given or action taken by such holder or Person and the nature of
such claimed Default, event or condition, and what action the Company has
taken, is taking or proposes to take with respect thereto;
(x) promptly upon any Responsible Officer of the Company or
any of its ERISA Affiliates becoming aware of the occurrence of (a) any
"reportable event," as such term is defined in section 4043 of ERISA, in
connection with any Plan subject to Title IV of ERISA or section 412 of the
Code or trust, insurance contract or other funding arrangement maintained or
created thereunder or an event requiring the Company or any ERISA Affiliate
to provide security to a Plan under section 401(a)(29) of the Code, (b) any
"prohibited transaction," as such term is defined in section 4975 of the Code
or in section 406 of ERISA in connection with any Plan or any trust,
insurance contract or other funding arrangement maintained or created
thereunder, or in connection with any Welfare Plan or Multiemployer Plan or
(c) the institution of proceedings or the taking or expected taking of action
by the PBGC or the Company or any of its ERISA Affiliates to terminate or
withdraw or partially withdraw, in connection with any Plan subject to Title
IV of ERISA or section 412 of the Code or any Multiemployer Plan or any
trust, insurance contract or other funding arrangement maintained or created
thereunder, a written notice specifying the nature thereof, what action the
Company or any such Subsidiary has taken, is taking or proposes to take with
respect thereto, and, when known, any action taken or threatened by the
Internal Revenue Service or the PBGC with respect thereto;
(xi) promptly upon any material revision to the budgets
referred to in clause (i) above, such monthly budgets, as revised; and
(xii) with reasonable promptness, such other information and
data with respect to the Company or any of its Subsidiaries as such
Significant Holder may reasonably request.
6B. INSPECTION OP PROPERTY. For so long as the Purchasers hold any
Note, any Warrant exchangeable into at least 5% of the issued and outstanding
Common Stock on a Fully Diluted
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basis, or at least 5% of the issued and outstanding Common Stock on a Fully
Diluted basis, the Company will permit any Person designated by any
Significant Holder in writing, at such Significant Holder's expense, to visit
and inspect any of the properties of the Company and its Subsidiaries
(provided that, unless a Default or Event of Default shall have occurred and
be continuing, such visits will not occur more frequently than once per
calendar quarter), to examine the books and financial records of the Company
and its Subsidiaries and make copies thereof or extracts therefrom and to
discuss its affairs, finances and accounts with its officers and its
independent public accountants, all at reasonable times and upon reasonable
prior notice to the Company.
6C. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any of
its Subsidiaries shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted
by paragraph 7D hereof (unless prior written consent shall have been obtained
pursuant to paragraph 17C hereof), make or cause to be made effective
provision whereby the Notes will be secured by such Lien equally and ratably
with any and all other Debt thereby secured; provided that such security
shall not in any way alter the rights of the holders of the Senior Debt or
the Seller Note.
6D. MAINTENANCE OF PROPERTIES: INSURANCE. The Company will, and will
cause each of its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition all properties used or useful in the
business of the Company and its Subsidiaries and from time to time will make
or cause to be made all appropriate repairs, renewals and replacements
thereof. The Company will, and will cause each of its Subsidiaries to,
maintain or cause to be maintained, with financially sound and reputable
insurers (or, as to workers' compensation or similar insurance, in an
insurance fund or by self-insurance authorized by the laws of the applicable
jurisdiction), insurance with respect to their respective properties and
businesses against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such type and in such amounts as are
customarily carried under similar circumstances by such corporations and as
are in good faith believed by the Company to be sufficient to prevent the
Company or a Subsidiary from becoming a co-insurer within the terms of the
policies in question.
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6E. CORPORATE EXISTENCE. ETC. The Company will, and will cause each of
its Subsidiaries to, at all times preserve and keep in full force and effect
their respective corporate, partnership or other existence, and rights,
licenses and franchises material to its business, and will qualify to do
business in any jurisdiction where the failure to do so would have a material
adverse effect on the business, condition (financial or otherwise), assets,
properties or operations of the Company and its Subsidiaries, taken as a
whole.
6F. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each
of its Subsidiaries to, pay all taxes, assessments and other governmental
charges imposed upon them or any of their respective properties or assets or
in respect of any of their respective franchises, business income or
properties before any penalty or significant interest accrues thereon, and
all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which
by law have or may become a Lien upon any of its properties or assets;
provided that no such charge or claim need be paid if being contested in good
faith by appropriate proceedings promptly instituted and diligently pursued
and if such accrual or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor.
6G. COMPLIANCE WITH LAWS. ETC. The Company will, and will cause each of
its Subsidiaries to, comply with the requirements of all applicable laws,
rules, regulations, and orders of any court or other governmental authority
(including, without limitation, those related to environmental or ERISA
compliance), the noncompliance with which could have a material adverse
effect on the business, condition (financial or otherwise), assets, property,
operations or prospects of the Company and its Subsidiaries, taken as a whole.
6H. BOARD MEMBER: ATTENDANCE AT BOARD MEETINGS.
(i) For so long as the Purchasers hold any Note, any
Warrant exchangeable into at least 5% of the issued and outstanding Common
Stock on a Fully Diluted basis, or at least 5% of the issued and outstanding
Common Stock on a Fully Diluted basis, at the Purchasers' request, the
Company will cause one Person designated by the Purchasers to be included in
any list of Persons nominated by management of the Company for election as
members of the Board of Directors of the Company (the "Board") and will take
all actions reasonably within its power to cause such Person to be elected a
member of the Board. Such director
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will have the right to be a member of the Audit Committee and the
Compensation Committee of the Board, or such other committees of the Board
performing the functions typically performed by such committees.
(ii) The Company will reimburse such director for all costs
and expenses (including travel expenses) incurred in connection with such
director's attendance at meetings of the Board or any committee of the Board
upon which such director serves. The Company will pay such director annual
fees and fees for attending Board or committee meetings, if any such fees are
paid to directors; provided that the Company may offset amounts paid to
Electra as an Advisory Fee against any such director's fees.
6I. SECURITIES MATTERS. To the extent required, the Company will, and will
cause each of its Subsidiaries to, comply in all material respects with the
reporting requirements of the Securities Act and the Exchange Act, or successor
rules thereto or otherwise. The Company will cooperate with each holder of
Securities in supplying such information as may be requested by such holder
to comply with the Securities Act or Exchange Act, including Rule 144 and
Rule 144A, or successor rules thereto or otherwise.
6J. RESERVATION OF SHARES. The Company will reserve and keep reserved
at all times sufficient shares of its Common Stock for issuance upon exercise
of the Warrants and, upon such exercise, the Company will promptly issue and
deliver the shares required to be delivered, and such shares, when issued and
delivered, will be validly issued, fully paid and nonassessable.
6K. HART-SCOTT FILINGS. The Company or its "ultimate parent" (as
defined in the Hart-Scott-Rodino Act) will promptly prepare and file, or
cause to be prepared and filed, any notification or response to any request
for additional information required to be filed under the Hart-Scott-Rodino
Act and the rules and regulations promulgated thereunder with respect to the
acquisition of voting securities of the Company or of any other Person by the
Company.
6L. USE OF PROCEEDS. The Company will use the proceeds from the sale and
issuance of the Securities to repay existing indebtedness, repay vendor
payables, finance working capital and for future acquisition financing.
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6M. MANAGEMENT. The Company will enter into an employment agreement with
terms satisfactory to the Purchasers with, and will continue the employment
of, R. Jack DeCrane, or if such employment is not continued, his replacement
shall be acceptable to the Purchasers.
6N. INTERCOMPANY NOTE. The Company will, promptly after the
satisfaction in full of its obligations under the Credit Agreement, deliver
to the Purchasers the Intercompany Note duly endorsed in blank. Cory agrees
to perform all of its obligations under the Intercompany Note and, after the
satisfaction in full of its obligations under the Credit Agreement and until
payment in full of all amounts payable by the Company under this Agreement,
to make all payments under the Intercompany Note directly to the Purchasers
for application to, the payment of principal and/or interest in respect of
the Notes.
7. NEGATIVE COVENANTS. The provisions of this paragraph 7 shall remain
in effect so long as any Note shall remain outstanding.
7A. FINANCIAL COVENANTS. The Company and the Subsidiary Guarantors shall
comply in all respects with each of the following financial covenants:
(i) LEVERAGE RATIO. The Company and the Subsidiary
Guarantors will not permit the Leverage Ratio to exceed the respective ratios
at any time during the respective periods set forth on Schedule 7A(i)
attached hereto.
(ii) EBITDA RATIO. The Company and the Subsidiary
Guarantors will not permit the EBITDA Ratio to exceed the respective ratios.
at any time during the respective periods set forth on Schedule 7A(ii)
attached hereto.
(iii) NET WORTH. The Company will not permit its Net Worth
to be less than the respective amounts at any time during the respective
periods set forth on Schedule 7A(iii) attached hereto.
(iv) FIXED CHARGES RATIO. The Company and the Subsidiary
Guarantors will not permit the Fixed Charges Ratio to be less than the
respective ratios at any time during the respective periods set forth on
Schedule 7A(iv) attached hereto.
7B. RESTRICTIONS ON DEBT. The Company will not, and will not permit any
of its Subsidiaries to, create, assume, incur, issue, guarantee or otherwise
become directly or indirectly liable in respect of, any Debt, except:
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(i) Debt to the holders of Notes incurred by the Company
pursuant to this Agreement;
(ii) the Senior Debt, and any refinancing of the Senior Debt
(provided that no refinancing of Senior Debt shall have a principal amount
greater than the principal amount of Senior Debt at the time outstanding,
extend the maturity beyond the original maturity of the Senior Debt as of the
date hereof, increase the Applicable Margin (as defined in the Credit
Agreement) from that in effect as of the date hereof or affect the time of
payment of interest payable with respect to the Senior Debt as of the date
hereof or materially adversely affect the rights (taken as a whole) of any
holder of the Notes);
(iii) additional Senior Debt in an amount not to exceed
$1,500,000 (provided that such additional Senior Debt is provided on
substantially the terms set forth in and by the lenders party to the Credit
Agreement);
(iv) the Seller Note;
(v) Debt outstanding on the Closing Date and which is
listed on Schedule 11E attached hereto; and
(vi) Additional Debt incurred or assumed in the ordinary
course of business in an aggregate amount outstanding at any time not to
exceed $1,100,000.
7C. RESTRICTIONS ON SALES, MERGERS AND CONSOLIDATIONS. The Company will
not consolidate or merge with or into, or sell, assign, lease, convey or
otherwise dispose of all or substantially all of its properties or assets to,
or acquire all or substantially all of the properties or assets of, in one
transaction or a series of transactions, another corporation, Person or
entity, without the prior written consent of the Purchasers; provided that
nothing contained in this paragraph 7C shall prevent (i) a merger of the
Company and Tri-Star Holdings, Inc., (ii) the reincorporation in the state of
Delaware of the Company or any of its Subsidiaries or (iii) the purchase,
sale, assignment, lease, conveyance or other disposition or acquisition of
properties or assets by the Company in the ordinary course of its business.
7D. RESTRICTIONS ON LIENS. The Company or any Subsidiary Guarantor will
not, and will not permit any of their Subsidiaries to, create, incur, assume
or suffer to exist any Lien upon any of its assets or property of any
character (excluding any such property or assets owned by a customer but in
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the possession of either the Company or any of its Subsidiaries), whether now
owned or hereafter acquired, except:
(i) Liens existing on the Closing Date and described on
Schedule 7D attached hereto;
(ii) Liens created in connection with the Senior Debt and
Debt permitted by paragraph 7B hereof;
(iii) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or the affected Subsidiaries, as the
case may be, in accordance with GAAP;
(iv) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith and by appropriate proceedings and Liens securing
judgments but only to the extent for an amount and for a period not resulting
in an Event of Default hereunder;
(v) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(vi) deposits to secure the performance of bids, trade
contracts (other than for Debt), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of assets or property of any character or minor
imperfections in title thereto that, in the aggregate, are not material in
amount, and that do not in any case materially detract from the value of such
assets or property subject thereto or interfere with the ordinary conduct of
the business of the Company or any Subsidiary Guarantor; and
(viii) Liens upon real and/or tangible personal property
acquired after the date hereof (by purchase, construction or otherwise) by
the Company or any Subsidiary Guarantor, each of which Liens either (A)
existed on such
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property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Debt representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of such property; provided that (1) no
such Lien shall extend to or cover any property of the Company or any
Subsidiary Guarantor, other than the property so acquired and improvements
thereon and (2) the principal amount of Debt secured by any such Lien shall
at no time exceed 80% of the fair market value (as determined in good faith
by a senior financial officer of the Company or Subsidiary Guarantor, as
appropriate) of such property at the time it was acquired (by purchase,
construction or otherwise).
The Company, any Subsidiary Guarantor or any of their Subsidiaries will not
sign or file in any state or other jurisdiction a financing statement under
the Uniform Commercial Code which names the Company or any of its
Subsidiaries as debtor, or sign any security agreement authorizing any
secured party thereunder to file any such financing statement, if the
financing statement would perfect or protect a security interest which the
Company or any of its Subsidiaries is not entitled to create, assume, incur
or permit to exist under the foregoing provisions of this paragraph 7D.
7E. RESTRICTIONS ON DIVIDENDS AND REPURCHASES. The Company will not,
and, except for dividends or other distributions to the Company or to another
Subsidiary, will not permit any of its Subsidiaries to, declare or pay any
dividends, in cash or otherwise, or make any distributions, to its
shareholders or partners, or purchase, redeem or otherwise acquire any of its
outstanding Capital Stock, or set apart assets for a sinking or other
analogous fund for the purchase, redemption, retirement or other acquisition
of, any shares of its Capital Stock; provided, however, that notwithstanding
the foregoing, (i) Tri-Star Technologies may make those partnership
distributions to Alexander Kerner required by the Tri-Star Technologies
General Partnership Agreement, as amended, and (ii) Cory may declare and pay
dividends provided such dividends are made ratably to its shareholders.
7F. RESTRICTIONS ON TRANSACTIONS WITH CERTAIN PARTIES. Except as set
forth in Schedule 7F attached hereto, the Company will not, and will not
permit any of it Subsidiaries to, sell, lease, transfer or otherwise dispose
of any of its properties or assets to, or purchase any properties or assets
from, or enter into any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "Affiliate Transaction") other than in the ordinary course of business,
unless such Affiliate Transaction is on terms
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no less favorable to the Company than would have been obtained in a
comparable arms' length transaction by the Company or such Subsidiary with a
Person who is not an Affiliate of the Company or such Subsidiary.
7G. RESTRICTIONS ON INVESTMENTS. The Company will not, other than in
the ordinary course of business, purchase, acquire or agree to purchase or
acquire or invest in the business, property or assets of, or any securities
of, any other company or business, except:
(i) the Company may invest its excess cash in Cash
Equivalents; and
(ii) investments permitted by paragraphs 7C, 7E and 7F
hereof.
7H. RESTRICTIONS ON SALE AND LEASEBACK TRANSACTIONS. The Company will
not sell or transfer any of its properties to anyone with the intention of
taking back a lease of the same property or leasing other property for
substantially the same use as the property being sold or transferred,
provided that, subject to paragraph 7A hereof, the Company may continue and
extend its existing leasing arrangements and may lease, under operating
leases, fixtures, equipment and real estate in the ordinary course of
business.
7I. RESTRICTIONS ON SUBSIDIARIES. The Company will not permit any of its
Subsidiaries to issue any Capital Stock to any Person other than to the
Company or another Subsidiary of the Company unless such issuance is at fair
market value and the Company's percentage ownership in the Subsidiary is not
decreased as a result of such issuance. The Company will not permit any of
its Subsidiaries to issue any Debt to any Person other than to the Company or
another Subsidiary of the Company except as permitted under paragraph 7B
hereof.
7J. ACTION AFFECTING PAYMENTS ON NOTES. The Company will not enter into,
become a party to or otherwise become subject to any instrument evidencing or
governing the terms of any Debt, or other contract or agreement, or any
amendments or modifications of the foregoing, the provisions of which
restrict or limit the Company's ability or obligation to make payments on, or
which alter or impair the rights of any holder of, the Notes.
7K. NO AMENDMENT OF CHARTER OR BY-LAWS. The Company will not permit any
amendment of or modification to its Articles of Incorporation or Code of
Regulations, which amendment or
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modification would alter or impair the rights of any holder of the Notes or
the Warrants.
7L. COMPLIANCE WITH ERISA. The Company will not, and will not permit
any of its ERISA Affiliates to:
(i) engage in any transaction in connection with which the
Company or any of its Subsidiaries could be subject to either a material
civil penalty assessed pursuant to section 502(i) or (1) of ERISA or a
material tax imposed by section 4975 of the Code;
(ii) terminate or partially terminate any Plan, or withdraw
or partially withdraw from a Multiemployer Plan, in a manner, or take any
other action, which in any case may reasonably be expected to result in any
material liability of the Company or any of its ERISA Affiliates to the PBGC
or to any Multiemployer Plan;
(iii) fail to make full payment when due of all amounts
which, under the provisions of any Plan, the Company or any of its ERISA
Affiliates is required to pay as contributions thereto under section 302 of
ERISA and section 412 of the Code, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan;
(iv) fail to make full payment when due of all amounts
which, under the provisions of any Multiemployer Plan or collective
bargaining agreement, the Company or any of its ERISA Affiliates is required
to pay as contributions thereto. The Company agrees (x) upon the request of
any Purchaser to obtain a current statement of withdrawal liability from each
Multiemployer Plan to which the Company or any of its ERISA Affiliates
contributes or to which the Company or any of its ERISA Affiliates has an
obligation to contribute and (y) to transmit a copy of such statement to each
Purchaser, so long as such Purchaser or such Purchaser's nominee shall be the
holder of any Notes, and to each other Significant Holder, within 15 days
after the Company receives the same;
(v) amend or permit an ERISA Affiliate to amend a Plan
resulting in an increase in current liability for the plan year such that
either the Company or an ERISA Affiliate is required to provide security to
such Plan under section 401(a)(29) of the Code; or
(vi) amend or permit an ERISA Affiliate to adopt or amend a
Welfare Plan resulting in an increase in current
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liability in an amount that is material to the Company or such ERISA
Affiliate for the plan year.
8. SUBORDINATION OF THE NOTES. (a) Anything in this Agreement or the
Notes to the contrary notwithstanding, the indebtedness evidenced by the
Notes, including principal and interest and the Subordinated Liabilities,
shall be subordinate and junior in right of payment to the extent set forth
in clauses (i) through (vi) below to all Senior Obligations. Without
limiting the foregoing:
(i) The Purchasers and the holders of the Notes may not exercise any
right of offset in respect of obligations owing from the Company or any
Subsidiary Guarantor against obligations of the Company or Subsidiary
Guarantor hereunder.
(ii) In the event (A) of a default in the payment of principal of or
interest on any Senior Debt or (B) any Senior Debt is declared immediately
due and payable prior to its stated maturity, and the holders of the Notes
are given notice by the Company or any holder of Senior Debt of either such
event, then no payments may be made by the Company or any Subsidiary
Guarantor on the Subordinated Liabilities until such default is cured or such
declaration is rescinded. In addition, the holders of the Notes may not take
any action under paragraph 10 hereof or initiate any bankruptcy proceeding
with respect to the Company or any Subsidiary Guarantor until the earlier of
the date on which such default is cured, or such declaration is rescinded by
written notice by or on behalf of any holder of Senior Debt or 180 days after
the giving of such notice (in each case to the extent the holders of the
Notes are permitted to take such action under paragraph 10).
(iii) In the event (a) the Company defaults in the performance of
its obligations under any of Sections 9.01(a), 9.01(b), 9.01(c), 9.01(h),
9.01(1), 9.04(1), 9.04(6), 9.11, 9.13, 9.14 or 9.17 of the Credit Agreement
or there occurs an "event of default" (as defined in the Credit Agreement)
under any of Sections 10(b), 10(j), 10(k), 10(m) or 10(n) of the Credit
Agreement, and (b) upon receipt by the holders of the Notes of a certificate
from the Agent (as defined in the Credit Agreement) substantially in the form
attached hereto as Exhibit 8(a), then, unless and until such default shall
have been cured or waived or shall have ceased to exist, no payment may be
made by the Company or any Subsidiary Guarantor on any of the Subordinated
Liabilities during any period of 180 consecutive days after the occurrence of
such event and receipt of such certificate; provided that any Advisory Fee
payable hereunder during such 180-day period shall accrue during such 180-day
period and shall be
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payable together with the next succeeding semi-annual installment of the
Advisory Fee on the date such succeeding semi-annual installment is due; and
provided, further, that no more than one such certificate shall be given
pursuant to this clause (iii) in any period of 360 consecutive days. In
addition, the holders of the Notes may not take any action under paragraph 10
hereof, or initiate any bankruptcy proceeding with respect to the Company or
any Subsidiary Guarantor, during such period.
(iv) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceeding, or any receivership proceeding in
connection therewith, relative to the Company or any Subsidiary Guarantor,
then all principal of and interest on all Senior Obligations shall first be
paid in full in cash before any payment on account of principal or interest
is made by the Company or any Subsidiary Guarantor upon the Subordinated
Liabilities.
(v) In any of the proceedings referred to in clause (iv) above, any
payment or distribution of any kind or character, whether in cash, property,
stock or obligations, which may be payable or deliverable by the Company or
any Subsidiary Guarantor in respect of the Subordinated Liabilities shall be
paid or delivered directly to the holders of Senior Debt (or as designated by
any holder of Senior Debt) for application in payment thereof in accordance
with the priorities then existing among such holders, unless and until all
principal of and interest on all Senior Obligations shall have been paid in
full.
(vi) If any payment or distribution of any character, whether in
cash, securities or other property, shall be received by any holder of Notes
after such holder has received written notice from the Company or any holder
of Senior Debt correctly stating that such payment or distribution would be
in contravention of any of the terms of this paragraph 8, and before all the
Senior Debt shall have been paid in full, such payment or distribution shall
be received in trust for the benefit of the holders of the Senior Debt at the
time outstanding in accordance with the priorities then existing among such
holders, and shall be paid over or delivered and transferred to the holders
of the Senior Debt upon request.
(b) The holders of the Notes will prove, enforce and endeavor to obtain
payment of the Notes in any reorganization proceeding with respect to the
Company or any Subsidiary Guarantor. The holders of the Notes hereby
authorize and empower the Agent (as defined in the Credit Agreement) in any
reorganization proceeding with respect to the Company or any Subsidiary
Guarantor to (i) file a proof of claim on behalf of
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the holders of the Notes if such holders fail to file proof of their claims
prior to twenty (20) days before the expiration of the time period during
which such claims must be submitted and (ii) vote claims and otherwise act in
such reorganization proceeding on behalf of the holders of the Notes if such
holders fail to vote their claims or otherwise act within five (5) Business
Days prior to the last date for voting or expressing their consent or
disapproval. Upon the failure of any holder of the Notes to file a proof of
claim, vote claims or otherwise act in a reorganization proceeding as
provided in this paragraph 8(b) {including within the time periods specified
herein), the Agent, on behalf of the holders of Senior Debt, is hereby
irrevocably authorized and empowered, in its sole and absolute discretion, to
make and present for and on behalf of such holder of the Notes such proof of
claims against the Company or any Subsidiary Guarantor on account of the
Subordinated Liabilities as the holders of the Senior Debt may have deemed
expedient or proper and to vote such proofs of claims in any such proceeding.
(c) The provisions of this paragraph 8 are for the purpose of defining
the relative rights of the holders of Senior Debt, on the one hand, and the
holders of the Notes, on the other hand, against the Company and its
property, and nothing herein shall impair, as between the Company and the
holders of the Notes, the obligation of the Company, which is unconditional
and absolute, to pay to the holders of the Notes the principal thereof and
interest thereon in accordance with their terms and the provisions hereof and
the other obligations under this Agreement, nor, except for the provisions of
clause (i) above relating to the taking of action under paragraph 10, shall
anything herein prevent the holders of the Notes from exercising all remedies
otherwise permitted by applicable law or hereunder upon default hereunder or
under the Notes. Upon payment in full of the Senior Obligations, the holders
of the Notes shall be subrogated to the rights of the holders of the Senior
Debt to receive payments or distributions of assets of the Company made on
the Senior Obligations until the principal of and interest on the Notes and
the other obligations under this Agreement shall be paid in full, and, for
the purposes of such subrogation, no payments to the holders of Senior Debt
of any cash, property, stock or obligations to which the holders of the Notes
would be entitled shall, as between the Company, its respective creditors
(other than the holders of the Senior Debt) and the holders of the Notes, be
deemed to be a payment by the Company to or on account of the Senior
Obligations.
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<PAGE>
9. INDEMNIFICATION.
9A. INDEMNIFICATION BY COMPANY. The Company agrees to indemnify,
defend, and hold the Purchasers harmless from and against all claims,
demands, losses, liabilities or judgments, including, without limitation, all
interest, penalties, fines and other sanctions, and any reasonable costs or
expenses in connection therewith, including, without limitation, attorneys'
fees and expenses, arising out of or in connection with the breach by the
Company or any of its Subsidiaries of any of the representations and
warranties set forth herein or failure by the Company or its Subsidiaries to
observe, pay or perform any of its or their respective covenants or
agreements set forth herein.
9B. INDEMNIFICATION BY PURCHASERS. The Purchasers hereby agree to
indemnify, defend, and hold the Company harmless from and against all claims,
demands, losses, liabilities or judgments, including, without limitation, all
interest, penalties, fines and other sanctions, and any reasonable costs or
expenses in connection therewith, including, without limitation, attorneys'
fees and expenses, arising out of or in connection with the breach or failure
by the Purchasers to observe, pay or perform any of the warranties,
representations, covenants or agreements set forth herein.
9C. PROCEDURES UNDER INDEMNIFICATION. In the event that any legal
proceedings shall be instituted or that any claim or demand shall be asserted
by any person in respect of which payment may be sought by either party from
the other party under the provisions of this paragraph 9, the party seeking
indemnification (the "Indemnitee") shall promptly cause written notice of the
assertion of any claim of which it has knowledge and which is covered by this
paragraph 9 to be forwarded to the party from which indemnification is sought
(the "Indemnitor"). The Indemnitor shall have the right, at its option and at
its expense, to be represented by counsel of its choice and to participate
in, or to take exclusive control of, the defense, negotiation and/or
settlement of any proceeding, claim or demand which relates to any losses or
potential losses indemnified against hereunder; provided, however, that (i)
such participation by the Indemnitor shall not be deemed to be an admission
of its liability to the Indemnitee or any other claimant and (ii) the
Indemnitee may participate in any such proceeding with counsel of its choice
and at its own expense. To the extent that the Indemnitor elects not to
defend or settle such proceeding, claim or demand, the Indemnitee may in
accordance with its good faith business judgment elect reasonably to defend
against, settle or otherwise deal with any such proceeding, claim or demand;
provided, however, that any such settlement shall be made only
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with the consent of the Indemnitor (which consent shall not be unreasonably
withheld or delayed, and shall be deemed given by the Indemnitor unless the
Indemnitor shall notify the Indemnitee of its objection to such settlement
and the reasons for such objection by notice given within ten (10) days after
such consent shall be requested by the Indemnitee). The parties agree to
cooperate fully with each other in connection with the defense, negotiation
or settlement of any such legal proceeding, claim or demand. After any final
judgment or award shall have been rendered by a court, arbitration board or
administrative agency of competent jurisdiction and the time in which to
appeal such final judgment or award shall have expired, or a settlement shall
have been consummated, or the Indemnitee and the Indemnitor shall have
arrived at a mutually binding agreement with respect to each separate matter
indemnified by the Indemnitor, the Indemnitee shall forward to the Indemnitor
notice of any sums due and owing by the Indemnitor with respect to such
matter and the Indemnitor shall be required to pay all of such sums owing by
reason of such judgment, award or settlement to the Indemnitee by wire
transfer in immediately available funds within thirty (30) days after the
date of such notice. If defendants in any action include both the Indemnitor
and the Indemnitee, and the Indemnitee shall have been advised by its counsel
that there may be legal defenses available to the Indemnitee which are
different from or additional to those available to the Indemnitor, the
Indemnitee shall have the right to employ its own counsel in such action, and
in such event, the fees and expenses of such counsel shall be borne by the
Indemnitor.
10. EVENTS OF DEFAULT.
10A. DEFAULT: ACCELERATION. If any of the following events shall occur
and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation
of law or otherwise):
(i) the Company defaults in the payment of any principal on any Note
at its maturity or when otherwise due, or in the payment of any purchase or
redemption obligation, or in the payment of interest on any Note when the
same shall become due, either by the terms thereof or otherwise as provided
herein, and such default shall continue for three (3) or more Business Days
after the same shall have become due; or
(ii) the Company or any of its Subsidiaries fails to perform or
observe any of the financial covenants in paragraph 7A hereof, and such
default shall continue unremedied for a period of thirty (30) or more
Business Days after written notice thereof to the Company and, for so long as
the Senior Debt
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is outstanding, the Agent (as defined in the Credit Agreement), which written
notice shall provide in reasonable detail the calculations relating to such
financial covenants; or
(iii) the Company or any of its Subsidiaries defaults in any payment
of principal of or interest on any Debt in an amount in excess of $250,000
beyond any period of grace provided with respect thereto and the effect of
such failure is to cause such Debt to become due prior to any stated
maturity; or
(iv) any representation or warranty made in writing by or on behalf
of the Company in this Agreement or in any writing furnished in connection
with or pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement shall be false in any material respect on the
date as of which made; or
(v) the Company fails to perform or observe any provision contained
in clause (ix) of paragraph 6A, in paragraphs 6C or 6H(i), or in paragraphs
7B through 7L hereof, and such default shall continue unremedied for a period
of thirty (30) or more Business Days after notice thereof to the Company; or
(vi) repudiation by any Subsidiary of the Company of its obligations
under a Subsidiary Guarantee or a final judicial determination that a
Subsidiary Guarantee is not enforceable against any Subsidiary Guarantor in
accordance with its terms; or
(vii) the Company fails to perform or observe any other material
agreement, term or condition contained in this Agreement, and such failure
shall not have been remedied within 30 days after such failure shall first
have become known to any Responsible Officer of the Company or written notice
thereof shall have been received by the Company (regardless of the source of
such notice); or
(viii) any judgment, order or decree for relief in respect of the
Company or any of its Subsidiaries is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or similar law, whether now or hereafter in effect
(herein called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any of its Subsidiaries, within the meaning of
any Bankruptcy Law: (A) commences a voluntary case or proceeding; (B)
consents to the entry of a judgment, decree or order for relief against it in
an involuntary case or proceeding; (C) consents to the appointment of a
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receiver, trustee, custodian, liquidator or similar official for it or for
all or substantially all of its property or assets; (D) consents to or
acquiesces in the institution of a bankruptcy or insolvency proceeding
against it; (E) makes an assignment for the benefit of its creditors or is
generally not paying its debts as they become due; (F) takes any corporate
action to authorize or effect any of the foregoing; (G) is the subject of any
judgment, decree or order entered in any proceeding (1) approving a petition
seeking reorganization, arrangement, adjustment or composition, (2)
appointing a receiver, trustee, custodian, liquidator or similar official for
it or for all or substantially all of its property or assets or (3) ordering
its winding-up, dissolution or liquidation, and in each case the judgment,
decree or order remains unstayed and in effect for 30 days; or
(x) a final judgment (excluding a judgment in a matter listed on
Schedule 11D hereto) in an amount not fully covered by insurance in excess of
$100,000 is rendered against the Company or any of its Subsidiaries and,
within 30 Business Days after entry thereof, such judgment is not discharged
or execution thereof stayed pending appeal, or within 10 days after the
expiration of any such stay, such judgment is not discharged;
then (a) if such event is an Event of Default specified in clause (viii) or
(ix) of this paragraph 10A, all of the Notes at the time outstanding shall
automatically become due and payable at par, together with interest accrued
thereon; (b) if such event is any ether Event of Default, a Significant
Holder of the Notes may, at its option, by notice in writing to the Company,
declare all of the Notes to be, and all of the Notes shall thereupon be and
become, immediately due and payable at par, together with interest accrued
thereon, in each of the cases referred to in clauses (a) and (b) above,
without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; (c) the Notes will have
preference in right of payment to all other subordinated debt of the Company
and to any Capital Stock of the Company in the event of any event specified
in clause (viii) or (ix) of this paragraph 10A; and (d) if such event is an
Event of Default specified in clause (i) of this paragraph 10A, the Company
will promptly issue to the Purchasers Penalty Warrants in accordance with the
provisions of paragraph 16D hereof.
10B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to
paragraph 10A hereof, the Significant Holder may, by notice in writing to the
Company, rescind and annul such declaration and its consequences if (i) the
Company shall have paid all overdue interest on the Notes, any principal
payable
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with respect to Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal at
the rate specified in the Notes, (ii) the Company shall not have paid any
amounts which have become due solely by reason of such declaration, (iii) all
Defaults and Events of Default, other than non-payment of amounts which have
become due solely by reason of such declaration, shall have been cured or
waived pursuant to paragraph 17C hereof, and (iv) no judgment or decree shall
have been entered for the payment of any amounts due pursuant to the Notes or
this Agreement. No such rescission or annulment shall extend to or affect
any subsequent Default or Event of Default or impair any right arising
therefrom.
10C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall he
declared immediately due and payable pursuant to paragraph 10A hereof, or any
such declaration shall be rescinded and annulled pursuant to paragraph 10B
hereof, written notice shall forthwith be given thereof by the Significant
Holder of the Notes to the holder of each Note at the time outstanding. In
addition, whenever any Note shall be declared immediately due and payable
pursuant to paragraph 10A hereof, the Significant Holder of the Notes shall
give written notice thereof to the Agent (as defined in the Credit Agreement)
not less than five (5) Business Days before any such Note becomes due and
payable.
10D. OTHER REMEDIES. Subject to the provisions of paragraph 8(i) hereof,
if any Default or Event of Default shall occur and be continuing, the holder
of any Note may proceed to protect and enforce its rights under this
Agreement and such Note by exercising such remedies as are available to such
holder in respect thereof under applicable law, either by suit in equity or
by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of
any power granted in this Agreement. No remedy conferred in this Agreement
upon the holder of any Note is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition
to every other remedy conferred herein or now or hereafter existing at law or
in equity or by statute or otherwise.
11. REPRESENTATIONS BY THE COMPANY. The Company hereby represents,
covenants and warrants to the Purchasers as follows:
11A. ORGANIZATION; CORPORATE AUTHORITY. The Company and each of its
Subsidiaries, is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and
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has all requisite corporate or other power and authority to own and operate
its properties and to carry on its business. The Company and each of its
Subsidiaries has all requisite corporate or other power and authority to
enter into and perform all of its obligations under this Agreement and to
issue and sell the Notes and Warrants as contemplated hereby. The Company
and each of its Subsidiaries is duly qualified and in good standing and duly
authorized to do business in each jurisdiction where it is or will be on the
Closing Date required so to qualify, except where the failure so to qualify
would not have a material adverse effect on its business, condition
(financial or otherwise), prospects, assets or properties.
11B. BUSINESS: FINANCIAL STATEMENTS. The Company has furnished the
Purchasers with the following financial statements: (i) the audited balance
sheets of the Company at December 31, 1993 and December 31, 1992 and the
related audited statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1993, all
reported on by Price Waterhouse, and (ii) the unaudited balance sheet of the
Company at August 31, 1994 and the related unaudited statement of operations,
stockholders' equity and cash flow for the period ended on such date
(collectively, the "Disclosure Documents"). The Disclosure Documents (i)
have been prepared in conformity with GAAP applied on a consistent basis and
disclose all liabilities, direct and contingent, required to be shown in
accordance with such principles and (ii) present fairly the financial
position of the Company at the dates indicated and results of operations for
the periods indicated. The Disclosure Documents did not, as of their
respective dates, and this Agreement does not, contain an untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements therein and herein, in light of the circumstances under which
they were made, not misleading. There is no fact (other than facts related
to general economic conditions) peculiar to the Company which materially
adversely affects or in the future would reasonably be expected to materially
adversely affect the business, prospects, condition (financial or otherwise)
or operations of the Company which has not been set forth or reflected in
this Agreement or the Disclosure Documents. The Company has not sustained
since August 31, 1994 any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree which
is material to the Company, other than as set forth in the Disclosure
Documents. Since August 31, 1994, there has not been any material change in
the Capital Stock or long-term or short-term Debt of the Company or in the
capitalization of the Company (other than the changes resulting from the
transactions
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contemplated by this Agreement and the Related Agreements) or any material
adverse change, or any development which the Company has reasonable cause to
believe will involve a prospective material adverse change, in or affecting
the business, condition (financial or otherwise), assets, properties,
operations or prospects of the Company.
11C. CAPITAL STOCK AND RELATED MATTERS. As of the Closing Date (or other
indicated date) and after giving effect to the transactions contemplated
hereby the authorized Capital Stock of the Company is as set forth in
Schedule 11C attached hereto. Except as set forth in Schedule 11C, the
Company has not granted or agreed to grant any rights relating to the
registration of its securities under applicable federal and state securities
laws, including piggyback rights.
11D. LITIGATION. Except as set forth in Schedule 11D attached hereto,
there are no claims, actions, suits, proceedings, labor disputes or
investigations in process by or against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened either by a
written communication directed to the Company or by an oral communication
directed to the Company by a stockholder of the Company, before any federal
or state court, arbitrator or governmental authority by or against the
Company which, if adversely determined, may reasonably be expected to result
in any material adverse change in the business, condition (financial or
otherwise), assets, properties, operations or prospects of the Company or in
any liability on the part of the Company which would be material to the
Company or which, to the best knowledge of the Company, includes a claim
against or involving the Company in excess of $100,000 or which questions the
validity or legality of or seeks damages in connection with this Agreement or
any action taken or to be taken pursuant to this Agreement. There are no
outstanding judgments, decrees or orders of any court or governmental
authority against the Company which may reasonably be expected to result in
any material adverse change in the business, condition (financial or
otherwise), assets, properties, operations or prospects of the Company or in
any liability on the part of the Company which would be material to the
Company.
11E. OUTSTANDING DEBT. Except as set forth in Schedule 11E attached
hereto, the Company does not, and each of its Subsidiaries do not, have any
outstanding secured or unsecured Debt or commitments for any Debt, other than
the Senior Debt and Debt permitted by paragraph 7B hereof, and as of the
Closing Date there will exist no default or event of default by the Company
or any of its Subsidiaries under the provisions of any instrument evidencing
such Debt or of any agreement relating thereto that
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has or would be expected to have a material adverse effect on the Company or
any of its Subsidiaries.
11F. TITLE TO PROPERTIES. The Company and each of its Subsidiaries has
good and marketable title to all of its respective properties and assets,
free and clear of all Liens other than Liens permitted by paragraph 7D
hereof. The Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all leases necessary in any material respect for
the operation of its properties and businesses; and none of such leases
contain any unusual or burdensome provisions which might materially affect or
impair the operation of such properties and businesses. Except to perfect
and protect security interests of the character permitted by paragraph 7D
hereof, at the time of the Closing (i) no effective financing statement under
the Uniform Commercial Code which names the Company or any of its
Subsidiaries as debtor or lessee will be on file in any jurisdiction and (ii)
the Company and each of its Subsidiaries will not have signed any effective
financing statement or any effective security agreement authorizing any
secured party thereunder to file any such financing statement.
11G. TAXES. The Company has filed all tax returns required by law to be
filed by it (or obtained valid extensions thereof), and all taxes,
assessments and other governmental charges levied upon the Company or any of
its properties, assets, income or franchises which are due and payable, other
than those presently payable without penalty or interest, have been paid.
There are no tax liens upon any assets of the Company.
11H. CONFLICTING AGREEMENTS AND OTHER MATTERS. The Company and each of
its Subsidiaries is not a party to any contract or agreement or subject to
any restriction which materially and adversely affects its business,
condition (financial or otherwise), prospects, assets or properties. Neither
the execution or delivery of this Agreement or the Notes or the Warrants, nor
the offering, issuance and sale of the Notes or the Warrants, nor fulfillment
of or any compliance with the terms and provisions hereof and thereof, will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the properties or assets of the
Company pursuant to, the Articles of Incorporation or Code of Regulations of
the Company, any award of any arbitrator or any material agreement,
instrument, order, judgment, decree, statute, law, rule or regulation to
which the Company, or any of its respective property or assets is subject.
The Company is not a party to or otherwise subject to any contract or
agreement which limits the amounts of, or otherwise
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imposes restrictions on the incurring of, Debt of the type to be evidenced by
the Notes or which contains dividend or redemption limitations on any Capital
Stock of the Company, except for this Agreement and as set forth in Schedule
11H attached hereto.
11I. PATENTS, ETC. All patents, trademarks, service-marks, trade names,
permits, licenses, franchises or other rights (including industry
certificates and approvals and including, without limitation, FAA
Supplemental Type Certificate ("STC") approvals) (collectively, "Intangible
Rights") owned or held by the Company or any of its Subsidiaries that are
material to the business of the Company or any of its Subsidiaries are
described on Schedule 11I attached hereto. Except as described on Schedule
11I, all such Intangible Rights are free and clear of any Lien. Nothing has
come to the attention of the Company to the effect that (i) any activity in
operating the business of the Company or any of its Subsidiaries as presently
conducted or as proposed to be conducted may infringe any patent, trademark,
service-mark, trade name, copyright, permit, license, franchise or other
right owned by any other Person, (ii) there is pending or threatened any
claim or litigation against or affecting the Company or any of its
Subsidiaries contesting its right to carry on such activities or (iii) there
is, or there is pending or proposed, any statute, law, rule, regulation,
standard or code which would prevent or inhibit, or substantially reduce the
projected revenues of, or otherwise adversely affect the business, condition
(financial or otherwise), or operations of, the Company.
11J. OFFERING OF SECURITIES. Except as set forth in Schedule 11J
attached hereto, the Company, has not, directly or indirectly, offered any of
the Notes or the Warrants or any similar security of the Company, including,
without limitation, Common Stock, for sale to, or solicited any offers to buy
any such security of the Company from, or otherwise approached or negotiated
with respect thereto with, any Person or Persons other than the Purchasers
and no more than 10 other investors; and neither the Company nor any agent
acting on its behalf has taken or will take any action which would subject
the issuance or sale of any of the Notes to the provisions of section 5 of
the Securities Act or to the provisions of any securities or Blue Sky law of
any applicable jurisdiction.
11K. BROKER'S OR FINDER'S COMMISSIONS. Except for a fee in the amount of
$650,000 (plus expenses totaling not more than $155,000) payable to Alex.
Brown & Sons Incorporated, no broker's or finder's fee or commission will be
payable by the Company with respect to the issuance and sale of the Notes or
the Warrants or the transactions contemplated hereby.
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11L. COMPLIANCE WITH LAW. (a) The Company has not received notice of, or
citation or summons for, and no complaint has been filed, no penalty has been
assessed and no investigation or review is in process or, to the best
knowledge of the Company, threatened by any governmental authority with
respect to, any violation or alleged violation of any law, regulation, order
or other legal requirement, or failure by the Company to have any permit,
certificate, license, approval, registration or authorization (including
industry certificates and approvals and including, without limitation, STCs)
required in connection with the operation of its business, other than where
such violation or failure would not reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), assets,
properties, operations or prospects of the Company. The Company is not in
default with respect to any order, writ, judgment, award, injunction or
decree of any federal, state or local court or governmental or regulatory
authority or arbitrator, domestic or foreign, applicable to or in connection
with its business or any of its assets, properties or operations, other than
defaults the consequences of which would not reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise),
assets, properties, operations or prospects of the Company.
(b) With respect to the operation of its business, the Company
possesses and is in compliance with all material permits, certificates,
licenses, approvals, registrations and authorizations (including industry
certificates and approvals and including, without limitation, STCs) required
under all applicable laws, rules and regulations, all of which are in full
force and effect, and the business has been conducted and is now being
conducted in compliance with all applicable laws, rules, regulations,
judgments and orders of the United States and states, counties,
municipalities and agencies thereof, including, without limitation, laws,
rules and regulations relating to pollution and environmental control, equal
employment opportunity, health and safety and zoning, except for such
noncompliance which, individually or in the aggregate, would not reasonably
be expected to have a material adverse effect on the business, condition
(financial or otherwise), assets, properties, operations or prospects of the
Company.
11M. INVESTMENT COMPANY ACT. The Company is not an "investment company,"
or a company "controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
11N. PUBLIC UTILITY HOLDING COMPANY ACT. The Company is not a "holding
company," or a "subsidiary company" of a
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"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
11O. FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT. The Company is not a
"United States real property holding corporation," as defined in section 897
of the Code and applicable regulations thereunder.
11P. GOVERNMENTAL CONSENTS, ETC. No consent, approval, authorization,
exemption or other action by, or notice to or filing with, any court or
administrative or governmental body (or modification to any of the foregoing)
which has not been obtained, taken or made is required in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or thereby or fulfillment of or compliance
with the terms and provisions hereof.
11Q. COMPLIANCE WITH ERISA. (a) PROHIBITED TRANSACTIONS. Neither the
Company nor any ERISA Affiliate has engaged in a transaction in connection
with which the Company could be subject to a material liability for either a
civil penalty assessed pursuant to section 502(i) or (1) of ERISA or a tax
imposed by section 4975 of the Code.
(b) PLAN TERMINATION; MATERIAL LIABILITIES. There has been no
termination or partial termination of a Plan or trust, insurance contract or
other funding arrangement maintained or created under any Plan, and there has
been no withdrawal or partial withdrawal from a Multiemployer Plan, that
would give rise to a material liability to the PBGC, or to a Multiemployer
Plan, on the part of the Company or an ERISA Affiliate. No material
liability to the PBGC has been or is expected to be incurred with respect to
any Plan by the Company or an ERISA Affiliate. The PBGC has not instituted
proceedings to terminate any Plan with respect to which the Company or an
ERISA Affiliate has liabilities. There exists no condition or set of
circumstances which presents a material risk of termination or partial
termination of any Plan by the PBGC. The Company and each ERISA Affiliate
have paid all premiums to the PBGC when due. No condition exists or event or
transaction has occurred in connection with any Plan or Multiemployer Plan or
Welfare Plan which has resulted and/or will result in the incurrence by the
Company or any ERISA Affiliate of any material liability, fine, penalty or
tax.
(c) ACCUMULATED FUNDING DEFICIENCY. Full payment has been made of
all amounts which are required under the terms
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of each Plan to have been paid or accrued as contributions to such Plan as of
the last day of the most recent fiscal year of such Plan ended on or before
the date of this Agreement (except such contributions as have not been made
but that can be timely made at a later date without penalty in accordance
with sections 412 and 4971 of the Code), and no accumulated funding
deficiency (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, exists with respect to any Plan. Neither the Company
nor an ERISA Affiliate has failed to make a required installment under
section 412(m) of the Code.
(d) RELATIONSHIP OF BENEFITS TO PENSION PLAN ASSETS. The current
value of the "benefit liabilities" (as defined in section 4001(a)(16) of
ERISA) of each Plan subject to Title IV of ERISA and section 412 of the Code
does not exceed the fair market value of the assets of such Plan. Neither
the Company nor any ERISA Affiliate is required to provide security to any
Plan. No Lien under section 412(n) of the Code or sections 312(f) or 4068 of
ERISA has been or is reasonably expected by the Company to be imposed on the
assets of the Company or any ERISA Affiliate. The Company and the ERISA
Affiliates may cease contributions to or terminate any Plan or Welfare Plan
without incurring any material liability.
(e) COMPLIANCE WITH ERISA. All Plans which are intended to be
"qualified" are "qualified" under section 401(a) of the Code and will have
been submitted to the Internal Revenue Service by the end of the current plan
year for a determination letter confirming such qualification. All Plans and
Welfare Plans contributed to or maintained by the Company or an ERISA
Affiliate have been administered substantially in compliance with ERISA and
the applicable provisions of the Code. There are no pending issues before
the Internal Revenue Service or any court of competent jurisdiction related
to the qualification of, or payment of benefits under, any Plan or Welfare
Plan.
(f) EXECUTION OF AGREEMENTS; PURCHASE AND SALE OF SECURITIES, ETC. The
execution and delivery of this Agreement the issue and sale of the Notes and
the Warrants and the consummation of the transactions contemplated by this
Agreement will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975 of the Code. The representation by the
Company in the preceding sentence is made in reliance upon and subject to the
accuracy of the Purchasers' representations in paragraph 12C hereof as to the
source of funds used to pay the purchase price of the Notes and the Warrants.
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11R. EMPLOYEE MATTERS. Except as set forth in Schedule 11R attached
hereto, (a) there are no open National Labor Relations Board claims,
petitions, proceedings, charges, complaints or notices with respect to the
Company, (b) the Company has no labor negotiations in process with any labor
union or other labor organization, (c) no labor disputes, including, but not
limited to, strikes, slowdowns, picketing or work stoppages or other labor
difficulty exist or to the best of the Company's knowledge are threatened,
with respect to any employees of the Company, (d) no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement
relating to the employees of the Company is in process, and to the best
knowledge of the Company, no claim thereunder exists, (e) the Company is not
experiencing any labor disputes, including but not limited to strikes,
slowdowns, picketing or work stoppages with respect to the employees of the
Company and (f) no "plant closing" or "mass layoff" has been effectuated by
the Company (in each case as defined in the Worker Adjustment and Retraining
Notification Act (29 U.S.C. Section 2101, ET SEQ.), as amended). To the best
knowledge of the Company, there are no efforts in process by unions to
organize any employees of the Company who are not now represented by
recognized collective bargaining agents.
11S. MATERIAL AGREEMENTS. The agreements, contracts and other documents
listed in Schedule 11S attached hereto comprise all of the material
agreements, contracts and other arrangements to which the Company is a party
(including, without limitation, contracts or other agreements for the
employment or compensation of any officer, director, stockholder, consultant
or key employee of the Company, joint venture agreements, shareholder
agreements or similar arrangements).
11T. ENVIRONMENTAL MATTERS. The Company and each of its Subsidiaries has
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business
as now being or as proposed to be conducted, except to the extent failure to
have any such permit, license or authorization would not (either individually
or in the aggregate) have a material adverse effect on the condition
(financial or otherwise), assets, properties, operations or prospects of the
Company or any of its Subsidiaries (for purposes of this paragraph 11T, a
"Material Adverse Effect"). Each of such permits, licenses and
authorizations is in full force and effect and the Company and each of its
Subsidiaries is in compliance with the terms and conditions thereof, and is
also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable
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Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply therewith would not
(either individually or in the aggregate) have a Material Adverse Effect.
In addition, except as set forth on Schedule 11T attached hereto:
(a) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the
Company or any of its Subsidiaries to have any environmental, health or
safety permit, license or other authorization required under any
Environmental Law in connection with the conduct of the business of the
Company or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, discharge or disposal, or any
Release of any Hazardous Materials generated by the Company or any of its
Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under the
Resource Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and
(i) no polychlorinated biphenyls (PCB's) is or has been present at
any site or facility now or previously owned, operated or leased by the
Company or any of its Subsidiaries;
(ii) no asbestos or asbestos-containing materials is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
(iii) there are no underground storage tanks or surface
impoundments for Hazardous Materials, active or abandoned, at any site or
facility now or previously owned, operated or leased by the Company or any
of its Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or under any
site or facility now or previously owned, operated or leased by the
Company or any of its Subsidiaries in a reportable quantity
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established by statute, ordinance, rule, regulation or order; and
(v) no Hazardous Materials have been otherwise Released at, on or
under any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries,
in each case, that would (either individually or in the aggregate) have a
Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries has transported or
arranged for the transportation of any Hazardous Material to any location
that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), listed for possible inclusion on the NPL by the
Environmental Protection Agency in the Comprehensive Environmental Response
and Liability Information System, as provided for by 40 C.F.R. Section 300.5
("CERCLIS"), or on any similar state or local list or that is the subject of
Federal, state or local enforcement actions or other investigations that may
lead to environmental liability against any Company or any of its
Subsidiaries.
(d) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored disposed of or Released by
the Company or any of its Subsidiaries at any location other than those
listed in Schedule 11T.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any of its
Subsidiaries and no site or facility now or previously owned, operated or
leased by any Company and each of its Subsidiaries is listed or proposed for
listing on the NPL, CERCLIS or any similar state list of sites requiring
investigation or clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Laws on
any site or facility owned, operated or leased by the Company or any of its
Subsidiaries, and no government action has been taken or is in process that
could subject any such site or facility to such Liens and none of the Company
or any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such site or
facility is located.
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(g) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by or that are in the possession of the Company
or any of its Subsidiaries in relation to facts, circumstances or conditions
at or affecting any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries and that could result in a
Material Adverse Effect have been made available to the Purchasers.
11U. PRODUCTS LIABILITY. Except for lawsuits, claims (asserted or
unasserted), damages and expenses adequately covered by the Company's
insurance, there are no (i) liabilities of the Company, fixed or contingent,
asserted or, to the best knowledge of the Company, unasserted, with respect
to any product liability or any similar claim that relates to any product
sold by the Company to others prior to the Closing Date, or (ii) liabilities
of the Company, fixed or contingent, asserted or, to the best knowledge of
the Company, unasserted, with respect to any claim for the breach of any
express or implied product warranty or any other similar claim with respect
to any product sold by the Company to others prior to the Closing Date, other
than standard warranty obligations (to replace, repair or refund) made by the
Company in the ordinary course of the conduct of its business to purchasers
of its products, and except, in each case, where such liabilities do not or
would not reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), assets, properties, operations
or prospects of the Company.
11V. SOLVENCY. As of and at the Closing, both immediately prior to and
following the consummation of the transactions contemplated by this
Agreement, the Related Agreements and the Credit Agreement, the Company, each
Subsidiary Guarantor and each other Subsidiary of the Company:
(a) is able to pay its debts as they become due;
(b) owns property whose fair saleable value is greater than the amount
required to pay its debts (including a reasonable estimate of the amount of
all contingent liabilities);
(c) has adequate capital to carry on its business, and has capital
which is not unreasonably small for the businesses in which it is engaged or
proposes to engage; and
(d) is making no transfer of property and is incurring no obligation
in connection with the transactions contemplated by this Agreement, the
Related Agreements and the
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Credit Agreement, with the intent to hinder, delay or defraud any of the
present or future creditors of such company.
12. REPRESENTATIONS BY PURCHASERS. The Purchasers hereby represent,
covenant and warrant to the Company as follows:
12A. ORGANIZATION, AUTHORIZATION, ETC. The Purchasers are duly
organized, validly existing and in good standing under the laws of their
respective jurisdiction of organization, having the corporate power and
authority to execute, deliver and perform this Agreement and have taken all
action required by law, the Purchasers' governing documents or otherwise to
authorize such execution, delivery and performance. Such execution and
delivery do not, and the consummation of the transactions contemplated hereby
will not, violate any provision of the Purchasers' governing documents or any
provision of any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which the Purchasers are a party or
by which the Purchasers are bound, and this Agreement is a valid and binding
obligation of the Purchasers enforceable in accordance with its terms.
12B. PURCHASE FOR INVESTMENT. The Securities to be acquired hereunder
and any shares of Common Stock issuable upon the exercise thereof will be
acquired by the Purchasers for investment for the Purchasers' own accounts
and not with a view to the resale or distribution of any part thereof within
the meaning of the Securities Act. Upon the issuance of the Common Stock
issuable upon exercise of the Warrants, the Purchasers will represent to the
Company that the Purchasers have acquired such shares for investment for the
Purchasers' own accounts and not with a view to the resale or distribution of
any part thereof within the meaning of the Securities Act.
12C. SOURCE OF FUNDS. The source of funds is not an employee benefit
plan, as defined in Section 3(3) of ERISA.
13. DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the meanings specified below with respect thereto:
"ADDITIONAL WARRANTS" shall mean the warrants issued under (a) the
Common Stock Purchase Warrant, dated as of the date hereof, of the Company in
favor of Internationale Nederlanden (U.S.) Capital Corporation, (b) the
Common Stock Purchase Warrant, dated as of the date hereof, of the Company in
favor of The Provident Bank, and (c) the Senior Subordinate Loan and Warrant
Purchase Agreement, dated October 15, 1991, as amended,
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among Banc One Capital Partners Corporation, the Company and certain of its
Subsidiaries.
"ADVISORY AGREEMENT" shall mean that certain Advisory Agreement, dated
as of the date hereof, between the Company and Electra.
"ADVISORY FEE" shall have the meaning specified in paragraph 15.
"AFFILIATE" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with, such Person. The term Affiliate shall include, without
limitation, (i) any director or executive officer of such Person or of an
Affiliate of such Person, (ii) a parent, spouse or child (a "relative") of
such director or executive officer, (iii) any group, acting in concert, of
such director, executive officer or relative (a "group"), (iv) any Person
controlled by any such director, executive officer, relative or group, and
(v) any Person or group which beneficially owns or holds 5% or more of any
class of voting securities or a 5% or greater equity or profits interest in
such Person. The term Affiliate shall not include (a) the Purchasers and any
Transferee that might be deemed to be an Affiliate solely by reason of its
ownership of the Securities (or any other securities issued in exchange for
any such Securities) or by reason of its benefiting from any agreements or
covenants of the Company or its Subsidiaries contained in or contemplated by
this Agreement or (b) with respect to the Company and its Subsidiaries, Brian
Gamberg. The term control (including, with correlative meanings,
controlling, controlled by or under common control with) shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or by contract or otherwise.
"AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT" shall mean that
certain Second Amended and Restated Registration Rights Agreement, dated as
of the date hereof, between the Company, the Purchasers and each other Person
to which the Company has granted registration rights for any of its
securities.
"AMENDED AND RESTATED STOCKHOLDERS AGREEMENT" shall mean that certain
Second Amended and Restated Stockholders Agreement, dated as of the date
hereof, between the Company, the Purchasers and certain other shareholders of
the Company.
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"ASSOCIATES" shall have the meaning specified in the first paragraph
hereof.
"BANC ONE WARRANT" shall mean the warrants issued under the Senior
Subordinate Loan and Warrant Purchase Agreement, dated October 15, 1991, as
amended, among Banc One Capital Partners Corporation, the Company and certain
of its Subsidiaries.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 10A.
"BUSINESS DAY" shall mean any day which is not a Saturday or a Sunday or
a day on which commercial banks in New York City are required or authorized
to be closed.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of liabilities under
Capitalized Leases incurred during such period) made by the Company or any of
its Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.
"CAPITAL STOCK" shall mean any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"CAPITALIZED LEASE" shall mean any lease obligation which, under GAAP,
is or will be required to be capitalized on the books of the Company or its
Subsidiaries.
"CASH EQUIVALENTS" shall mean (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit or eurodollar time deposits having maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the
types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications described in clause (iii) above, and
(v) commercial paper of any Person that is not a Subsidiary or an Affiliate
of the Company, having the highest rating obtainable from Moody's Investors
Service, Inc. or
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Standard & Poor's Corporation, and maturing within six months after the date
of acquisition.
"CASH FLOW" shall mean, for any period, the sum, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) EBITDA for such period minus
(b) cash taxes based on or measured by income that are paid during such
period (including penalties with respect thereto and interest thereon) minus
(c) Capital Expenditures made during such period to the extent permitted
hereunder.
"CHANGE OF CONTROL" shall mean the occurrence of any of the following
events: (a) the sale, lease or other disposition of all or substantially all
of the Capital Stock or assets of the Company (other than in an Initial
Public Offering), or a merger or consolidation of the Company with or into
another entity in a transaction in which the shareholders of the Company own
less than 50% of the voting securities of the surviving or resulting
corporation immediately after such merger or consolidation; or (b) any
liquidation, dissolution or winding up of the Company.
"CLOSING" shall have the meaning specified in paragraph 3.
"CLOSING DATE" shall have the meaning specified in paragraph 3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COMMISSION" shall mean the United States Securities and Exchange
Commission and any successor agency having similar powers.
"COMMON STOCK" shall have the meaning specified in paragraph 1(ii).
"CORY" shall mean Cory Components, Inc., a California corporation.
"CREDIT AGREEMENT" shall mean that certain Credit Agreement, dated as of
the date hereof, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent),
as amended from time to time.
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"CURRENT LIABILITIES" shall mean, at any date of determination, the
total liabilities of the Company (including tax and other proper accruals)
which may properly be classified as current liabilities in accordance with
GAAP.
"DEAL COSTS" shall mean all costs and expenses, up to $2,500,000,
incurred by the Company in connection with the transactions contemplated by
this Agreement and the Credit Agreement, including (without limitation) the
following: (a) fees and expenses paid to the Purchasers and Electra and their
counsel, (b)fees and expenses paid to the Lender and the Agent (each as
defined in the Credit Agreement) and the Lenders' and Agent's counsel, (c)
fees and expenses paid to environmental, aerospace industry and other
consultants and (d) all other fees, commissions and expenses relating to any
of the foregoing (including, without limitation, investment banking,
independent accountants, depository, brokerage, publicity, legal, arrangement
and commitment fees, commissions and expenses).
"DEBT" shall mean, as to any Person (calculated for any Person without
duplication): (i) all liabilities, whether contingent or otherwise and
whether recourse is limited or otherwise, for borrowed money or for the
deferred purchase price of property or services (but excluding trade expenses
and accounts payable incurred in the ordinary course of business and which
are not overdue by more than 90 days unless being contested in good faith),
including obligations under leases which would be treated as Capital Leases;
(ii) reimbursement obligations with respect to letters of credit; (iii) any
obligation secured by any property or asset of such Person; (iv) any
obligation with respect to currency or hedging agreements; and (v) any of the
foregoing liabilities which such Person has guaranteed, including, without
limitation, the Subsidiary Guarantees; provided that Debt shall not include
(a) obligations of the Company with respect to the Warrants and (b)
contingent amounts payable by the Company under the Seller Note unless and
until such amounts become due and payable in cash.
"DEBT SERVICE" shall mean, for any period, the sum, for the Company and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all payments of principal of
Debt (including, without limitation, the principal component of any payments
in respect of Capitalized Leases) scheduled to be made during such period
plus (b) all Interest Expense that is payable in cash for such period.
"DEFAULT": see "EVENT OF DEFAULT."
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"DEFERRED NOTE PAYABLE" shall mean all non-cash liabilities and all
non-cash expenses arising under the Technical Consulting Agreement (and which
are referred to in the Company's balance sheet under the caption "due to/due
from former shareholder").
"EBITDA" shall mean, for any period, the sum of the following for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP): (a) net income for such period, plus
(b) the aggregate amount of depreciation, amortization (including, without
limitation, amortization of intangibles and amortization of Deal Costs (to
the extent that such Deal Coats do not exceed $2,500,000)), taxes based on or
measured by income and Interest Expense for such period, plus (c) any
accretion expense with respect to the Warrants and the Additional Warrants
(or any other Equity Rights with respect to the Company and its Subsidiaries)
for such period, plus (d) any non-cash charges related to the Technical
Consulting Agreement, plus (e) any non-cash expense related to any minority
interests, plus (f) any non-cash expenses related to foreign currency
translation.
"EBITDA RATIO" shall mean, at any time, the ratio of (a) all Debt of the
Company and its Subsidiaries at such time to (b) EBITDA for the period of
four consecutive fiscal quarters most recently ended prior to such time.
"EIT" shall have the meaning specified in the first paragraph hereof.
"ELECTRA" shall have the meaning specified in paragraph 3 hereof.
"ENVIRONMENTAL LAWS" means all federal, state, and local laws,
ordinances, rules, regulations, codes, duties under the common law or orders,
including, without limitation, any requirements imposed under any permits,
licenses, judgments, decrees, agreements or recorded covenants, conditions,
restrictions or easements, the purpose of which is to protect the
environment, human health, public safety or welfare, or which pertain to
Hazardous Materials.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of,
or securities convertible into, any additional shares of capital stock of any
class, or
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partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Company is treated as a "single
employer" under sections (b), (c), (m), (n) or (o) of section 414 of the
Code, or section 4001 of ERISA; provided that in no event shall the
Purchasers or any of their Affiliates be deemed to be an ERISA Affiliate for
purposes of this Agreement.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
10A, provided that there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the
happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXPENSES" shall have the meaning specified in paragraph 17B hereof.
"FINANCING FEE" shall have the meaning specified in paragraph 3.
"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of (a) Cash
Flow for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date (or, with respect to any date prior to
December 31, 1995, for the period commencing on January 1, 1995 and ending on
the fiscal quarter ending on or most recently ended prior to such date) to
(b) Debt Service for such period.
"FORMER TRI-STAR NOTE" shall mean (a) the "Contingent Incentive
Payments" referred to in the Share Purchase Agreement dated as of October 15,
1991 among the Company, Cory Holdings, Inc. and Neil Castleman and (b) that
certain subordinated note, dated October 15, 1991, issued by Tri-Star
Electronics International, Inc. and payable to Tri-Star Electronics, Inc.
"FULLY DILUTED" shall mean, at any point in time, the number of common
shares outstanding, increased by all common equivalent shares (stock options,
warrants, convertible
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securities and any other security or instrument, whether in or out of the
money, that could result in additional common shares being issued at any time
in the future) at the time outstanding.
"GAAP" shall mean generally accepted accounting principles as set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"GUARANTEE" shall mean, as applied to any obligation, a guarantee (other
than by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation.
"GUARANTEED OBLIGATIONS" shall have the meaning specified in paragraph
14A.
"HAZARDOUS MATERIALS" means any product, substance, chemical, material
or waster, whose presence, nature, quantity and/or intensity of existence,
use, manufacture, processing, treatment, storage, disposal, transportation,
spill, release or effect, either by itself or in combination with other
materials expected to be on the property owned or leased by the Company or
any of its Subsidiaries (the "Property") is either (A) potentially injurious
to public health, safety, welfare, or the environment, or to the Property;
(B) regulated, monitored or subject to reporting by any governmental agency;
or (C) a basis for potential liability to any governmental agency or a third
party under any applicable statute or common law theory. Without limiting
the foregoing, the term, "Hazardous Materials," includes but is not limited
to any material, waste or substance which is or contains (A) petroleum or
petroleum products, including crude oil or any fraction thereof, natural gas,
or synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C)
polychlorinated bipheneyls, (D) flammable explosives; (E) radioactive
materials; (F) radon in excess of EPA recommended exposure limits or (G)
paint containing concentrations of lead in excess of .06% or mercury in
excess of 200 parts per million, and located within any portion of the Real
Property.
"ING WARRANT" shall mean that certain Common Stock Purchase Warrant,
dated as of the date hereof, of the Company in favor of Internationale
Nederlanden (U.S.) Capital Corporation.
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"INITIAL PUBLIC OFFERING" shall mean the closing of an underwritten
public offering for shares of common stock of the Company pursuant to a
registration statement under the Securities Act, with proceeds to the Company
of $25,000,000 or more, and valuing the total common equity of the Company at
$55,000,000 or more at closing.
"INTERCOMPANY NOTE" shall mean a promissory note of Cory to the Company,
in an aggregate principal amount of $1,500,000, evidencing a loan made by the
Company to Cory solely to permit Cory to repay certain existing Debt of Cory.
"INTEREST EXPENSE" shall mean, for any period, all interest expense less
interest income for such period for the Company and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP), including (without limitation) the following: (a) all interest in
respect of Debt (including, without limitation, the interest component of any
payments in respect of Capitalized Leases) accrued or capitalized during such
period (whether or not actually paid during such period) and (b) the net
amounts payable (or minus the net amount receivable) under Interest Rate
Protection Agreements (as defined in the Credit Agreement) during such period
(whether or not actually paid or received during such period).
"LEVERAGE RATIO" shall mean, at any time, the ratio of Total Liabilities
to Net Worth of the Company at such time.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease
in the nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" within the
meaning of section 3(37) of ERISA or section 414(f) of the Code to which
contributions are or have been made by the Company or any ERISA Affiliate.
"NET WORTH" shall mean, as at any date for any Person, the sum for such
Person and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of paid-in capital (both in respect of common equity
and preferred equity), plus
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(b) the amount of surplus and retained earnings (or, in the case
of a surplus or retained earnings deficit, minus the amount of such
deficit), plus
(c) the cumulative effect of Deal Costs, any warrant accretion
expense (as such term is used in GAAP) or any original issue discount
accretion expense (as such term is used in GAAP) arising after the
Closing Date, minus
(d) the cost of treasury shares, plus
(e) the value ascribed to the Warrants and the Additional Warrants
(and any other Equity Rights exercisable in respect of capital stock of
the Company) and the cumulative effect of any change in the valuation of
the Warrants and the Additional Warrants, plus
(f) the cumulative effect of any original issue discount related
to the Seller Note (including any non-cash portion thereof relating to
the consulting arrangements contemplated thereby) and any other non-cash
effect of the Seller Note, plus
(g) $6,627,000;
provided that (i) any predecessor basis adjustment required under GAAP and
(ii) any foreign currency translation adjustments permitted under GAAP shall
be disregarded in calculating "Net Worth".
"NOTES" shall have the meaning specified in paragraph 1(a).
"OFFICER'S CERTIFICATE" shall mean a certificate of the Company (or, if
specified, a Subsidiary of the Company) signed by a Responsible Officer.
"ORDER" shall mean the Order Against Defendants DeCrane Aircraft
Holdings, Inc., et al., dated July 12, 1994, issued by the Superior Court of
the State of California for the County of Los Angeles in connection with
Brian Gamberg v. Cory Components, Inc., et al.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENALTY WARRANTS" shall have the meaning specified in paragraph 16D.
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"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, an estate, a trust, an unincorporated organization
and a government or any department or agency thereof.
"PLAN" shall mean an "employee pension benefit plan" within the meaning
of section 3(2) of ERISA maintained or to which contributions are or have
been made by the Company or any ERISA Affiliate.
"PROVIDENT WARRANT" shall mean that certain Common Stock Purchase
Warrant, dated as of the date hereof, of the Company in favor of The
Provident Bank.
"PURCHASE PRICE" shall have the meaning specified in paragraph 5.
"PURCHASERS" shall have the meaning specified in the first paragraph
hereof.
"PUT AMOUNT" shall mean an amount equal to (a) the greater of (i) the
price that would be paid for the entire common equity interest in the Company
on a going-concern basis in a single arms-length transaction between a
willing buyer and a willing seller (neither acting under compulsion), using
valuation techniques then prevailing in the securities industry and always
determined in accordance with the Valuation Procedures, and assuming full
disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale, (ii) the net book value of the
Company determined by reference to the Company's financial statements as of
the most recently ended fiscal quarter, or (iii) a multiple of (1) 6.0 times
earnings before interest, income taxes, depreciation and amortization
(determined in accordance with GAAP) less (2) amounts outstanding under the
Credit Agreement and this Agreement less (3) any other indebtedness (but
excluding the Seller Note) (as defined in accordance with GAAP) plus (4) cash
and cash equivalents of the Company, divided by (b) the number of shares of
Common Stock outstanding on a Fully Diluted basis. For purposes of
determining the Put Amount, (i) the exercise price of options or warrants to
acquire Common Stock which are deemed to have been exercised for the purpose
of determining the number of shares of Common Stock outstanding on a Fully
Diluted basis shall be deemed to have been received by the Company, (ii) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis, (iii) any contract limitation in respect of the
shares of Common Stock, including their transfer, voting and
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other rights and (iv) any illiquidity arising by contract law in respect of
the shares of Common Stock and any voting rights or control rights amongst
the shareholders of the Company shall be deemed to have been eliminated or
cancelled.
"RELATED AGREEMENTS" means the Advisory Agreement, the Notes, the
Warrants, the Stock Purchase Agreement, the Amended and Restated Shareholders
Agreement and the Amended and Restated Registration Rights Agreement.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation, the
movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"RESPONSIBILITY OFFICER" shall mean the Chairman of the Board, Chief
Executive Officer, President, Chief Operating Officer, Chief Financial
Officer, Treasurer, Secretary and, with respect to the Company, any Vice
President; provided that, for purposes of this Agreement, Brian Gamberg shall
be deemed not to be a Responsible Officer.
"SECURITIES" shall have the meaning specified in paragraph 1.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SELLER NOTE" shall mean the Former Tri-Star Note and the Deferred Note
Payable.
"SENIOR DEBT" shall mean indebtedness of the Company and any of its
Subsidiaries incurred under the Credit Agreement, together with any
refinanced Senior Debt permitted by paragraph 7B (ii) and additional Senior
Debt permitted by paragraph 7B (iii).
"SENIOR FINANCING" shall mean the transactions pursuant to and
contemplated by the Credit Agreement.
"SENIOR OBLIGATIONS" shall mean the obligations of the Company and any
of its Subsidiaries incurred with respect to the Senior Debt, including
principal and interest (including post-petition interest at a rate not to
exceed the applicable pre-default rate of interest with respect thereto
(which amount shall not exceed the Base Rate plus the Applicable Margin (each
as defined in the Credit Agreement)) and liabilities with respect to
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yield protection, indemnities, reimbursement obligations and fees and
expenses, all as specified in the Credit Agreement (or any agreement
evidencing the refinanced Senior Debt referred to in paragraph 7B(ii)) and
related to such indebtedness; provided that the Senior Obligations exclude,
without limitation, any put rights with respect to warrants issued to the
parties to the Credit Agreement.
"SIGNIFICANT HOLDER" shall mean (i) the Purchasers, so long as the
Purchasers or the Purchasers' nominees shall hold any Notes (or any other
security of the Company acquired by the Purchasers in exchange for such
Notes) and (ii) any ether holder of at least 50% of the aggregate principal
amount of the Notes from time to time outstanding.
"STOCK PURCHASE AGREEMENT" shall mean that certain Stock Purchase
Agreement, dated as of the date hereof, between Key Equity Capital
Corporation and the Purchasers.
"SUBORDINATED LIABILITIES" shall mean the indebtedness of the Company
and any of its Subsidiaries incurred under this Agreement and guarantees
related to such indebtedness, including (without limitation) principal and
interest on the Notes, fees, expenses, indemnities and liabilities with
respect to representations related to such indebtedness and obligations of
the Company with respect to the Put (including, without limitation, the Put
Amount and any interest thereon) described in paragraph 16C hereof; provided
that the Subordinated Liabilities shall not include any obligations of the
Company and any of its Subsidiaries (i) representing damages suffered by the
Purchasers for any breach or misrepresentation by the Company or otherwise
with respect to the Foreign Investment in Real Property Tax Act under this
Agreement or (ii) representing liabilities in respect of environmental
matters incurred by the Purchasers for any breach or misrepresentation by the
Company or otherwise with respect to environmental liabilities under this
Agreement; and provided, further, that the Subordinated Liabilities shall not
include (x) the Advisory Fee except to the extent and as provided in
paragraph 8(a)(iii) hereof or (y) after bankruptcy proceedings have been
initiated with respect to the Company or following acceleration of the Notes,
attorneys' fees incurred by the Purchasers or their Affiliates with respect
to such events, or (z) the Penalty Warrants.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or similar entity, a majority of the Voting Stock or interests of
which is at the time as of which any determination is being made owned by
such Person either directly or indirectly through subsidiaries.
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"SUBSIDIARY GUARANTEE" shall mean a Guarantee pursuant to the terms of
this Agreement by any Subsidiary Guarantor.
"SUBSIDIARY GUARANTORS" shall mean Cory Components, Inc. (but only to
the extent permitted by the Order and as limited by paragraph 14I); Cory
Holdings, Inc.; Tri-Star Technologies; Tri-Star Technologies, Inc.; Unidec
S.A.; Tri-Star Electronics International, Inc.; Tri-Star Holdings, Inc.;
Hollingsead International Limited; Hollingsead International, Inc.; and such
other Persons as may become Subsidiary Guarantors pursuant to the provisions
of this Agreement; provided, however, that no Person shall be a Subsidiary
Guarantor after such time as it has been released from its Subsidiary
Guarantee pursuant to the provisions of this Agreement.
"TECHNICAL CONSULTING AGREEMENT" shall mean the Technical Consulting
Agreement dated as of October 15, 1991 between the Company and Neil Castleman.
"TOTAL LIABILITIES" shall mean, as at any date, the sum, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication
in accordance with GAAP), of the following: (a) all Debt and (b) all other
liabilities that should be classified as liabilities on a balance sheet,
including, without limitation, all reserves (other than general contingency
reserves) and all deferred taxes and other deferred items; provided that
"Total Liabilities" shall not include any contingent liabilities of the
Company under the Seller Note unless and until such liabilities become due
and payable in cash.
"TRANSFEREE" shall mean, with respect to all or any part of any of the
Securities, any direct or indirect transferee with (i) net worth, assets or
investment discretion with respect to assets of at least $25,000,000 and (ii)
in the opinion of the transferor, sufficient financial and business
sophistication, knowledge and experience, including, without limitation,
private venture capital entities that satisfy the requirements of clause (i)
above.
"TRIGGERING EVENT" shall mean the occurrence of the event described in
clause (i) below together with either of the events described in clause
(ii)(a) or (ii)(b) below: (i) the payment in full (including payment of all
principal and all accrued and unpaid interest) of the Notes and (ii) either
(a) a sale of all or substantially all of the stock or assets of the Company
for cash in an amount equivalent to a common equity valuation of $30,000,000
or more or (b) an Initial Public Offering.
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"VALUATION PROCEDURES" shall mean, with respect to the determination of
any amount or value required to be determined in accordance with such
procedure, a determination (which shall be final and binding on the parties)
made (i) by agreement among the Company and the Purchasers within thirty (30)
days following the event requiring such determination or (ii) in the absence
of such an agreement, by an Appraiser (as defined below) selected as set
forth below. If required, an Appraiser shall be selected within ten (10)
days following the expiration of the 30-day period referred to above, either
by agreement among the Company and the Purchasers or, in the absence of such
agreement, by lot from a list of four potential Appraisers remaining after
the Company nominates three, the Purchasers nominate three, and each side
eliminates one potential Appraiser. The Appraiser shall be instructed by the
Company and the Purchasers to make its determination within thirty (30) days
of its selection. The fees and expenses of an Appraiser selected hereunder
shall be borne solely by the Company. As used herein, "Appraiser" shall mean
a nationally recognized investment banking firm.
"VOTING STOCK" shall mean securities of any class or series (including
rights to purchase such securities through warrants, options or otherwise) of
a corporation or association the holders of which are entitled to participate
in the election of directors (or persons performing similar functions) of
such corporation or association.
"WARRANTS" shall have the meaning specified in paragraph 1(b).
"WELFARE PLAN" shall mean an "employee welfare benefit plan" within the
meaning of section 3(1) of ERISA maintained or to which contributions have
been made by the Company or any ERISA Affiliate.
14. GUARANTEE OF NOTES AND OTHER OBLIGATIONS.
14A. OBLIGATIONS GUARANTEED. Each of the Subsidiary Guarantors, jointly
and severally, in consideration of the execution and delivery of this
Agreement and certain other benefits to the Subsidiary Guarantors which are
expected to arise as a result of the transactions contemplated by this
Agreement, hereby unconditionally and irrevocably guarantees to the
Purchasers and to the holders from time to time of the Notes the due and
punctual payment of the principal of and interest on the Notes when and as
the same shall become due and payable (whether at the maturity thereof, by
acceleration, by notice of prepayment or otherwise) according to the terms
thereof and of this Agreement, as such may be amended from time to time, and
the due
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and punctual payment of any other amounts owing to the Purchasers and to such
holders under or in respect of the Notes, and the due and punctual payment of
any obligations with respect to the Put owing to the Purchasers and to the
holders of the Warrants, under this Agreement and all other payment
obligations of the Company and its Subsidiaries hereunder and thereunder,
whether absolute or contingent, liquidated or unliquidated (collectively, the
"Guaranteed Obligations"). In the absence of the due observance and
performance by the Company and its Subsidiaries of any of its or their other
obligations, undertakings and conditions contained in this Agreement, each
Subsidiary Guarantor shall use its best efforts, to the extent practicable,
to provide reasonably equivalent performance intended to achieve comparable
results. If the Company or its Subsidiaries shall not punctually pay any such
principal, interest or other amounts in respect of the Guaranteed Obligations
(regardless of whether the Purchasers or the holders of the Notes or Warrants
have recourse against the Company), each Subsidiary Guarantor shall provide
that such payment be made forthwith thereafter. If the Purchasers or any of
the holders of the Notes shall have the right to declare any or all of the
Notes or other Guaranteed Obligations due and payable,. and acceleration of
the payment of such Notes or other Guaranteed Obligations is stayed, enjoined
or otherwise prevented for any reason, in each case as determined in good
faith by the Purchasers and each holder of Notes, each Subsidiary Guarantor,
upon demand therefor, shall pay to the Purchasers and each holder of Notes,
the sums which would have been due to the Purchasers and such holders under
this Agreement if such acceleration had occurred, all as permitted by
applicable law.
14B. OBLIGATIONS UNCONDITIONAL. Each Subsidiary Guarantor agrees that
its obligations hereunder are absolute and unconditional, irrespective of the
validity, regularity or enforceability of or any change in or amendment to
any Note or the Guaranteed Obligations or this Agreement, the institution or
absence of any action to enforce the same, the waiver or consent by the
Purchasers or the holder of any Note with respect to the provisions thereof
or hereof, the exchange, release or non-perfection of any collateral
security, or any release or amendment or waiver or consent to departure from
the terms of any Subsidiary Guarantee of, the Notes or any other Guaranteed
Obligations, the obtaining of any judgment against the Company or any
Subsidiary or any action to enforce the same, the inability to recover from
the Company or any Subsidiary because of any statute of limitations, laches
or otherwise or any other circumstance which might otherwise constitute a
legal or equitable discharge of or a defense to a guarantor, and that the
provisions of this paragraph 14 constitute a guarantee of payment and not of
collectibility.
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14C. WAIVERS AND AGREEMENTS. Each Subsidiary Guarantor hereby
unconditionally: (i) waives notice of acceptance hereof, of any action taken
or omitted in reliance hereon and of any defaults in respect of the Notes or
in the payment of any other Guaranteed Obligations, diligence, protest,
presentment, filing of claims with a court in the event of the bankruptcy of
the Company, any right to require a proceeding first against the Company, or
that the Company be joined in any proceeding against the Subsidiary
Guarantors, any marshalling of assets of the Subsidiary Guarantors or the
Company, any notice of default with respect to any of the Notes or the other
Guaranteed Obligations or this Agreement or any other act or omission or
thing or delay to do any other act or thing which might in any manner or to
any extent vary the risk of the Subsidiary Guarantors or which might
otherwise operate as a discharge of the Subsidiary Guarantors; (ii) agrees
that this Subsidiary Guarantee shall remain in full force and effect without
regard to, and shall not be affected or impaired by, any invalidity,
irregularity or unenforceability in whole or in part of any of the Notes or
the other Guaranteed Obligations or this Agreement or any of the limitations
of liability or payment conditions thereunder which may now or hereafter be
caused or imposed in any manner whatsoever; (iii) agrees that this Subsidiary
Guarantee shall not be subject to any counterclaim (other than those which
are compulsory in nature), set-off, deduction or defense based upon any claim
the Subsidiary Guarantors may have against the Company or the Purchasers or
any holder of the Notes hereunder or otherwise; and (iv) agrees that this
Subsidiary Guarantee shall be discharged only by complete performance of the
undertakings in the Notes and in this paragraph 14. Nothing herein is
intended to impair any rights of the Subsidiary Guarantors to enforce any
rights they may have against any Person by way of a separate proceeding or
action.
14D. OBLIGATIONS UNIMPAIRED. Each of the Subsidiary Guarantors
authorizes the Purchasers and the holders of the Notes and the other
Guaranteed Obligations, without notice or demand to the Subsidiary Guarantors
and without affecting its liability hereunder, from time to time (a) to
renew, compromise, extend, accelerate or otherwise change the time for
payment of, or otherwise change the terms of, all or any part of the
Guaranteed Obligations; (b) to take and hold security for the payment of the
Notes and the other Guaranteed Obligations, for the performance of this
Subsidiary Guarantee or otherwise for the Guaranteed Obligations and to
exchange, enforce, waive and release any such security; (c) to apply any such
security and to direct the order or manner of sale thereof as the Purchasers
and such holders in their discretion may determine; (d) to obtain additional
or substitute endorsers or guarantors; (e) to exercise or refrain
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from exercising any rights against the Company or others; and (f) to apply
any sums, by whomsoever paid or however realized, to the payment of the
principal of, premium, if any and interest on the Notes and any other
obligation hereunder. Each of the Subsidiary Guarantors waives any right to
require the Purchasers and the holders of the Notes to proceed against any
additional or substitute endorsers or guarantors or to pursue or exhaust any
security provided by the Company, the Subsidiary Guarantors or any other
Person or to pursue any other remedy available to the Purchasers or to such
holders.
14E. WAIVER OF SUBROGATION, ETC. Each of the Subsidiary Guarantors
agrees not to exercise, and hereby irrevocably waives, to the fullest extent
it may effectively do so, any and all rights of reimbursement, indemnity and
other rights of repayment which it may have or which it may acquire by way of
subrogation or otherwise as a result of the Company's failure to observe or
perform any of the Guaranteed Obligations or its undertakings hereunder or
under any of the Guaranteed Obligations or as a result of any other event or
condition, whether such rights arise directly against the Company or through
any holders of a Guaranteed Obligation.
14F. RESCISSION OF PAYMENT. This Subsidiary Guarantee shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
a part thereof, of the principal of or interest on any of the Notes or of any
other Guaranteed Obligation is rescinded or must otherwise be restored or
returned by the Purchasers or any subsequent holder of any of the Notes or
any other Guaranteed Obligation upon the insolvency, bankruptcy or
reorganization of the Company or any of its Subsidiaries, or otherwise, all
as though such payment had not been made.
14G. ELECTION TO PERFORM OBLIGATIONS. The Subsidiary Guarantors may at
any time elect to pay or otherwise perform any obligation of the Company or
any of its Subsidiaries under this Agreement or in respect of the Notes or
any other Guaranteed Obligation, which shall operate as a discharge and
release of the Company from such obligation to the Purchasers or any
subsequent holders of any of the Notes or any other Guaranteed Obligation,
provided that no such election shall release the Company from any of its
other obligations hereunder and under the Notes and any other Guaranteed
Obligations.
14H. RIGHTS OF CONTRIBUTION. The Subsidiary Guarantors hereby agree, as
between themselves, that if any Subsidiary Guarantor shall become an Excess
Funding Guarantor (as defined below) by reason of the payment by such
Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary
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Guarantor shall, on demand of such Excess Funding Guarantor (but subject to
the next sentence), pay to such Excess Funding Guarantor an amount equal to
such Subsidiary Guarantor's Pro Rata Share (as defined below and determined,
for this purpose, without reference to the assets, debts and liabilities of
such Excess Funding Guarantor) of the Excess Payment (as defined below) in
respect of such Guaranteed Obligations; provided that the aggregate amount
that Cory shall be required to pay hereunder shall be limited as provided in
paragraph 14I hereof. The payment obligation of a Subsidiary Guarantor to
any Excess Funding Guarantor under this paragraph 14H shall be subordinate
and subject in right of payment to the prior payment in full of the
obligations of such Subsidiary Guarantor under the other provisions of this
paragraph 14 and such Excess Funding Guarantor shall not exercise any right
or remedy with respect to such excess until payment and satisfaction in full
of all of such obligations.
For purposes of this paragraph 14H, (i) "Excess Funding Guarantor" shall
mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that
has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its
Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share"
shall mean, for any Subsidiary Guarantor, the ratio (expressed as a
percentage) of (x) the amount by which the aggregate present fair saleable
value of all assets of such Subsidiary Guarantor (excluding any shares of
stock of any other Subsidiary Guarantor) exceeds the amount of all the debts
and liabilities of such Subsidiary Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Subsidiary Guarantor hereunder and any obligations of any
other Subsidiary Guarantor that have been Guaranteed by such Subsidiary
Guarantor) to (y) the amount by which the aggregate fair saleable value of
all assets of the Company and all of the Subsidiary Guarantors exceeds the
amount of all the debts and liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of the
Company and the Subsidiary Guarantors hereunder) of the Company and all of
the Subsidiary Guarantors, all as of the Closing Date. If any Subsidiary
becomes a Subsidiary Guarantor hereunder subsequent to the Closing Date, then
for purposes of this paragraph 14H such subsequent Subsidiary Guarantor shall
be deemed to have been a Subsidiary Guarantor as of the Closing Date and the
aggregate present fair saleable value of the assets, and the amount of the
debts and liabilities, of such Subsidiary Guarantor as of the Closing Date
shall be deemed to be equal to such value and amount
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on the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.
14I. LIMITATION ON CORY GUARANTEE. Notwithstanding the foregoing
provisions of this paragraph 14, the maximum aggregate amount that Cory may
be required to pay hereunder shall not exceed an amount equal to $13,500,000
less the outstanding principal amount of the Intercompany Note (it being
understood that all payments and prepayments of the Guaranteed Obligations by
the Company or any of its Subsidiaries for purposes of this paragraph 14I be
applied first to the portion of the Guaranteed Obligations that exceeds said
$13,500,000 and last to the portion of the Guaranteed Obligations that does
not exceed $13,500,000) and that Cory shall only be liable hereunder to the
extent permitted under the Order. It is understood and agreed that, with
respect to the guarantee of Cory pursuant to the Credit Agreement, Cory's
liability hereunder will only be in an amount which, when added to its
liability under the Credit Agreement, does not exceed said $13,500,000. It
is further understood and agreed that Cory's liability will be applied as
follows: first, to the guarantee of Cory under the Credit Agreement; second,
to the guarantee of Cory under this Agreement (other than with respect to the
Put Amount); and third, to the guarantee of Cory with respect to the put
rights contained in this Agreement, the ING Warrant and the Provident Warrant.
14J. LIMITATION ON KERNER LIABILITY. It is understood and agreed that
the sole recourse in respect of the obligations of Tri-Star Technologies
under this paragraph 14 shall be to the assets of Tri-Star Technologies and
that nothing contained herein shall create any obligation of or right to look
to Alexander Kerner or his assets individually for the satisfaction of such
obligations.
14K. LIMITATION ON GUTERMANN LIABILITY. It is understood and agreed
that the sole recourse in respect of the obligations of Unidec S.A. under
this paragraph 14 shall be to the assets of Unidec S.A. and that nothing
contained herein shall create any obligation of or right to look to Silvia
Gutermann or her assets individually for the satisfaction of such obligations.
14L. GENERAL LIMITATION ON GUARANTEES. In any action or proceeding
involving any state corporate law, or any state or Federal bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of any Subsidiary Guarantor hereunder would
otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors (other than the holders of
the Senior Debt), then, notwithstanding any other provisions
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hereof to the contrary, the amount of such liability shall, without any
further action by such Subsidiary Guarantor, the Purchasers, the holder of
any Note or any other Person, be automatically limited and reduced to the
highest amount that is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.
14M. SURVIVAL. The obligations of the Subsidiary Guarantors under this
paragraph 14 shall survive the transfer and payment in full of all of the
Notes and any other Guaranteed Obligation.
15. ADVISORY FEE. For so long as the Purchasers hold any Note, any
Warrant exchangeable into at least 2% of the issued and outstanding Common
Stock on a Fully Diluted basis, or at least 2% of the issued and outstanding
Common Stock on a Fully Diluted basis, the Company will pay to Electra in
cash an annual fee (the "Advisory Fee") in the amount of $72,000, payable in
advance in equal semi-annual installments on the first Business Day of each
January and July, and commencing with the first Business Day in the January
next succeeding the date hereof; provided that if the Purchasers no longer
hold any Note and an Initial Public Offering has occurred, no Advisory Fee
will be payable. In addition, at the Closing, the Company will pay to
Electra a pro rated amount of the semi-annual installment for the period
commencing July 1, 1994.
16. WARRANTS.
16A. TERM; EXERCISE. Subject to the terms and conditions contained in
this Agreement and in the Warrants, the Warrants are exercisable, in the
manner set forth in the Warrants, in whole or in part, at any time and from
time to time during the period commencing on the Closing Date and ending at
5:00 p.m. New York City time on December 31, 2004, and shall be void
thereafter.
16B. SERIES OF WARRANTS AND TRIGGERING EVENT. The Warrants will be
issued in several series, which will be identical in all respects except as
to the date after which the Warrants may be exercised and transferred. At
the Closing, the Purchasers will receive the following Warrants exercisable
into an aggregate of 15% of the issued and outstanding Common Stock on a
Fully Diluted basis:
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Percentage of
Series Shares For Which
of Warrant Exercisable
---------- ----------------
Series A 8%
Series B 2%
Series C 2%
Series D 3%
The Series A Warrants will be immediately exercisable and transferable.
The Series B, Series C and Series D Warrants will be identical to the Series A
Warrants in all respects, except that they may only be exercised into
shares of Common Stock and may only be transferred if no Triggering Event
occurs prior to the following corresponding dates:
Series of Warrant
If No Triggering Becoming Exercisable
Event Occurs Prior To: and Freely Transferable
---------------------- ----------------------
December 31, 1996 Series B
December 31, 1997 Series C
December 31, 1998 Series D
If a Triggering Event occurs prior to the date a series of Warrant would
otherwise become exercisable or freely transferable, such series of Warrant
shall be void as of the date of occurrence of such Triggering Event.
16C. PUT. (a) If no Triggering Event shall have occurred by December 31,
2000, then:
(i) The Purchasers or other holder of the Warrants may, at
any time thereafter, by giving written notice to the Company (the "Put
Notice"), require the Company to repurchase (the "Put") all or any portion of
the Warrants held by the Purchasers or other holder of the Warrants for an
amount equal to the Put Amount and corresponding to that number of shares of
Common Stock then issuable upon exercise of the Warrants designated in the
Put Notice. The Company shall pay to the Purchasers such Put Amount within
366 days of the date of the Put and shall execute and deliver to the
Purchasers a promissory note evidencing such Put Amount; any unpaid balance
of the Put Amount shall bear interest, which interest shall be paid together
with any payment of the Put Amount, at a rate of 14% per annum.
(ii) Immediately upon receipt of (i) a Put Notice or (ii)
notice from the holders of any of the ING Warrant, the Provident Warrant or
the Banc One Warrant (such holders being
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referred to herein collectively as the "Put Holders") that the Purchasers or
such Put Holders intend to exercise put rights in connection with the
repurchase of any of their warrants by the Company, the Company shall, before
repurchasing any such warrants, give written notice thereof to the Purchasers
and/or all other Put Holders, as the case may be. For a period of twenty
(20) days following receipt of such notice, the Purchasers and each Put
Holder shall be entitled, by written notice to the Company, the Purchasers
and/or each Put Holder, as the case may be, to elect to require the Company
to repurchase for cash its pro rata share (on the basis of the number of
shares of Common Stock then issuable upon exercise of all of the warrants
held by the Purchasers and each such Put Holder) of the warrants held by the
Purchasers and each such Put Holder. If, at the expiration of such
twenty-day period the Purchasers or any Put Holders have not elected to have
the Company repurchase their warrants, the Company shall repurchase only
those warrants for which notice has been received.
(iii) If the Company shall not have funds legally available
in the amount necessary to repurchase all warrants of the Purchasers and Put
Holders with respect to which notice has been received, then such warrants
shall be repurchased by the Company on a pro rata basis in accordance with
the number of shares of Common Stock then issuable upon exercise of all of
the warrants held by the Purchasers and each such Put Holder. Any Put not
satisfied in full in cash shall remain an obligation of the Company and shall
be evidenced by a promissory note due within 366 days and bearing interest
at a rate of 14% per annum, which interest shall be paid together with the
Put Amount.
(b) If, prior to December 31, 2000, any Put Holder notifies
the Company that such Put Holder intends to exercise put rights in connection
with the repurchase of any of its warrants by the Company, the Company shall,
before repurchasing any such warrants, give written notice thereof to the
Purchasers and all other Put Holders. For a period of twenty (20) days
following receipt of such notice, the Purchasers shall be entitled, by
written notice to the Company and each Put Holder, to elect to require the
Company to repurchase at a price equal to the Put Amount (i) for cash, pro
rata with the Put Holders, Warrants representing 40% of all shares of Common
Stock issuable upon the exercise of Warrants then held by the Purchasers, and
(ii) with a promissory note due within 366 days and bearing interest at a
rate of 14% per annum (which interest shall be paid together with the Put
Amount), any or all other Warrants held by the Purchasers.
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16D. PENALTY WARRANTS. For so long as the Purchasers hold any Note as
to which an event described in clause (i) of paragraph 10A hereof has
occurred, the Company will promptly issue to the Purchasers, for no
additional consideration, additional Warrants in the form of the Series A
Warrant (the "Penalty Warrants") representing the right to purchase that
number of shares of Common Stock equal to 1% of the then issued and
outstanding Common Stock on a Fully Diluted basis for every calendar quarter
or a portion thereof that such event is not cured.
16E. ANTIDILUTION PROVISIONS. The percentage of Common Stock for which
the Warrants may be exercised shall be adjusted as set forth in the Warrants
in order to preserve the relative position of the holder of the warrants
vis-a-vis the percentage of the issued and outstanding shares of Common Stock
which such holder may acquire upon exercise of the Warrants.
16F. REGISTRATION. Pursuant to the terms of the Amended and Restated
Registration Rights Agreement, the Purchasers shall have and be entitled to
(i) two demand and (ii) unlimited piggyback registrations for shares of
Common Stock issuable upon exercise of the Warrants. The Purchasers' demand
registration rights will have preference over other demand registration
rights granted by the Company, and the Purchasers' piggyback registration
rights will be pro rata with any other holders of capital stock of the
Company participating in such registration, to the extent and as provided in
the Amended and Restated Registration Rights Agreement.
16G. VOTING. To the extent permitted by applicable law, the Warrants
shall entitle the holders thereof to vote with the Common Stock of the
Company that number of votes equal to the number of shares of Common Stock
issuable from time to time upon exercise of the Warrants on any matters upon
which the holders of Common Stock are entitled to vote.
17. MISCELLANEOUS.
17A. PAYMENTS WITH RESPECT TO SECURITIES. The Company agrees that, so
long as the Purchasers shall hold any Note or any Warrant, it will make
payments of principal of, and interest on, the Notes and payments in respect
of any such other Security, by wire transfer of immediately available funds
for credit to the Purchasers' account or accounts, as specified in Schedule 17A
attached hereto, or to such other account or accounts as the Purchasers
may designate in writing, notwithstanding any contrary provision herein or in
any Note or any other Security with respect to the place of payment. The
Purchasers agree that,
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before disposing of any Note, the Purchasers will make a notation thereon (or
on a schedule attached thereto) of all principal payments previously made
thereon and of the date to which interest thereon has been paid, provided
that the Purchasers shall have no liability for failure to do so. The
Company agrees to afford the benefits of this paragraph 17A to any Transferee
of any Note purchased by the Purchasers hereunder.
17B. EXPENSES. The Company agrees, whether or not the transactions
hereby contemplated shall be consummated, to pay, and save the Purchasers and
Electra harmless against liability for the payment of, all reasonable
out-of-pocket expenses arising in connection with this Agreement, the Notes,
the Warrants and the shares of common stock and/or preferred stock being
purchased (or otherwise issuable) to the Purchasers hereunder and under the
Related Agreements and the transactions hereby and thereby contemplated,
including, without limitation, the following (the "Expenses"): (i) all
document production and duplication charges, (ii) all fees and expenses of
counsel, accountants or advisors engaged by the Purchasers in connection with
such agreements or instruments, or the transactions contemplated hereby or
thereby, (iii) all expenses, including attorneys fees and expenses, incurred
by the Purchasers or any of the Purchasers' Affiliates with respect to the
enforcement of any rights or provisions of any such agreement or instrument,
or in responding to any subpoena or other legal process issued in connection
with such agreements and instruments or the transactions contemplated hereby
or thereby, and (iv) all expenses incurred in connection with the printing of
such agreements and instruments and all taxes (together in each case with
interest and penalties, if any, and any income tax payable by the Purchasers
in respect of any reimbursement therefor) which may be payable in respect of
the execution and delivery of such agreements or instruments, or the
issuance, delivery or purchase by the Purchasers of any Note or Warrant. The
Company further agrees to indemnify and save harmless the Purchasers' and
each of the Purchasers' officers, directors, employees and agents (herein
called the "indemnified parties") from and against any and all actions,
causes of action, suits, losses, liabilities and damages, and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
in connection therewith (herein called the "indemnified liabilities")
incurred by the indemnified parties as a result of, or arising out of, or
relating to any of the transactions contemplated hereby or by the Related
Agreements, except for any indemnified liabilities arising on account of the
gross negligence or willful misconduct of the indemnified parties, provided
that, if and to the extent such agreement to indemnify may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
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and satisfaction of each of the indemnified liabilities which shall be
permissible under applicable law. The obligations of the Company under this
paragraph 17B shall survive the transfer of any Note or Warrant and the
payment of any Note or Warrant.
17C. AMENDMENTS, CONSENTS AND WAIVERS. This Agreement may be amended,
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only with the written consent to
such amendment, action or omission to act, of the Significant Holder, or the
holder of Warrants exchangeable into 5% or more of the Common Stock from time
to time outstanding, affected by such amendment, action or omission to act
and each holder of any Security at the time or thereafter outstanding shall
be bound by any consent authorized by this paragraph 17C, whether or not such
Security shall have been marked to indicate such consent; provided that
notwithstanding anything in this paragraph 17C to the contrary, without the
written consent of the holder or holders of all Securities at the time
outstanding, no consent, amendment or waiver to or under this Agreement shall
extend or reduce the maturity of any Security, or reduce the rate or affect
the time of payment of interest payable with respect to any Security, or
affect the exchange or conversion rights of any Security, or affect the time,
amount or allocation of any required or optional prepayments, or reduce the
proportion of the amount of the Securities required with respect to any
consent, amendment or waiver of, or contemplated by, this Agreement; and
provided, further, that no amendment to this Agreement shall increase the
remaining principal amount or extend the maturity of the Notes or increase
the rate or affect the time of payment of interest payable with respect to
the Notes, in each case from that in effect as of the date hereof, or
materially adversely affect the rights (taken as a whole) of any holder of
Senior Debt without the written consent of the Agent (as defined in the
Credit Agreement). The Company shall promptly send copies of any amendment,
consent or waiver (and any request for any such amendment, consent or waiver)
relating to this Agreement, any Related Agreement or the Securities to the
Purchasers and, to the extent practicable, shall consult with the Purchasers
in connection with each such amendment, consent and waiver. No course of
dealing between the Company and the holder of any Security nor any delay in
exercising any rights hereunder or under any Security shall operate as a
waiver of any rights of any holder of such Security.
17D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES AND WARRANTS.
The Notes and Warrants may be transferred to any Transferee acceptable to
(which acceptance will not be unreasonably withheld by) the Company, provided
that any such
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transfer does not violate any applicable rule or regulation under the
Securities Act or the Exchange Act. The Notes may be transferred in
denominations of at least $1,000,000. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration and transfer of the Warrants. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration and transfer of the Notes. The Notes are issuable as registered
Notes only, each without coupons, in denominations of at least $500,000
(except as may be necessary to reflect any principal amount not evenly
divisible by $500,000). Upon surrender for registration of transfer of any
Note at the principal office of the Company, the Company shall, at its
expense, execute and deliver one or more new Notes of like tenor and of a
like aggregate principal amount, which Notes shall be registered in the name
of such transferee or transferees. At the option of the holder of any Note
such Note may be exchanged for Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the
Note to be exchanged at the principal office of the Company. Whenever any
Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is
entitled to receive. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any
Note or upon transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in
the case of any such loss, theft or destruction, upon receipt of such
holder's unsecured indemnity agreement, or other indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a
new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Note. The Purchasers' unsecured indemnity or that of any Transferee that is
an institution shall be acceptable to the Company.
17E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name
any Note is registered as the owner and holder of such Note for the purpose
of receiving payment of principal of and interest on such Note and for all
other purposes whatsoever, whether or not such Note shall be overdue, and the
Company shall not be affected by notice to the
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contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in all or any
part of such Note to any Person on such terms and conditions as
may be determined by such holder in its sole and absolute
discretion. Any Notes at any time owned or acquired in any
manner by or on behalf of the Company or any Subsidiary of the
Company shall not be deemed to be outstanding for any purpose of
this Agreement and shall be forthwith canceled.
17F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT. All representations and warranties contained
herein or made in writing by or on behalf of the Company or any
of its Subsidiaries in connection herewith shall survive the
execution and delivery of this Agreement and the Securities, the
transfer by the Purchasers of any Security or portion thereof or
interest therein and the payment of any Security, and may be
relied upon by any Transferee, regardless of any investigation
made at any time by or on behalf of the Purchasers or any
Transferee; provided, however, that any claim for a breach of any
representation or warranty set forth herein must be made on or
prior to the expiration of the first anniversary of the repayment
in full of the Notes (together with all accrued interest
thereon). Subject to the preceding sentence, this Agreement, the
Related Agreements and the Securities embody the entire agreement
and understanding between the Purchasers and the Company and
supersede all prior agreements and understandings relating to the
subject matter hereof.
17G. SUCCESSORS AND ASSIGNS. All covenants and other
agreements in this Agreement contained by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether or not so
expressed.
17H. CERTAIN RELATIONSHIPS. The Agent and the Lenders
(each as defined in the Credit Agreement) (i) shall be third
party beneficiaries with respect to paragraph 8 of this Agreement
and (ii) are not fiduciaries, agents or representatives of the
Purchasers or any other holder of the Notes.
17I. DISCLOSURE TO OTHER PERSONS. The Company
acknowledges that the holder of any Security may deliver copies
of any financial statements and other documents delivered to such
holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or its Subsidiaries in
connection with or pursuant to this Agreement to (i) such
holder's directors, officers, employees, agents and professional
consultants, (ii) any other holder of any Security, (iii) any
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Person to which such holder offers to sell such Security or any part thereof,
(iv) any Person to which such holder sells or offers to sell a participation
in all or any part of such Security, (v) any federal or state regulatory
authority having jurisdiction over such holder, or (vi) any other Person to
which such delivery or disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or order applicable to such holder,
(b) in response to any subpoena or other legal process, (c) in connection
with any litigation to which such holder is a party Or (d) in order to
protect such holder's investment in such Security; provided, that any
confidential information so disclosed to any third party may be the subject
of a confidentiality agreement if reasonably requested by the Company.
17J. NOTICES. All communications provided for hereunder shall be sent
by confirmed telecopy, first class mail certified mail (return receipt
requested) or overnight delivery service (with charges prepaid): (i) if to
the Purchasers, addressed to EIT at 65 Kingsway, London, England WC2B6QT,
ATTENTION: Company Secretary, and addressed to Associates at 65 Kingsway,
London, England WC2B6QT, ATTENTION: Philip J. Dyke, or to such other
addresses as the Purchasers may have designated to the Company in writing,
with copies to Electra at 70 East 55th Street (25th Floor), New York, New
York 10022, ATTENTION: John L. Pouschine, and to Willkie Farr & Gallagher,
153 East 53rd Street, New York, New York 10022, ATTENTION: Peter J. Hanlon;
(ii) if to any other holder of any Notes, addressed to such holder at the
registered address of such holder as set forth in the register kept by the
Company at its principal office as provided in paragraph 17D hereof; (iii) if
to any other holder of the Warrants, addressed to such holder at the address
of such holder in the record hooks of the Company; and (iv) if to the
Company, addressed to it at 155 Montrose West Avenue, Suite 210, Copley, Ohio
44321, ATTENTION: R. Jack DeCrane, or to such other address or addresses as
the Company may have designated in writing to the Purchasers and each other
holder of any of the Securities at the time outstanding, with a copy to Baker &
Hostetler, 3200 National City Center, Cleveland, Ohio 44114, ATTENTION:
James Griswold.
17K. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
17L. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory or acceptable to any party, the
determination of such satisfaction
-67-
<PAGE>
or acceptability shall be made by such party in its sole and
exclusive reasonable judgment (as determined in accordance with
such party's customary legal and business practices) exercised in
good faith.
17M. GOVERNING LAW: JURISDICTION. This Agreement (including, without
limitation, paragraph 14 hereof as it applies to Unidec S.A.) and the
Securities shall be construed and enforced in accordance with, and the rights
of the parties shall be governed by, the law of the State of New York without
reference to such State's conflicts of laws principles. The Company and each
Subsidiary Guarantor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York state court sitting in New York City (and of the appropriate
appellate courts) for the purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby and
irrevocably waives, to the fullest extent permitted by applicable law, any
objection to venue laid therein. Process in any such proceeding may be
served on such party anywhere in the world, whether within or without the
State of New York (except for Unidec S.A. which must be served at its
principal place of business in Switzerland).
17N. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
-68-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the date first above written.
Very truly yours,
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
ELECTRA INVESTMENT TRUST P.L.C.
By:
------------------------------------
Name:
Title:
ELECTRA ASSOCIATES, INC.
By:
------------------------------------
Name:
Title:
The foregoing Agreement is hereby
accepted solely as it relates to
the Subsidiary Guarantees
contained herein as of the date
first above written
SUBSIDIARY GUARANTORS:
CORY COMPONENTS, INC.
By: /s/ Robert Rankin
------------------------------------
Name: Robert Rankin
Title: Treasurer, Chief Financial
Officer & Secretary
CORY HOLDINGS, INC.
By: /s/ R. Jack DeCrane
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the date first above written.
Very truly yours,
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
ELECTRA INVESTMENT TRUST P.L.C.
By: /s/ H.A.L.H. MUMFORD
------------------------------------
Name: H.A.L.H. MUMFORD
Title: Director
ELECTRA ASSOCIATES, INC.
By: /s/ R. J. Lewis
------------------------------------
Name: R. J. LEWIS
Title: Director
The foregoing Agreement is hereby
accepted solely as it relates to
the Subsidiary Guarantees
contained herein as of the date
first above written
SUBSIDIARY GUARANTORS:
CORY COMPONENTS, INC.
By:
------------------------------------
Name:
Title:
CORY HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
TRI-STAR TECHNOLOGIES
By: Tri-Star Technologies, Inc.,
its General Partner
By: /s/ R. Jack DeCrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
TRI-STAR TECHNOLOGIES, INC.
By: /s/ R. Jack Decrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By: /s/ R. Jack DeCrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
TRI-STAR HOLDINGS, INC.
By: /s/ R. Jack DeCrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
UNIDEC S. A.
By:
------------------------------------
Name:
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By: /s/ R. Jack DeCrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
HOLLINGSEAD INTERNATIONAL, INC.
By: /s/ R. Jack DeCrane
------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
<PAGE>
TRI-STAR TECHNOLOGIES
By: Tri-Star Technologies, Inc.,
its General Partner
By:
------------------------------------
Name:
Title:
TRI-STAR TECHNOLOGIES, INC.
By:
------------------------------------
Name:
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
TRI-STAR HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
UNIDEC S.A.
By: /s/ Silvia Gutermann
------------------------------------
Name: Silvia Gutermann
Title: Sole Administrator
HOLLINGSEAD INTERNATIONAL LIMITED
By:
------------------------------------
Name:
Title:
HOLLINGSEAD INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 1(b)
SERIES [A] WARRANT
TO PURCHASE COMMON STOCK
OF
DeCRANE AIRCRAFT HOLDINGS, INC.
WARRANT NO. [A-1]
NUMBER OF SHARES OF COMMON STOCK: [438,733]
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3. Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . 6
2.4. Continued Validity . . . . . . . . . . . . . . . . . . . . . . . 6
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . . 6
3.1. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. Division and Combination . . . . . . . . . . . . . . . . . . . . 7
3.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4. Maintenance of Books . . . . . . . . . . . . . . . . . . . . . . 7
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. Stock Dividends, Subdivisions and Combinations . . . . . . . . . 8
4.2. Certain Other Distributions . . . . . . . . . . . . . . . . . . 8
4.3. Issuance of Additional Shares of Common Stock . . . . . . . . . 9
4.4. Issuance of Warrants, Options or Other Rights . . . . . . . . . 11
4.5. Issuance of Convertible Securities . . . . . . . . . . . . . . . 11
4.6. Superseding Adjustment . . . . . . . . . . . . . . . . . . . . . 12
4.7. Other Provisions Applicable to Adjustments under this Section. . 13
4.8. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets . . . . . . . . . . . . . . . . . . . . . 15
4.9. Other Action Affecting Common Stock . . . . . . . . . . . . . . 16
4.10. Taking of Record; Stock and Warrant Transfer
Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANT HOLDERS . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Notice of Adjustments . . . . . . . . . . . . . . . . . . . . . 17
5.2. Notice of Certain Corporate Action . . . . . . . . . . . . . . . 17
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY . . . . . . . . . . . . . . . . 18
8. PUT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . 19
9.1. Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Notice of Proposed Transfers; Requests for Registration . . . . 19
(i)
<PAGE>
10. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . . . . . . . 20
12. APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.1. Nonwaiver and Expenses . . . . . . . . . . . . . . . . . . . . . 20
14.2. Notice Generally . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 22
14.7. Office of the Company . . . . . . . . . . . . . . . . . . . . . 22
14.8. Information . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBITS:
Exhibit A - Subscription Form
Exhibit B - Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
SECOND AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF NOVEMBER 2,
1994, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES [A] WARRANT
To Purchase Common Stock
Of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT [ELECTRA INVESTMENT TRUST P.L.C., a corporation
organized under the laws of the United Kingdom] [ELECTRA ASSOCIATES, INC., a
corporation organized under the laws of Delaware] ("Electra"), or registered
assigns (such person, together with any permitted transferee, is referred to
herein as the "Holder"), is entitled, beginning on the Effective Date and at
any time prior to the Expiration Date, to purchase from DeCRANE AIRCRAFT
HOLDINGS, INC., an Ohio corporation (the "Company"), that number of shares of
Common Stock (as defined herein) which shall be initially equal to [438,733]
shares and which is subject to adjustment as provided herein, at a purchase
price equal to the Current Warrant Price, which shall be initially equal to $.01
per share and which is subject to adjustment as provided herein. This Warrant
is issued in connection with the Holder's purchase on the date hereof of certain
of the Company's 12% Senior Subordinated Notes due December 31, 2001, together
with the other warrants referred to in the Securities Purchase Agreement.
Capitalized terms used but not otherwise defined in this Warrant shall have the
meanings ascribed to such terms in the Securities Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
<PAGE>
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of the Series B,
Series C and Series D warrants issued in connection with the transactions
contemplated by the Securities Purchase Agreement, (iii) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of Internationale Nederlanden (U. S.)
Capital Corporation, (iv) shares of Common Stock issuable under the Common
Stock Purchase Warrant, dated as of November 2, 1994, of the Company in favor
of The Provident Bank, (v) shares of Common Stock issuable under the Senior
Subordinate Loan and Warrant Purchase Agreement, dated October 15, 1991, as
amended, among Banc One Capital Partners Corporation, the Company and certain
of its Subsidiaries, (vi) shares of Common Stock issuable upon conversion or
exercise of the Company's convertible preferred stock and warrants outstanding
on the Closing Date and (vii) Common Stock issued to or issuable upon conversion
or exercise of options to directors, officers, employees or consultants of the
Company, provided that the aggregate amount of all such Common Stock shall not
exceed 17.05% of the Common Stock outstanding on a Fully Diluted basis as of
the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common Stock as
of any date herein specified, (y) the price that would be paid for the entire
common equity interest in the Company on a going-concern basis in a single
arms-length transaction between a willing buyer and a willing seller (neither
acting under compulsion), using valuation techniques then prevailing in the
securities industry and always determined in accordance with the valuation
procedures set forth in Section 12, and assuming full disclosure and
understanding of all relevant information and a reasonable period of time for
effectuating such sale, divided by (z) the number of shares of Common Stock
outstanding on a Fully Diluted basis. For purposes of determining the
Appraised Value, (i) the exercise price of options or warrants to acquire
Common Stock which are deemed to have been exercised for the purpose of
determining the number of shares of Common Stock outstanding on a Fully
Diluted basis shall be deemed to have been received by the Company, (ii) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis, (iii) any contract limitation in respect of the
shares of Common Stock, including their transfer, voting and other rights and
(iv) any illiquidity arising by contract law in respect of the shares of
Common Stock and any voting rights or control
2
<PAGE>
rights amongst the shareholders of the Company shall be deemed to have been
eliminated or cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday or
a day on which commercial banks are required or authorized to be closed in
the City of New York.
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise indicates)
the common stock, without par value, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof which is
also not preferred as to dividends or assets over any other class of stock of
the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated
by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence
of a specified date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as of
November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per
share of Common Stock as determined by reference to the Company's financial
statements for the most recently ended fiscal quarter, or (ii) a valuation
per share of Common Stock in an amount equal to (y) the product of (A) 5.67
times (B) the Company's EBITDA less Capital Expenditures (each as defined in
the Securities Purchase Agreement) permitted under the Securities Purchase
Agreement, in each event for the twelve-month period preceding the most
recently ended fiscal quarter, with
3
<PAGE>
such product reduced by (z) principal amounts outstanding under the Credit
Agreement and the Securities Purchase Agreement, or (iii) the Appraised Value
per share of Common Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean [November 2, 1994].
"Electra" shall have the meaning set forth in the first paragraph hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Expiration Date" shall mean December 31, 2004.
"Fully-Diluted" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant increased by all common equivalent
shares issuable at any time pursuant to any stock options, warrants,
convertible securities, and any other security or instrument that could
result in additional common shares being issued at any time in the future,
outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph hereof.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization,
association, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
4
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of November 2, 1994, by and among the Company,
Electra and Electra Associates, Inc., a Delaware corporation.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or
of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Triggering Event" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Warrant" or "Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Effective Date, and until
5:00 P.M. New York time on the Expiration Date, the Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder [***delete the following for Series A
Warrants only*** ; provided, however, that if a Triggering Event shall have
occurred prior to the Effective Date this Warrant shall be void as of the date
of occurrence of such Triggering Event].
In order to exercise this Warrant, in whole or in part, the Holder shall
deliver to the Company at its principal office at 155 Montrose West Avenue,
Suite 210, Copley, Ohio 44321, or at the office or agency designated by the
Company pursuant to Section 14.7, (i) a written notice of the Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased, (ii) the Holder's check in payment of
the Warrant Price and (iii) this Warrant. Such
5
<PAGE>
notice shall be substantially in the form of the subscription form appearing
at the end of this Warrant as Exhibit A, duly executed by the Holder or its
agent or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter,
execute or cause to be executed and deliver or cause to be delivered to the
Holder a certificate or certificates representing the aggregate number of
full shares of Common Stock issuable upon such exercise, together with cash
in lieu of any fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as the Holder shall request and shall be
registered in the name of the Holder or, subject to Section 9, such other
name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate
or certificates shall be deemed to have been issued, and the Holder or any
other Person so designated to be named therein shall be deemed to have become
a holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check and this Warrant, is received by the
Company as described above and all taxes, if any, required to be paid prior
to the issuance of such shares have been paid pursuant to Section 2.2. If
this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates, deliver to the Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
shares of Common Stock called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same
returned to the Holder.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, and the Company shall pay all expenses
in connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes
or charges are income taxes or otherwise imposed upon income of the Holder.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights
under which are exercised in the same transaction, would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal
6
<PAGE>
to the same fraction of the Current Market Price per share of Common Stock on
the date of exercise.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11
and 14 of this Warrant. The Company will, at the time of each exercise of
this Warrant, in whole or in part, upon the request of the holder of the
shares of Common Stock issued upon such exercise hereof, acknowledge in
writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all such rights; provided, however, that
if such holder shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to such holder all
such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant
at the principal office of the Company referred to in Section 2.1 or the
office or agency designated by the Company pursuant to Section 14.7, together
with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by the Holder or its agent or attorney. Upon
such surrender, the Company shall, subject to Section 9, execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new
Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1
and Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
7
<PAGE>
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants,
unless such taxes or charges are income taxes or otherwise imposed upon
income of the Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to time as
set forth in this Section 4. The Company shall give each Holder notice of
any event which requires an adjustment pursuant to this Section 4 at the time
of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder
of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the occurrence of such event, and (ii) the Current
Warrant Price shall be adjusted to equal the product of (A) the Current
Warrant Price prior to the occurrence of such event multiplied by (B) a
fraction, the numerator of which is the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment and
the denominator of which is the number of shares for which this Warrant is
exercisable immediately after such adjustment.
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4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to such adjustment multiplied by (B) a fraction, the numerator of which
shall be the Current Market Price per share of Common Stock at the date of
taking such record and the denominator of which shall be such Current Market
Price per share of Common Stock minus the amount allocable to one share of
Common Stock of any such cash so distributable and of the fair value (as
determined pursuant to Section 4.7(a), including as to an opinion from an
investment banking firm) of any and all such evidences of indebtedness,
shares of stock, other than securities or property or warrants or other
subscription or purchase rights so distributable; and (ii) the Current
Warrant Price shall be adjusted to equal (A) the Current Warrant Price
multiplied by (B) a fraction, the numerator of which shall be the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment and the denominator of which shall be the number of
shares for which this Warrant is exercisable immediately after such
adjustment. A reclassification of the Common Stock (other than a change in
par value, or from par value to no par value or from no par value to par
value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed
into a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision
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or combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time
the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i)
the Current Warrant Price as to the number of shares for which this Warrant
is exercisable prior to such adjustment shall be reduced to a price
determined by dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Current Warrant Price plus (y) the
consideration, if any, received by the Company upon such issue or sale, by
(B) the total number of shares of Common Stock outstanding immediately after
such issue or sale; and (ii) the number of shares of Common Stock for which
this Warrant is exercisable shall be adjusted to equal the product of (A) the
Current Warrant Price in effect immediately prior to such issue or sale
multiplied by (B) the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to such issue or sale, and dividing the
product thereof by the Current Warrant Price resulting from the adjustment
made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common
Stock are issued, then (i) the number of shares of Common Stock for which
this Warrant is exercisable shall be adjusted to equal the product of (A) the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale multiplied by (B) a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale and the denominator of which shall be
the sum of (x) number of shares of Common Stock outstanding immediately prior
to such issue or sale plus (y) the number of shares which the aggregate
offering price of the total number of such Additional Shares of Common Stock
would purchase at the then Current Market Price; and (ii) the Current Warrant
Price as to the number of shares for which this Warrant is exercisable prior
to such adjustment shall be adjusted by multiplying (A) such Current Warrant
Price by (B) a fraction, the numerator of which shall be the number of shares
for which this Warrant is exercisable immediately prior to such issue or sale
and the denominator of which shall be the number of shares of Common
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Stock for which this Warrant is exercisable immediately after such issue or
sale.
(c) If at any time the Company (except as hereinafter provided) shall
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under
this Section 4.3 shall be made in accordance with the formula in paragraph
(a) or (b) above which results in the lower Current Warrant Price following
such adjustment. The provisions of paragraphs (a) and (b) of Section 4.3
shall not apply to any issuance of Additional Shares of Common Stock for
which an adjustment is provided under Section 4.1 or Section 4.2. No
adjustment of the number of shares of Common Stock for which this Warrant
shall be exercisable shall be made under paragraph (a) or (b) of this Section
4.3 upon the issuance of any Additional Shares of Common Stock which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange
rights in any Convertible Securities, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights or upon the
issuance of such Convertible Securities (or upon the issuance of any warrant
or other rights therefor) pursuant to Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time the
Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell, any warrants, options or other
rights to subscribe for or purchase any Additional Shares of Common Stock or
any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such warrants, options or other
rights or upon conversion or exchange of such Convertible Securities shall be
less than the Current Warrant Price or the Current Market Price in effect
immediately prior to such issue or sale, then the number of shares for which
this Warrant is exercisable and the Current Warrant Price shall be adjusted
as provided in Section 4.3 on the basis that the maximum number of Additional
Shares of Common Stock issuable pursuant to all such warrants, options or
other rights or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding
and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such warrants, options
or other rights. No
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further adjustment of the Current Warrant Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise of
such warrants, options or other rights or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price
in effect immediately prior to the time of such issue or sale, then the
number of Shares for which this Warrant is exercisable and the Current
Warrant Price shall be adjusted as provided in Section 4.3 on the basis that
the maximum number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Convertible Securities shall be deemed
to have been issued and outstanding and the Company shall have received all
of the consideration payable therefor, if any, as of the date of actual
issuance of such Convertible Securities. No adjustment of the number of
shares for which this Warrant is exercisable and the Current Warrant Price
shall be made under this Section 4.5 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants, options
or other subscription or purchase rights therefor, if any such adjustment
shall previously have been made upon the issuance of such warrants, options
or other rights pursuant to Section 4.4. No further adjustments of the
number of Shares for which this Warrant is exercisable and the Current
Warrant Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and, if any issue or
sale of such Convertible Securities is made upon exercise of any warrant,
option or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of Shares for which this
Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current
Warrant Price shall be made by reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable
and of the Current Warrant Price shall have been made pursuant to Section 4.4
or Section 4.5 as the result of any issuance of warrants, options, rights or
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Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all
or a portion of such warrants, options or rights, or the right of conversion
or exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, than such
previous adjustment shall be rescinded and annulled and the Additional Shares
of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such warrants,
options or rights or Convertible Securities on the basis of (a) treating the
number of Additional Shares of Common Stock or other property, if any,
theretofore actually issued or issuable pursuant to the previous exercise of
any such warrants, options or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any such exercise and
for the consideration actually received and receivable therefor, and (b)
treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share
for which shares of Common Stock or other property are issuable under such
warrants, options or rights or other Convertible Securities, whereupon a new
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall be made, which new adjustment
shall supersede the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options
or other rights to subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for cash consideration,
the consideration received by the Company therefor shall be the amount of the
cash received by the Company, or, if such Additional Shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the public offering price (in any
such case subtracting any amounts paid or receivable for accrued interest or
accrued dividends and without
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taking into account any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in connection
with, the issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed to be the fair
value of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Company. In case any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options
or other rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any merger
in which the Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair value, as determined in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board in good faith shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants, options or other rights, as the case may
be. The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for
issuing such warrants, options or other rights plus the additional
consideration payable to the Company upon exercise of such warrants, options
or other rights. The consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Convertible Securities shall be the
consideration received by the Company for issuing warrants, options or other
rights to subscribe for or purchase such Convertible Securities, plus the
consideration paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Company upon the exercise of the right
of conversion or exchange of such Convertible Securities. In case of the
issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of
stock other than Common Stock, the Company shall be deemed to have received
for such Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
Whenever the Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any consideration, such
determination shall, if requested by the Holder, be supported by an opinion
of an investment banking firm selected by the Company and reasonably
acceptable to such Holder (or, if more than one Warrant is outstanding, by
holders of a majority of the Warrant Stock issuable upon exercise of the
Warrants).
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(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number
of shares of Common Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of a subdivision
or combination of shares of the Common Stock, as provided for in Section 4.1)
up to, but not beyond the date of exercise if such adjustment either by
itself or with other adjustments not previously made adds or subtracts less
than 1% of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as aforesaid)
which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and
not previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its
occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of the
event for which such record is taken, and the Holder exercises this Warrant,
any Additional Shares of Common Stock issuable upon exercise by reason of
such adjustment shall be deemed the last shares of Common Stock for which
this Warrant is exercised (notwithstanding any other provision to the
contrary herein) and such shares or other property shall be held in escrow
for the Holder by the Company to be issued to the Holder upon and to the
extent that the event actually takes place, upon payment of the then Current
Warrant Price. Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is
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rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination
may be challenged in good faith by the Holder, and any dispute shall be
resolved by an investment banking firm selected by the Company and reasonably
acceptable to such Holder (or, if more than one Warrant is outstanding, to
holders of a majority of Warrant Stock issuable upon exercise of the
Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all
or substantially all its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation (herein referred to as "Other
Property"), are to be received by or distributed to the holders of Common
Stock of the Company, then each Holder shall have the right thereafter to
receive, upon exercise of such Warrant, the number of shares of common stock
of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of
each and every term and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereof,
subject to such modifications as may be deemed appropriate (as determined in
good faith by resolution of the Board of Directors of the Company) in order
to provide for adjustments of shares of the Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 4.
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For purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is
not preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event,
and any warrants, options or other rights to subscribe for or purchase any
such stock. The foregoing provisions of this Section 4.8 shall similarly
apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock
which give rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether
outstanding at the Closing Date or hereafter issued and together with any
agreements related thereto, but excluding antidilution or other adjustment
rights with respect to the Banc One Warrant or the Warrants, then the Company
will promptly make proportional, equitable and corresponding adjustments in
the number of shares of Common Stock issuable upon exercise of the Warrants
to protect the holders thereof against dilution as a result of such events.
4.10. TAKING OF RECORD: STOCK AND WARRANT TRANSFER BOOKS. In the case
of all dividends or other distributions by the Company to the holders of its
Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take
such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time close its stock transfer
books or warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of this Warrant,
shall be adjusted pursuant to Section 4, the Company shall forthwith prepare
a certificate to be executed by the chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or
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change. The Company shall promptly cause a signed copy of such certificate
to be delivered to the Holder in accordance with Section 14.2. The Company
shall keep at its office or agency designated pursuant to Section 14.7 copies
of all such certificates and cause the same to be available for inspection at
said office during normal business hours by the Holder or any prospective
purchaser of a Warrant designated by the Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be entitled
to the same rights to receive notice of corporate action as any holder of
Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder against impairment. Without limiting the generality
of the foregoing, the Company will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
Upon the request of the Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for issuance
upon the exercise of this Warrant such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full
of all outstanding warrants. The Company covenants that all shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant
and payment therefor in accordance with the terms of such Warrant, shall be
duly and validly issued and fully paid and nonassessable.
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Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any and all corporate action which may be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares of such
Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in
the Current Warrant Price, the Company shall obtain all authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will
in good faith, as expeditiously as possible and at its own expense, endeavor
to cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase all
or any portion of the Warrants held by the Holder upon the terms and as
provided in paragraph 16C of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the Securities Act with
respect to the Transfer of any Warrant or any Warrant Stock. The Holder, by
acceptance of this Warrant, agrees to be bound by the provisions of this
Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant Stock
issued upon exercise hereof, shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
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EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION
THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant, the holder of such Warrant shall give
five days' prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, including a description of the
manner and circumstances of the proposed Transfer and, if requested by the
Company, an opinion from counsel to such holder that the proposed Transfer of
such Warrant may be effected without registration under the Securities Act.
After delivery of the Transfer Notice, the holder shall be entitled to
Transfer such Warrant in accordance with the terms of the Transfer Notice.
Each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1, unless such legend is not required in order to ensure
compliance with the Securities Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that
the written agreement of Electra Investment Trust P.L.C. and subsequent
institutional transferees, if any, shall be sufficient indemnity) and, in
case of mutilation, upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder,
as provided in paragraph 6A of the Securities Purchase Agreement, certain
financial information, financial analyses, notices, reports, statements and
certificates, all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination
(which shall be final and binding on the parties) made (i) by agreement among
the Company and the Purchasers within thirty (30) days following the event
requiring such determination or (ii) in the absence of such an agreement, by
an Appraiser (as defined below) selected as set forth below. If required, an
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Appraiser shall be selected within ten (10) days following the expiration of
the 30-day period referred to above, either by agreement among the Company
and the Purchasers or, in the absence of such agreement, by lot from a list
of four potential Appraisers remaining after the Company nominates three, the
Purchasers nominate three, and each side eliminates one potential Appraiser.
The Appraiser shall be instructed by the Company and the Purchasers to make
its determination within thirty (30) days of its selection. All fees and
expenses of an Appraiser selected hereunder shall be borne solely by the
Company. As used herein, "Appraiser" shall mean a nationally recognized
investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay
or failure to exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any provision of this
Warrant, the Company shall pay to the Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, incurred by the Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the books of the Company maintained for such
purpose;
21
<PAGE>
(b) If to the Company at:
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: R. Jack DeCrane
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, or three (3) Business
Days after the same shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the
Company that number of votes equal to the number of shares of Common Stock
issuable from time to time upon exercise of this Warrant on any matters upon
which the holders of Common Stock are entitled to vote [***delete the following
for Series A Warrants only*** ; provided, however, that solely for purposes of
this Section 14.3, the Effective Date shall be deemed to be the date of issue
of this Warrant].
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys'
fees, expenses and disbursements of any kind which may be imposed upon,
incurred by or asserted against the Holder in any manner relating to or
arising out of (i) the Holder's exercise of this Warrant and/or ownership of
any shares of Warrant Stock issued in connection therewith, or (ii) any
litigation to which the Holder is made a party in its capacity as a
stockholder of the Company; provided, however, that the Company will not be
liable hereunder to the extent that any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys'
fees, expenses or disbursements are found in a final non-appealable judgment
by a court to have resulted from the Holder's gross negligence, bad faith or
willful misconduct in its capacity as a stockholder or warrantholder of the
Company.
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 9 of this
Warrant. The
22
<PAGE>
Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 9
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and assigns of Electra or any other holder hereof. The provisions
of this Warrant are intended to be for the benefit of all holders from time
to time of this Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants
remain outstanding, the Company shall maintain an office or agency (which may
be the principal executive offices of the Company) where the Warrants may be
presented for exercise, registration of transfer, division or combination as
provided in this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder
of a Warrant and each holder of Warrant Stock in supplying such information
as may be reasonably requested by such holder to comply with any filings or
information reporting forms presently or hereafter required as a condition to
the availability of an exemption from the Securities Act for the sale of any
Warrant or Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
23
<PAGE>
14.12. GOVERNING LAW. This Warrant shall be governed by the laws
of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
24
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: November 2, 1994
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
-------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
Attest:
By:
-------------------------------------
Name: Robert A. Rankin
Title: Secretary
25
<PAGE>
Exhibit 1(a)
DeCRANE AIRCRAFT HOLDINGS, INC.
12% SENIOR SUBORDINATED NOTE DUE DECEMBER 31, 2001
No._____ New York, New York
$________________ November __, 1994
FOR VALUE RECEIVED, the undersigned, DeCRANE AIRCRAFT HOLDINGS,
INC. (herein called the "Company"), a corporation organized and existing
under the laws of the State of Ohio, hereby promises to pay to ELECTRA
INVESTMENT TRUST P.L.C. [ELECTRA ASSOCIATES, INC.], or registered assigns,
the principal sum of___________________________________________________________
DOLLARS ($________________) on December 31, 2001, with interest (computed on
the basis of a 360-day year of twelve 30-day months) on the unpaid balance
thereof at the rate of 12% per annum from the date hereof, payable
semi-annually on the last day of June and December in each year, commencing
with the last day of the December next succeeding the date hereof, until the
principal hereof shall have become due and payable, and on the maturity date
hereof. Capitalized terms used but not otherwise defined in this Note shall
have the respective meanings ascribed thereto in the Securities Purchase
Agreement, dated as of November___, 1994, as may be amended from time to time
(the "Agreement"), among the Company and the original purchasers of the Notes.
Payments of principal and interest are to be made in lawful money
of the United States of America, in the manner provided in the Agreement.
This Note is one of a series of Senior Subordinated Notes (herein
called the "Notes") issued pursuant to the Agreement, and is entitled to the
benefits thereof. As provided in the Agreement, this Note is subject to
prepayment, in whole or from time to time in part.
This Note is a registered Note and, as provided and subject to the
limitations contained in the Agreement, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or such
holder's attorney duly authorized in writing, a new Note for a like principal
amount will be issued to, and registered in the name of, the transferee.
Prior to due presentment for registration of transfer, the Company shall
treat the person in whose name this
-1-
<PAGE>
Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
This Note is guaranteed by the Subsidiary Guarantors, as provided
in the Agreement. Reference is made to the Agreement for a description of
the obligations of the Subsidiary Guarantors and the rights of the holder of
this Note with respect thereto.
The payment of this Note is subordinated to the prior payment of
Senior Debt, as provided in the Agreement. This Note shall rank senior in
right of payment to all other subordinated indebtedness of the Company, as
provided in the Agreement.
This Note shall bear interest on the unpaid balance hereof as set
forth above; provided, however, that the rate of interest will in no event be
in excess of the maximum rate of interest permitted under applicable law.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement. In addition, the
original purchasers of the Notes may be entitled to Penalty Warrants
exercisable for Common Stock of the Company, as provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the law of such State.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
-------------------------------------
Name: R. Jack DeCrane
Title: President
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<PAGE>
DeCRANE AIRCRAFT HOLDINGS, INC.
12% SENIOR SUBORDINATED NOTE DUE DECEMBER 31, 2001
No. 1 New York, New York
$6,115,973.00 November 2, 1994
FOR VALUE RECEIVED, the undersigned, DeCRANE AIRCRAFT HOLDINGS,
INC. (herein called the "Company"), a corporation organized and existing
under the laws of the State of Ohio, hereby promises to pay to ELECTRA
INVESTMENT TRUST P.L.C., or registered assigns, the principal sum of SIX
MILLION ONE HUNDRED FIFTEEN THOUSAND NINE HUNDRED SEVENTY-THREE DOLLARS
($6,115,973.00) on December 31, 2001, with interest (computed on the basis of
a 360-day year of twelve 30-day months) on the unpaid balance thereof at the
rate of 12% per annum from the date hereof, payable semi-annually on the last
day of June and December in each year, commencing with the last day of the
December next succeeding the date hereof, until the principal hereof shall
have become due and payable, and on the maturity date hereof. Capitalized
terms used but not otherwise defined in this Note shall have the respective
meanings ascribed thereto in the Securities Purchase Agreement, dated as of
November 2, 1994, as may be amended from time to time (the "Agreement"),
among the Company and the original purchasers of the Notes.
Payments of principal and interest are to be made in lawful money
of the United States of America, in the manner provided in the Agreement.
This Note is one of a series of Senior Subordinated Notes (herein
called the "Notes") issued pursuant to the Agreement, and is entitled to the
benefits thereof. As provided in the Agreement, this Note is subject to
prepayment, in whole or from time to time in part.
This Note is a registered Note and, as provided and subject to the
limitations contained in the Agreement, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or such
holder's attorney duly authorized in writing, a new Note for a like principal
amount will be issued to, and registered in the name of, the transferee.
Prior to due presentment for registration of transfer, the Company shall
treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
<PAGE>
This Note is guaranteed by the Subsidiary Guarantors, as provided
in the Agreement. Reference is made to the Agreement for a description of
the obligations of the Subsidiary Guarantors and the rights of the holder of
this Note with respect thereto.
The payment of this Note is subordinated to the prior payment of
Senior Debt, as provided in the Agreement. This Note shall rank senior in
right of payment to all other subordinated indebtedness of the Company, as
provided in the Agreement.
This Note shall bear interest on the unpaid balance hereof as set
forth above; provided, however, that the rate of interest will in no event be
in excess of the maximum rate of interest permitted under applicable law.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement. In addition, the
original purchasers of the Notes may be entitled to Penalty Warrants
exercisable for Common Stock of the Company, as provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the law of such State.
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
-------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
-2-
<PAGE>
DeCRANE AIRCRAFT HOLDINGS, INC.
12% SENIOR SUBORDINATED NOTE DUE DECEMBER 31, 2001
No. 2 New York, New York
$884,027.00 November 2, 1994
FOR VALUE RECEIVED, the undersigned, DeCRANE AIRCRAFT HOLDINGS,
INC. (herein called the "Company"), a corporation organized and existing
under the laws of the State of Ohio, hereby promises to pay to ELECTRA
ASSOCIATES, INC., or registered assigns, the principal sum of EIGHT HUNDRED
EIGHTY-FOUR THOUSAND TWENTY-SEVEN DOLLARS ($884,027.00) on December 31, 2001,
with interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid balance thereof at the rate of 12% per annum from the
date hereof, payable semi-annually on the last day of June and December in
each year, commencing with the last day of the December next succeeding the
date hereof, until the principal hereof shall have become due and payable,
and on the maturity date hereof. Capitalized terms used but not otherwise
defined in this Note shall have the respective meanings ascribed thereto in
the Securities Purchase Agreement, dated as of November 2, 1994, as may be
amended from time to time (the "Agreement"), among the Company and the
original purchasers of the Notes.
Payments of principal and interest are to be made in lawful money
of the United States of America, in the manner provided in the Agreement.
This Note is one of a series of Senior Subordinated Notes (herein
called the "Notes") issued pursuant to the Agreement, and is entitled to the
benefits thereof. As provided in the Agreement, this Note is subject to
prepayment, in whole or from time to time in part.
This Note is a registered Note and, as provided and subject to the
limitations contained in the Agreement, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or such
holder's attorney duly authorized in writing, a new Note for a like principal
amount will be issued to, and registered in the name of, the transferee.
Prior to due presentment for registration of transfer, the Company shall
treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
<PAGE>
This Note is guaranteed by the Subsidiary Guarantors, as provided
in the Agreement. Reference is made to the Agreement for a description of
the obligations of the Subsidiary Guarantors and the rights of the holder of
this Note with respect thereto.
The payment of this Note is subordinated to the prior payment of
Senior Debt, as provided in the Agreement. This Note shall rank senior in
right of payment to all other subordinated indebtedness of the Company, as
provided in the Agreement.
This Note shall bear interest on the unpaid balance hereof as set
forth above; provided, however, that the rate of interest will in no event be
in excess of the maximum rate of interest permitted under applicable law.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement. In addition, the
original purchasers of the Notes may be entitled to Penalty Warrants
exercisable for Common Stock of the Company, as provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the law of such State.
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
-------------------------------------
Name: R. Jack DeCrane
Title: Chief Executive Officer
-2-
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
TO SECURITIES PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT, dated as of
February 20, 1996 (this "AMENDMENT") is made among DeCRANE AIRCRAFT HOLDINGS,
INC. (the "COMPANY"), ELECTRA INVESTMENT TRUST P.L.C. ("EIT") and ELECTRA
ASSOCIATES, INC. ("ASSOCIATES" and, together with EIT, the "PURCHASERS").
W I T N E S S E T H :
WHEREAS, the Company, EIT and Associates are parties to that
certain Securities Purchase Agreement, dated as of November 2, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"SECURITIES PURCHASE AGREEMENT");
WHEREAS, the Company has requested that the Purchasers amend the
Securities Purchase Agreement and waive compliance with certain provisions of
the Securities Purchase Agreement as set forth herein; and
WHEREAS, the Purchasers are willing to so amend and waive
compliance with certain provisions of the Securities Purchase Agreement, but
only upon the terms and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, the Company, EIT and Associates hereby agree as
follows:
Section 1. DEFINITIONS. Unless otherwise defined herein,
capitalized terms used in this Amendment have the meanings provided in the
Securities Purchase Agreement.
Section 2. AMENDMENTS AND WAIVERS. Subject to satisfaction of the
conditions precedent set forth herein, and effective as of the Effective Date
(as defined herein), the Securities Purchase Agreement shall be amended, and
compliance with certain provisions of the Securities Purchase Agreement shall
be waived, as follows:
2.1. NEW DEFINITIONS. Section 13 of the Securities Purchase
Agreement is hereby amended by inserting the following definitions in their
alphabetically appropriate places:
"'APPLICABLE ANNUALIZATION FACTOR' shall mean: (a) for the fiscal
quarter ended March 31, 1996, 4.0; (b) for the fiscal quarter ended June 30,
1996, 2.0; and (c) for the fiscal quarter ended September 30, 1996, 1.33."
<PAGE>
"'CORY PURCHASE AGREEMENT' shall mean the Stock Purchase Agreement,
dated January 1, 1995, between the Company, Cory and Brian Gamberg."
"'CORY REPURCHASE' shall mean the purchase by the Company from
Brian Gamberg of 25% of the outstanding capital stock of Cory pursuant to the
Cory Purchase Agreement."
"'NASSAU' shall mean Nassau Capital Partners L.P., a Delaware
limited partnership, and NAS Partners I L.L.C., a Delaware limited liability
company."
"'NASSAU EQUITY INFUSION' shall mean the purchase by Nassau for
cash, on or about the date of Amendment No 1 hereto, of shares of preferred
stock of the Company and the Nassau Warrants for a purchase price equal to
$6,500,000 pursuant to the Nassau Purchase Agreement."
"'NASSAU/GAMBERG DEAL COSTS' shall mean all costs and expenses
incurred by the Company and its subsidiaries in connection with the
transactions contemplated by the Nassau Purchase Agreement and the Cory
Purchase Agreement."
"'NASSAU PURCHASE AGREEMENT' shall mean the Securities; Purchase
Agreement dated as of February 20, 1996 among the Company and Nassau, as in
existence on such date."
"'NASSAU WARRANTS' shall mean the warrants to be acquired by Nassau
pursuant to the terms of the Nassau Purchase Agreement."
2.2. AMENDMENTS TO DEFINITIONS. (a) The definition of "EBITDA" is
hereby amended by replacing the second parenthetical phrase therein with the
following:
"(including, without limitation, (x) amortization of intangibles,
(y) amortization of Deal Costs (to the extent that such Deal Costs
do not exceed $2,500,000) and (z) amortization of Nassau/Gamberg
Deal Costs (to the extent that such Nassau/Gamberg Deal Costs do not
exceed $600,000) and legal expenses incurred prior to February 20,
1996 in connection with a derivative action against the Company and
certain of its subsidiaries maintained by Brian Gamberg on behalf of
Cory (to the extent that such legal expenses do not exceed
$350,000))".
(b) The definition of "EBITDA Ratio" is hereby amended by adding
the following proviso immediately prior to the end of such definition:
"; provided, that with respect to any date prior to December 31,
1996, 'EBITDA Ratio' shall mean the ratio of (a) all Debt of the
Company and the Subsidiary
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<PAGE>
Guarantors at such time to (b) the product of (x) EBITDA for the
period commencing on January 1, 1996 and ending on the fiscal
quarter ending on or most recently ended prior to such date and (y)
the Applicable Annualization Factor".
(c) The definition of "Fixed Charges Ratio" is hereby amended by
deleting the parenthetical in clause "(a)" thereof and adding the following
proviso immediately prior to the end of such definition:
"; provided, that with respect to any date prior to December 31,
1996, 'Fixed Charges Ratio' shall mean the ratio of (x) Cash Flow
for the period commencing on January 1, 1996 and ending on the
fiscal quarter ending on or most recently ended prior to such date
to (y) Debt Service for such period".
(d) The definition of "Interest Expense" is hereby amended by
relettering the existing clause "(b)" thereof as clause "(c)", deleting the
word "and" at the end of clause "(a)" and by adding the following new clause
"(b)":
"(b) the aggregate amount payable by the Company pursuant to
Section 11.09 of the Credit Agreement (whether or not actually
paid) during such period, and".
(e) The definition of "Net Worth" is hereby amended by replacing
clause "(e)" thereof in its entirety with the following:
" (e) the value ascribed to the Warrants, the Additional
Warrants and the Nassau Warrants and the cumulative effect of any
change in the valuation of the Warrants, the Additional Warrants
and the Nassau Warrants, plus".
2.3. NO LIMIT ON CORY OBLIGATIONS. (a) The parenthetical in the
definition of "Subsidiary Guarantors" is hereby deleted.
(b) The proviso at the end of the first sentence of Section 14H is
hereby deleted.
(c) Section 14I is hereby deleted in its entirety.
2.4. CORY REPURCHASE. (a) The Purchasers hereby waive the
provisions of Sections 7B, 7C, 7E, 7F and 7G of the Securities Purchase
Agreement to the extent necessary to permit the Cory Repurchase.
(b) Section 7C of the Securities Purchase Agreement is hereby
amended by adding the following at the end thereof:
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<PAGE>
"; provided, further, that nothing contained in this paragraph 7C
shall prevent the Company from purchasing capital stock of Cory
pursuant to the Cory Purchase Agreement".
(c) Section 7B of the Securities Purchase Agreement is hereby amended by
renumbering the existing clause "(vi)" as clause "(vii)", by deleting the
word "and" at the end of clause (v), and by adding the following new clause
(vi) thereto:
" (vi) Debt in an aggregate amount not to exceed $600,000
consisting of obligations to Brian Gamberg under the Restrictive
Covenant Agreement referred to in the Cory Purchase Agreement; and".
2.5. FINANCIAL COVENANTS (SCHEDULES). (a) The Purchasers hereby waive
compliance by the Company with Sections 7(A)(i), 7(A)(ii), 7(A)(iii) and
7(A)(iv) of the Securities Purchase Agreement for each of the periods through
and including December 31, 1995.
(b) Each of Schedules 7A(i), 7A(ii), 7a(iii) and 7A(iv) to the
Securities Purchase Agreement is hereby amended for, all periods after
December 31, 1995 to read as set forth on Schedules 7A(i), 7A(ii), 7a(iii)
and 7A(iv), respectively, to this Amendment.
2.6. INTEREST RATE PROTECTION; COMMODITY PRICE PROTECTION. Section 7G
of the Securities Purchase Agreement is hereby amended by renumbering the
existing clause "(ii)" as clause "(iii)", by deleting the word "and" at the
end of clause (i), and by adding the following new clause (ii) thereto:
" (ii) the Company may invest in Interest Rate Protection Agreements
(as such term is defined in the Credit Agreement) and Commodity Price
Protection Agreements (as such term is defined in the Credit Agreement) as
required by the terms of the Credit Agreement; and".
2.7. WAIVER OF AMENDMENT TO CHARTER. The Purchasers hereby waive
compliance by the Company with Section 7K of the Securities Purchase
Agreement to the extent required to consummate the transactions contemplated
by the Nassau Purchase Agreement.
2.8. ADVISORY FEE. Section 15 of the Securities Purchase Agreement is
hereby amended in its entirety to read as follows:
"For so long as the Purchasers hold any Note, any Warrant
exchangeable into at least 2% of the issued and outstanding Common
Stock on a Fully Diluted basis, or at least 2% of the issued and
outstanding Common Stock on a Fully Diluted basis, the Company will
pay to
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<PAGE>
Electra in cash an annual fee (the "Advisory Fee") in the amount of
$100,000, payable in advance in equal quarterly installments on the
first Business Day of each January, April, July and October;
provided, that if the Purchasers no longer hold any Note and an
Initial Public Offering has occurred no Advisory Fee will be
payable. In addition, on the date of Amendment No. 1 hereto, the
Company will pay to Electra a pro rated amount of the quarterly
installment for the period commencing January 1, 1996."
2.9. WAIVER OF ANTI-DILUTION ADJUSTMENTS. The Purchasers hereby waive
all anti-dilution adjustments contained in the Securities Purchase Agreement
and each of the Warrants which would otherwise result from the initial
issuance of securities pursuant to the Nassau Purchase Agreement.
2.10. PUT. Section 16C of the Securities Purchase Agreement is hereby
amended in its entirety to read as follows:
" 16C. PUT. (a)(i) If no Triggering Event shall have
occurred by December 31, 2000, then the Purchasers or other holder
of the Warrants may, at any time thereafter, by giving written
notice to the Company (the "Put Notice"), require the Company to
repurchase (the "Put") all or any portion of the Warrants held by
the Purchasers or other holder of the Warrants for an amount equal
to the Put Amount and corresponding to that number of shares of
Common Stock then issuable upon exercise of the Warrants designated
in the Put Notice. The Company shall pay to the Purchasers the Put
Amount in full in cash within 30 days of the date of the Put, or if
sooner, at the same time payment is required by the terms of the
Nassau Warrants, the ING Warrant or the Provident Warrant.
(ii) Immediately upon receipt of (i) a Put Notice or (ii)
notice, whether prior to or after December 31, 2000, from the
holders of any of the Nassau Warrants, the ING Warrant, the
Provident Warrant or the Banc One Warrant (such holders being
referred to herein collectively as the "Put Holders") that the
Purchasers or such Put Holders intend to exercise put rights in
connection with the repurchase of any of their warrants by the
Company, the Company shall, before repurchasing any such warrants,
give written notice thereof to the Purchasers and/or all other Put
Holders, as the case may be. For a period of twenty (20) days
following receipt of such notice, the Purchasers and each Put
Holder shall be entitled, by written notice to the Company, the
Purchasers and/or each Put Holder, as the case may be, to elect to
require the Company to repurchase for cash its pro rata share (on
the basis of the number of shares of Common Stock then issuable upon
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<PAGE>
exercise of all of the warrants held by the Purchasers and each
such Put Holder) of the warrants held by the Purchasers and each
such Put Holder. If, at the expiration of such twenty-day period
the Purchasers or any Put Holders have not elected to have the
Company repurchase their warrants, the Company shall repurchase
only those warrants for which notice has been received and shall
pay the Put Amount in full in cash within ten (10) days of the
above-described twenty-day period.
(iii) If the Company shall not have funds legally available
in the amount necessary to repurchase all warrants of the
Purchasers and Put Holders with respect to which notice has been
received, then such warrants shall be repurchased by the Company in
the following order of priority: (A) first, on a pro rata basis in
accordance with the number of shares of Common Stock then issuable
upon exercise of all of the warrants held by the Purchasers, ING
and Provident, and (B) second, to the extent funds are legally
available therefor and subject to the prior payment in full of the
Electra, ING and Provident warrants, on a pro rata basis in
accordance with the number of shares of Common Stock then issuable
upon exercise of all of the warrants held by each other Put Holder.
(b) If, prior to December 31, 2000, any Put Holder notifies
the Company that such Put Holder intends to exercise put rights in
connection with the repurchase of any of its warrants by the
Company, the Company shall, before repurchasing any such warrants,
give written notice thereof to the Purchasers and all other Put
Holders. For a period of twenty (20) days following receipt of
such notice, the Purchasers shall be entitled, by written notice to
the Company and each Put Holder, to elect to require the Company to
repurchase the Warrants for cash at a price equal to the Put Amount
(c) Any Put not satisfied in full in cash shall remain an
obligation of the Company and shall bear interest, which interest
shall be paid together with any payment of the Put Amount, at a
rate of 14% per annum."
2.11. PREPAYMENT FEES. The Securities Purchase Agreement is hereby
amended by adding the following new Section 5F:
" 5F. PREPAYMENT FEES. The Company hereby agrees to pay the
following prepayment fees:
(a) A prepayment fee of $140,000 shall be due and payable by
the Company to Electra upon
-6-
<PAGE>
repayment of all of the principal and interest on the Notes
(whether pursuant to paragraph 5A or paragraph 5B hereof or
otherwise) if the same shall occur on or prior to February 15, 1997.
(b) A prepayment fee of $70,000 shall be due and payable by
the Company to Electra upon repayment of all of the principal and
interest on the Notes (whether pursuant to paragraph 5A or
paragraph 5B hereof or otherwise) if the same shall occur after
February 15, 1997 and on or prior to February 15, 1998.
Notwithstanding the foregoing, no such prepayment fee shall be
payable upon repayment of all principal and interest on the Notes
pursuant to paragraph 5A(ii) hereof in connection with an Initial
Public Offering."
Section 3. CONDITIONS PRECEDENT. This Amendment shall become effective
as of the date (the "EFFECTIVE DATE") that each of the conditions precedent
set forth below shall have been fulfilled to the satisfaction of each of the
Purchasers:
(a) DELIVERY OF AMENDMENT. The Purchasers shall have received a
counterpart of this Amendment duly executed by the Company and the Subsidiary
Guarantors.
(b) DELIVERY OF ADVISORY AMENDMENT. The Purchasers shall have received
a counterpart of the Amendment No. 1 to Advisory Agreement in form and
substance satisfactory to the Purchasers and duly executed by the Company.
(c) NO DEFAULT. On and as of the Effective Date, and after giving
effect to this Amendment, no Default or Event of Default under the Securities
Purchase Agreement shall have occurred and be continuing.
(d) CREDIT AGREEMENT: OTHER DOCUMENTS. The Purchasers shall have
received a true and correct copy of all amendments, waivers and consents
applicable to the Senior Debt, in form and substance satisfactory to the
Purchasers. In addition, the Purchasers shall have received a true and
correct copy of the Cory Purchase Agreement, the Nassau Purchase Agreement,
the Nassau Warrants and all documents and agreements related thereto, each in
form and substance satisfactory to the Purchasers.
(e) EQUITY PROCEEDS: DEAL COSTS. The Purchasers shall have received
satisfactory evidence that (a) the Company has received from Nassau cash
proceeds of at least $6,500,000 from the Nassau Equity Infusion, (b) the
aggregate amount of Nassau/Gamberg Deal Costs do not and will not
substantially exceed $600,000 and (c) the proceeds of the Nassau Equity
Infusion will be sufficient to pay substantially all of the Nassau/Gamberg
Deal Costs.
-7-
<PAGE>
(f) FEES AND EXPENSES. Electra shall have received a fee in the amount
of $25,000. In addition, the Company shall have paid or reimbursed Electra
for its out-of-pocket costs and expenses, and for the fees and expenses of
Willkie Farr & Gallagher, counsel to the Purchasers and Electra, in
connection with this Amendment and any other documents prepared in connection
herewith and the transactions contemplated hereby.
Section 4. REPRESENTATION AND WARRANTY. To induce the Purchasers to
enter into this Amendment, the Company hereby represents and warrants to the
Purchasers that the representations and warranties made by the Company in the
Securities Purchase Agreement are true and correct in all material respects
on and as of the Effective Date after giving effect to the effectiveness of
this Amendment, as if made on and as of the Effective Date, unless expressly
stated to relate to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such
earlier date. References in such representations and warranties to the
Securities Purchase Agreement shall be deemed to be references to the
Securities Purchase Agreement as amended by this Amendment.
Section 5. MISCELLANEOUS. (a) The Company hereby confirms that,
except as expressly provided in this Amendment, all of the representations,
warranties, terms, covenants and conditions of the Securities Purchase
Agreement and the Warrants shall remain unwaived and shall continue to be in
full force and effect in accordance with their respective terms. The
amendments, waivers and consents provided herein shall be limited precisely
as provided herein and shall not be deemed to be an amendment to, waiver of
or consent to any other provision of the Securities Purchase Agreement or the
Warrants, or of any transaction or further or future action on the part of
the Company or any other Person which would require the consent of the
Purchasers under the Securities Purchase Agreement or the Warrants or any
other instrument.
(b) This Amendment may be executed in any number of counterparts by the
parties hereto and all of said counterparts when taken together shall be
deemed to constitute one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as
of the date first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rank
-------------------------------------
Name:
Title:
ELECTRA INVESTMENT TRUST P.L.C.
By:
-------------------------------------
Name:
Title:
ELECTRA ASSOCIATES, INC.
By:
-------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as
of the date first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
ELECTRA INVESTMENT TRUST P.L.C.
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
ELECTRA ASSOCIATES, INC.
By: /s/ [ILLEGIBLE] /s/ RJ Lewis
-------------------------------------
Name:
Title:
<PAGE>
SUBSIDIARY GUARANTORS:
CORY COMPONENTS, INC.
By: /s/ Robert Rank
-------------------------------
Name:
Title:
CORY HOLDINGS, INC.
By: /s/ Robert Rank
-------------------------------
Name:
Title:
TRI-STAR TECHNOLOGIES
By: Tri-Star Technologies, Inc.,
its General Partner
By: /s/ Robert Rank
-------------------------------
Name:
Title:
TRI-STAR TECHNOLOGIES, INC.
By: /s/ Robert Rank
-------------------------------
Name:
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By: /s/ Robert Rank
-------------------------------
Name:
Title:
TRI-STAR HOLDINGS, INC.
By: /s/ Robert Rank
-------------------------------
Name:
Title:
UNIDEC S.A.
By:
-------------------------------
Name:
Title.
<PAGE>
SUBSIDIARY GUARANTORS:
CORY COMPONENTS, INC.
By:
-------------------------------
Name:
Title:
CORY HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
TRI-STAR TECHNOLOGIES
By: Tri-Star Technologies, Inc.,
its General Partner
By:
-------------------------------
Name:
Title:
TRI-STAR TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By:
-------------------------------
Name:
Title:
TRI-STAR HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
UNIDEC S.A.
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
<PAGE>
HOLLINGSEAD INTERNATIONAL LIMITED
By: /s/ Robert Rank
-------------------------------
Name:
Title:
HOLLINGSEAD INTERNATIONAL, INC.
By: /s/ Robert Rank
-------------------------------
Name:
Title:
<PAGE>
Schedule 7A(i)
Leverage Ratio
The Company and the Subsidiary Guarantors will not permit the Leverage
Ratio to exceed the following respective ratios at any time during the
following respective periods.
PERIOD RATIO
------ -----
From January 1, 1996
through March 30, 1996 12.10 to 1
From March 31, 1996 through
June 29, 1996 3.98 to 1
From June 30, 1996 through
September 29, 1996 3.82 to 1
From September 30, 1996
through December 30, 1996 3.38 to 1
From December 31, 1996
through March 30, 1996 2.84 to 1
From March 31, 1997
through June 30, 1997 4.29 to 1
From July 1, 1997 through
December 31, 1997 3.30 to 1
From January 1, 1998
through June 30, 1998 3.03 to 1
From July 1, 1998 through
December 31, 1998 2.48 to 1
From January 1, 1999 and
at all times thereafter 2.20 to 1
<PAGE>
Schedule 7A(ii)
EBITDA Ratio
The Company and the Subsidiary Guarantors will not permit the EBITDA
Ratio to exceed the following respective ratios at any time during the
following respective periods:
PERIOD RATIO
------ -----
From March 31, 1996 through
June 29, 1996 7.86 to 1
From June 30, 1996 through
September 29, 1996 5.38 to 1
From September 30, 1996
through December 30, 1996 4.05 to 1
From December 31, 1996
through March 30, 1997 3.27 to 1
From March 31, 1997
through June 30, 1997 2.53 to 1
From July 1, 1997 through
December 31, 1997 2.20 to 1
From January 1, 1998
through December 31, 1998 1.93 to 1
From January 1, 1999 and
at all times thereafter 1.65 to 1
<PAGE>
Schedule 7A(iii)
Net Worth
The Company will not permit its Net worth to be less than the following
respective amounts at any time during the following respective periods:
PERIOD AMOUNT
------ ------
From January 1, 1996
through March 30, 1996 $ 2,700,000
From March 31, 1996 through
June 29, 1996 $ 8,929,800
From June 30, 1996 through
September 29, 1996 $ 9,255,600
From September 30, 1996
through December 30, 1996 $10,102,500
From December 31, 1996
through March 30, 1997 $11,169,000
From March 31, 1997
through June 30, 1997 $ 8,100,000
From July 1, 1997 through
December 31, 1997 $ 9,450,000
From January 1, 1998
through June 30, 1998 $11,700,000
From July 1, 1998 through
December 31, 1998 $13,725,000
From January 1, 1999 and
at all times thereafter $15,750,000
<PAGE>
Schedule 7A(iv)
Fixed Charges Ratio
The Company and the Subsidiary Guarantors will not permit the Fixed
Charges Ratio to be less than the following respective ratios at any time
during the following respective periods:
PERIOD RATIO
------ -----
From March 31, 1996 through
June 29, 1996 0.234 to 1
From June 30, 1996 through
September 29, 1996 0.666 to 1
From September 30, 1996
through December 30, 1996 0.891 to 1
From December 31, 1996
through March 30, 1997 1.089 to 1
From March 31, 1997
through June 30, 1997 1.035 to 1
From July 1, 1997 through
December 31, 1997 1.215 to 1
From January 1, 1998 and
at all times thereafter 1.350 to 1
<PAGE>
D.A.H., INC. 2201 Rosecrans Avenue
El Segundo, California 9025
(310) 536-0444
Fax (310)536-9322
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
November 28, 1994
Mr. Charles H. Becker
303 Williams Road
Fort Washington, PA 19034
Dear Chuck:
I am pleased to offer you the position of President of Tri-Star Electronics
International, Inc,.
As President of Tri-Star Electronics International, you would report
directly to me. You would be responsible for all functions of Tri-Star with
the exception of Treasury. Reporting to you would be the following:
Tri-Star Chief Financial Officer, the Vice President of Sales & Marketing,
Director of Engineering, Supervisor of Human Resources, Director of
Operations, Director of Quality Assurance and the Director of Materials
Management.
The total compensation package we are prepared to offer is as follows:
- Base salary would be $140,000.00 per annum.
- Incentive Bonus as follows:
Percentage of Plan Incentive Bonus as a
EBIT Attainment Percent of Base Salary
------------------- ----------------------
80 10%
90 20%
100 30%
110 40%
You would also be granted stock options in D.A.H. for 50,000 shares that
would vest in equal increments over five years, with the first vesting
occurring 12 months following your hire date. These are qualified ISOs under
IRS Regs at a nominal exercise price of 15 cents per share.
<PAGE>
Page Two
Mr. Charles H. Becker
November 28, 1994
We would also provide you with six months severance pay at your base
rate that would be valid under circumstances of involuntary termination other
than termination for cause.
In terms of your moving and relocation expenses, we would offer you the
following:
- Up to six months temporary living allowance not to exceed a maximum
of $1,000.00 a month.
- Actual cost of selling your home in PA, and relocation of household
goods from Pennsylvania to California not to exceed $40,000.00.
- Other expenses related to the acquiring of a home in California in an
amount not to exceed $5,000.00.
We also discussed 100% vesting of stock options under a change of
control or IPO. This is an area that Jack DeCrane is currently reviewing for
all of Senior Management with the Compensation Committee of the Board of
Directors but we are unable to either offer or guarantee anything under this
arrangement today.
You would be covered under our Executive Benefits Program about which we
are enclosing copies via Federal Express to your home along with two
originals of this offer for you to sign, retaining one and returning the
other.
Sincerely,
/s/ R.G. MacDonald
R.G. MacDonald
President
RGM/kj
AGREED & ACCEPTED:
/s/ Charles H. Becker November 29, 1994
- ----------------------------------- -----------------
Charles H. Becker Date
<PAGE>
COMPANY'S EMPLOYEE ACKNOWLEDGEMENT
I acknowledge that I have received a copy of the Company's Code of
Business Ethics. I have read and do understand the Code of Business Ethics
and all of my questions concerning the same have been answered to my
satisfaction. I understand that I must abide by the terms of the Code of
Business Ethics, as well as state and federal laws and regulations, as a
condition of my continued employment with the Company.
Date: 11-30-94 C. H. Becker
---------- ----------------------
(Print Name)
/s/ C. H. Becker
----------------------
(Signature)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT. IN ADDITION, THE SECURITIES REPRESENTED
HEREBY ARE SUBJECT TO THE LIMITATIONS ON TRANSFER SET FORTH IN THE FOURTH
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 18, 1996,
BETWEEN THE CORPORATION AND CERTAIN HOLDERS OF THE CORPORATION'S SECURITIES. A
COPY OF THE FOURTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE CORPORATION AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE CORPORATION.
DECRANE AIRCRAFT HOLDINGS, INC.
No. 96-ING September 18, 1996
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION, a Delaware corporation, is entitled to purchase from DECRANE
AIRCRAFT HOLDINGS, INC, an Ohio corporation (the "Corporation"), for value
received, 187,500 shares of the Common Shares, without par value (the "Common
Stock") of the Corporation at the price (the "Exercise Price") of $4 per share,
at any time or from time to time during the period commencing on the Closing
Date and ending at 5:00 P.M. on the tenth anniversary of the Closing Date (the
"Expiration Date"); PROVIDED, HOWEVER, that this Warrant may not be exercised
for Common Stock by any Regulated Holder to the extent that such exercise will
result in a violation of any Applicable Law.
Reference is made to the Amended and Restated Credit Agreement (as the
same may be amended from time to time, the "Amended Restated Credit Agreement")
among the Corporation (in such capacity, the "Borrower"), the Lenders (as
defined therein), and Internationale Nederlanden (U.S.) Capital Corporation
("ING"), as agent for the Lenders. In order to induce ING to enter into the
Amended and Restated Credit Agreement and to make certain loans and provide
other financial accommodations to the Borrower thereunder, the Corporation has
agreed to issue to ING this warrant (this "Warrant") to purchase Common Stock of
the Corporation.
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. As used in this Warrant, the following
terms shall have the following meanings:
"AFFILIATE" shall mean, with respect to any person, any Person that
directly or indirectly through one or more intermediaries Controls, is
Controlled by or is under common Control with such Person.
"ALLOCABLE NUMBER" shall have the meaning given to such term in
Section 4.2.
<PAGE>
"AMENDED AND RESTATED CREDIT AGREEMENT" shall have the meaning given
to such term in the Preamble.
"APPLICABLE LAW" shall mean all provisions of laws, statutes,
ordinances, rules, regulations, permits, certificates or orders of any
Governmental Authority applicable to the Person in question or any of its assets
or property, and all judgments, injunctions, orders and decrees of all courts
and arbitrators in proceedings or actions in which the Person in question is a
party or by which any of its assets or properties are bound.
"ASSET SALE" shall mean (a) the sale of all or substantially all of
the assets of the Corporation or (b) a merger or consolidation of or otherwise
involving the Corporation (other than a merger or consolidation solely involving
a merger of a wholly-owned Subsidiary of the Corporation with or into another
wholly-owned Subsidiary of the Corporation).
"BORROWER" shall have the meaning given to such term in the preamble.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banks are authorized or required to be closed in New York, New
York; PROVIDED, HOWEVER, that any determination of a Business Day relating to a
securities exchange shall mean a Business Day on which such exchange is open for
trading.
"CALL" shall have the meaning given to such term in Section 5.3
hereof.
"CALL CLOSING" shall have the meaning given to such term in Section
5.3 hereof.
"CALL NOTICE" shall have the meaning given to such term in Section 5.3
hereof.
"CALL PRICE" shall mean 120% of the Put Market Value Per Share;
PROVIDED, HOWEVER, that if at the time of determination of the Call Price,
Warrant Shares shall consist in any part of securities or property other than
Common Stock, the Call Price shall include a cash amount per Warrant Share equal
to that portion of the fair value (determined in accordance with the Valuation
Procedure) of such securities or property allocable to each Warrant Share.
"CHANGE OF CONTROL" shall mean an Event of Default specified in
Section 10(k) of the Amended and Restated Credit Agreement.
"CLOSING DATE" shall mean September 18, 1996.
"COMMISSION" shall mean the Securities and Exchange Commission (or a
successor thereto).
"COMMON STOCK" shall have the meaning specified in the Preamble.
"CONTROL" shall mean, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERTIBLE SECURITIES" shall have the meaning given to such term in
Section 4.4.1(b).
"CORPORATION" shall have the meaning given to such term in the
Preamble.
"DELIVERY DATE" shall have the meaning given to such term in Section
4.3(a).
-2-
<PAGE>
"EQUIVALENT NONVOTING SECURITY", with respect to any security (a
"first security") issued or to be issued by any Person, shall mean a security
(an "equivalent security") of such Person that is identical in rights and
benefits to such first security, except that (a) the equivalent security
shall not be entitled to vote on any matter on which holders of voting
securities of such Person are entitled to vote, other than as required by
Applicable Law or with respect to any amendment or repeal of any provision of
the Organizational Documents of such Person or any other agreement or
instrument pursuant to which the equivalent security was issued which
provision specifically affects such equivalent security, (b) subject to such
reasonable restrictions as any affected Regulated Holder may request
(including, without limitation, any restriction necessary to prevent the
violation by such Regulated Holder of any provision of Applicable Law with
respect to its Ownership of voting securities), the equivalent security shall
be convertible in a one-to-one ratio into the first security and (c) the
terms of the equivalent security shall include such provisions requested by
any affected Regulated Holder as are reasonable and equitable to ensure that
(i) the equivalent security is treated comparably to the first security with
respect to dividends, distributions, stock splits, reclassifications, capital
reorganizations, mergers, consolidations and other similar events and
transactions, (ii) the conversion right provided in clause (b) above is
equitably protected and (iii) the acquisition of the equivalent security will
not cause such Regulated Holder to violate Applicable Law.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCHANGE FORM" shall mean an exchange form satisfactory to the
Corporation (in its reasonable judgment).
"EXCLUDED SECURITIES" shall mean:
(i) shares of capital stock issued pursuant to a stock dividend or a
stock split or other subdivision of shares;
(ii) Common Stock issued upon (A) conversion or exercise of any of
the Corporation's convertible preferred stock outstanding at the Closing Date,
or (B) exercise of the Warrants or upon exercise of any warrants issued in
connection with a refinancing of the obligations of the Borrower under the
Amended and Restated Credit Agreement;
(iii) securities issued by the Corporation in a Qualified Public
Offering;
(iv) securities issued pursuant to the direct or indirect BONA FIDE
acquisition by the Corporation of any Person, whether by merger, purchase of
stock, purchase of assets or otherwise;
(v) securities issued upon exercise of conversion or exchange
rights, options or subscription calls, warrants, commitments or claims, provided
that the foregoing are outstanding on the Closing Date or are issued hereafter
in compliance with Section 5.2 hereof, and
(i) Common Stock or options to purchase Common Stock issued to
directors, officers, employees or consultants of the Corporation or the issuance
of Common Stock upon the exercise of any such options; PROVIDED, HOWEVER, that
the aggregate amounts of all such Common Stock or Common Stock which may be
acquired upon the exercise of such options shall not exceed an aggregate of
17.05% of the Common Stock (on a Fully-Diluted Basis).
"EXECUTIVE OFFICER" shall mean, with respect to the Corporation, its
Chairman or President.
"EXERCISE FORM" shall mean an exercise form satisfactory to the
Corporation (in its reasonable judgment).
-3-
<PAGE>
"EXERCISE PRICE" shall mean $4 per share of Common Stock, subject to
adjustment from time to time in the manner provided in Section 4.4.
"EXPIRATION DATE" shall mean the tenth anniversary of the Closing
Date.
"FINANCIAL OFFICER" shall mean the Chief Financial Officer, Treasurer
or Assistant Treasurer of the Corporation.
"FISCAL YEAR" shall mean, with respect to the Corporation, the
one-year period ending on December 31 of any year.
"FULLY DILUTED STOCKS" means, as applied to the calculation of the
number of shares of Common Stock outstanding at any time, after giving effect to
(a) all shares of Common Stock outstanding at the time of determination, (b) all
shares of Common Stock issuable upon the exercise of any option, warrant
(including the Warrants) or similar right to purchase Common Stock outstanding
at the time of determination and then exercisable at a per share price equal to
or less than the price per share of Common Stock being determined and (c) all
shares of Common Stock issuable upon the conversion or exchange of any security
convertible into or exchangeable for shares of Common Stock outstanding at the
time of determination and then so convertible or exchangeable at a conversion or
exchange price equal to or less than the price per share of Common Stock being
determined. Such calculation will not be made in accordance with the "treasury
method."
"GAAP" shall have the meaning specified in the Amended and Restated
Credit Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States of
America or foreign.
"HOLDER" shall have the meaning given to such term in Section 3.1.
"ING" shall have the meaning given to such term in the Preamble.
"IPO PRICE" shall mean the price per Common Share at which the Common
Stock is offered in any Qualified Public Offering.
"LIQUIDATION EQUIVALENT" shall mean the per share cash amount,
determined in accordance with the Valuation Procedure, which would be paid to
holders of Common Stock outstanding (on a Fully-Diluted Basis) on the date of
determination assuming (a) the actual receipt by the Corporation of the
Corporation, as applicable, of the full amount of the consideration proposed to
be paid or exchanged for the capital stock or assets of the Corporation in the
relevant transaction (net of reasonable expenses incurred in connection with
such transaction which are payable to Persons who or which are not Affiliates of
Major Stockholder) and (b) the liquidation of the Corporation and all of its
Subsidiaries immediately thereafter. For the purposes of determining the
Liquidation Value, (i) the exercise price of options or warrants to acquire
Common Stock which are deemed to have been exercised for the purpose of
determining the number of shares of Common Stock outstanding on a Fully-Diluted
Basis, shall be deemed to have been received by the Corporation and (ii) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for the
purpose of determining the number of shares of Common Stock outstanding on a
Fully Diluted Basis, shall be deemed to have been eliminated or cancelled. If
any transaction requiring the determination and payment of the Liquidation
Equivalent shall involve a purchase price adjustment based on the closing
balance sheet of the Corporation or any of its Subsidiaries as of the closing
date of such transaction, which results in a reduction in the purchase price,
each Holder shall be obligated to remit to the purchaser such Holder's PRO RATA
share of such amount, unless the amount of such adjustment has not been finally
determined
-4-
<PAGE>
within 180 days following the closing of such transaction, in which case each
Holder shall be obligated to remit to such purchaser such Holder's PRO RATA
share of the amount of such adjustment (as finally determined). Each Holder
shall be entitled to receive its full PRO RATA share of any adjustment in favor
of the sellers in a transaction involving a purchase price adjustment when and
as paid to all such Holders.
"MARKET PRICE" shall mean, with respect to a share of Common Stock on
any Business Day, the Market Value Per Share.
"MARKET VALUE" shall mean the highest of (i) the net book value as
determined by reference to the Corporation's financial statements for the most
recently ended fiscal quarter, or (ii) or an amount equal to (y) the product of
(A) 5.67 and (B) the Corporation's EBITDA (as defined in the Amended and
Restated Credit Agreement) LESS Capital Expenditures (as defined in the Amended
and Restated Credit Agreement) permitted under the Amended and Restated Credit
Agreements and the Securities Purchase Agreement, in each event for the
twelve-month period preceding the most recently ended fiscal quarter, LESS (x)
amounts outstanding under the Amended and Restated Credit Agreement and the
Securities Purchase Agreement, or (iii) the price that would be paid for the
entire common equity interest in the Corporation on a going-concern basis in a
single arm's-length transaction between a willing buyer and a willing seller
(neither acting under compulsion), using valuation techniques then prevailing in
the securities industry and always determined in accordance with the Valuation
Procedures, and assuming full disclosure and understanding of all relevant
information and a reasonable period of time for effectuating such sale. For the
purposes of determining the Market Value, (i) the exercise price of options or
warrants to acquire Common Stock which are deemed to have been exercised for the
purpose of determining the number of shares of Common Stock outstanding on a
fully Diluted Basis, shall be deemed to have been received by the Corporation,
(ii) the liquidation preference or indebtedness, as the case may be, represented
by securities which are deemed exercised for or converted into Common Stock for
the purpose of determining the number of shares of Common Stock outstanding on a
Fully Diluted Basis, (iii) any contract limitation in respect of the shares of
Common Stock, including their transfer, voting and other rights and (iv) any
liquidity arising by contract law in respect of the shares of Common Stock and
any voting rights or control rights amongst the Stockholders, shall be deemed to
have been eliminated or cancelled.
"MARKET VALUE PER SHARE" shall mean the price per share of Common
Stock obtained by dividing (A) the Market Value by (B) the number of shares of
Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"OPTIONS" shall have the meaning given to such term in Section
4.4.1(b) hereof.
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to any Person,
each instrument or other document that (a) defines the existence of such Person,
including its articles or certificate of incorporation, as filed or recorded
with an applicable Governmental Authority or (b) governs the internal affairs of
such Person, including its by-laws, in each case as amended, supplemented or
restated.
"OTHER ANTI-DILUTION INSTRUMENTS" shall mean any option, warrant,
convertible security or other rights to acquire Common Stock, whether
outstanding as of the Closing Date or hereafter issued, together with any
agreements relating thereto, which provide for anti-dilution or other
adjustments in the number of shares of Common Stock and/or exercise or
conversion price, EXCEPT for anti-dilution or other adjustment rights
provided under the Senior Subordinate Documents.
"OWN" shall mean, with respect to any security, to own, hold or
Control. Owns and Ownership shall have correlative meanings.
"PARTICIPATION NOTICE" shall have the meaning given to such term in
Section 5.2(b) hereof.
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"PARTICIPATION PERIOD" shall have the meaning given to such term in
Section 5.2(b) hereof.
"PERSON" shall mean and include any natural person, company,
partnership, joint venture, corporation, business trust or unincorporated
organization.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PROPORTIONATE PERCENTAGE" shall mean, with respect to any Holder at
any time, the quotient obtained by dividing (a) the aggregate number of Warrant
Shares then held by such Holder by (b) the total number of shares of Common
Stock then outstanding (on a Fully-Diluted Basis).
"PUT" shall have the meaning given to such term in Section 5.2 hereof.
"PUT CLOSING" shall have the meaning given to such term in Section 5.3
hereof.
"PUT EVENT" shall mean any of the following:
(a) a Change of Control;
(b) as Asset Sale;
(c) the repayment in full of all borrowings under the Amended
and Restated Credit Agreement and the termination of all
borrowing commitments other than in connection with any
transaction otherwise constituting a Put Event or any
transaction constituting a Call Event or the acceleration of
all borrowings under the Amended and Restated Credit
Agreement; or
(d) the filing of a registration statement under the Securities
Act which relates to a Qualified Public Offering.
"PUT EVENT NOTICE" shall have the meaning given to such term in
Section 5.3 (a) hereof.
"PUT MARKET PRICE" shall mean, with respect to a share of Common Stock
on any Business Day, the Put Market Value Per Share.
"PUT MARKET VALUE" shall mean the highest of the following:
(i) the price that would be paid for the entire common equity
interest in the Corporation on a going-concern basis in a single
arm's-length transaction between a willing buyer and a willing seller
(neither acting under compulsion), using valuation techniques then
prevailing in the securities industry and always determined in
accordance with the Valuation Procedures, and assuming full disclosure
and understanding of all relevant information and a reasonable period
of time for effectuating such sale,
(ii) the net book value of the Corporation determined by
reference to the Corporation's financial statements as of the most
recently ended fiscal quarter, or
(iii) an amount equal to (A) six times earnings before interest,
income taxes, depreciation and amortization (determined in accordance
with GAAP) as of the 12 month period immediately preceding the most
recently ended fiscal quarter MINUS (B) amounts outstanding under the
Amended and Restated Credit Agreement and the Securities Purchase
Agreement MINUS (C) any other indebtedness (as defined
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in accordance with GAAP, but excluding obligations of the Corporation
in respect of (w) this Warrant (x) the warrants issued in connection
with the Original Credit Agreement (as that term is defined in the
Amended and Restated Credit Agreement), (y) the warrants issued under
the Senior Subordinate Agreement, ( ) the warrants issued under the
Securities Purchase Agreement and the 1996 (September) Securities
Purchase Agreement (as that term is defined in the Amended and
Restated Credit Agreement) PLUS (D) cash and cash equivalents of the
Corporation.
For the purposes of determining the Put Market Value, (i) the exercise price of
options or warrants to acquire Common Stock which are deemed to have been
exercised for the purpose of determining the number of shares of Common Stock
outstanding on a Fully-Diluted Basis, shall be deemed to have been received by
the Corporation, (ii) the liquidation preference or indebtedness, as the case
may be, represented by securities which are deemed exercised for or converted
into Common Stock for the purpose of determining the number of shares of Common
Stock outstanding on a Fully Diluted Basis, (iii) any contract limitation in
respect of the shares of Common Stock, including their transfer, voting and
other rights and (iv) any illiquidity arising by contract law in respect of the
shares of Common Stock and any voting rights or control rights amongst the
Stockholders, shall be deemed to have been eliminated or cancelled.
"PUT MARKET VALUE PER SHARE" shall mean the price per share of Common
Stock obtained by dividing (A) the Put Market Value by (B) the number of shares
of Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"PUT NOTICE" shall have the meaning given to such term in Section
5.3(b) hereof.
"PUT PRICE" shall mean the Put Market Value Per Share; PROVIDED,
HOWEVER, that, if at the time of determination of the Put Price, Warrant Shares
shall consist in any part of securities or property other than Common Stock, the
Put Price shall include a cash amount per Warrant Share equal to that portion of
the fair value (determined in accordance with the Valuation Procedure) of such
securities or property allocable to each Warrant Share.
"QUALIFIED PUBLIC OFFERING" shall mean an underwritten public offering
of the Common Stock registered under the Securities Act, (a) which offering
results in net proceeds to the Corporation of at least $25,000,000, and (b)
after which the shares of Common Stock are Publicly Traded and shares of Common
Stock held by persons other than Affiliates of the Corporation have a Market
Price of at least $55,000,000.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Fourth Amended and
Restated Registration Rights Agreement, dated as of September 18, 1996 among the
Corporation and certain other parties thereto (as amended from time to time).
"REGULATED HOLDER" shall mean any Holder subject to any provisions of
Applicable Law (including without limitation the Bank Holding Company Act of
1956, as amended, (12 U.S.C. Section 1841 ET SEQ.) and the regulations
promulgated thereunder) limiting the quantity of kind or securities (or any
class thereof) of the Corporation which such Holder is permitted to Own.
"SALE NOTICE" shall have the meaning given to such term in Section
3.3(d) hereof.
"SECTION 7.4 TRANSACTION" shall have the meaning given to such term in
Section 7.4.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" shall mean that certain Securities
Purchase Agreement, dated as of November 2, 1994, among the Corporation, Electra
Investment Trust P.L.C. and Electra Associates, Inc., as
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[illegible] from time to time, and the Warrants to Purchase Common Stock of the
Corporation, dated the date [illegible] to Electra Investment Trust PLC or
its registered assigns and to Electra Associates, Inc. or its registered
assigns.
"SELLER NOTES" shall mean promissory notes issued by a transferee
(or an Affiliate thereof) as [illegible] in connection with any transfer of
stock and/or other assets.
"SENIOR SUBORDINATE AGREEMENT" shall mean that certain Fifth
Amendment to the Senior Subordinate [illegible] and Warrant Purchase
Agreement, dated as of November 2, 1994, between the Corporation, Banc One
[illegible] Partners Corporation and others party thereto
"SENIOR SUBORDINATE DOCUMENTS" shall mean the Senior Subordinate
Agreement and that certain Warrant Purchase Common Stock of DeCrane Aircraft
Holdings, Inc., dated the date hereof, issued to Banc One [illegible] Partners
Corporation or its registered assigns.
"SHAREHOLDERS AGREEMENT" shall mean that certain Fourth Amended and
Restated Shareholders Agreement, dated as of September 18, 1996, between the
Corporation and certain holders of the Corporation's Securities.
"SUBSIDIARY" shall mean, at any time, any Person of which more than
fifty percent (50%) of the shares of stock or other interests entitled to vote
in the election of directors or comparable Persons performing similar functions
(excluding shares or other interests entitled to vote only upon the failure to
pay dividends thereon or other contingencies) are at the time owned directly or
indirectly through one or more Subsidiaries, by the Corporation.
"TRANSFER" shall mean any sale, transfer, assignment, or other
disposition of any interest in, with or without consideration, any security
(other than a pledge or hypothecation).
"TRI-STAR TECHNOLOGIES" shall mean Tri-Star Technologies, a general
partnership organized under the bylaws of the State of California.
"UNIDEC" shall mean Tri-Star Electronics Europe S.A., Mezzovico
(formerly known as, Unidec, S.A. Mezzovico), a corporation organized under the
laws of Switzerland.
"VALUATION PROCEDURE" shall mean, with respect to the determination
of any amount or value required to be determined in accordance with such
procedure, a determination (which shall be final and binding on the
Corporation and the Holder) made (i) by agreement among the Corporation and
the Holder within thirty (30) days following the event requiring such
determination or (ii) in the absence of such an agreement, by an Appraiser
(as defined below) selected in accordance with the further provisions of this
definition. If required, an Appraiser shall be selected within 10 days
following the expiration of the 30-day period referred to above, either by
agreement among the Corporation and the Holder or, in the absence of such
Agreement, by lot from a list of four potential Appraisers remaining after
the Corporation nominates three, the Holder nominates three, and each side
eliminates one potential Appraiser. The Appraiser shall be instructed by the
Corporation and the Holder to make its determination within thirty (30) days
of its selection. All fees and expenses of an Appraiser selected hereunder
shall be borne by the Holder. As used herein, "Appraiser" shall mean a
nationally-recognized investment banking firm.
"WARRANT" shall mean any warrant issued in the form of this Warrant
(except as provided in Section 3.3(b)), duly executed on behalf of the
Corporation.
"WARRANT REGISTER" shall have the meaning given to such term in
Section 3.1.
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Warrant in accordance with Section 4.1 or upon exchange of this [unreadable]
other securities or other property issued or issuable upon any such exercise or
exchange in accordance with this Warrant and (c) any securities of the
Corporation distributed with respect to the securities referred to in the
preceding clauses (a) and (b). As used in this Warrant, the phrase "Warrant
Shares then held" by any Holder or Holders shall mean Warrant Shares held at the
time of determination by such Holder or Holders, and shall include Warrant
Shares issuable upon exercise of Warrants held at the time of determination by
such Holder or Holders.
SECTION 1.2. INTERPRETATION. Unless the context of this Warrant
clearly require otherwise, references to the plural include the singular, to
the singular include the plural, and to the part include the whole. The term
"including" is not limiting and the term "or" has the inclusive meaning
represented by the term "and/or." The words "hereof," "herein," "hereunder,"
and similar terms in this Warrant refer to this Warrant as a whole and not to
any particular provisions of this Warrant. References to "Articles,"
"Sections," "Subsections," "Exhibits," and "Schedules" are to Articles,
Sections, Subsections, Exhibits and Schedules, respectively, of this Warrant,
unless otherwise specifically provided. Terms defined herein may be used in
the singular or the plural. Any capitalized terms used herein which are not
specifically defined herein have the meaning given to them in the Amended and
Restated Credit Agreement.
ARTICLE II
ISSUANCE OF WARRANT; CLOSING
SECTION 2.1. ISSUANCE OF WARRANT. This Warrant evidences the right
to purchase, on or before 5:00 p.m. on the Expiration Date, a total of 187,500
shares of Common Stock of the Corporation as a price per share equal to the
Exercise Price. At the Closing Date, such shares of Common Stock represent
62.1% of the outstanding shares of Common Stock and 1.575% of the outstanding
shares of Common Stock on a fully diluted basis (which determination (a) assumes
the exercise of all outstanding options or Convertible Securities, whether or
not currently exercisable or convertible, and irrespective of the exercise or
conversion price and other related terms, and (b) not be made in accordance with
the "treasury method"). The number of Warrant Shares which may be purchased
upon exercise of such Warrant and the Exercise Price to be paid for such Warrant
Shares are subject to adjustment in the manner provided in Article 4.
ARTICLE III
REGISTRATION; EXCHANGE; TRANSFER; TAXES
SECTION 3.1. FORM OF WARRANT. The Company shall register this
Warrant in a warrant register (the "Warrant Register"). The Warrant Register
shall set forth the number of this Warrant, the name and address of the holder
(a "Holder"), and the original number of Warrant Shares purchasable upon the
exercise hereof. The Warrant Register will be maintained by the Corporation and
will be available for inspection by any Holder at the principal office of the
Corporation or such other location as the Corporation may designate to the
Holders in the manner set forth in Section 9.1. The Corporation shall be
entitled to treat the Holder of this Warrant as the owner in fact thereof for
all purposes and shall not be bound to recognize any equitable or other claim
to or interest in such Warrant on the part of any other persons. The
Corporation shall not be liable for complying with a request by a fiduciary or
nominee of a fiduciary to register a transfer of this Warrant which is
registered in the name of such fiduciary or nominee, unless made with the actual
knowledge that such fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer, or with knowledge of such facts that
the Corporation's participation therein amounts to bad faith.
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SECTION 3.2. EXCHANGE OF WARRANT FOR WARRANTS. (a) The Holder may
exchange this Warrant for another Warrant or Warrants of like kind and tenor
representing in the aggregate the right to purchase the same number of
Warrant Shares which could be purchased pursuant to this Warrant. In order
to effect an exchange permitted by this Section 3.2, the Holder shall deliver
to the Corporation this Warrant accompanied by a written request signed by
the Holder thereof specifying the number and denominations of Warrants to be
issued in such exchange and the names in which such Warrants are to be
issued. Within ten (10) Business Days of receipt of such a request, the
Corporation shall issue, register and deliver to the Holder thereof each
Warrant to be issued in such exchange.
(b) Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the Holder being satisfactory) of the ownership
and the loss, theft, destruction or mutilation of this Warrant, and in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Corporation (if the Holder is a creditworthy
financial institution or other creditworthy institutional investor its own
agreement being satisfactory) or, in the case of any such mutilation, upon
surrender of this Warrant, the Corporation shall (at its expense) execute and
deliver in lieu of this Warrant a new Warrant representing the same rights
represented by and dated the date of such lost, stolen, destroyed or
mutilated Warrant. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
any Person.
(c) The Corporation shall pay all taxes (other than any
applicable income or similar taxes payable by a Holder of this Warrant)
attributable to an exchange of this Warrant pursuant to this Section 3.2;
PROVIDED, HOWEVER, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance of any
Warrant in a name other than that of the Holder of this Warrant.
SECTION 3.3. TRANSFER WARRANT. (a) Subject to Section 3.3(c) hereof,
this Warrant may be transferred by the Holder by delivering to the Corporation
this Warrant accompanied by a properly completed Assignment Form. Within ten
(10) Business Days of receipt of such Assignment Form the Corporation shall
issue, register and deliver to the Holder, subject to Section 3(c) thereof a new
Warrant or Warrants of like kind and tenor representing in the aggregate the
right to purchase the same number of Warrant Shares which could be purchased
pursuant this Warrant. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or a copy thereof, duly certified, shall be
deposited and remain with the Corporation. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced and may be required to be
deposited and remain with the Corporation in its discretion.
(b) Each Warrant issued in accordance with this Section 3.3
shall bear the restrictive legend set forth on this Warrant, unless the Holder
or transferee thereof supplies to the Corporation an opinion of counsel,
reasonably satisfactory to the Corporation, that the restrictions described in
such legend are no longer applicable to such Warrant.
(c) The transfer Warrants and Warrant Shares shall be
permitted, so long as such transfer is pursuant to a transaction that
complies with, or is exempt from, the provisions of the Securities Act, and
the Corporation may require an opinion of counsel (which may be internal
counsel to a Holder) in form and substance reasonably satisfactory to it to
such effect prior to effecting any transfer of Warrants or Warrant Shares.
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ARTICLE IV
EXERCISE OF WARRANT: EXCHANGE FOR WARRANT SHARES
SECTION 4.1. EXERCISE OF WARRANTS. On any Business Day prior to the
Expiration Date, a Holder may exercise this Warrant, in whole or in part, by
delivering to the Corporation this Warrant accompanied by a properly completed
Exercise Form and a check in an aggregate amount equal to the product obtained
by multiplying (a) the Exercise Price by (b) the number of Warrant Shares being
purchased. Any partial exercise of such Warrant shall be for a whole number of
Warrant Shares only. At the option of the Holder, all or any portion of the
amount that would otherwise be required to be paid by the Holder by check may be
paid by the Holder's agreeing to reduce a like amount of principal of the term
loans outstanding under the Amended and Restated Credit Agreement (such
reduction to be effected net of any "success" fee payable to the Holder in
connection with such exercise and by reducing installments of such term loans in
the inverse order of the maturity thereof).
SECTION 4.2. EXCHANGE FOR WARRANT SHARES. On any Business Day prior
to the Expiration Date, a Holder may exchange this Warrant, in whole or in part,
for Warrant Shares by delivering to the Corporation this Warrant accompanied by
a properly completed Exchange Form. The number of shares of Common Stock to be
received by a Holder upon such exchange shall be equal to (a) the number of
Warrant Shares allocable to the portion of this Warrant being exchanged (the
"Allocable Number"), as specified by such Holder in the Exchange Form less (b)
the number of shares equal to the quotient obtained by dividing (i) the product
obtained by multiplying (A) the Exercise Price by (B) the Allocable Number of
Warrant Shares by (ii) the Market Price as of the close of business on the date
of delivery of the Exchange Form. The Allocable Number need not be a whole
number.
SECTION 4.3. ISSUANCE OF COMMON STOCK. (a) Within ten (10) Business
Days following the delivery date (the "Delivery Date") of (i) an Exercise Form
or Exchange Form in accordance with Section 4.1 or 4.2, (ii) this Warrant and
(iii) any required payments of the Exercise Price, the Corporation shall issue
and deliver to the Holder a certificate or certificates, registered in the name
or names set forth on such notice, representing the Warrant Shares being
purchased or to be received upon such exchange.
(b) If a Holder shall exercise or exchange this Warrant for less
than all of the Warrant Shares which could be purchased or received thereunder,
the Corporation shall issue to the Holder, within ten (10) Business Days of the
Delivery Date, a new Warrant evidencing the right to purchase the remaining
Warrant Shares. In the case of an exchange pursuant to Section 4.2, the number
of remaining Warrant Shares shall be the original number of Warrant Shares
subject to this Warrant so exchanged reduced by the Allocable Number of Warrant
Shares. Each Warrant surrendered pursuant to Section 4.1 or 4.2 shall be
canceled.
(c) The Corporation shall not be required to issue fractional
shares of Common Stock upon the exercise or exchange of this Warrant. If any
fraction of a share of Common Stock would be issuable on the exercise or
exchange of this Warrant, the Corporation may, in lieu of issuing such
fractional share, pay to such Holder for any such fraction of a share an amount
in cash equal to the product obtained by multiplying (i) such fraction by (ii)
the Market Price in effect on the Delivery Date.
(d) The Corporation shall pay all taxes (other than any
applicable income or similar taxes payable by a Holder of this Warrant)
attributable to the initial issuance of Warrant Shares upon the exercise or
exchange of this Warrant, PROVIDED, HOWEVER, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance of any Warrants or any certificate for Warrant Shares in a name
other than that of the Holder of this Warrant.
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(e) If permitted by Applicable Law, the person in whose name
any certificate for shares of Common Stock is issued upon exercise or
exchange of this Warrant shall for all purposes be deemed to have become the
holder of record of such shares on the Delivery Date, irrespective of the
date of delivery of such certificate, except that if the Delivery Date is a
date when the stock transfer books of the Corporation are closed, such person
shall be deemed to have become the holder of record of such shares at the
close of business on the next succeeding date on which the stock transfer
books are open.
(f) If any shares of Common Stock required to be reserved for
purposes of the exercise or exchange of this Warrant require registration or
approval under any Applicable Law, the Corporation will in good faith and as
expeditiously as possible cause such shares to be registered or seek such
approval, as applicable. The Corporation may suspend the exercise of any
Warrant so affected for the period during which such registration or approval is
required but not in effect.
(g) Any Exercise Form or Exchange Form delivered under Section
4.1 or 4.2 may condition the exercise or exchange of this Warrant on the
consummation of a sale contemplated by Section 5.3, 5.4, 5.5 or 5.6, or on the
consummation of a sale of Warrant Shares pursuant to a public offering
registered under the Securities Act, and such exercise or exchange shall not be
deemed to have occurred except concurrently with the consummation of any such
sale.
SECTION 4.4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES. The number and kind of Warrant Shares purchasable upon exercise of each
Warrant shall be subject to adjustment from time to time in accordance with this
Section 4.4.
SECTION 4.4.1. ADJUSTMENT UPON ISSUANCE OF COMMON STOCK. (a) If, at
any time after the Closing Date, the Corporation shall issue or sell (or, in
accordance with Section 4.4.1(b), shall be deemed to have issued or sold) any
shares of Common Stock without consideration or for a consideration per share
less than the Market Price determined as of the date of such issuance or sale,
then, effective immediately upon such issuance or sale, the Exercise Price shall
be reduced to an amount equal to the product obtained by multiplying (A) the
Exercise Price in effect immediately prior to such issuance or sale, by (B) a
fraction, the numerator of which shall be the sum of (x) the product obtained by
multiplying (1) the number of shares of Common Stock outstanding (on a Fully-
Diluted Basis) immediately prior to such issuance or sale by (2) the Market
Price as of the date of such issuance or sale, and (y) the consideration, if
any, received by the Corporation upon such issuance or sale, and the denominator
of which shall be the product obtained by multiplying (C) the number of shares
of Common Stock outstanding (on a Fully-Diluted Basis) immediately after such
issuance or sale, by (D) such Market Price. Upon each such adjustment of the
Exercise Price hereunder, the number of Warrant Shares which may be obtained
upon exercise of this Warrant shall be increased to the number of shares
determined by multiplying (A) the number of Warrant Shares which could be
obtained upon exercise of this Warrant immediately prior to such adjustment by
(B) a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
(b) For the purpose of determining the adjusted Exercise Price
under Section 4.4.1(a), the following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner issues or grants any rights or options to subscribe for or to
purchase (A) Common Stock or (B) any stock or other securities convertible
into or exchangeable for Common Stock (such rights or options being herein
called "Options" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), and the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Market Price determined as of the date of issuance or grant of such
Options, then the total maximum number of
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shares of Common Stock issuable upon the exercise of such Options
(or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options)
shall be deemed to be outstanding and to have been issued and sold
by the Corporation for such price per share. For purposes of this
paragraph, the price per share for which Common Stock is issuable
upon excercise of Options or upon conversion or exchange of
Convertible Securities issuable upon exercise of Options shall be
determined by dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the issuing or
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the
exercise of all such Options, plus in the case of such Options
which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the
Corporation upon issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon exercise of such
Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further
adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible
Securities upon the Exercise of such Options or upon actual
issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in any
manner issues or sells any Convertible Securities having an
exercise or conversion or exchange price per share of Common Stock
which is less than the Market Price determined as of the date of
such issuance or sale, then the maximum number of shares of Common
Stock issuable upon the conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been
issued and sold by the Corporation for such lower price per share.
For purposes of this paragraph, the price per share for which
Common Stock is issuable upon conversion or exchange of Convertible
Securities is determined by dividing (A) the total amount received
or receivable by the Corporation as consideration for the issuance
or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No
further adjustment of the Exercise Price shall be made upon the
actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities, and if any such issuance or sale of
such Convertible Securities is made upon exercise of any Options
for which adjustments of the Exercise Price had been or are
required to be made pursuant to other provisions of this Section
4.4.1(b), no further adjustment of the Exercise Price shall be made
by reason of such issuance or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issuance, conversion or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
change at any time, then the Exercise Price in effect at the time
of such change shall be readjusted to the Exercise Price which
would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or
sold and the number of Warrant Shares shall be correspondingly
readjusted.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination
of any right to convert or exchange any Convertible Securities
without the exercise of such Option or right, the Exercise Price
then in effect and the number of Warrant Shares acquirable
hereunder shall be adjusted to the Exercise Price and the number of
shares which would have been in effect at the time of such
expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
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(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, then the consideration received
therefor shall be deemed to be the net amount received by the
Corporation therefor. If any Common Stock, Options or Convertible
Securities are issued or sold for consideration other than cash,
then the amount of the consideration other than cash received by
the Corporation shall be the fair value of such consideration
determined by the Board of Directors of the Corporation.
(vi) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held
by or for the account of the Corporation or any Subsidiary of the
Corporation, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock.
(vii) RECORD DATE. If the Corporation maintains a record of the
holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale
of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
SECTION 4.4.2. SUBDIVISIONS OR COMBINATIONS OF COMMON STOCK. If, at
any time after the Closing Date, (a) the number of shares of Common Stock
outstanding is increased by a dividend or other distribution payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock or (b)
the number of shares of Common Stock outstanding is decreased by a combination
or reverse stock split of shares of Common Stock, then, in each case, effective
as of the effective date of such event retroactive to the record date, if any,
of such event, (i) the Exercise Price shall be adjusted to a price determined
by multiplying (A) the Exercise Price in effect immediately prior to such
event by (B) a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such event, and (ii) the number of Warrant
Shares subject to purchase upon the exercise of this Warrant shall be
adjusted effective at such time, to a number equal to the product of (A) the
number of Warrant Shares subject to purchase upon the exercise of this
Warrant immediately prior to such event by (B) a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding after giving
effect to such event and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event.
SECTION 4.4.3. CAPITAL REORGANIZATION OR CAPITAL RECLASSIFICATIONS.
If, at any time after the Closing Date, there shall be any capital
reorganization or any reclassification of the capital stock of the
Corporation (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the
Corporation shall cause effective provision to be made so that this Warrant
shall, effective as of the effective date of such event retroactive to the
record date, if any, of such event, be exercisable or exchangeable for the
kind and number of shares of stock, other securities, cash or other property
to which a holder of the number of shares of Common Stock deliverable upon
exercise or exchange of this Warrant would have been entitled upon such
reorganization or reclassification and any such provision shall include
adjustments in respect of such stock, securities or other property that shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Warrant.
SECTION 4.4.4. CONSOLIDATIONS AND MERGERS. If, at any time after the
Closing Date, the Corporation shall consolidate with, merge with or into, or
sell all or substantially all of its assets or property to, another corporation,
then the Corporation shall cause effective provision to be made so that this
Warrant shall, effective as of the effective date of such event retroactive to
the record date, if any, of such event, be exercisable or
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exchangeable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the number of shares of Common Stock
deliverable upon exercise or exchange of such Warrant would have been entitled
upon such event.
SECTION 4.4.5. NOTICE; CALCULATIONS; ETC. Whenever the Exercise
Price and the number of Warrant Shares shall be adjusted as provided in this
Section 4.4, the Corporation shall provide to the Holder of this Warrant a
statement, signed by an Executive Officer, describing in detail the facts
requiring such adjustment and setting forth a calculation of the Exercise Price
and the number of Warrant Shares applicable to this Warrant after giving effect
to such adjustment. All calculations under this Section 4.4 shall be made to
the nearest one hundredth of a cent ($.0001) or to the nearest one-tenth of a
share, as the case may be. Adjustments pursuant to Sections 4.4.1, 4.4.2 and
4.4.3 shall apply to successive events or transactions of the type covered
thereby.
SECTION 4.4.6. CERTAIN ADJUSTMENTS. (a). Subject to the limitations
set forth in Section 4.4, the Corporation may make such reductions in the
Exercise Price or increase in the number of Warrant Shares to be received by any
Holder upon the exercise or exchange of this Warrant, in addition to those
adjustments required by this Section 4.4, as it in its sole discretion shall
determine to be advisable in order that any consolidation or subdivision of the
Common Stock, or any issuance wholly for cash of any shares of Common Stock, or
any issuance wholly for cash of shares of Common Stock or securities which by
their terms are convertible into or exchangeable for shares of Common Stock, or
any stock dividend, or any issuance of rights, options or warrants hereinafter
made by the Corporation to the holders of its Common Stock shall not be taxable
to such holders.
(b). In the event that the Corporation in any manner issues or
grants Options or Convertible Securities, or any other transaction,
circumstances or events occur which give rise to anti-dilution adjustments under
Other Anti-Dilution Instruments, but not the Warrants, then the Corporation will
promptly make proportional, equitable and corresponding adjustments in the
number of shares of Common Stock issuable upon exercise of the Warrants to
protect the Holders against dilution as a result of such events.
SECTION 4.4.7. EXCLUDED TRANSACTIONS; INCLUDED TRANSACTIONS.
Notwithstanding any other provision of this Section 4.4, no adjustment shall be
made pursuant to this Section 4.4 in respect of the issuance of Excluded
Securities. Notwithstanding any other provision of this Section 4.4, Penalty
Warrants (as defined in the Securities Purchase Agreement) shall not be deemed
Excluded Securities and shall be deemed to have been issued by the Corporation
without consideration.
SECTION 4.4.8. ADJUSTMENT RULES. (a) Any adjustments pursuant to
this Section 4.4 shall be made successively whenever an event referred to herein
shall occur, except that, notwithstanding any other provision of this Section
4.4, no adjustment shall be made to the number of shares of Common Stock or to
the Exercise Price if such adjustment represents less than 1% of the number of
shares previously required to be so delivered, but any lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which together with any adjustments so carried
forward shall amount to 1% or more of the number of shares to be so delivered.
(b) Notwithstanding any other provision of this Warrant, the
actual amount payable by a Holder in connection with the exercise of this
Warrant shall not be less than the par value per share of the Common Stock,
unless and until the Exercise Price, as adjusted pursuant to this Section 4.4,
has been reduced to an amount less than 1% of the par value per share of the
Common Stock. Before taking any action which would cause an adjustment pursuant
to this Section 4.4 which would reduce the Exercise Price below 1% of the par
value per share, the Corporation shall be required to take any corporate action
which may be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
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SECTION 4.4.9. REGULATED HOLDERS. If, in the written opinion of
counsel to any Regulated Holder (which may be internal counsel), the receipt
by such Regulated Holder of Warrant Shares (or any security included therein)
upon any exercise or exchange pursuant to this Article IV would cause such
Regulated Holder to violate any provision of Applicable Law with respect to
its Ownership of voting securities of the Corporation, then the Corporation
will use its best efforts (including without limitation using its best
efforts to cause its Organizational Documents to be amended) to create an
Equivalent Nonvoting Security with respect to Warrant Shares (or any such
security included therein), and such Regulated Holder shall be entitled to
receive upon such exercise or exchange, in lieu of such number (as it shall
specify) of shares or other units of Warrant Shares (or any such security
included therein) otherwise receivable by such Regulated Holder, the same
number of shares or other units of such Equivalent Nonvoting Security.
ARTICLE V
CERTAIN OTHER RIGHTS
SECTION 5.1. PAYMENTS IN RESPECT OF DIVIDENDS AND DISTRIBUTIONS.
(a) If, at any time prior to the earlier of (i) the Expiration Date and (ii)
the consummation of a Qualified Public Offering, the Corporation pays any
dividend or makes any distribution (whether in cash, property, or securities
of the Corporation) on its capital stock which does not result in an
adjustment under Section 4.4, then the Corporation shall simultaneously pay
to the Holder of each Warrant the dividend or distribution which would have
been paid to such Holder on the Warrant Shares receivable upon the exercise
in full of such Warrant had such Warrant been fully exercised immediately
prior to the record date for such dividend or distribution or, if no record
is taken, the date as of which the record holders of Common Stock entitled to
such dividend or distribution are to be determined.
(b) If, in the written opinion of counsel to any Regulated
Holder (which counsel may be internal counsel), the distribution to such
Regulated Holder of any security of the Corporation pursuant to Section
5.1(a) would cause such Regulated Holder to violate any provision of
Applicable Law with respect to its Ownership of voting securities of the
Corporation, then the Corporation will use its best efforts (including,
without limitation, using its best efforts to cause its Organizational
Documents to be amended) to create an Equivalent Nonvoting Security with
respect to the security to be distributed and such Regulated Holder shall be
entitled to receive, in lieu of such number (as it shall specify) of shares
or other units of the security to be distributed pursuant to Section 5.1(a)
otherwise receivable by such Regulated Holder, the same number of shares or
other units of such Equivalent Nonvoting Security.
SECTION 5.2. PUT RIGHTS. (a) Not less than sixty (60) days prior to
any Put Event the Corporation shall give to each Holder written notice of such
Put Event (the "Put Event Notice"), which shall set forth in reasonable detail a
description of the transactions expected to result in such Put Event and the
anticipated effective date thereof.
(b) Subject to Section 5.2(a) hereof, if at any time (i)
within 50 days following delivery of a Put Event Notice (or at any time
following a Put Event if a Put Event Notice was required to be delivered to
the Holders pursuant to Section 5.3(a) but was not so delivered prior to the
occurrence of such Put Event or (ii) following the fifth anniversary of the
Closing Date, the Holder shall notify the Corporation in writing (the "Put
Notice") of its desire to cause the Corporation to repurchase all (but not
less than all) of the Warrant Shares issued or represented by this Warrant,
such Holder shall have the right to require the Corporation to repurchase all
(but not less than all) of the Warrant Shares (or Warrants) represented by
this Warrant (the "Put") at a price per share equal to the Put Price. Upon
delivery of the Put Notice, the Corporation shall give notice to all other
Holders, and such Holders shall have the right to participate in such Put by
so notifying the Corporation (a "Participation Notice") within twenty (20)
days (the "Participation Period") after receipt of such notice.
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(c) Upon the expiration of any Participation Period (or upon
delivery of a Put Notice, if there is only one Holder at the time of such
delivery), the Put Price shall be determined. Within ten (10) Business Days
following such determination (or, if applicable, upon consummation of the Put
Event if later), the Corporation shall purchase, and such Holders shall sell,
the number of Warrant Shares (or Warrants) specified in the Put Notice and
all Participation Notices at a mutually agreeable time and place (the "Put
Closing").
(d) If the Corporation shall not have funds legally available
in the amount necessary to purchase all Warrant Shares and Warrants with
respect to which the Put has been exercised, then the Warrant Shares and
Warrants with respect to which each Holder has exercised the Put shall be
repurchased on a PRO RATA basis, in accordance with the number of Warrant
Shares held by each Holder. Any Put not satisfied in full pursuant to the
terms of this Section 5.2 shall remain an obligation of the Corporation until
such time as such satisfaction shall have occurred and the Company shall pay
interest on the amount of such obligation at the Base Rate (as defined in the
Amended and Restated Credit Agreement) plus 5% from the Put Closing to the
date on which such amount is paid in full. In the event that, based on the
values of the Corporation's assets and liabilities reflected in the books and
records of the Corporation, it would be unlawful, under applicable state
corporation laws, for it to purchase put shares, or pay the Put Price
therefor, the Corporation hereby agrees, if and to the extent permitted by
the Amended and Restated Credit Agreement and any other borrowing agreements
of the Corporation then in place and applicable law, to revalue its assets
and liabilities based upon their current fair market value, and to take such
other action as may be necessary, to cause such purchase to no longer be
unlawful.
(e) At the Put Closing, each Holder that has provided the
Corporation with a Participation Notice shall deliver to the corporation such
Holder's Warrant Shares or Warrants representing Warrant Shares and the
Corporation shall deliver to such Holder an amount equal to the product,
obtained by multiplying (i) the number of such Warrant Shares (issued or
represented by outstanding Warrants) by (ii) the Put Price (less, in the case
of the repurchase of Warrants, the per share exercise price), by cashier's or
certified check of a creditworthy bank payable to such Holder or by wire
transfer of immediately available funds to an account designated by such
Holder.
(f) After the Closing Date, the Corporation shall not grant
any other rights similar to the Put that are exercisable prior to the time at
which the Put is exercised or that are not expressly subordinated to the Put,
in form and substance reasonably acceptable to the Holders, to the rights of
Holders pursuant to the Put; PROVIDED, HOWEVER, that the Corporation shall be
entitled to grant put rights on a pari passu basis with the Put to a creditor
(or creditors) in connection with a refinancing by such creditor (or
creditors) of all obligations of the Corporation under the Amended and
Restated Credit Agreement. The Corporation shall not (and shall not permit
any Subsidiary of the Corporation to) enter into any contract or other
consensual arrangement that by its terms restricts the Corporation's ability
to honor the Put.
(g) Notwithstanding anything contained herein to the
contrary, the rights set forth in this Section 5.2 shall cease to be
exercisable upon the consummation of a Qualified Public Offering. However,
irrespective of the foregoing, the rights set forth in this Section 5.2 shall
be reinstated if, after the consummation of a Qualified Public Offering, (i)
Rule 144 under the Securities Act becomes unavailable to the Holders due to
actions or omissions by the Corporation or (ii) the Corporation ceases to be
subject to Sections 12(b) or 12(g) under the Exchange Act.
(h) After the Closing Date, the Corporation shall not enter
into any agreement, understanding or transaction other than the Amended and
Restated Credit Agreement pursuant to which the Company shall be required, or
makes a covenant, representation or warranty, to prevent or to contractually
impair the exercise of the put rights provided for in this Section 5.2 or the
obligation of the Corporation to pay the Put Price. If the Company is
unable, pursuant to the Amended and Restated Credit Agreement or in
accordance with applicable corporation statutes, to purchase all of the
Warrants and/or Warrant Shares which are the subject of a Put Notice,
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the Corporation shall if so requested in writing by the Holders exercising
put rights, (i) purchase in accordance with the Put Notice the maximum number
of such Warrants and/or Warrant Shares put which the Company may purchase and
(ii) in one or more installments, at the earliest time that the Company may
lawfully or contractually do so, purchase all remaining Warrants and/or
Warrant Shares put and pay interest at the Base Rate (as defined in the
Amended and Restated Credit Agreement) plus 5% on the amount of the aggregate
Put Price attributable to such remaining Warrants and/or Warrant Shares from
the Put Closing to the date on which such amount is paid in full. In the
event that, based on the values of the Corporation's assets and liabilities
reflected in the books and records of the Corporation, it would be unlawful,
under applicable state corporation laws, for it to purchase put shares, or
pay the Put Price therefor, the Corporation hereby agrees, if and to the
extent permitted by the Amended and Restated Credit Agreement and any other
borrowing agreements of the Corporation then in place and applicable law, to
revalue its assets and liabilities based upon their current fair market
value, and to take such other action as may be necessary, to cause such
purchase to no longer be unlawful.
(i) Notwithstanding anything contained herein to the
contrary, the rights of the Holders in relation to the holders of warrants
(other than Penalty Warrants (as defined in the Securities Purchase
Agreement)) issued pursuant to the Senior Subordinate Documents and the
Securities Purchase Agreement shall be as set forth in clauses (b) and (c) of
the Senior Subordinate Agreement (including, without limitation, that any
obligation of the Corporation shall be evidenced by a promissory note due
within 366 days and bearing interest at a rate of 14% per annum); PROVIDED,
HOWEVER, that clauses (b) and (c) of Section 7.03 of the Senior Subordinate
Agreement shall not be amended or modified without the prior consent of the
Holder.
SECTION 5.3. CALL RIGHTS. (a) Subject to Section 5.3(e), the
Corporation shall have the right, at any time after the fifth anniversary of
the Closing Date, to purchase all (but not less than all) of the Warrant
Shares (issued or represented by outstanding Warrants) held by all Holders
(the "Call") at a price per Warrant Share equal to the Call Price (less, in
the case of a repurchase of Warrants, the per share exercise price). The
Corporation may exercise the Call by delivering at least 10 days' prior
written notice (the "Call Notice") to the Holders. Upon delivery of the Call
Notice, the Call Price shall be determined.
(b) The closing (the "Call Closing") of the purchase of
Warrant Shares and Warrants pursuant to the Call shall take place, within 10
days following determination of the Call Price, at a mutually agreeable
place. At the Call Closing, the Corporation shall purchase from the Holders,
and the Holders shall sell to the Corporation, all of the Warrants and
Warrant Shares then held by the Holders at a price per share equal to the
Call Price.
(c) At the Call Closing, each Holder shall deliver to the
Corporation its Warrant Shares (or Warrants representing Warrant Shares),
against payment of an amount equal to the product obtained by multiplying (i)
the number of such Warrant Shares (or Warrant Shares represented by Warrants)
being repurchased by (ii) the Call Price (less, in the case of the repurchase
of Warrants, the aggregate exercise price for the Warrant Shares represented
thereby), by cashier's or certified check of a creditworthy bank payable to
such Holder or, at the option of such Holder, by wire transfer of immediately
available funds to an account designated by such Holder.
(d) If within twelve (12) months following the exercise of
the Call pursuant to clause (ii) of Section 5.3(a)(i) all or substantially
all of the Corporation's consolidated assets are sold for a consideration
that implies a value of the Corporation's equity per share of Common Stock
(on a Fully-Diluted Basis) which exceeds the Call Price, (ii) a merger or
consolidation of the Corporation at a consideration per share of Common Stock
(on a Fully-Diluted Basis) in excess of the Call Price, or (iii) ten percent
(10%) or more of the Common Stock outstanding as of the date of the Call
Notice is sold in a single transaction or series of related transactions, or
a public offering registered under the Securities Act is consummated, at a
price per share in excess of the Call Price, or (iv) a transaction occurs
under which a Holder would have had co-sale rights under Section 5 of the
Shareholders Agreement, then, in any such case, upon consummation of any such
transaction, each Holder shall
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be entitled to receive from the Corporation an amount in cash equal to such
excess multiplied by the number of Warrant Shares sold by such Holder under the
Call, payable by certified or cashier's check (of a bank reasonably acceptable
to such Holder) or wire transfer of immediately available funds to an account
designated by such Holder. In the event any issuance or sale during such 12-
month period is for non-cash consideration, the fair value of such consideration
shall be determined in accordance with the Valuation Procedure.
(e) Notwithstanding anything contained herein to the contrary,
the rights set forth in this Section 5.3 shall be subject to the terms of the
Amended and Restated Credit Agreement, and shall cease to be exercisable upon
the consummation of a Qualified Public Offering.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. By the
acceptance hereof, the Holder of this Warrant represents that it is acquiring
the Warrant for its own account for investment purposes only and not with a view
to any distribution or public offering in violation of the Securities Act.
SECTION 6.2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to the Holder of this Note as
follows:
(a) ORGANIZATION. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, has all requisite power and
authority and has all material governmental licenses, approvals,
consents and authorizations necessary to own its property and assets
and to carry on its business as currently conducted and is qualified
to do business in each jurisdiction in which the nature of the
business conducted or the property owned or leased by it requires such
qualification except where the failure to be so qualified or licensed
would not have a material adverse effect on the business, condition,
operations or properties of the Corporation.
(b) CORPORATE POWER AND AUTHORITY; NO REQUIRED CONSENTS OR
APPROVALS. (i) The Corporation has the power to execute, deliver and
perform its obligations under this Warrant and the Registration Rights
Agreement.
(ii) The execution, delivery and performance by the Corporation
of this Warrant and the Registration Rights Agreement, the issuance of
Warrants and the issuance of Warrant Shares upon exercise of each
Warrant, have been duly authorized by all required corporate and
stockholder action of the Corporation and will not (i) violate any
provision of Applicable Law, any Organizational Document, or any
indenture or other material agreement or instrument to which the
Corporation is a party or by which the Corporation or any of its
properties are or may be bound, (ii) conflict with result in a breach
of or constitute (alone or with notice or lapse of time or both) a
default under any such indenture or other material agreement or
instrument to which the Corporation is a party, or by which the
Corporation or any of its properties are or may be bound, (iii)
results in the creation or imposition of any Lien upon any property of
the Corporation or (iv) require registration or filing with, or
consent, approval or any other action by any Governmental Authority
(other than any registration, filing, consent or approval or other
action that has been provided, granted or taken, as the case may be).
(c) ENFORCEABILITY. This Warrant and the Registration Rights
Agreement have been duly executed and delivered by the Corporation and
each constitute a legal, valid, binding and enforceable obligation of
the Corporation except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar event
affecting the enforcement of creditors rights generally and except as
enforceability may be subject to general principles of equity, whether
such
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principles are applied in a court of equity. The Warrant Shares, when
issued upon the exercise or exchange of a Warrant in accordance with
the terms hereof, will be duly authorized, validly issued, fully paid
and nonassessable shares of the Common Stock with no personal
liability attaching to the ownership thereof.
(d) CREDIT AGREEMENT. Each of the representations and
warranties of the Corporation set forth in or under the Amended and
Restated Credit Agreement is true and correct in all material
respects, and are hereby incorporated herein, with the same effect as
if stated in their entirety herein.
ARTICLE VII
COVENANTS OF THE CORPORATION
SECTION 7.1. NOTICES OF CERTAIN ACTIONS. (a) In the event that the
Corporation:
(i) shall authorize issuance to all holders of Common Stock of
rights or warrants to subscribe for or purchase capital stock of the
Corporation or of any other subscription rights or warrants; or
(ii) shall authorize a dividend or other distribution to all
holders of Common Stock of evidences of its indebtedness, cash or
other property or assets; or
(iii) proposes to become a party to any consolidation or merger
for which approval of any stockholders of the Corporation will be
required, or to a conveyance or transfer of the properties and assets
of the Corporation substantially as an entirety, or of any capital
reorganization or reclassification or change of the Common Stock
(other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination); or
(iv) commences a voluntary or involuntary dissolution,
liquidation or winding up;
(v) commences a Qualified Public Offering;
(vi) defaults under this Warrant; or
(vii) proposes to take any other action which would require an
adjustment pursuant to Section 4.4;
then the Corporation shall provide a written notice to the Holder stating (i)
the date as of which the holders of record of Common Stock to be entitled to
receive any such rights, warrants or distribution are to be determined, (ii) the
material terms of any such consolidation or merger and the expected effective
date thereof, or (iii) the material terms of any such conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, conveyance, transfer, dissolution,
liquidation or winding up. Such notice shall be given not later than twenty
(20) Business Days prior to the effective date (or the applicable record date,
if earlier) of such event. The failure to give the notice required by this
Section 7.1 or any defect therein shall not affect the legality or validity of
any distribution, right, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.
SECTION 7.2 FINANCIAL STATEMENTS AND REPORTS. The Corporation shall
furnish to the Holder hereof:
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(a) as soon as available but in any event within ninety (90)
days after the end of each Fiscal Year (commencing with the Fiscal Year ending
December 31, 1996), consolidated balance sheets, income statements and cash flow
statements of the Corporation and its Subsidiaries, showing its financial
condition as of the close of such Fiscal Year and the results of its operations
during such year, all the foregoing financial statements to be audited by
independent accountants of nationally recognized standing and prepared in
accordance with GAAP (subject to year end adjustments);
(b) as soon as available but in any event within thirty (30)
days after the end of each Fiscal Quarter, the unaudited consolidated balance
sheets, income statements and cash flow statements, showing the financial
condition and results of operations of the Corporation, as at the end of each
such Fiscal Quarter and for the then elapsed portion of the Fiscal Year, in each
case prepared in accordance with GAAP;
(c) as soon as practicable and in any event not less than 30
days prior to the end of each fiscal year of the Corporation, an annual
operating budget for the Corporation for the succeeding fiscal year, containing
budget of profit and loss and cash flow (the "Budget"). Promptly upon
preparation thereof, the Corporation will furnish to the Holder any revisions
of such previously furnished Budgets; and
(d) promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which the Corporation
shall have provided to its stockholders of filed with the Securities and
Exchange Commission or any national securities exchange;
SECTION 7.3. INFORMATION RIGHTS. The Holder of this Warrant shall
have all of the rights of a holder of Common Stock under Applicable Law, whether
or not such holder has exercised or exchanged any Warrants, to receive lists of
stockholders or other information respecting the Corporation, to inspect the
books and records of the Corporation and to visit the properties of the
Corporation.
SECTION 7.4. REGULATED HOLDERS. (a) Notwithstanding any other
provision of this Warrant to the contrary, except as provided in this Section
7.4, without the prior written consent of any Regulated Holder, the Corporation
shall not redeem, purchase or otherwise acquire, directly or indirectly,
convert, take any action (including any amendment to an Organizational Document)
with respect to the voting rights of, or undertake any other action or
transaction (including without limitation any merger, consolidation or
recapitalization) affecting, any shares of its capital stock or other voting
securities if the result of this foregoing would be to cause the Ownership of
the capital stock of any Person by such Regulated Holder, or the Ownership of
voting securities of any Person (or any class thereof) by such Regulated Holder,
to exceed the quantity of such capital stock or voting securities (or any class
thereof) that such Regulated Holder is permitted under Applicable Law to Own.
Any section or transaction referred to in the preceding sentence shall be
referred to herein as a "Section 7.4 Transaction". The Corporation shall be
permitted to undertake any Section 7.4 Transaction which would otherwise result
in the Ownership by any Regulated Holder of voting securities (or any class
thereof) in excess of the quantity permitted by Applicable Law if, in a manner
reasonably satisfactory to such Regulated Holder, the Corporation shall provide
or cause to be provided for such Regulated Holder (i) to receive in connection
with any such action or transaction a number of shares or other units of
Equivalent Nonvoting Securities equal to such excess in lieu of the same number
of shares or other units of the voting securities it would otherwise have
received or (ii) if it would not otherwise have received voting securities in
connection with such action or transaction, to exchange a number of shares or
other units of voting securities then held by such Regulated Holder equal to
such excess for the same number of shares or other units of Equivalent Nonvoting
Securities. If the Corporation proposes to undertake any action or transaction
which could constitute a Section 7.4 Transaction, it shall provide the Holders
at least 15 days prior written notice thereof. If, in the written opinion of
counsel to any Regulated Holder (which may be internal counsel) delivered within
10 days following receipt of such notice, such action or transaction constitutes
a Section 7.4 Transaction with respect to such Regulated Holder, then the
Corporation shall delay undertaking such Section 7.4 Transaction for the purpose
of using its best efforts to agree on a manner in which to restructure such
action or transaction in a manner reasonably satisfactory to the
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Corporation and such Regulated Holder so that it no longer would constitute a
Section 7.4 Transaction. If the Corporation and such Regulated Holder are
unable to agree, within 20 days of the delivery of such written opinion, upon
a manner in which to so restructure such Section 7.4 Transaction and such
Section 7.4 Transaction is a bona fide action or transaction proposed by the
Corporation in good faith, then the Corporation shall be permitted to
undertake such Section 7.4 Transaction if prior to or concurrently with doing
so it purchases from such Regulated Holder, at a purchase price equal to the
Put Market Value Per Share, a number (specified by such Regulated Holder) of
Warrants (based on the number of Warrant Shares represented thereby) or
Warrant Shares sufficient, in the written opinion of counsel to such
Regulated Holder (which may be internal counsel), to prevent such Section 7.4
Transaction from causing the Ownership of the capital stock of any Person by
such Regulated Holder to exceed the quantity of such capital stock that such
Regulated Holder is permitted under Applicable Law to Own.
(b) If it becomes unlawful for any Regulated Holder to continue to
hold some or all of the Warrants or Warrant Shares held by it, or restrictions
are imposed on any Regulated Holder by Applicable Law which, in the reasonable
judgment of such Regulated Holder, make it unduly burdensome to continue to hold
such Warrants or Warrant Shares, the Corporation shall (i) cooperate with such
Regulated Holder in any efforts by such Regulated Holder to dispose of some or
all of such Warrants or Warrant Shares in a prompt and orderly manner, including
without limitation providing (and authorizing such Regulated Holder to provide)
financial and other information concerning the Corporation to any prospective
purchaser of such Warrants or Warrant Shares and (ii) at the request of such
Regulated Holder, take all steps (including without limitation using it best
efforts to cause its Organizational Documents to be amended) necessary to create
an Equivalent Nonvoting Security with respect to the Warrant Shares then held by
such Regulated Holder and permit such Regulated Holder to exchange Warrant
Shares for the same number of shares or other units of such Equivalent Nonvoting
Security; PROVIDED, HOWEVER, that nothing in this Section 7.4(b) shall require
the Corporation to register or qualify such Warrants or Warrant Shares under any
federal or state securities laws.
SECTION 7.5. MERGER OR CONSOLIDATION OF THE CORPORATION. The
Corporation will not merge or consolidate with or into, or sell, transfer, or
lease all or substantially all of its property to, any other corporation or
partnership unless the successor or purchasing entity, as the case may be (if
not the Corporation), is organized under the laws of the United States of
America or any state or political subdivision thereof and shall expressly
agree to provide to the Holder the securities, cash or property required by
Section 4.4.4 hereof upon the exercise or exchange of Warrants and expressly
assumes, by supplemental agreement reasonably satisfactory in form and
substance to each Holder, the due and punctual performance and observance of
each and every covenant and condition of this Warrant to be performed and
observed by the Corporation; PROVIDED, HOWEVER, that the initial obligation
of such successor with respect to the exercise or exchange of Warrants shall
be only as set forth in Section 4.4.4.
SECTION 7.6 RESERVATION OF SHARES. The Corporation will at all
times have authorized, and reserve and keep available, free from preemptive
rights, for the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon the exercise or exchange of each Warrant, the number of
shares of Common Stock deliverable upon exercise or exchange of all
outstanding Warrants.
SECTION 7.7 CURRENT PUBLIC INFORMATION. At all times after the
Corporation has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act, the Corporation will file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder, and will take such further action as any holder or holders of
restricted securities may reasonably request, all to the extent required to
enable such holders to sell Restricted Securities pursuant to Rule 144 or Rule
144A adopted by the Securities and Exchange Commission under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and
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Exchange Commission. Upon request, the Company will deliver to such holders a
written statement as to whether it has complied with such requirements.
SECTION 7.8 PUBLIC DISCLOSURES. The Corporation will not disclose
any Holder's name or identity as an investor in the Company in any press release
or other public announcement or in any written consent of such Holder, unless
such disclosure is required by applicable law or governmental regulations or by
order of a court of competent jurisdictions in which case prior to making such
disclosure the Company will given written notice on such Holder describing in
reasonable detail the proposed content of such disclosure and will permit the
Holder to review and comment upon the form and substance of such disclosure.
ARTICLE VIII.
GUARANTEE
SECTION 8.1 THE GUARANTEE. Subject to the limitations set forth in
Section 8.8 hereof, the Subsidiaries of the Corporation identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto (individually, a
"Subsidiary Guarantor" and, collectively, "Subsidiary Guarantors") hereby
jointly and severally guarantee to the Holder and its respective successors and
assigns the prompt payment in full when due of all amounts from time to time
owing to the Holder by the Corporation under this Warrant, in each case strictly
in accordance with the terms hereof (such obligations being herein collectively
called the "Guaranteed Obligations"). The Subsidiary Guarantors hereby further
jointly and severally agree that if the Corporation shall fail to pay in full
when due any of the Guaranteed Obligations, the Subsidiary Guarantors will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due in accordance with
the terms of such extension or renewal.
SECTION 8.2 OBLIGATIONS UNCONDITIONAL. Subject to the limitations
set forth in Section 8.8 hereof, the obligations of the Subsidiary Guarantors
under Section 8.1 hereof are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Corporation under this Warrant or any other agreement
or instrument referred to herein, or any substitution, release or exchange of
any other guarantee of or security for any of the Guaranteed Obligations, and,
to the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 8.2 that the obligations of the Subsidiary Guarantors hereunder shall be
absolute and unconditional, joint and several, under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of the Subsidiary Guarantors hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Warrant or any other agreement or instrument referred to herein or
therein shall be done or omitted; or
(iii) any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Warrant or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part otherwise dealt with.
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The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all motions whatsoever, and any requirement that the
Holder exhaust any right, power or remedy or proceed against the Corporation
under this Warrant or any other agreement or instrument referred to herein, or
against any other Person under any other guarantee of, or security for, any of
the Guaranteed Obligations.
SECTION 8.3 REINSTATEMENT. The obligations of the Subsidiary
Guarantors under this Section 8 shall be automatically reinstated if and to
the extent that for any reason any payment by or on behalf of the Corporation
in respect of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of any of the Guaranteed Obligations, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise and
the Subsidiary Guarantors jointly and severally agree that they will
indemnify the Holder on demand for all reasonable costs and expenses
(including, without limitation, fees of counsel) incurred by such in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
SECTION 8.4 SUBROGATION. Each Subsidiary Guarantor hereby waives all
rights of subrogation or contribution, whether arising by contract or operation
of law (including, without limitation, any such right arising under the Federal
Bankruptcy Code of 1978, as amended) or otherwise by reason of any payment by it
pursuant to the provisions of this Section 8 and each Subsidiary Guarantor
further agrees with the Corporation for the benefit of each of its creditors
(including, without limitation, the Holder) that any such payment by it shall
constitute a contribution of capital by such Subsidiary Guarantor to the
Corporation (or an investment in the equity capital of the Corporation by such
Subsidiary Guarantor).
SECTION 8.5 CONTINUING GUARANTEE. The guarantee in this Section 8 is
a continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
SECTION 8.6 RIGHTS OF CONTRIBUTION. The Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the
payment by such Subsidiary Guarantor of any Guaranteed Obligations, each
other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor
(but subject to the next sentence), pay to such Excess Funding Guarantor an
amount equal to such subsidiary Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the Properties, debts
and liabilities of such Excess Funding Guarantor) of the Excess Payment (as
defined below) in respect of such Guaranteed Obligations. The payment
obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under
this Section 8.6 shall be subordinate and subject in right of payment to the
prior payment in full of the obligations of such Subsidiary Guarantor under
the other provisions of this Section 8 and such Excess Funding Guarantor
shall not exercise any right or remedy with respect to such excess until
payment and satisfaction in full of all of such obligations.
For purposes of this Section 8.6, (i) "Excess Funding Guarantor"
shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor
that has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its
Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share"
shall mean, for any Subsidiary Guarantor, the ratio (expressed as a
percentage) of (x) the amount by which the aggregate present fair saleable
value of all Properties of such Subsidiary Guarantor (excluding any shares of
stock of any other Subsidiary Guarantor) exceeds the amount of all the debts
and liabilities of such Subsidiary Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Subsidiary Guarantor hereunder and any obligations of any
other Subsidiary Guarantor that have been Guaranteed by such Subsidiary
Guarantor) to (y) the amount by which the aggregate fair saleable value of
all Properties of the Corporation and all of the Subsidiary Guarantors
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Corporation and the Subsidiary Guarantors hereunder) of
the Corporation.
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and all of the Subsidiary Guarantors, all as of the Closing Date. If any
Subsidiary becomes a Subsidiary Guarantor hereunder subsequent to the Closing
Date, then for the purposes of this Section 8.6 such subsequent Subsidiary
Guarantor shall be deemed to have been a Subsidiary Guarantor as of the Closing
Date and the aggregate present fair saleable value of the Properties, and the
amount of the debts and liabilities, of such Subsidiary Guarantor as of the
Closing Date shall be deemed to be equal to such value and amount on the date
such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.
SECTION 8.7 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action
or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 8.1 hereof would otherwise, taking into account the provisions of
Section 8.7 hereof, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on
account of the amount of its liability under said Section 8.1, then,
notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by such Subsidiary
Guarantor, the Holder or any other Person, be automatically limited and
reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
SECTION 8.8 LIMITATION ON KERNER'S LIABILITY. It is understood and agreed
that the sole recourse of the Holder in respect of the obligations of Tri-Star
Technologies under this Section 8 shall be to the assets of Tri-Star
Technologies and that nothing contained herein shall create any obligation of or
right to look to Alexander Kerner or his assets individually for the
satisfaction of such obligations.
SECTION 8.9 LIMITATION ON GUTERMANN'S LIABILITY. It is understood and
agreed that the sole recourse of the Holder in respect of the obligations of
Unidec under this Section 8 shall be to the assets of Unidec and that nothing
contained herein shall create any obligation of or right to look to Silvia
Gutermann or her assets individually for the satisfaction of such obligations.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, demands and requests of any kind to be
delivered to any party hereto in connection with this Warrant shall be in
writing (i) delivered personally, (ii) sent by nationally-recognized overnight
courier, (iii) sent by first class, registered or certified mail, return receipt
requested or (iv) sent by facsimile, in each case to such party at its address
as follows (or such other address as shall be notified in writing):
(a) if to the Corporation, to:
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: R. Jack DeCrane
Telephone: 330-668-2518
Telecopier: 330-668-3061
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<PAGE>
(b) if to ING, to:
Internationale Nederlanden (U.S.)
Capital Corporation
135 East 57th Street
New York, New York 10021
Attention: Corporate Finance Department
Telephone: 212/409-1521
Telecopier: 212/593-3362
Any notice, demand or request so delivered shall constitute valid notice under
this Warrant and shall be deemed to have been received (i) on the day of actual
delivery in the case of personal delivery, (ii) on the next Business Day after
the date when sent in the case of delivery by nationally-recognized overnight
courier, (iii) on the fifth Business Day after the date of deposit in the U.S.
mail in the case of mailing or (iv) upon receipt in the case of a facsimile
transmission.
SECTION 9.2. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. No Warrant shall
entitle the holder thereof to any voting rights or, except as otherwise provided
herein, other rights of a stockholder of the Corporation, as such. No provision
hereof, in the absence of affirmative action by the Holder to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder
shall give rise to any liability of such Holder for the Exercise Price of
Warrant Shares acquirable by exercise hereof or as a stockholder of the
Corporation.
SECTION 9.3. AMENDMENTS AND WAIVERS. Any provision of this Warrant may be
amended or waived, but only pursuant to a written agreement signed by the
Corporation, the Subsidiary Guarantors and the Holder.
SECTION 9.4. SEVERABILITY. Any provision of this Warrant which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Warrant
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.5. SPECIFIC PERFORMANCE. Each Holder shall have the right to
specific performance by the Corporation of the provisions of this Warrant, in
addition to any other remedies it may have at law or in equity. The Corporation
hereby irrevocably waives, to the extent that it may do so under applicable law,
any defense based on the adequacy of a remedy at law which may be asserted as a
bar to the remedy of specific performance in any action brought against the
Corporation for specific performance of this Warrant by the Holders of the
Warrants or Warrant Shares.
SECTION 9.6. BINDING EFFECT. This Warrant shall be binding upon and inure
to the benefit of the Corporation, each Holder and their respective successors
and assigns.
SECTION 9.7. ENTIRE AGREEMENT; GOVERNING LAW. THIS WARRANT (INCLUDING,
WITHOUT LIMITATION, THE OBLIGATIONS OF UNIDEC UNDER SECTION 8 HEREOF) SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Warrant
constitutes the entire understanding among the parties hereto with respect to
the subject matter hereof and supersede any prior agreements, written or oral,
with respect thereto. In the event of any conflict between the terms of this
Warrant and the terms of the Registration Rights Agreement or Shareholders
Agreement (except with respect to limitations on the transfer of Warrants and
Warrant Shares set forth therein), the terms of this Warrant shall be deemed to
govern.
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<PAGE>
SECTION 9.8. BENEFITS OF THIS WARNING. Nothing in this Warrant shall be
construed to give to any person other than the Corporation and each Holder of a
Warrant or a Warrant Share any legal or equitable right, remedy or claim
hereunder.
SECTION 9.9. HEADINGS. The various headings of this Warrant are inserted
for convenience only and shall not affect the meaning or interpretation of this
Warrant or any provisions hereof or thereof.
SECTION 9.10. INDEMNIFICATION. The Corporation shall indemnify, defend
and hold the Holder harmless against all liability, loss or damagte, together
with all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), arising from, relating to, or connected with the
untruth, inaccuracy or breach of any representations, warranties or covenants
contained herein.
SECTION 9.11. EXPENSES. The Corporation will promptly (and in any event
within thirty (30) days of having any material or invoice therefor) pay all
reasonable fans, expenses and costs relating hereto, including, but not limited
to, (i) all transfer, stamp, documentary or other similar notes, assignments or
charges levied by any governmental or revenue authority in respect hereof or any
other document referred to herein, (ii) fees and expenses (including, without
limitation, reasonable attorneys' fees) incurred in respect of the enforcement
by Holders of the rights granted to Holders under this Warrant, and (iii) the
expenses relating to the consideration, organization, preparation or execution
of any amendments, waivers or consents requested by the Corporation pursuant to
the provisions hereof, whether or not any such amendments, waivers or consents
are executed.
SECTION 9.12. ATTORNEYS' FEES. In any action or proceeding brought by a
party to enforce any provision of this Warrant, the prevailing party shall be
entitled to recover the reasonable costs and expenses incurred by it in
connection with that action or proceeding (including, but not limited to,
attorneys' fees).
SECTION 9.13. FILINGS. The Corporation shall, at its own expense,
promptly execute and deliver, or cause to be executed and delivered, to the
Holder all applications, certificates, instruments and all other documents and
papers that such holder of Warrants may reasonably request in connection with
the obtaining of any consent, approval, qualification, or authorization of any
federal, provincial, state or local government (or any agency or commission
thereof) necessary or appropriate in connection with, or for the effective
exercise of, any Warrants then held by such holder.
SECTION 9.14. OTHER TRANSACTIONS. Nothing contained herein shall preclude
the Holder from engaging in any transaction. In addition to those contemplated
by this Warrant with the Corporation or any of its Affiliates in which the
Corporation or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 9.15. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF THE HOLDERS, THE CORPORATION OR THE SUBSIDIARY GUARANTORS SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; THE
CORPORATION AND THE SUBSIDIARY GUARANTORS EACH HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
CORPORATION AND THE SUBSIDIARY GUARANTORS EACH FURTHER IRREVOCABLY
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CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE CORPORATION AND
THE SUBSIDIARY GUARANTORS EACH HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE CORPORATION OR ANY SUBSIDIARY
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE CORPORATION AND THE SUBSIDIARY GUARANTORS EACH
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
WARRANT.
SECTION 9.16. WAIVER OF JURY TRIAL. THE HOLDERS, THE CORPORATION AND
THE SUBSIDIARY GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE HOLDERS, THE CORPORATION OR THE SUBSIDIARY GUARANTORS. THE
CORPORATION AND EACH OF THE SUBSIDIARY GUARANTORS ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER ACQUIRING THIS WARRANT.
IN WITNESS WHEREOF, DeCrane Aircraft Holdings, Inc. and each
Subsidiary Guarantor has caused this Warrant to be duly executed and delivered
by its authorized officers, all as of the date and year first above written.
DECRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R Jack DeCrane
------------------------------
Name:
Title:
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<PAGE>
SUBSIDIARY GUARANTORS
---------------------
ADS ACQUISITION, INC.
By /s/ R Jack De Crane
------------------------------
Title:
TRI-STAR HOLDINGS, INC.
By /s/ R Jack DeCrane
-------------------------------
Title:
TRI-STAR ELECTRONICS INTERNATIONAL, INC.
By /s/ R Jack DeCrane
-------------------------------
Title:
TRI-STAR TECHNOLOGIES, INC.
By /s/ R Jack DeCrane
-------------------------------
Title:
TRI-STAR TECHNOLOGIES
By Tri-Star Technologies,
Inc., as general partner
By /s/ R Jack DeCrane
--------------------------
Title:
TRI-STAR ELECTRONICS EUROPE S.A.,
MEZZOVICO
By /s/ [illegible]
-------------------------------
Title:
CORY HOLDINGS, INC.
By R Jack DeCrane
-------------------------------
Title:
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CORY COMPONENTS, INC.
By /s/ R Jack DeCrane
-------------------------------
Title:
HOLLINGSEAD INTERNATIONAL, INC.
By /s/ R Jack DeCrane
-------------------------------
Title:
HOLLINGSEAD INTERNATIONAL LIMITED
By /s/ R Jack DeCrane
-------------------------------
Title:
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<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC.
Common Stock Purchase Warrant
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II ISSUANCE OF WARRANT; CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.1. Issuance of Warrant. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III REGISTRATION; EXCHANGE; TRANSFER; TAXES. . . . . . . . . . . . . . . . . . . 9
SECTION 3.1 Form of Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.2 Exchange of Warrant for Warrants . . . . . . . . . . . . . . . . . . . 10
SECTION 3.3 Transfer of Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES. . . . . . . . . . . . . . . 11
SECTION 4.1 Exercise of Warrants . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.2 Exchange for Warrant Shares. . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.3 Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.4 Adjustment of Exercise Price and Number of Warrant Shares. . . . . . 12
SECTION 4.4.1. Adjustment upon Issuance of Common Stock . . . . . . . . . . . . . . 12
SECTION 4.4.2. Subdivisions or Combinations of Common Stock . . . . . . . . . . . . 14
SECTION 4.4.3. Capital Reorganization or Capital Reclassifications. . . . . . . . . 14
SECTION 4.4.4. Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.4.5. Notice; Calculations; Etc. . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.4.6. Certain Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.4.7. Excluded Transactions; Included Transactions . . . . . . . . . . . . 15
SECTION 4.4.8. Adjustment Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.4.9. Regulated Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V CERTAIN OTHER RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.1. Payments in Respect of Dividends and Distributions . . . . . . . . . . 16
SECTION 5.2. Put Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.3. Call Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.1. Representations and Warranties of the Holder . . . . . . . . . . . . . 19
SECTION 6.2. Representations and Warranties of the Corporation. . . . . . . . . . . 19
ARTICLE VII COVENANTS OF THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.1. Notices of Certain Actions . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.2. Financial Statements and Reports . . . . . . . . . . . . . . . . . . . 20
SECTION 7.3. Information Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.4. Regulated Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.5. Merger or Consolidation of the Corporation . . . . . . . . . . . . . . 22
SECTION 7.6. Reservation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.7. Current Public Information . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.8. Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE VIII. GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.1 The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.2 Obligations Unconditional . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.3 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.4 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.5 Continuing Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.6 Rights of Contribution. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.7 General Limitation on Guarantee Obligations . . . . . . . . . . . . . . 25
SECTION 8.8 Limitation on Kerner's Liability. . . . . . . . . . . . . . . . . . . . 25
SECTION 8.9 Limitation on Gutermann's Liability . . . . . . . . . . . . . . . . . . 25
ARTICLE IX. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9.2. No Voting Rights; Limitations of Liability . . . . . . . . . . . . . . 26
SECTION 9.3. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 9.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 9.5. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 9.6. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 9.7. Entire Agreement; Governing Law. . . . . . . . . . . . . . . . . . . . 26
SECTION 9.8. Benefit of this Warrant. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.9. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.10. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.11. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.12. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.13. Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.14. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.15. Forum Selection and Consent to Jurisdiction. . . . . . . . . . . . . . 27
SECTION 9.16. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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<PAGE>
EXECUTION COPY
--------------
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. E-1
Number of Shares of Common Stock: 195,023
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. WARRANT VALUE . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. MANNER OF EXERCISE .. . . . . . . . . . . . . . . . . . . . 6
2.3. PAYMENT OF TAXES .. . . . . . . . . . . . . . . . . . . . . 7
2.4. FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . 7
2.5. CONTINUED VALIDITY .. . . . . . . . . . . . . . . . . . . . 7
3. TRANSFER, DIVISION AND COMBINATION .. . . . . . . . . . . . . . . 7
3.1. TRANSFER .. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . 8
3.3. EXPENSES .. . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4. MAINTENANCE OF BOOKS .. . . . . . . . . . . . . . . . . . . 8
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS .. . . . . . 8
4.2. CERTAIN OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . 9
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK . . . . . . . 10
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS . . . . . . . 11
4.5. ISSUANCE OF CONVERTIBLE SECURITIES .. . . . . . . . . . . . 12
4.6. SUPERSEDING ADJUSTMENT. . . . . . . . . . . . . . . . . . . 12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION . . . . . . . . . . . . . . . . . . . . . . . 13
(a) COMPUTATION OF CONSIDERATION . . . . . . . . . . . . . 13
(b) WHEN ADJUSTMENTS TO BE MADE .. . . . . . . . . . . . . 14
(c) FRACTIONAL INTERESTS . . . . . . . . . . . . . . . . . 15
(d) WHEN ADJUSTMENT NOT REQUIRED . . . . . . . . . . . . . 15
(e) ESCROW OF WARRANT STOCK .. . . . . . . . . . . . . . . 15
(f) CHALLENGE TO GOOD FAITH DETERMINATION. . . . . . . . . 15
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS . . . . . . . . . . 15
4.9. OTHER ACTION AFFECTING COMMON STOCK . . . . . . . . . . . . 16
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS . . . . 17
4.11. CERTAIN REDUCTIONS . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANT HOLDERS. . . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS . . . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION. . . . . . . . . . . . . 18
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY . . . 18
8. PUT RIGHTS .. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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<PAGE>
9. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . 19
9.1. RESTRICTIVE LEGEND. . . . . . . . . . . . . . . . . . . . . 19
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION . . 20
10. LOSS OR MUTILATION. . . . . . . . . . . . . . . . . . . . . . . . 20
11. FINANCIAL AND BUSINESS INFORMATION. . . . . . . . . . . . . . . . 20
12. APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . 21
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.1. NONWAIVER AND EXPENSES . . . . . . . . . . . . . . . . . . 21
14.2. NOTICE GENERALLY . . . . . . . . . . . . . . . . . . . . . 21
14.3. VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 22
14.5 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . 23
14.7. OFFICE OF THE COMPANY. . . . . . . . . . . . . . . . . . . 23
14.8. INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 23
14.9. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.10. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . 23
14.11. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 20,
1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES E WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NASSAU CAPITAL PARTNERS L.P., a limited
partnership organized under the laws of the State of Delaware ("Nassau
Capital"), or registered assigns (such person, together with any permitted
transferee, is referred to herein as the "Holder"), is entitled, beginning on
the Effective Date and at any time prior to the Expiration Date, to purchase
from DeCRANE AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that
number of shares of Common Stock (as defined herein) which shall be initially
equal to the Warrant Value (as defined herein), and which is subject to
adjustment as provided herein, at a purchase price equal to the Current Warrant
Price, which shall be initially equal to $0.01 per share and which is subject to
adjustment as provided herein. This Warrant is issued in connection with the
Holder's purchase on the date hereof of Series D Convertible Preferred Stock
pursuant to the Securities Purchase Agreement. Capitalized terms used but not
otherwise defined in this Warrant shall have the meanings ascribed to such terms
in the Securities Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement and (y) the Series E, F and G warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase Warrant, dated as of November 2, 1994, of the Company in favor of
Internationale Nederlanden (U.S.) Capital Corporation, (iv) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of The Provident Bank, (v) shares of Common Stock
issuable under the Senior Subordinate Loan and Warrant Purchase Agreement, dated
October 15, 1991, as amended, among Banc One Capital Partners Corporation, the
Company and certain of its Subsidiaries, (vi) shares of Common Stock issuable
upon conversion or exercise of the Company's convertible preferred stock and
warrants outstanding on the Closing Date and (vii) Common Stock issued to or
issuable upon conversion or exercise of options to directors, officers,
employees or consultants of the Company, provided that the aggregate amount of
all such Common Stock shall not exceed 17.05% of the Common Stock outstanding on
a Fully Diluted basis as of the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common
Stock as of any date herein specified, (y) the price that would be paid for
the entire common equity interest in the Company on a going-concern basis in
a single arm's-length transaction between a willing buyer and a willing
seller (neither acting under compulsion), using valuation techniques then
prevailing in the securities industry and always determined in accordance
with the valuation procedures set forth in Section 12, and assuming full
disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale, divided by (z) the number of
shares of Common Stock outstanding on a Fully Diluted basis. For purposes of
determining the Appraised Value, (i) the exercise price of options or
warrants to acquire Common Stock which are deemed to have been exercised for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis shall be deemed to have been received by the
Company, (ii) the liquidation preference or indebtedness, as the case may be,
represented by securities which are deemed exercised for or converted into
Common Stock for the purpose of determining the number of shares of Common
Stock outstanding on a Fully Diluted basis, (iii) any contract limitation in
respect of the shares of Common Stock, including their transfer, voting and
other rights and, (iv) any illiquidity arising by contract law in respect of
the shares of Common Stock and any voting rights or control rights amongst
the shareholders of the Company shall be deemed to have been eliminated or
cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
<PAGE>
3
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial statements
for the most recently ended fiscal quarter, or (ii) a valuation per share of
Common Stock in an amount equal to (y) the product of (A) 5.67 times (B) the
Company's EBITDA less Capital Expenditures (each as defined in the Electra
Agreement) permitted under the Electra Agreement, in each event for the twelve-
month period preceding the most recently ended fiscal quarter, with such product
reduced by (z) principal amounts outstanding under the Credit Agreement and the
Electra Agreement or (iii) the Appraised Value per share of Common Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean December 31, 1997.
<PAGE>
4
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Expiration Date" shall mean December 31, 2003.
"Fully Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registered Public Offering" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of February 20, 1996, by and among the Company,
Nassau Capital Partners L.P. and NAS.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
<PAGE>
5
"Triggering Event" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Value" shall have the meaning set forth in Section 2.1.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. WARRANT VALUE. The number of shares for which this Warrant
shall be exercisable (the "WARRANT VALUE") shall be determined in accordance
with the following, subject to adjustment as provided in Section 4 hereof:
(a) if as of the Effective Date no Registered Public Offering and no
Triggering Event shall have occurred, the Warrant Value shall be 195,023 shares;
or
(b) if one or more Registered Public Offerings shall have occurred prior
to the Effective Date and no Triggering Event shall have occurred, the Warrant
Value shall be determined on the Effective Date by reference to the value of the
total common equity of the Company, on a Fully Diluted basis (the "EQUITY MARKET
VALUE"), realized on the closing date of each such Registered Public Offering in
accordance with the following: if the highest Equity Market Value realized on
the closing date of any Registered Public Offering is
(i) equal to or greater than $60,000,000 but less than $65,000,000,
then the Warrant Value shall be 146,268 shares;
(ii) equal to or greater than $65,000,000 but less than $70,000,000,
then the Warrant Value shall be 97,512 shares;
(iii) equal to or greater than $70,000,000 but less than $75,000,000,
then the Warrant Value shall be 48,756 shares.
<PAGE>
6
(c) if a Triggering Event shall have occurred prior to the
Effective Date, then the Warrant Value shall be zero and the
Warrant shall be null and void as of the date of such Triggering
Event.
2.2. MANNER OF EXERCISE. From and after the date of the earlier to
occur of (i) a Registered Public Offering and (ii) the Effective Date, and until
5:00 P.M. New York time on the Expiration Date, the Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder; PROVIDED, HOWEVER, that if Section 2.1(c) is
applicable, then this Warrant shall be void as of the date of occurrence of such
Triggering Event.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President, and also at 155 Montrose
West Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer,
or at the office or agency designated by the Company pursuant to Section 14.7,
(i) a written notice of the Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
the Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check and this Warrant, is received by the
Company as described above and all taxes, if any, required to be paid prior to
the issuance of such shares have been paid pursuant to Section 2.2. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of the Holder, appropriate
<PAGE>
7
notation may be made on this Warrant and the same returned to the Holder.
2.3. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.4. FRACTIONAL SHARES. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.5. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company referred to in Section 2.2 or the office or
agency designated by the Company pursuant to Section 14.7, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by the Holder or its agent or attorney. Upon such surrender, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant
<PAGE>
8
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of
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9
Common Stock which a record holder of the same number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the occurrence of such
event, and (ii) the Current Warrant Price shall be adjusted to equal the product
of (A) the Current Warrant Price prior to the occurrence of such event
multiplied by (B) a fraction, the numerator of which is the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment and the denominator of which is the number of shares for which this
Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market Price per share of
Common Stock minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined pursuant to Section
4.7(a), including as to an opinion from an investment banking firm) of any and
all such evidences of indebtedness, shares of stock, other than securities or
property or warrants or other subscription or purchase rights so distributable;
and (ii) the Current Warrant Price shall be adjusted to equal (A) the Current
Warrant Price multiplied by (B) a fraction, the numerator of which shall be the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment and the denominator of which shall be the
number of shares for which this Warrant is exercisable immediately after such
adjustment. A reclassification of the Common Stock (other than a
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10
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common
Stock are issued, then (i) the number of shares of Common Stock for which
this Warrant is exercisable shall be adjusted to equal the product of (A) the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale multiplied by (B) a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale and the denominator of which shall be
the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issue or sale plus (y) the number of shares which the aggregate
offering price of the total number of such Additional Shares of Common Stock
would purchase at the then Current Market Price; and (ii) the Current Warrant
Price as to the number of shares for which this Warrant is exercisable prior
to such adjustment shall be adjusted by multiplying (A) such Current Warrant
Price by (B) a fraction, the numerator of which
<PAGE>
11
shall be the number of shares for which this Warrant is exercisable immediately
prior to such issue or sale and the denominator of which shall be the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such issue or sale.
(c) If at any time the Company (except as hereinafter provided)
shall issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants, options or other rights or
upon conversion or exchange of such Convertible Securities shall be less than
the Current Warrant Price or the Current Market Price in effect immediately
prior to such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of actual issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price shall
<PAGE>
12
be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants, options or other rights or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current Warrant
Price shall be made by reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment
of the number of shares of Common Stock for which this Warrant is exercisable
and of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the
<PAGE>
13
case may be, shall not have been exercised, then such previous adjustment shall
be rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be made
of the effect of such warrants, options or rights or Convertible Securities on
the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case subtracting
any amounts paid or receivable for accrued interest or accrued dividends and
without taking into account any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such issuance shall
be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Company. In case any Additional
Shares of Common Stock or any Convertible
<PAGE>
14
Securities or any warrants, options or other rights to subscribe for or purchase
such Additional Shares of Common Stock or Convertible Securities shall be issued
in connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional Shares of
Common Stock, Convertible Securities, warrants, options or other rights, as the
case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as
<PAGE>
15
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm selected by the Company and reasonably acceptable to
such Holder (or, if more than one Warrant is outstanding, to holders of a
majority of Warrant Stock issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock,
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16
consolidate or merge with or into another corporation (where there is a change
in or distribution with respect to the Common Stock of the Company other than a
subdivision, combination or exchange otherwise provided for herein), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation (herein
referred to as "Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then each Holder shall have the right
thereafter to receive, upon exercise of such Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every term and condition of this Warrant to he performed and observed by the
Company and all the obligations and liabilities hereof, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.8 "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrants, options or other rights to subscribe for or
purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements
<PAGE>
17
related thereto, but excluding antidilution or other adjustment rights with
respect to the Banc One Warrant (as defined in the Electra Agreement) and the
Warrants, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable upon
exercise of the Warrants to protect the holders thereof against dilution as a
result of such events.
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
4.11. CERTAIN REDUCTIONS. The number of shares of Common Stock for
which this Warrant is exercisable shall be reduced by a number of shares of
Common Stock equal to two percent (2%) of the sum of (i) the number of shares of
Common Stock issuable to the holders of the Series B warrants issued in
connection with the transactions contemplated by the Electra Agreement (the
"Series B Warrants"), if prior to the date of exercise of this Warrant a
Triggering Event as defined in the Electra Agreement has occurred and the Series
B Warrants have been voided, (ii) the number of shares of Common Stock issuable
to the holders of the Series C warrants issued in connection with the
transactions contemplated by the Electra Agreement (the "Series C Warrants"), if
prior to the date of exercise of this Warrant a Triggering Event as defined in
the Electra Agreement has occurred and the Series C Warrants have been voided,
(iii) the number of shares of Common Stock issuable to the holders of the Series
D warrants issued in connection with the transactions contemplated by the
Electra Agreement (the "Series D Warrants"), if prior to the date of exercise of
this Warrant a Triggering Event as defined in the Electra Agreement has occurred
and the Series D Warrants have been voided and (iv) the number of shares of
Common Stock that have been authorized for issuance upon conversion or exercise
of options to directors, officers or employees of the Company which are not
issued as of the date of exercise of this Warrant.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which
<PAGE>
18
such adjustment was calculated and specifying the Current Warrant Price and the
number of shares of Common Stock for which this Warrant is exercisable after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 14.2. The Company shall keep at its office or agency designated pursuant
to Section 14.7 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by the
Holder or any prospective purchaser of a Warrant designated by the Holder
thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for
issuance upon the exercise of this Warrant such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding warrants. The Company covenants that all shares of
Common Stock which shall be so issuable, when issued upon exercise of any
Warrant and payment therefor in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable.
<PAGE>
19
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may he necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to he reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 7.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
<PAGE>
20
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant, the holder of such Warrant shall give
five days' prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, including a description of the
manner and circumstances of the proposed Transfer and, if requested by the
Company, an opinion from counsel to such holder that the proposed Transfer of
such Warrant may be effected without registration under the 1933 Act. After
delivery of the Transfer Notice, the holder shall be entitled to Transfer
such Warrant in accordance with the terms of the Transfer Notice. Each
Warrant issued upon such Transfer shall bear the restrictive legend set forth
in Section 9.1, unless such legend is not required in order to ensure
compliance with the 1933 Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of Nassau Capital Partners L.P. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 5.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a majority of the Warrant Stock issuable upon exercise of the
Warrants) within thirty (30) days following the event requiring such
determination or (ii) in the absence of such an agreement, by an Appraiser (as
defined below) selected as set forth below. If required, an Appraiser shall be
selected within ten (10) days following the expiration of the 30-day period
referred to above, either by agreement among the Company and the Holder (or, if
there is more than one Warrant outstanding, to holders of a majority of the
Warrant Stock issuable upon exercise of the Warrants) or, in the absence of such
agreement, by lot from a list of four potential Appraisers remaining after the
Company nominates three, the Holder (or, if there is more than one
<PAGE>
21
Warrant outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) nominates three, and each side eliminates one
potential Appraiser. The Appraiser shall be instructed by the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) to make
its determination within thirty (30) days of its selection. All fees and
expenses of an Appraiser selected hereunder shall be borne solely by the
Company. As used herein, "Appraiser" shall mean a nationally recognized
investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings. Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
<PAGE>
22
DeCrane Aircraft Holdings. Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
<PAGE>
23
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Nassau Capital or any other holder hereof. The provisions of
this Warrant are intended to be for the benefit of all holders from time to time
of this Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder of
a Warrant and each holder of Warrant Stock in supplying such information as may
be reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: February 20, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rauk
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to whose address is
and, if such shares of Common Stock shall not include all
of the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
Dated:
------------------------
---------------------------------------
(Name of Registered Owner)
---------------------------------------
(Signature of Registered Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of Decrane
Aircraft Holdings, Inc. maintained for the purpose, with full power of
substitution in the premises.
Dated:
------------------------
------------------------------
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
EXECUTION COPY
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. E-2
Number of Shares of Common Stock: 1,067
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. WARRANT VALUE . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. MANNER OF EXERCISE .. . . . . . . . . . . . . . . . . . . . 6
2.3. PAYMENT OF TAXES .. . . . . . . . . . . . . . . . . . . . . 7
2.4. FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . 7
2.5. CONTINUED VALIDITY .. . . . . . . . . . . . . . . . . . . . 7
3. TRANSFER, DIVISION AND COMBINATION .. . . . . . . . . . . . . . . 7
3.1. TRANSFER .. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . 8
3.3. EXPENSES .. . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4. MAINTENANCE OF BOOKS .. . . . . . . . . . . . . . . . . . . 8
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS .. . . . . . 8
4.2. CERTAIN OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . 9
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK . . . . . . . 10
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS . . . . . . . 11
4.5. ISSUANCE OF CONVERTIBLE SECURITIES .. . . . . . . . . . . . 12
4.6. SUPERSEDING ADJUSTMENT. . . . . . . . . . . . . . . . . . . 12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION . . . . . . . . . . . . . . . . . . . . . . . 13
(a) COMPUTATION OF CONSIDERATION . . . . . . . . . . . . . 13
(b) WHEN ADJUSTMENTS TO BE MADE .. . . . . . . . . . . . . 14
(c) FRACTIONAL INTERESTS . . . . . . . . . . . . . . . . . 15
(d) WHEN ADJUSTMENT NOT REQUIRED . . . . . . . . . . . . . 15
(e) ESCROW OF WARRANT STOCK .. . . . . . . . . . . . . . . 15
(f) CHALLENGE TO GOOD FAITH DETERMINATION. . . . . . . . . 15
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS . . . . . . . . . . 15
4.9. OTHER ACTION AFFECTING COMMON STOCK . . . . . . . . . . . . 16
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. . . . . 17
4.11. CERTAIN REDUCTIONS. . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANT HOLDERS .. . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS . . . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION .. . . . . . . . . . . . 18
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY. . . 18
8. PUT RIGHTS .. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . 19
9.1. RESTRICTIVE LEGEND. . . . . . . . . . . . . . . . . . . . . 19
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . 20
10. LOSS OR MUTILATION. . . . . . . . . . . . . . . . . . . . . . . . 20
11. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . . . . 20
12. APPRAISAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . . 21
14. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.1. NONWAIVER AND EXPENSES. . . . . . . . . . . . . . . . . . . 21
14.2. NOTICE OF GENERALLY . . . . . . . . . . . . . . . . . . . . 21
14.3. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 22
14.5 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . 23
14.7. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . . 23
14.8. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 23
14.9. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.10. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . 23
14.11. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 20,
1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES E WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NAS PARTNERS I L.L.C., a limited liability
company organized under the laws of the State of Delaware ("NAS"), or
registered assigns (such person, together with any permitted transferee, is
referred to herein as the "Holder"), is entitled, beginning on the Effective
Date and at any time prior to the Expiration Date, to purchase from DeCRANE
AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that number of
shares of Common Stock (as defined herein) which shall be initially equal to
the Warrant Value (as defined herein), and which is subject to adjustment as
provided herein, at a purchase price equal to the Current Warrant Price,
which shall be initially equal to $0.01 per share and which is subject to
adjustment as provided herein. This Warrant is issued in connection with the
Holder's purchase on the date hereof of Series D Convertible Preferred Stock
pursuant to the Securities Purchase Agreement. Capitalized terms used but
not otherwise defined in this Warrant shall have the meanings ascribed to
such terms in the Securities Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement and (y) the Series E, F and G warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase Warrant, dated as of November 2, 1994, of the Company in favor of
Internationale Nederlanden (U.S.) Capital Corporation, (iv) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of The Provident Bank, (v) shares of Common Stock
issuable under the Senior Subordinate Loan and Warrant Purchase Agreement, dated
October 15, 1991, as amended, among Banc One Capital Partners Corporation, the
Company and certain of its Subsidiaries, (vi) shares of Common Stock issuable
upon conversion or exercise of the Company's convertible preferred stock and
warrants outstanding on the Closing Date and (vii) Common Stock issued to or
issuable upon conversion or exercise of options to directors, officers,
employees or consultants of the Company, provided that the aggregate amount of
all such Common Stock shall not exceed 17.05% of the Common Stock outstanding on
a Fully Diluted basis as of the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common
Stock as of any date herein specified, (y) the price that would be paid for
the entire common equity interest in the Company on a going-concern basis in
a single arm's-length transaction between a willing buyer and a willing
seller (neither acting under compulsion), using valuation techniques then
prevailing in the securities industry and always determined in accordance
with the valuation procedures set forth in Section 12, and assuming full
disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale, divided by (z) the number of
shares of Common Stock outstanding on a Fully Diluted basis. For purposes of
determining the Appraised Value, (i) the exercise price of options or
warrants to acquire Common Stock which are deemed to have been exercised for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis shall be deemed to have been received by the
Company, (ii) the liquidation preference or indebtedness, as the case may be,
represented by securities which are deemed exercised for or converted into
Common Stock for the purpose of determining the number of shares of Common
Stock outstanding on a Fully Diluted basis, (iii) any contract limitation in
respect of the shares of Common Stock, including their transfer, voting and
other rights and, (iv) any illiquidity arising by contract law in respect of
the shares of Common Stock and any voting rights or control rights amongst
the shareholders of the Company shall be deemed to have been eliminated or
cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
<PAGE>
3
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial statements
for the most recently ended fiscal quarter, or (ii) a valuation per share of
Common Stock in an amount equal to (y) the product of (A) 5.67 times (B) the
Company's EBITDA less Capital Expenditures (each as defined in the Electra
Agreement) permitted under the Electra Agreement, in each event for the twelve
month period preceding the most recently ended fiscal quarter, with such product
reduced by (z) principal amounts outstanding under the Credit Agreement and the
Electra Agreement or (iii) the Appraised Value per share of Common Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean December 31, 1997.
<PAGE>
4
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Expiration Date" shall mean December 31, 2003.
"Fully Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registered Public Offering" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of February 20, 1996, by and among the Company,
Nassau Capital Partners L.P. and NAS.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
<PAGE>
5
"Triggering Event" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Value" shall have the meaning set forth in Section 2.1.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. WARRANT VALUE. The number of shares for which this Warrant
shall be exercisable (the "WARRANT VALUE") shall be determined in accordance
with the following, subject to adjustment as provided in Section 4 hereof:
(a) if as of the Effective Date no Registered Public Offering and no
Triggering Event shall have occurred, the Warrant Value shall be 1,067 shares;
or
(b) if one or more Registered Public Offerings shall have occurred prior
to the Effective Date and no Triggering Event shall have occurred, the Warrant
Value shall he determined on the Effective Date by reference to the value of the
total common equity of the Company, on a Fully Diluted basis (the "EQUITY MARKET
VALUE"), realized on the closing date of each such Registered Public Offering in
accordance with the following: if the highest Equity Market Value realized on
the closing date of any Registered Public Offering is
(i) equal to or greater than $60,000,000 but less than $65,000,000,
then the Warrant Value shall be 801 shares;
(ii) equal to or greater than $65,000,000 but less than $70,000,000,
then the Warrant Value shall be 534 shares;
(iii) equal to or greater than $70,000,000 but less than $75,000,000,
then the Warrant Value shall be 267 shares.
<PAGE>
6
(c) if a Triggering Event shall have occurred prior to the Effective Date,
then the Warrant Value shall be zero and the Warrant shall be null and void as
of the date of such Triggering Event.
2.2. MANNER OF EXERCISE. From and after the date of the earlier to
occur of (i) a Registered Public Offering and (ii) the Effective Date, and until
5:00 P.M. New York time on the Expiration Date, the Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder; PROVIDED, HOWEVER, that if Section 2.1(c) is
applicable, then this Warrant shall be void as of the date of occurrence of such
Triggering Event.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President, and also at 155 Montrose
West Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer,
or at the office or agency designated by the Company pursuant to Section 14.7,
(i) a written notice of the Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
the Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall he deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check and this Warrant, is received by the
Company as described above and all taxes, if any, required to be paid prior to
the issuance of such shares have been paid pursuant to Section 2.2. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of the Holder, appropriate
<PAGE>
7
notation may be made on this Warrant and the same returned to the Holder.
2.3. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.4. FRACTIONAL SHARES. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.5. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company referred to in Section 2.2 or the office or
agency designated by the Company pursuant to Section 14.7, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by the Holder or its agent or attorney. Upon such surrender, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant
<PAGE>
8
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of
<PAGE>
9
Common Stock which a record holder of the same number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the occurrence of such
event, and (ii) the Current Warrant Price shall be adjusted to equal the product
of (A) the Current Warrant Price prior to the occurrence of such event
multiplied by (B) a fraction, the numerator of which is the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment and the denominator of which is the number of shares for which this
Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market Price per share of
Common Stock minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined pursuant to Section
4.7(a), including as to an opinion from an investment banking firm) of any and
all such evidences of indebtedness, shares of stock, other than securities or
property or warrants or other subscription or purchase rights so distributable;
and (ii) the Current Warrant Price shall be adjusted to equal (A) the Current
Warrant Price multiplied by (B) a fraction, the numerator of which shall be the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment and the denominator of which shall be the
number of shares for which this Warrant is exercisable immediately after such
adjustment. A reclassification of the Common Stock (other than a
<PAGE>
10
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to equal the product of (A) the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale multiplied by (B) a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such issue
or sale and the denominator of which shall be the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issue or sale plus
(y) the number of shares which the aggregate offering price of the total number
of such Additional Shares of Common Stock would purchase at the then Current
Market Price; and (ii) the Current Warrant Price as to the number of shares for
which this Warrant is exercisable prior to such adjustment shall be adjusted by
multiplying (A) such Current Warrant Price by (B) a fraction, the numerator of
which
<PAGE>
11
shall be the number of shares for which this Warrant is exercisable immediately
prior to such issue or sale and the denominator of which shall be the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such issue or sale.
(c) If at any time the Company (except as hereinafter provided)
shall issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants, options or other rights or
upon conversion or exchange of such Convertible Securities shall be less than
the Current Warrant Price or the Current Market Price in effect immediately
prior to such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of actual issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price shall
<PAGE>
12
be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants, options or other rights or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current Warrant
Price shall be made by reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment
of the number of shares of Common Stock for which this Warrant is exercisable
and of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the
<PAGE>
13
case may be, shall not have been exercised, then such previous adjustment shall
be rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be made
of the effect of such warrants, options or rights or Convertible Securities on
the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case subtracting
any amounts paid or receivable for accrued interest or accrued dividends and
without taking into account any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such issuance shall
be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Company. In case any Additional
Shares of Common Stock or any Convertible
<PAGE>
14
Securities or any warrants, options or other rights to subscribe for or purchase
such Additional Shares of Common Stock or Convertible Securities shall be issued
in connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional Shares of
Common Stock, Convertible Securities, warrants, options or other rights, as the
case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as
<PAGE>
15
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm selected by the Company and reasonably acceptable to
such Holder (or, if more than one Warrant is outstanding, to holders of a
majority of Warrant Stock issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION. MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock,
<PAGE>
16
consolidate or merge with or into another corporation (where there is a change
in or distribution with respect to the Common Stock of the Company other than a
subdivision, combination or exchange otherwise provided for herein), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation (herein
referred to as "Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then each Holder shall have the right
thereafter to receive, upon exercise of such Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every term and condition of this Warrant to he performed and observed by the
Company and all the obligations and liabilities hereof, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.8 "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrants, options or other rights to subscribe for or
purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether Outstanding
at the Closing Date or hereafter issued and together with any agreements
<PAGE>
17
related thereto, but excluding antidilution or other adjustment rights with
respect to the Banc One Warrant (as defined in the Electra Agreement) and the
Warrants, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable upon
exercise of the Warrants to protect the holders thereof against dilution as a
result of such events.
4.10. TAKING OF RECORD: STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
4.11. CERTAIN REDUCTIONS. The number of shares of Common Stock for
which this Warrant is exercisable shall be reduced by a number of shares of
Common Stock equal to two percent (2%) of the sum of (i) the number of shares of
Common Stock issuable to the holders of the Series B warrants issued in
connection with the transactions contemplated by the Electra Agreement (the
"Series B Warrants"), if prior to the date of exercise of this Warrant a
Triggering Event as defined in the Electra Agreement has occurred and the Series
B Warrants have been voided, (ii) the number of shares of Common Stock issuable
to the holders of the Series C warrants issued in connection with the
transactions contemplated by the Electra Agreement (the "Series C Warrants"), if
prior to the date of exercise of this Warrant a Triggering Event as defined in
the Electra Agreement has occurred and the Series C Warrants have been voided,
(iii) the number of shares of Common Stock issuable to the holders of the Series
D warrants issued in connection with the transactions contemplated by the
Electra Agreement (the "Series D Warrants"), if prior to the date of exercise of
this Warrant a Triggering Event as defined in the Electra Agreement has occurred
and the Series D Warrants have been voided and (iv) the number of shares of
Common Stock that have been authorized for issuance upon conversion or exercise
of options to directors, officers or employees of the Company which are not
issued as of the date of exercise of this Warrant.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which
<PAGE>
18
such adjustment was calculated and specifying the Current Warrant Price and the
number of shares of Common Stock for which this Warrant is exercisable after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 14.2. The Company shall keep at its office or agency designated pursuant
to Section 14.7 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by the
Holder or any prospective purchaser of a Warrant designated by the Holder
thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for
issuance upon the exercise of this Warrant such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding warrants. The Company covenants that all shares of
Common Stock which shall be so issuable, when issued upon exercise of any
Warrant and payment therefor in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable.
<PAGE>
19
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may he necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 7.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
<PAGE>
20
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of NAS Partners I L.L.C. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 5.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a majority of the Warrant Stock issuable upon exercise of the
Warrants) within thirty (30) days following the event requiring such
determination or (ii) in the absence of such an agreement, by an Appraiser (as
defined below) selected as set forth below. If required, an Appraiser shall be
selected within ten (10) days following the expiration of the 30-day period
referred to above, either by agreement among the Company and the Holder (or, if
there is more than one Warrant outstanding, to holders of a majority of the
Warrant Stock issuable upon exercise of the Warrants) or, in the absence of such
agreement, by lot from a list of four potential Appraisers remaining after the
Company nominates three, the Holder (or, if there is more than one
<PAGE>
21
Warrant outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) nominates three, and each side eliminates one
potential Appraiser. The Appraiser shall be instructed by the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) to make
its determination within thirty (30) days of its selection. All fees and
expenses of an Appraiser selected hereunder shall be borne solely by the
Company. As used herein, "Appraiser" shall mean a nationally recognized
investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings. Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
<PAGE>
22
DeCrane Aircraft Holdings. Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
<PAGE>
23
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of NAS or any other holder hereof. The provisions of this Warrant
are intended to be for the benefit of all holders from time to time of this
Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder of
a Warrant and each holder of Warrant Stock in supplying such information as may
be reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: February 20, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rauk
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of shares of Common Stock of
DeCrane Aircraft Holdings, Inc., and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to whose address is
and, if such shares of Common Stock shall not include all
of the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
Dated:
------------------------
---------------------------------------
(Name of Registered Owner)
---------------------------------------
(Signature of Registered Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint __________________________
____________ attorney-in-fact to register such transfer on the books of Decrane
Aircraft Holdings, Inc. maintained for the purpose, with full power of
substitution in the premises.
Dated:
------------------------
---------------------------------------
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
EXHIBIT 10.28
EXECUTION COPY
--------------
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. F-1
Number of Shares of Common Stock: 195,023
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT. . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . 5
2.2. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . 6
2.3. FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . . . 6
2.4. CONTINUED VALIDITY . . . . . . . . . . . . . . . . . . . . . 6
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . . . 6
3.1. TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . . . 7
3.3. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4. MAINTENANCE OF BOOKS . . . . . . . . . . . . . . . . . . . . . 7
4. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS . . . . . . . . 7
4.2. CERTAIN OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . 8
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. . . . . . . . . 9
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. . . . . . . . . 10
4.5. ISSUANCE OF CONVERTIBLE SECURITIES . . . . . . . . . . . . . . 11
4.6. SUPERSEDING ADJUSTMENT . . . . . . . . . . . . . . . . . . . . 12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) COMPUTATION OF CONSIDERATION . . . . . . . . . . . . . . . 12
(b) WHEN ADJUSTMENTS TO BE MADE .. . . . . . . . . . . . . . . 13
(c) FRACTIONAL INTERESTS . . . . . . . . . . . . . . . . . . . 14
(d) WHEN ADJUSTMENT NOT REQUIRED . . . . . . . . . . . . . . . 14
(e) ESCROW OF WARRANT STOCK .. . . . . . . . . . . . . . . . . 14
(f) CHALLENGE TO GOOD FAITH DETERMINATION .. . . . . . . . . . 14
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS . . . . . . . . . . . . 15
4.9. OTHER ACTION AFFECTING COMMON STOCK. . . . . . . . . . . . . . 16
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS . . . . . . 16
4.11. CERTAIN REDUCTIONS . . . . . . . . . . . . . . . . . . . . . . 16
5. NOTICES TO WARRANT HOLDERS . . . . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION . . . . . . . . . . . . . 17
6. NO IMPAIRMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY . . . . . . . . . . . . . . . 17
8. PUT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . 18
9.1. RESTRICTIVE LEGEND . . . . . . . . . . . . . . . . . . . . . . . 18
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. . . . . 19
10. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . . . . . . . 19
12. APPRAISAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13. LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.1. NONWAIVER AND EXPENSES. . . . . . . . . . . . . . . . . . . . . 20
14.2. NOTICE GENERALLY. . . . . . . . . . . . . . . . . . . . . . . . 20
14.3. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . 22
14.7. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . 22
14.8. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10. SEVERABILITY .. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11. HEADINGS .. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 20,
1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES F WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NASSAU CAPITAL PARTNERS L.P., a limited
partnership organized under the laws of the State of Delaware ("Nassau
Capital"), or registered assigns (such person, together with any permitted
transferee, is referred to herein as the "Holder"), is entitled, beginning on
the Effective Date and at any time prior to the Expiration Date, to purchase
from DeCRANE AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that
number of shares of Common Stock (as defined herein) which shall be initially
equal to 195,023 shares, and which is subject to adjustment as provided herein,
at a purchase price equal to the Current Warrant Price, which shall be initially
equal to $0.01 per share and which is subject to adjustment as provided herein.
This Warrant is issued in connection with the Holder's purchase on the date
hereof of Series D Convertible Preferred Stock pursuant to the Securities
Purchase Agreement. Capitalized terms used but not otherwise defined in this
Warrant shall have the meanings ascribed to such terms in the Securities
Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement and (y) the Series E, F and G warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase Warrant, dated as of November 2, 1994, of the Company in favor of
Internationale Nederlanden (U.S.) Capital Corporation, (iv) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of The Provident Bank, (v) shares of Common Stock
issuable under the Senior Subordinate Loan and Warrant Purchase Agreement, dated
October 15, 1991, as amended, among Banc One Capital Partners Corporation, the
Company and certain of its Subsidiaries, (vi) shares of Common Stock issuable
upon conversion or exercise of the Company's convertible preferred stock and
warrants outstanding on the Closing Date and (vii) Common Stock issued to or
issuable upon conversion or exercise of options to directors, officers,
employees or consultants of the Company, provided that the aggregate amount of
all such Common Stock shall not exceed 17.05% of the Common Stock outstanding on
a Fully Diluted basis as of the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common
Stock as of any date herein specified, (y) the price that would be paid for
the entire common equity interest in the Company on a going-concern basis in
a single arm's-length transaction between a willing buyer and a willing
seller (neither acting under compulsion), using valuation techniques then
prevailing in the securities industry and always determined in accordance
with the valuation procedures set forth in Section 12, and assuming full
disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale, divided by (z) the number of
shares of Common Stock outstanding on a Fully Diluted basis. For purposes of
determining the Appraised Value, (i) the exercise price of options or
warrants to acquire Common Stock which are deemed to have been exercised for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis shall be deemed to have been received by the
Company, (ii) the liquidation preference or indebtedness, as the case may be,
represented by securities which are deemed exercised for or converted into
Common Stock for the purpose of determining the number of shares of Common
Stock outstanding on a Fully Diluted basis, (iii) any contract limitation in
respect of the shares of Common Stock, including their transfer, voting and
other rights and (iv) any illiquidity arising by contract law in respect of
the shares of Common Stock and any voting rights or control rights amongst
the shareholders of the Company shall be deemed to have been eliminated or
cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
<PAGE>
3
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial statements
for the most recently ended fiscal quarter, or (ii) a valuation per share of
Common Stock in an amount equal to (y) the product of (A) 5.67 times (B) the
Company's EBITDA less Capital Expenditures (each as defined in the Electra
Agreement) permitted under the Electra Agreement, in each event for the
twelve-month period preceding the most recently ended fiscal quarter, with such
product reduced by (z) principal amounts outstanding under the Credit Agreement
and the Electra Agreement or (iii) the Appraised Value per share of Common
Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean December 31, 1998.
<PAGE>
4
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Expiration Date" shall mean December 31, 2003.
"Fully-Diluted" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant increased by all
common equivalent shares issuable at any time pursuant to any stock options,
warrants, convertible securities, and any other security or instrument that
could result in additional common shares being issued at any time in the
future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of February 20, 1996, by and among the Company,
Nassau Capital and NAS Partners I L.L.C.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Triggering Event" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
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5
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Effective Date, and
until 5:00 P.M. New York time on the Expiration Date, the Holder may exercise
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder; provided, however, that if a Triggering
Event shall have occurred prior to the Effective Date this Warrant shall be void
as of the date of occurrence of such Triggering Event.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President and at 155 Montrose West
Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer, or at
the office or agency designated by the Company pursuant to Section 14.7, (i) a
written notice of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (ii) the
Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall he substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice,
<PAGE>
6
together with the cash or check and this Warrant, is received by the Company as
described above and all taxes, if any, required to be paid prior to the issuance
of such shares have been paid pursuant to Section 2.2. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant and the same returned to the Holder.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such
<PAGE>
7
purpose, upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 14.7, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by the Holder or its
agent or attorney. Upon such surrender, the Company shall, subject to Section
9, execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to SECTION 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
<PAGE>
8
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the occurrence of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the product of (A) the Current Warrant Price prior to
the occurrence of such event multiplied by (B) a fraction, the numerator of
which is the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment and the denominator of which is
the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market Price per share of
Common Stock minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined pursuant to Section
4.7(a), including as to an opinion from an investment banking firm) of any and
all such evidences of indebtedness, shares of stock,
<PAGE>
9
other than securities or property or warrants or other subscription or purchase
rights so distributable; and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by (B) a fraction, the numerator
of which shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment and the denominator of which
shall be the number of shares for which this Warrant is exercisable immediately
after such adjustment. A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall he deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the
then existing Current Warrant Price plus (y) the consideration, if any, received
by the Company upon such issue or sale, by (B) the total number of shares of
Common Stock outstanding immediately after such issue or sale; and (ii) the
number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product of (A) the Current Warrant Price in effect
immediately prior to such issue or sale multiplied by (B) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale, and dividing the product thereof by the Current Warrant Price
resulting from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to equal the product of (A) the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale multiplied by (B) a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately
<PAGE>
10
after such issue or sale and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale plus (y) the number of shares which the aggregate offering price of the
total number of such Additional Shares of Common Stock would purchase at the
then Current Market Price; and (ii) the Current Warrant Price as to the number
of shares for which this Warrant is exercisable prior to such adjustment shall
be adjusted by multiplying (A) such Current Warrant Price by (B) a fraction, the
numerator of which shall be the number of shares for which this Warrant is
exercisable immediately prior to such issue or sale and the denominator of which
shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided)
shall issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any warrant or other rights therefor) pursuant to
Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants, options or other rights or
upon conversion or exchange of such Convertible Securities shall be less than
the Current Warrant Price or the Current Market Price in effect immediately
prior to such issue or sale, then the number of shares for which this Warrant is
exercisable and the
<PAGE>
11
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants, options or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such warrants, options or other rights. No further adjustment of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants, options or other
rights or upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current Warrant
Price shall be made by reason of such issue or sale.
<PAGE>
12
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such warrants, options or rights or Convertible
Securities on the basis of (a) treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants, options or rights or any
such right of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and receivable
therefor, and (b) treating any such warrants, options or rights or any such
Convertible Securities which then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which shares of Common Stock or other property are issuable under such
warrants, options or rights or other Convertible Securities, whereupon a new
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall be made, which new adjustment
shall supersede the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case subtracting
any amounts paid or
<PAGE>
13
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants, options or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants, options or other rights, as
the case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except
<PAGE>
14
that any adjustment of the number of shares of Common Stock for which this
Warrant is exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the shares of Common Stock for which this Warrant
is exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall he carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall he deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good
<PAGE>
15
faith by the Holder, and any dispute shall be resolved by an investment banking
firm selected by the Company and reasonably acceptable to such Holder (or, if
more than one Warrant is outstanding, to holders of a majority of Warrant Stock
issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all
or substantially all its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation (herein referred to as "Other
Property"), are to be received by or distributed to the holders of Common
Stock of the Company, then each Holder shall have the right thereafter to
receive, upon exercise of such Warrant, the number of shares of common stock
of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of
each and every term and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereof,
subject to such modifications as may be deemed appropriate (as determined in
good faith by resolution of the Board of Directors of the Company) in order
to provide for adjustments of shares of the Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 4. For purposes of this Section
4.8 "common stock of the successor or acquiring corporation" shall include
stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into
or exchangeable for any such stock, either immediately or upon the arrival of
a specified date or the happening of a specified event, and any warrants,
options or other rights to subscribe for or purchase any such stock. The
foregoinq provisions of this Section 4.8 shall similarly apply to
<PAGE>
16
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Warrants, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable upon
exercise of the Warrants to protect the holders thereof against dilution as a
result of such events.
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
4.11. CERTAIN REDUCTIONS. The number of shares of Common Stock
for which this Warrant is exercisable shall be reduced by a number of shares of
Common Stock equal to two percent (2%) of the sum of (i) the number of shares of
Common Stock issuable to the holders of the Series B warrants issued in
connection with the transactions contemplated by the Electra Agreement (the
"Series B Warrants"), if prior to the date of exercise of this Warrant a
Triggering Event as defined in the Electra Agreement has occurred and the Series
B Warrants have been voided, (ii) the number of shares of Common Stock issuable
to the holders of the Series C warrants issued in connection with the
transactions contemplated by the Electra Agreement (the "Series C Warrants"), if
prior to the date of exercise of this Warrant a Triggering Event as defined in
the Electra Agreement has occurred and the Series C Warrants have been voided,
(iii) the number of shares of Common Stock issuable to the holders of the Series
D warrants issued in connection with the transactions contemplated by the
Electra Agreement (the "Series D Warrants"), if prior to the date of exercise of
this Warrant a Triggering Event as defined in the Electra Agreement has occurred
and the Series D Warrants have been voided and (iv) the number of shares of
Common Stock that have been authorized for issuance upon conversion or exercise
of options to directors, officers or employees of the Company which are not
issued as of the date of exercise of this Warrant.
<PAGE>
17
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
<PAGE>
18
The Company shall at all times reserve and keep available for
issuance upon the exercise of this Warrant such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding warrants. The Company covenants that all shares of
Common Stock which shall be so issuable, when issued upon exercise of any
Warrant and payment therefor in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 7.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or
<PAGE>
19
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS: REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of Nassau Capital Partners L.P. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 5.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a
<PAGE>
20
majority of the Warrant Stock issuable upon exercise of the Warrants) within
thirty (30) days following the event requiring such determination or (ii) in the
absence of such an agreement, by an Appraiser (as defined below) selected as set
forth below. If required, an Appraiser shall be selected within ten (10) days
following the expiration of the 30 day period referred to above, either by
agreement among the Company and the Holder (or, if there is more than one
Warrant outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) or, in the absence of such agreement, by lot from a
list of four potential Appraisers remaining after the Company nominates three,
the Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) nominates
three, and each side eliminates one potential Appraiser. The Appraiser shall be
instructed by the Company and the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) to make its determination within thirty (30) days of
its selection. All fees and expenses of an Appraiser selected hereunder shall
be borne solely by the Company. As used herein, "Appraiser" shall mean a
nationally recognized investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
<PAGE>
21
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings. Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
<PAGE>
22
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of Section 8 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and assigns of Nassau Capital or any other holder hereof. The
provisions of this Warrant are intended to be for the benefit of all holders
from time to time of this Warrant, and shall be enforceable by any such
holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants
remain outstanding, the Company shall maintain an office or agency (which may
be the principal executive offices of the Company) where the Warrants may be
presented for exercise, registration of transfer, division or combination as
provided in this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder
of a Warrant and each holder of Warrant Stock in supplying such information
as may be reasonably requested by such holder to comply with any filings or
information reporting forms presently or hereafter required as a condition to
the availability of an exemption from the 1933 Act for the sale of any
Warrant or Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
<PAGE>
23
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: February 20, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rankin
--------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _______shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to __________ whose address is _________________________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
Dated:______________________
___________________________________
(Name of Registered Owner)
___________________________________
(Signature of Registered Owner)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint ___________ attorney-in-fact
to register such transfer on the books of Decrane Aircraft Holdings, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:____________________
___________________________________
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
EXECUTION COPY
--------------
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. F-2
Number of Shares of Common Stock: 1,067
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . . 5
2.2. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . 6
2.3. FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . . . . 6
2.4. CONTINUED VALIDITY . . . . . . . . . . . . . . . . . . . . . . 6
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . 6
3.1. TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . . . 7
3.3. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4. MAINTENANCE OF BOOKS . . . . . . . . . . . . . . . . . . . . . 7
4. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS . . . . . . . . 7
4.2. CERTAIN OTHER DISTRIBUTIONS. . . . . . . . . . . . . . . . . . 8
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. . . . . . . . . 9
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. . . . . . . . . 10
4.5. ISSUANCE OF CONVERTIBLE SECURITIES . . . . . . . . . . . . . . 11
4.6. SUPERSEDING ADJUSTMENT.............. . . . . . . . . . . . . . 12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION . . . . . . . . . . . . . . . . . . . . . . . 12
(a) COMPUTATION OF CONSIDERATION. . . . . . . . . . . . . . . 12
(b) WHEN ADJUSTMENTS TO BE MADE . . . . . . . . . . . . . . . 13
(c) FRACTIONAL INTERESTS. . . . . . . . . . . . . . . . . . . 14
(d) WHEN ADJUSTMENT NOT REQUIRED. . . . . . . . . . . . . . 14
(e) ESCROW OF WARRANT STOCK . . . . . . . . . . . . . . . . . 14
(f) CHALLENGE TO GOOD FAITH DETERMINATION . . . . . . . . . . 14
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS . . . . . . . . . . . 15
4.9. OTHER ACTION AFFECTING COMMON STOCK. . . . . . . . . . . . . . 16
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11. CERTAIN REDUCTIONS . . . . . . . . . . . . . . . . . . . . . 16
5. NOTICES TO WARRANT HOLDERS .. . . . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION . . . . . . . . . . . . . 17
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. PUT RIGHTS .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . 18
9.1. RESTRICTIVE LEGEND . . . . . . . . . . . . . . . . . . . . . . 18
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . 19
10. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . . . . . . . 19
12. APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13. LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.1. NONWAIVER AND EXPENSES. . . . . . . . . . . . . . . . . . . . 20
14.2. NOTICE GENERALLY. . . . . . . . . . . . . . . . . . . . . . . 20
14.3. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . 22
14.7. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . 22
14.8. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 20,
1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES F WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NAS PARTNERS I L.L.C., a limited liability
company organized under the laws of the State of Delaware ("NAS"), or
registered assigns (such person, together with any permitted transferee, is
referred to herein as the "Holder"), is entitled, beginning on the Effective
Date and at any time prior to the Expiration Date, to purchase from DeCRANE
AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that number of
shares of Common Stock (as defined herein) which shall be initially equal to
1,067 shares, and which is subject to adjustment as provided herein, at a
purchase price equal to the Current Warrant Price, which shall be initially
equal to $0.01 per share and which is subject to adjustment as provided herein.
This Warrant is issued in connection with the Holder's purchase on the date
hereof of Series D Convertible Preferred Stock pursuant to the Securities
Purchase Agreement. Capitalized terms used but not otherwise defined in this
Warrant shall have the meanings ascribed to such terms in the Securities
Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
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2
contemplated by the Electra Agreement and (y) the Series E, F and G warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase Warrant, dated as of November 2, 1994, of the Company in favor of
Internationale Nederlanden (U.S.) Capital Corporation, (iv) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of The Provident Bank, (v) shares of Common Stock
issuable under the Senior Subordinate Loan and Warrant Purchase Agreement, dated
October 15, 1991, as amended, among Banc One Capital Partners Corporation, the
Company and certain of its Subsidiaries, (vi) shares of Common Stock issuable
upon conversion or exercise of the Company's convertible preferred stock and
warrants outstanding on the Closing Date and (vii) Common Stock issued to or
issuable upon conversion or exercise of options to directors, officers,
employees or consultants of the Company, provided that the aggregate amount of
all such Common Stock shall not exceed 17.05% of the Common Stock outstanding on
a Fully Diluted basis as of the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common Stock
as of any date herein specified, (y) the price that would be paid for the
entire common equity interest in the Company on a going-concern basis in a
single arm's-length transaction between a willing buyer and a willing seller
(neither acting under compulsion), using valuation techniques then prevailing
in the securities industry and always determined in accordance with the
valuation procedures set forth in Section 12, and assuming full disclosure and
understanding of all relevant information and a reasonable period of time for
effectuating such sale, divided by (z) the number of shares of Common Stock
outstanding on a Fully Diluted basis. For purposes of determining the
Appraised Value, (i) the exercise price of options or warrants to acquire
Common Stock which are deemed to have been exercised for the purpose of
determining the number of shares of Common Stock outstanding on a Fully Diluted
basis shall be deemed to have been received by the Company, (ii) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for
the purpose of determining the number of shares of Common Stock outstanding on
a Fully Diluted basis, (iii) any contract limitation in respect of the shares
of Common Stock, including their transfer, voting and other rights and (iv) any
illiquidity arising by contract law in respect of the shares of Common Stock
and any voting rights or control rights amongst the shareholders of the Company
shall be deemed to have been eliminated or cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
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3
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial statements
for the most recently ended fiscal quarter, or (ii) a valuation per share of
Common Stock in an amount equal to (y) the product of (A) 5.67 times (B) the
Company's EBITDA less Capital Expenditures (each as defined in the Electra
Agreement) permitted under the Electra Agreement, in each event for the
twelve-month period preceding the most recently ended fiscal quarter, with such
product reduced by (z) principal amounts outstanding under the Credit Agreement
and the Electra Agreement or (iii) the Appraised Value per share of Common
Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean December 31, 1998.
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4
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Expiration Date" shall mean December 31, 2003.
"Fully-Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares heing issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of February 20, 1996, by and among the Company,
Nassau Capital Partners L.P. and NAS.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Triggering Event" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
<PAGE>
5
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Effective Date, and
until 5:00 P.M. New York time on the Expiration Date, the Holder may exercise
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder; provided, however, that if a Triggering
Event shall have occurred prior to the Effective Date this Warrant shall be void
as of the date of occurrence of such Triggering Event.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President and at 155 Montrose West
Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer, or at
the office or agency designated by the Company pursuant to Section 14.7, (i) a
written notice of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (ii) the
Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice,
<PAGE>
6
together with the cash or check and this Warrant, is received by the Company as
described above and all taxes, if any, required to be paid prior to the issuance
of such shares have been paid pursuant to Section 2.2. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant and the same returned to the Holder.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such
<PAGE>
7
purpose, upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 14.7, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by the Holder or its
agent or attorney. Upon such surrender, the Company shall, subject to Section
9, execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the ompany, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS; SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
<PAGE>
8
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the occurrence of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the product of (A) the Current Warrant Price prior to
the occurrence of such event multiplied by (B) a fraction, the numerator of
which is the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment and the denominator of which is
the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market Price per share of
Common Stock minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined pursuant to Section
4.7(a), including as to an opinion from an investment banking firm) of any and
all such evidences of indebtedness, shares of stock,
<PAGE>
9
other than securities or property or warrants or other subscription or purchase
rights so distributable; and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by (B) a fraction, the numerator
of which shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment and the denominator of which
shall be the number of shares for which this Warrant is exercisable immediately
after such adjustment. A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall he deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the
then existing Current Warrant Price plus (y) the consideration, if any, received
by the Company upon such issue or sale, by (B) the total number of shares of
Common Stock outstanding immediately after such issue or sale; and (ii) the
number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product of (A) the Current Warrant Price in effect
immediately prior to such issue or sale multiplied by (B) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale, and dividing the product thereof by the Current Warrant Price
resulting from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to equal the product of (A) the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale multiplied by (B) a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately
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10
after such issue or sale and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale plus (y) the number of shares which the aggregate offering price of the
total number of such Additional Shares of Common Stock would purchase at the
then Current Market Price; and (ii) the Current Warrant Price as to the number
of shares for which this Warrant is exercisable prior to such adjustment shall
be adjusted by multiplying (A) such Current Warrant Price by (B) a fraction, the
numerator of which shall be the number of shares for which this Warrant is
exercisable immediately prior to such issue or sale and the denominator of which
shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided)
shall issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any warrant or other rights therefor) pursuant to
Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants, options or other rights or
upon conversion or exchange of such Convertible Securities shall be less than
the Current Warrant Price or the Current Market Price in effect immediately
prior to such issue or sale, then the number of shares for which this Warrant is
exercisable and the
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11
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants, options or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such warrants, options or other rights. No further adjustment of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants, options or other
rights or upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current Warrant
Price shall be made by reason of such issue or sale.
<PAGE>
12
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such warrants, options or rights or Convertible
Securities on the basis of (a) treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants, options or rights or any
such right of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and receivable
therefor, and (b) treating any such warrants, options or rights or any such
Convertible Securities which then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which shares of Common Stock or other property are issuable under such
warrants, options or rights or other Convertible Securities, whereupon a new
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall be made, which new adjustment
shall supersede the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case subtracting
any amounts paid or
<PAGE>
13
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants, options or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants, options or other rights, as
the case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except
<PAGE>
14
that any adjustment of the number of shares of Common Stock for which this
Warrant is exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the shares of Common Stock for which this Warrant
is exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good
<PAGE>
15
faith by the Holder, and any dispute shall be resolved by an investment banking
firm selected by the Company and reasonably acceptable to such Holder (or, if
more than one Warrant is outstanding, to holders of a majority of Warrant Stock
issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (herein referred to as "Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume
the due and punctual observance and performance of each and every term and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereof, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4.
For purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is
not preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event, and any
warrants, options or other rights to subscribe for or purchase any such stock.
The foregoinq provisions of this Section 4.8 shall similarly apply to
<PAGE>
16
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Warrants, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable upon
exercise of the Warrants to protect the holders thereof against dilution as a
result of such events.
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
4.11. CERTAIN REDUCTIONS. The number of shares of Common Stock
for which this Warrant is exercisable shall be reduced by a number of shares of
Common Stock equal to two percent (2%) of the sum of (i) the number of shares of
Common Stock issuable to the holders of the Series B warrants issued in
connection with the transactions contemplated by the Electra Agreement (the
"Series B Warrants"), if prior to the date of exercise of this Warrant a
Triggering Event as defined in the Electra Agreement has occurred and the Series
B Warrants have been voided, (ii) the number of shares of Common Stock issuable
to the holders of the Series C warrants issued in connection with the
transactions contemplated by the Electra Agreement (the "Series C Warrants"), if
prior to the date of exercise of this Warrant a Triggering Event as defined in
the Electra Agreement has occurred and the Series C Warrants have been voided,
(iii) the number of shares of Common Stock issuable to the holders of the Series
D warrants issued in connection with the transactions contemplated by the
Electra Agreement (the "Series D Warrants"), if prior to the date of exercise of
this Warrant a Triggering Event as defined in the Electra Agreement has occurred
and the Series D Warrants have been voided and (iv) the number of shares of
Common Stock that have been authorized for issuance upon conversion or exercise
of options to directors, officers or employees of the Company which are not
issued as of the date of exercise of this Warrant.
<PAGE>
17
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
<PAGE>
18
The Company shall at all times reserve and keep available for
issuance upon the exercise of this Warrant such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding warrants. The Company covenants that all shares of
Common Stock which shall be so issuable, when issued upon exercise of any
Warrant and payment therefor in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 7.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or
<PAGE>
19
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of NAS Partners I L.L.C. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 5.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a
<PAGE>
20
majority of the Warrant Stock issuable upon exercise of the Warrants) within
thirty (30) days following the event requiring such determination or (ii) in the
absence of such an agreement, by an Appraiser (as defined below) selected as set
forth below. If required, an Appraiser shall be selected within ten (10) days
following the expiration of the 30-day period referred to above, either by
agreement among the Company and the Holder (or, if there is more than one
Warrant outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) or, in the absence of such agreement, by lot from a
list of four potential Appraisers remaining after the Company nominates three,
the Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) nominates
three, and each side eliminates one potential Appraiser. The Appraiser shall be
instructed by the Company and the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) to make its determination within thirty (30) days of
its selection. All fees and expenses of an Appraiser selected hereunder shall
be borne solely by the Company. As used herein, "Appraiser" shall mean a
nationally recognized investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
<PAGE>
21
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
<PAGE>
22
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of NAS or any other holder hereof. The provisions of this Warrant
are intended to be for the benefit of all holders from time to time of this
Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder of
a Warrant and each holder of Warrant Stock in supplying such information as may
be reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
<PAGE>
23
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: February 20, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rankin
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ________ shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to ____________ whose address is ____________________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
Dated:_______________________
________________________________________
(Name of Registered Owner)
________________________________________
(Signature of Registered Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of Decrane Aircraft Holdings, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:_______________________
________________________________________
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
EXECUTION COPY
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. G-1
Number of Shares of Common Stock: 292,534
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS.............................................................1
2. EXERCISE OF WARRANT.....................................................5
2.1. MANNER OF EXERCISE................................................5
2.2. PAYMENT OF TAXES..................................................6
2.3. FRACTIONAL SHARES.................................................6
2.4. CONTINUED VALIDITY................................................6
3. TRANSFER, DIVISION AND COMBINATION......................................6
3.1. TRANSFER..........................................................6
3.2. DIVISION AND COMBINATION..........................................7
3.3. EXPENSES..........................................................7
3.4. MAINTENANCE OF BOOKS..............................................7
4. ADJUSTMENTS.............................................................7
4.1. STOCK DIVIDENDS. SUBDIVISIONS AND COMBINATIONS....................7
4.2. CERTAIN OTHER DISTRIBUTIONS.......................................8
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.....................9
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS....................10
4.5. ISSUANCE OF CONVERTIBLE SECURITIES...............................11
4.6. SUPERSEDING ADJUSTMENT...........................................12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION....................................................12
(a) COMPUTATION OF CONSIDERATION................................12
(b) WHEN ADJUSTMENTS TO BE MADE.................................13
(c) FRACTIONAL INTERESTS........................................14
(d) WHEN ADJUSTMENT NOT REQUIRED................................14
(e) ESCROW OF WARRANT STOCK.....................................14
(f) CHALLENGE TO GOOD FAITH DETERMINATION.......................14
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS..........................15
4.9. OTHER ACTION AFFECTING COMMON STOCK..............................16
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS...........................................................16
4.11. CERTAIN REDUCTIONS..............................................16
5. NOTICES TO WARRANT HOLDERS.............................................17
5.1. NOTICE OF ADJUSTMENTS............................................17
5.2. NOTICE OF CERTAIN CORPORATE ACTION...............................17
6. NO IMPAIRMENT..........................................................17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY..............................................................17
8. PUT RIGHTS.............................................................18
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER...............................................18
9.1. RESTRICTIVE LEGEND...............................................18
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION....................................................19
10. LOSS OR MUTILATION.....................................................19
11. FINANCIAL AND BUSINESS INFORMATION.....................................19
12. APPRAISAL..............................................................19
13. LIMITATION OF LIABILITY................................................20
14. MISCELLANEOUS..........................................................20
14.1. NONWAIVER AND EXPENSES..........................................20
14.2. NOTICE GENERALLY................................................20
14.3. VOTING..........................................................21
14.4. INDEMNIFICATION.................................................21
14.5. REMEDIES........................................................22
14.6. SUCCESSORS AND ASSIGNS..........................................22
14.7. OFFICE OF THE COMPANY...........................................22
14.8. INFORMATION.....................................................22
14.9. AMENDMENT.......................................................22
14.10. SEVERABILITY...................................................22
14.11. HEADINGS.......................................................22
14.12. GOVERNING LAW..................................................23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 20,
1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES G WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NASSAU CAPITAL PARTNERS L.P., a limited
partnership organized under the laws of the State of Delaware ("Nassau
Capital"), or registered assigns (such person, together with any permitted
transferee, is referred to herein as the "Holder"), is entitled, beginning on
the Effective Date and at any time prior to the Expiration Date, to purchase
from DeCRANE AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that
number of shares of Common Stock (as defined herein) which shall be initially
equal to 292,534 shares, and which is subject to adjustment as provided herein,
at a purchase price equal to the Current Warrant Price, which shall be initially
equal to $0.01 per share and which is subject to adjustment as provided herein.
This Warrant is issued in connection with the Holder's purchase on the date
hereof of Series D Convertible Preferred Stock pursuant to the Securities
Purchase Agreement. Capitalized terms used but not otherwise defined in this
Warrant shall have the meanings ascribed to such terms in the Securities
Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement and (y) the Series E, F and G warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase Warrant, dated as of November 2, 1994, of the Company in favor of
Internationale Nederlanden (U.S.) Capital Corporation, (iv) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of The Provident Bank, (v) shares of Common Stock
issuable under the Senior Subordinate Loan and Warrant Purchase Agreement, dated
October 15, 1991, as amended, among Banc One Capital Partners Corporation, the
Company and certain of its Subsidiaries, (vi) shares of Common Stock issuable
upon conversion or exercise of the Company's convertible preferred stock and
warrants outstanding on the Closing Date and (vii) Common Stock issued to or
issuable upon conversion or exercise of options to directors, officers,
employees or consultants of the Company, provided that the aggregate amount of
all such Common Stock shall not exceed 17.05% of the Common Stock outstanding on
a Fully Diluted basis as of the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common Stock
as of any date herein specified, (y) the price that would be paid for the entire
common equity interest in the Company on a going concern basis in a single arm's
length transaction between a willing buyer and a willing seller (neither acting
under compulsion), using valuation techniques then prevailing in the securities
industry and always determined in accordance with the valuation procedures set
forth in Section 12, and assuming full disclosure and understanding of all
relevant information and a reasonable period of time for effectuating such sale,
divided by (z) the number of shares of Common Stock outstanding on a Fully
Diluted basis. For purposes of determining the Appraised Value, (i) the
exercise price of options or warrants to acquire Common Stock which are deemed
to have been exercised for the purpose of determining the number of shares of
Common Stock outstanding on a Fully Diluted basis shall be deemed to have been
received by the Company, (ii) the liquidation preference or indebtedness, as the
case may be, represented by securities which are deemed exercised for or
converted into Common Stock for the purpose of determining the number of shares
of Common Stock outstanding on a Fully Diluted basis, (iii) any contract
limitation in respect of the shares of Common Stock, including their transfer,
voting and other rights and, (iv) any illiquidity arising by contract law in
respect of the shares of Common Stock and any voting rights or control rights
amongst the shareholders of the Company shall be deemed to have been eliminated
or cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
<PAGE>
3
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial
statements for the most recently ended fiscal quarter, or (ii) a valuation per
share of Common Stock in an amount equal to (y) the product of (A) 5.67 times
(B) the Company's EBITDA less Capital Expenditures (each as defined in the
Electra Agreement) permitted under the Electra Agreement, in each event for the
twelve-month period preceding the most recently ended fiscal quarter, with such
product reduced by (z) principal amounts outstanding under the Credit Agreement
and the Electra Agreement or (iii) the Appraised Value per share of Common
Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean December 31, 1998.
<PAGE>
4
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Expiration Date" shall mean December 31, 2003.
"Fully Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of February 20, 1996, by and among the Company,
Nassau Capital and NAS Partners I L.L.C.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Triggering Event" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
<PAGE>
5
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Price" shall mean an amount equal to (i) the number of shares
o& Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Effective Date, and
until 5:00 P.M. New York time on the Expiration Date, the Holder may exercise
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder; provided, however, that if a Triggering
Event shall have occurred prior to the Effective Date this Warrant shall be void
as of the date of occurrence of such Triggering Event.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President and at 155 Montrose West
Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer, or at
the office or agency designated by the Company pursuant to Section 14.7, (i) a
written notice of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (ii) the
Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice,
<PAGE>
6
together with the cash or check and this Warrant, is received by the Company as
described above and all taxes, if any, required to be paid prior to the issuance
of such shares have been paid pursuant to Section 2.2. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant and the same returned to the Holder.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such
<PAGE>
7
purpose, upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 14.7, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by the Holder or its
agent or attorney. Upon such surrender, the Company shall, subject to Section
9, execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in or to receive any other distribution of
Additional Shares of Common Stock,
<PAGE>
8
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the occurrence of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the product of (A) the Current Warrant Price prior to
the occurrence of such event multiplied by (B) a fraction, the numerator of
which is the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment and the denominator of which is
the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any less shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market Price per share of
Common Stock minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined pursuant to Section
4.7(a), including as to an opinion from an investment banking firm) of any and
all such evidences of indebtedness, shares of stock,
<PAGE>
9
other than securities or property or warrants or other subscription or purchase
rights so distributable; and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by (B) a fraction, the numerator
of which shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment and the denominator of which
shall be the number of shares for which this Warrant is exercisable immediately
after such adjustment. A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to equal the product of (A) the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale multiplied by (B) a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately
<PAGE>
10
after such issue or sale and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale plus (y) the number of shares which the aggregate offering price of the
total number of such Additional Shares of Common Stock would purchase at the
then Current Market Price; and (ii) the Current Warrant Price as to the number
of shares for which this Warrant is exercisable prior to such adjustment shall
be adjusted by multiplying (A) such Current Warrant Price by (B) a fraction, the
numerator of which shall be the number of shares for which this Warrant is
exercisable immediately prior to such issue or sale and the denominator of which
shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided) shall
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants, options or other rights or
upon conversion or exchange of such Convertible Securities shall be less than
the Current Warrant Price or the Current Market Price in effect immediately
prior to such issue or sale, then the number of shares for which this Warrant is
exercisable and the
<PAGE>
11
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants, options or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such warrants, options or other rights. No further adjustment of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants, options or other
rights or upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current Warrant
Price shall be made by reason of such issue or sale.
<PAGE>
12
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such warrants, options or rights or Convertible Securities
on the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case subtracting
any amounts paid or
<PAGE>
13
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants, options or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants, options or other rights, as
the case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except
<PAGE>
14
that any adjustment of the number of shares of Common Stock for which this
Warrant is exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the shares of Common Stock for which this Warrant
is exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good
<PAGE>
15
faith by the Holder, and any dispute shall be resolved by an investment banking
firm selected by the Company and reasonably acceptable to such Holder (or, if
more than one Warrant is outstanding, to holders of a majority of Warrant Stock
issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (herein referred to as "Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every term and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereof, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event, and any
warrants, options or other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 4.8 shall similarly apply to
<PAGE>
16
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Warrants, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable upon
exercise of the Warrants to protect the holders thereof against dilution as a
result of such events.
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
4.11. CERTAIN REDUCTIONS. The number of shares of Common Stock for
which this Warrant is exercisable shall be reduced by a number of shares of
Common Stock equal to three percent (3%) of the sum of (i) the number of shares
of Common Stock issuable to the holders of the Series B warrants issued in
connection with the transactions contemplated by the Electra Agreement (the
"Series B Warrants"), if prior to the date of exercise of this Warrant a
Triggering Event as defined in the Electra Agreement has occurred and the Series
B Warrants have been voided, (ii) the number of shares of Common Stock issuable
to the holders of the Series C warrants issued in connection with the
transactions contemplated by the Electra Agreement (the "Series C Warrants"), if
prior to the date of exercise of this Warrant a Triggering Event as defined in
the Electra Agreement has occurred and the Series C Warrants have been voided,
(iii) the number of shares of Common Stock issuable to the holders of the Series
D warrants issued in connection with the transactions contemplated by the
Electra Agreement (the "Series D Warrants"), if prior to the date of exercise of
this Warrant a Triggering Event as defined in the Electra Agreement has occurred
and the Series D Warrants have been voided and (iv) the number of shares of
Common Stock that have been authorized for issuance upon conversion or exercise
of options to directors, officers or employees of the Company which are not
issued as of the date of exercise of this Warrant.
<PAGE>
17
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant co Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
<PAGE>
18
The Company shall at all times reserve and keep available for issuance
upon the exercise of this Warrant such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding warrants. The Company covenants that all shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 7.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or
<PAGE>
19
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of Nassau Capital Partners L.P. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 5.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a
<PAGE>
20
majority of the Warrant Stock issuable upon exercise of the Warrants) within
thirty (30) days following the event requiring such determination or (ii) in the
absence of such an agreement, by an Appraiser (as defined below) selected as set
forth below. If required, an Appraiser shall be selected within ten (10) days
following the expiration of the 30 day period referred to above, either by
agreement among the Company and the Holder (or, if there is more than one
Warrant outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) or, in the absence of such agreement, by lot from a
list of four potential Appraisers remaining after the Company nominates three,
the Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) nominates
three, and each side eliminates one potential Appraiser. The Appraiser shall be
instructed by the Company and the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) to make its determination within thirty (30) days of
its selection. All fees and expenses of an Appraiser selected hereunder shall
be borne solely by the Company. As used herein, "Appraiser" shall mean a
nationally recognized investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
<PAGE>
21
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings. Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall he deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
<PAGE>
22
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Nassau Capital or any other holder hereof. The provisions of
this Warrant are intended to be for the benefit of all holders from time to time
of this Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder of a
Warrant and each holder of Warrant Stock in supplying such information as may be
reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
<PAGE>
23
14.12. Governing Law. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: February 20, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rank
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _______ shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _________________ whose address is __________________________ and,
if such shares of Common Stock shall not include all of the shares of Common
Stock issuable as provided in this Warrant, that a new Warrant of like tenor
and date for the balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned.
Dated:_____________________
__________________________________
(Name of Registered Owner)
__________________________________
(Signature of Registered Owner)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- -----------------
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer on the books of Decrane Aircraft
Holdings, Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated:__________________
______________________________
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
EXECUTION COPY
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. G-2
Number of Shares of Common Stock: 1,601
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . 5
2.2. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . 6
2.3. FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . . . 6
2.4. CONTINUED VALIDITY . . . . . . . . . . . . . . . . . . . . . 6
3. TRANSFER, DIVISION AND COMBINATION. . . . . . . . . . . . . . . . . 6
3.1. TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . . 7
3.3. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4. MAINTENANCE OF BOOKS . . . . . . . . . . . . . . . . . . . . 7
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS . . . . . . . 7
4.2. CERTAIN OTHER DISTRIBUTIONS. . . . . . . . . . . . . . . . . 8
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. . . . . . . . 9
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. . . . . . . . 10
4.5. ISSUANCE OF CONVERTIBLE SECURITIES . . . . . . . . . . . . . 11
4.6. SUPERSEDING ADJUSTMENT . . . . . . . . . . . . . . . . . . . 12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. . . . . . . . . . . . . . . . . . . . . . . . 12
(a) COMPUTATION OF CONSIDERATION. . . . . . . . . . . . . . 12
(b) WHEN ADJUSTMENTS TO BE MADE . . . . . . . . . . . . . . 13
(c) FRACTIONAL INTERESTS. . . . . . . . . . . . . . . . . . 14
(d) WHEN ADJUSTMENT NOT REQUIRED. . . . . . . . . . . . . . 14
(e) ESCROW OF WARRANT STOCK . . . . . . . . . . . . . . . . 14
(f) CHALLENGE TO GOOD FAITH DETERMINATION . . . . . . . . . 14
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. . . . . . . . . . . 15
4.9. OTHER ACTION AFFECTING COMMON STOCK. . . . . . . . . . . . . 16
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11. CERTAIN REDUCTIONS . . . . . . . . . . . . . . . . . . . . . 16
5. NOTICES TO WARRANT HOLDERS. . . . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION . . . . . . . . . . . . . 17
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY . . . . . . . . . . . . . . 17
8. PUT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . . 18
9.1. RESTRICTIVE LEGEND . . . . . . . . . . . . . . . . . . . . . 18
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 19
10. LOSS OR MUTILATION. . . . . . . . . . . . . . . . . . . . . . . . . 19
11. FINANCIAL AND BUSINESS INFORMATION. . . . . . . . . . . . . . . . . 19
12. APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.1. NONWAIVER AND EXPENSES . . . . . . . . . . . . . . . . . . . 20
14.2. NOTICE GENERALLY . . . . . . . . . . . . . . . . . . . . . . 20
14.3. VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 21
14.5. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . 22
14.7. OFFICE OF THE COMPANY. . . . . . . . . . . . . . . . . . . . 22
14.8. INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.12. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF FEBRUARY 20,
1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES G WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NAS PARTNERS I L.L.C., a limited liability
company organized under the laws of the State of Delaware ("NAS"), or
registered assigns (such person, together with any permitted transferee, is
referred to herein as the "Holder"), is entitled, beginning on the Effective
Date and at any time prior to the Expiration Date, to purchase from DeCRANE
AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that number of
shares of Common Stock (as defined herein) which shall be initially equal to
1,601 shares, and which is subject to adjustment as provided herein, at a
purchase price equal to the Current Warrant Price, which shall be initially
equal to $0.01 per share and which is subject to adjustment as provided
herein. This Warrant is issued in connection with the Holder's purchase on
the date hereof of Series D Convertible Preferred Stock pursuant to the
Securities Purchase Agreement. Capitalized terms used but not otherwise
defined in this Warrant shall have the meanings ascribed to such terms in the
Securities Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement and (y) the Series E, F and G warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase Warrant, dated as of November 2, 1994, of the Company in favor of
Internationale Nederlanden (U.S.) Capital Corporation, (iv) shares of Common
Stock issuable under the Common Stock Purchase Warrant, dated as of November 2,
1994, of the Company in favor of The Provident Bank, (v) shares of Common Stock
issuable under the Senior Subordinate Loan and Warrant Purchase Agreement, dated
October 15, 1991, as amended, among Banc One Capital Partners Corporation, the
Company and certain of its Subsidiaries, (vi) shares of Common Stock issuable
upon conversion or exercise of the Company's convertible preferred stock and
warrants outstanding on the Closing Date and (vii) Common Stock issued to or
issuable upon conversion or exercise of options to directors, officers,
employees or consultants of the Company, provided that the aggregate amount of
all such Common Stock shall not exceed 17.05% of the Common Stock outstanding on
a Fully Diluted basis as of the Closing Date.
"Appraised Value" shall mean, in respect of any share of Common Stock
as of any date herein specified, (y) the price that would be paid for the entire
common equity interest in the Company on a going-concern basis in a single
arm's-length transaction between a willing buyer and a willing seller (neither
acting under compulsion), using valuation techniques then prevailing in the
securities industry and always determined in accordance with the valuation
procedures set forth in Section 12, and assuming full disclosure and
understanding of all relevant information and a reasonable period of time for
effectuating such sale, divided by (z) the number of shares of Common Stock
outstanding on a Fully Diluted basis. For purposes of determining the Appraised
Value, (i) the exercise price of options or warrants to acquire Common Stock
which are deemed to have been exercised for the purpose of determining the
number of shares of Common Stock outstanding on a Fully Diluted basis shall be
deemed to have been received by the Company, (ii) the liquidation preference or
indebtedness, as the case may be, represented by securities which are deemed
exercised for or converted into Common Stock for the purpose of determining the
number of shares of Common Stock outstanding on a Fully Diluted basis, (iii)
any contract limitation in respect of the shares of Common Stock, including
their transfer, voting and other rights and (iv) any illiquidity arising by
contract law in respect of the shares of Common Stock and any voting rights or
control rights amongst the shareholders of the Company shall be deemed to have
been eliminated or cancelled.
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
<PAGE>
3
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 2, 1994, between the Company, the Subsidiary Guarantors named
therein, the Lenders named therein, The Provident Bank (as Cash Management
Agent) and Internationale Nederlanden (U.S.) Capital Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial
statements for the most recently ended fiscal quarter, or (ii) a valuation per
share of Common Stock in an amount equal to (y) the product of (A) 5.67 times
(B) the Company's EBITDA less Capital Expenditures (each as defined in the
Electra Agreement) permitted under the Electra Agreement, in each event for the
twelve-month period preceding the most recently ended fiscal quarter, with such
product reduced by (z) principal amounts outstanding under the Credit Agreement
and the Electra Agreement or (iii) the Appraised Value per share of Common
Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Effective Date" shall mean December 31, 1998.
<PAGE>
4
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Expiration Date" shall mean December 31, 2003.
"Fully Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of February 20, 1996, by and among the Company,
Nassau Capital Partners L.P. and NAS.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Triggering Event" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
<PAGE>
5
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANTT
2.1. MANNER OF EXERCISE. From and after the Effective Date, and
until 5:00 P.M. New York time on the Expiration Date, the Holder may exercise
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder; provided, however, that if a Triggering
Event shall have occurred prior to the Effective Date this Warrant shall be void
as of the date of occurrence of such Triggering Event.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President and at 155 Montrose West
Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer, or at
the office or agency designated by the Company pursuant to Section 14.7, (i) a
written notice of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (ii) the
Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice,
<PAGE>
6
together with the cash or check and this Warrant, is received by the Company as
described above and all taxes, if any, required to be paid prior to the issuance
of such shares have been paid pursuant to Section 2.2. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant and the same returned to the Holder.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such
<PAGE>
7
purpose, upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 14.7, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by the Holder or its
agent or attorney. Upon such surrender, the Company shall, subject to
Section 9, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A Warrant, if properly assigned in compliance with Section 9, may be exercised
by a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
<PAGE>
8
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the occurrence of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the product of (A) the Current Warrant Price prior to
the occurrence of such event multiplied by (B) a fraction, the numerator of
which is the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment and the denominator of which is
the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market Price per share of
Common Stock minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined pursuant to
Section 4.7(a), including as to an opinion from an investment banking firm) of
any and all such evidences of indebtedness, shares of stock,
<PAGE>
9
other than securities or property or warrants or other subscription or purchase
rights so distributable; and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by (B) a fraction, the numerator
of which shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment and the denominator of which
shall be the number of shares for which this Warrant is exercisable immediately
after such adjustment. A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to equal the product of (A) the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale multiplied by (B) a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately
<PAGE>
10
after such issue or sale and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale plus (y) the number of shares which the aggregate offering price of the
total number of such Additional Shares of Common Stock would purchase at the
then Current Market Price; and (ii) the Current Warrant Price as to the number
of shares for which this Warrant is exercisable prior to such adjustment shall
be adjusted by multiplying (A) such Current Warrant Price by (B) a fraction, the
numerator of which shall be the number of shares for which this Warrant is
exercisable immediately prior to such issue or sale and the denominator of which
shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided)
shall issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to
Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants, options or other rights or
upon conversion or exchange of such Convertible Securities shall be less than
the Current Warrant Price or the Current Market Price in effect immediately
prior to such issue or sale, then the number of shares for which this Warrant is
exercisable and the
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11
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants, options or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such warrants, options or other rights. No further adjustment of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants, options or other
rights or upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of Section 4, no further adjustments of the
number of Shares for which this Warrant is exercisable and the Current Warrant
Price shall be made by reason of such issue or sale.
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12
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such warrants, options or rights or Convertible Securities
on the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case subtracting
any amounts paid or
<PAGE>
13
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants, options or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants, options or other rights, as
the case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except
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14
that any adjustment of the number of shares of Common Stock for which this
Warrant is exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the shares of Common Stock for which this Warrant
is exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good
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15
faith by the Holder, and any dispute shall be resolved by an investment banking
firm selected by the Company and reasonably acceptable to such Holder (or, if
more than one Warrant is outstanding, to holders of a majority of Warrant Stock
issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (herein referred to as "Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every term and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereof, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event, and any
warrants, options or other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 4.8 shall similarly apply to
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16
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Warrants, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable upon
exercise of the Warrants to protect the holders thereof against dilution as a
result of such events.
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
4.11. CERTAIN REDUCTIONS. The number of shares of Common Stock
for which this Warrant is exercisable shall be reduced by a number of shares of
Common Stock equal to three percent (3%) of the sum of (i) the number of shares
of Common Stock issuable to the holders of the Series B warrants issued in
connection with the transactions contemplated by the Electra Agreement (the
"Series B Warrants"), if prior to the date of exercise of this Warrant a
Triggering Event as defined in the Electra Agreement has occurred and the
Series B Warrants have been voided, (ii) the number of shares of Common Stock
issuable to the holders of the Series C warrants issued in connection with the
transactions contemplated by the Electra Agreement (the "Series C Warrants"), if
prior to the date of exercise of this Warrant a Triggering Event as defined in
the Electra Agreement has occurred and the Series C Warrants have been voided,
(iii) the number of shares of Common Stock issuable to the holders of the
Series D warrants issued in connection with the transactions contemplated by the
Electra Agreement (the "Series D Warrants"), if prior to the date of exercise of
this Warrant a Triggering Event as defined in the Electra Agreement has occurred
and the Series D Warrants have been voided and (iv) the number of shares of
Common Stock that have been authorized for issuance upon conversion or exercise
of options to directors, officers or employees of the Company which are not
issued as of the date of exercise of this Warrant.
<PAGE>
17
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
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18
The Company shall at all times reserve and keep available for
issuance upon the exercise of this Warrant such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding warrants. The Company covenants that all shares of
Common Stock which shall be so issuable, when issued upon exercise of any
Warrant and payment therefor in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 7.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or
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19
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of NAS Partners I L.L.C. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 5.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a
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20
majority of the Warrant Stock issuable upon exercise of the Warrants) within
thirty (30) days following the event requiring such determination or (ii) in the
absence of such an agreement, by an Appraiser (as defined below) selected as set
forth below. If required, an Appraiser shall be selected within ten (10) days
following the expiration of the 30-day period referred to above, either by
agreement among the Company and the Holder (or, if there is more than one
Warrant outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) or, in the absence of such agreement, by lot from a
list of four potential Appraisers remaining after the Company nominates three,
the Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) nominates
three, and each side eliminates one potential Appraiser. The Appraiser shall be
instructed by the Company and the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) to make its determination within thirty (30) days of
its selection. All fees and expenses of an Appraiser selected hereunder shall
be borne solely by the Company. As used herein, "Appraiser" shall mean a
nationally recognized investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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21
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings. Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
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22
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of NAS or any other holder hereof. The provisions of this Warrant
are intended to be for the benefit of all holders from time to time of this
Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
14.8. INFORMATION. The Company shall cooperate with each Holder of a
Warrant and each holder of Warrant Stock in supplying such information as may be
reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
<PAGE>
23
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: February 20, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ Robert Rankin
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to ________________ whose address is ____________________________ and,
if such shares of Common Stock shall not include all of the shares of Common
Stock issuable as provided in this Warrant, that a new Warrant of like tenor
and date for the balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned.
Dated:
-----------------------
----------------------------------------
(Name of Registered Owner)
----------------------------------------
(Signature of Registered Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint _______________________
attorney in fact to register such transfer on the books of Decrane Aircraft
Holdings, Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated:
------------------
--------------------------
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. H-1
Number of Shares of Common Stock: [15] 114,352
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. WARRANT VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. MANNER OF EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . 6
2.3. PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5. CONTINUED VALIDITY. . . . . . . . . . . . . . . . . . . . . . . . 7
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . [16] 8
3.1. TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . . . .[17] 8
3.2. DIVISION AND COMBINATION. . . . . . . . . . . . . . . . . . . . . 8
3.3. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4. MAINTENANCE OF BOOKS. . . . . . . . . . . . . . . . . . . . . . . 8
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. . . . . . . . . . 8
4.2. CERTAIN OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . 9
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK . . . . . . . . . . 10
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS . . . . . . . . . . 11
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . 12
4.6. SUPERSEDING ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . . 13
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) COMPUTATION OF CONSIDERATION. . . . . . . . . . . . . . . . . 13
(b) WHEN ADJUSTMENTS TO BE MADE . . . . . . . . . . . . . . . [18] 15
(c) FRACTIONAL INTERESTS. . . . . . . . . . . . . . . . . . . . . 15
(d) WHEN ADJUSTMENT NOT REQUIRED. . . . . . . . . . . . . . . . . 15
(e) ESCROW OF WARRANT STOCK . . . . . . . . . . . . . . . . . . . 15
(f) CHALLENGE TO GOOD FAITH DETERMINATION . . . . . . . . . . [19] 16
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS . . . . . . . . . . . . . 16
4.9. OTHER ACTION AFFECTING COMMON STOCK . . . . . . . . . . . . . . . 17
4.10. TAKING OF RECORD: STOCK AND WARRANT TRANSFER
BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANT HOLDERS. . . . . . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION. . . . . . . . . . . . . . [20] 18
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. PUT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . 19
9.1. RESTRICTIVE LEGEND. . . . . . . . . . . . . . . . . . . . . . . . 19
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11. FINANCIAL AND BUSINESS INFORMATION. . . . . . . . . . . . . . . . . . . 20
12. APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.1. NONWAIVER AND EXPENSES . . . . . . . . . . . . . . . . . . . . . 21
14.2. NOTICE GENERALLY . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3. VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 22
14.7. OFFICE OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 22
14.8. INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.9. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.10. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
FOURTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF SEPTEMBER [1]
18, 1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES H-1 WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT NASSAU CAPITAL PARTNERS L.P., a limited
partnership organized under the laws of the State of Delaware ("Nassau
Capital"), or registered assigns (such person, together with any permitted
transferee, is referred to herein as the "Holder"), is entitled, beginning on
the Effective Date and at any time prior to the Expiration Date, to purchase
from DeCRANE AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that
number of shares of Common Stock which shall be initially equal to the Warrant
Value, and which is subject to adjustment as provided herein, at a purchase
price equal to the Current Warrant Price, which shall be initially equal to
$0.01 per share and which is subject to adjustment as provided herein. This
Warrant is issued in connection with the Holder's purchase on the date hereof of
Series E Convertible Preferred Stock pursuant to the Securities Purchase
Agreement. Capitalized terms used but not otherwise defined in this Warrant
shall have the meanings ascribed to such terms in the Securities Purchase
Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement, (y) the Series E, F and G warrants issued
in connection with the transactions contemplated by the Securities Purchase
Agreement, dated as of February 20, 1996 and (z) the Series H and I warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase [2] Warrants, dated as of November 2, 1994 and September 18, 1996,
respectively, of the Company in favor of Internationale Nederlanden (U.S.)
Capital Corporation, (iv) shares of Common Stock issuable under the Common Stock
Purchase [3] Warrants, dated as of November 2, 1994 and September 18, 1996,
respectively, of the Company in favor of The Provident Bank, (v) shares of
Common Stock issuable under the Senior Subordinate Loan and Warrant Purchase
Agreement, dated October 15, 1991, as amended, among Banc One Capital Partners
Corporation, the Company and certain of its Subsidiaries, (vi) shares of Common
Stock issuable upon conversion or exercise of the Company's convertible
preferred stock and warrants outstanding on the Closing Date and (vii) Common
Stock issued to or issuable upon conversion, exercise of options to directors,
officers, employees or consultants of the Company, provided that the aggregate
amount of all such Common Stock shall not exceed 17.05% of the Common Stock
outstanding on a Fully Diluted basis as of the Closing Date [4].
"Appraised Value" shall mean, in respect of any share of Common
Stock as of any date herein specified, (y) the price that would be paid for
the entire common equity interest in the Company on a going-concern basis in
a single arm's-length transaction between a willing buyer and a willing
seller (neither acting under compulsion), using valuation techniques then
prevailing in the securities industry and always determined in accordance
with the valuation procedures set forth in Section 12, and assuming full
disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale, divided by (z) the number of
shares of Common Stock outstanding on a Fully Diluted basis. For purposes of
determining the Appraised Value, (i) the exercise price of options or
warrants to acquire Common Stock which are deemed to have been exercised for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis shall be deemed to have been received by the
Company, (ii) the liquidation preference or indebtedness, as the case may be,
represented by securities which are deemed exercised for or converted into
Common Stock for the purpose of determining the number of shares of Common
Stock outstanding on a Fully Diluted basis, (iii) any contract limitation in
respect of the shares of Common Stock, including their transfer, voting and
other rights and (iv) any illiquidity arising by contract law in respect of
the shares of Common Stock and any voting rights or control rights amongst
the shareholders of the Company shall be deemed to have been eliminated or
cancelled.
<PAGE>
3
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Amended and Restated Credit
Agreement, dated as of [5] September 18, 1996 between the Company, the
Subsidiary Guarantors named therein, the Lenders named therein, The Provident
Bank (as Cash Management Agent) and Internationale Nederlanden (U.S.) Capital
Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per
share of Common Stock as determined by reference to the Company's financial
statements for the most recently ended fiscal quarter, or (ii) a valuation
per share of Common Stock in an amount equal to (y) the product of (A) [5.67]
times (B) the Company's EBITDA less Capital Expenditures (each as defined in
the Electra Agreement) permitted under the Electra Agreement, in each event
for the twelve--month period preceding the most recently ended fiscal
quarter, with such product reduced by (z) principal amounts outstanding under
the Credit Agreement and the Electra Agreement or (iii) the Appraised Value
per share of Common Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at
<PAGE>
4
which a share of Common Stock may be purchased pursuant to this Warrant on such
date.
"Effective Date" shall mean the Closing Date.
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Exercise Date" shall have the meaning set forth in Section 2.2
hereof.
"Expiration Date" shall mean December 31, 2006.
"Fully-Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Private Financing" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
<PAGE>
5
"Private Financing Price" shall mean the effective price per share of
Common Stock received by the Company in connection with a Private Financing,
which Private Financing Price shall be equal to the sum of the aggregate value,
at the date of closing, of equity invested pursuant to such Private Financing
divided by the sum of the aggregate number of shares of Common Stock issued on
such closing date plus the number of shares of Common Stock issuable upon the
exercise or exchange of Convertible Securities issued in connection with such
Private Financing.
"RPO Price" shall mean the effective price per share of Common Stock
received by the Company in connection with a Registered Public Offering, whether
the consideration for such shares is paid in cash or otherwise.
"Registered Public Offering" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of September [6] 18, 1996, by and among the
Company, Nassau Capital, NAS Partners I L.L.C. [7] and Electra Investment
Trust P.L.C. [8]
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Value" shall have the meaning set forth in Section 2.1.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. WARRANT VALUE. The number of shares for which this Warrant
shall be exercisable (the "WARRANT VALUE") shall be determined in accordance
with the following, subject to adjustment as provided in Section 4 hereof:
<PAGE>
6
(a) if as of any Exercise Date no Registered Public Offering shall have
occurred, the Warrant Value shall be [9] 114,352 shares;
(b) if one or more Private Financings shall have occurred prior to any
Exercise Date and no Registered Public Offering shall have occurred, the Warrant
Value on such Exercise Date shall be the greater of (i) [10] 114,352 shares or
(ii) the number of shares determined pursuant to the following formula:
[11] $1,982,249 - 495,562 shares; or
----------------------------------------- ---------
80% of the lowest Private Financing Price
(c) if one or more Registered Public Offerings shall have occurred prior to
any Exercise Date, the Warrant Value on such Exercise Date shall be the greater
of (i) [12] 114,352 shares or (ii) the number of shares determined pursuant to
the following formula:
[13] $1,982,249 - 495,562 shares; or
--------------------------- ---------
80% of the lowest RPO Price
2.2. MANNER OF EXERCISE. From and after the date hereof, and until
5:00 P.M. New York time on the Expiration Date, the Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President, and also at 155 Montrose
West Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer,
or at the office or agency designated by the Company pursuant to Section 14.7,
(i) a written notice of the Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
the Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
<PAGE>
7
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check and this Warrant, is received by the
Company as described above and all taxes, if any, required to be paid prior to
the issuance of such shares have been paid pursuant to Section 2.2 (the
"Exercise Date"). If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder.
2.3. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.4. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.5. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
<PAGE>
8
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company referred to in Section 2.2 or the office or
agency designated by the Company pursuant to Section 14.7, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by the Holder or its agent or attorney. Upon such surrender, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
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9
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the occurrence of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the product of (A) the Current Warrant Price prior to
the occurrence of such event multiplied by (B) a fraction, the numerator of
which is the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment and the denominator of which is
the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market
<PAGE>
10
Price per share of Common Stock minus the amount allocable to one share of
Common Stock of any such cash so distributable and of the fair value (as
determined pursuant to Section 4.7(a), including as to an opinion from an
investment banking firm) of any and all such evidences of indebtedness, shares
of stock, other than securities or property or warrants or other subscription or
purchase rights so distributable; and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by (B) a fraction,
the numerator of which shall be the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the than
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for
<PAGE>
11
which this Warrant is exercisable shall be adjusted to equal the product of (A)
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale multiplied by (B) a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale and the denominator of which shall be the
sum of (x) the number of shares of Common Stock outstanding immediately prior to
such issue or sale plus (y) the number of shares which the aggregate offering
price of the total number of such Additional Shares of Common Stock would
purchase at the then Current Market Price; and (ii) the Current Warrant Price as
to the number of shares for which this Warrant is exercisable prior to such
adjustment shall be adjusted by multiplying (A) such Current Warrant Price by
(B) a fraction, the numerator of which shall be the number of shares for which
this Warrant is exercisable immediately prior to such issue or sale and the
denominator of which shall be the number of shares of Common Stock for which
this Warrant is exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided) shall
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the
<PAGE>
12
exercise of such warrants, options or other rights or upon conversion or
exchange of such Convertible Securities shall be less than the Current Warrant
Price or the Current Market Price in effect immediately prior to such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants, options or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such warrants, options or other rights. No further adjustment of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants, options or other
rights or upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of
<PAGE>
13
Section 4, no further adjustments of the number of Shares for which this Warrant
is exercisable and the Current Warrant Price shall be made by reason of such
issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such warrants, options or rights or Convertible Securities
on the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price,
<PAGE>
14
or, if such Additional Shares of Common Stock or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants, options or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants, options or other rights, as
the case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
<PAGE>
15
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
<PAGE>
16
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm selected by the Company and reasonably acceptable to
such Holder (or, if more than one Warrant is outstanding, to holders of a
majority of Warrant Stock issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (herein referred to as "Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every term and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereof, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
<PAGE>
17
immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrants, options or other rights to subscribe for or
purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassification, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Banc One Warrant (as defined in the Electra Agreement) and the Warrants,
then the Company will promptly make proportional, equitable and corresponding
adjustments in the number of shares of Common Stock issuable upon exercise of
the Warrants to protect the holders thereof against dilution as a result of such
events.
4.10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
<PAGE>
18
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for issuance
upon the exercise of this Warrant such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding warrants. The Company covenants that all shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
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19
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 9.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS: REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
<PAGE>
20
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of Nassau Capital Partners L.P. and subsequent institutional
transferees, if any, shall be sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS-INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 7.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall the final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a majority of the Warrant Stock issuable upon exercise of the
Warrants) within thirty (30) days following the event requiring such
determination or (ii) in the absence of such an agreement, by an Appraiser (as
defined below) selected as set forth below. If required, an Appraiser shall be
selected within ten (10) days following the expiration of the 30-day period
referred to above, either by agreement among the Company and the Holder (or, if
there is more than one Warrant outstanding, to holders of a majority of the
Warrant Stock issuable upon exercise of the Warrants) or, in the absence of such
agreement, by lot from a list of four potential Appraisers remaining after the
Company nominates three, the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) nominates three, and each side eliminates one
potential Appraiser. The Appraiser shall be instructed by the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) to make
its determination within thirty (30) days of its selection. All fees and
expenses of an Appraiser selected hereunder shall be borne solely by the
Company. As used herein, "Appraiser" shall mean a nationally recognized
investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no
<PAGE>
21
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of such Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings, Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
<PAGE>
22
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and assigns of Nassau Capital or any other holder hereof. The
provisions of this Warrant are intended to be for the benefit of all holders
from time to time of this Warrant, and shall be enforceable by any such
holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
<PAGE>
23
14.8. INFORMATION. The Company shall cooperate with each Holder of a
Warrant and each holder of Warrant Stock in supplying such information as may be
reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: September [14] 18, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of __________ shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _______________ whose address is ____________________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
Dated:
-------------------
-----------------------------------
(Name of Registered Owner)
-----------------------------------
(Signature of Registered Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint ________________ attorney in
fact to register such transfer on the books of Decrane Aircraft Holdings, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:
-------------------
-----------------------------------
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC
Warrant No. H-[21] 2
Number of Shares of Common Stock: [22] 1,021
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . .5
2.1. WARRANT VALUE . . . . . . . . . . . . . . . . . . . . . .5
2.2. MANNER OF EXERCISE. . . . . . . . . . . . . . . . . . . .6
2.3. PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . 7
2.4. FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . .7
2.5. CONTINUED VALIDITY. . . . . . . . . . . . . . . . . . . .7
3. TRANSFER, DIVISION AND COMBINATION. . . . . . . . . . . . . . .7
3.1. TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . .7
3.2. DIVISION AND COMBINATION. . . . . . . . . . . . . . . . .8
3.3. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . .8
3.4. MAINTENANCE OF BOOKS. . . . . . . . . . . . . . . . . . .8
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. . . . . .8
4.2. CERTAIN OTHER DISTRIBUTIONS . . . . . . . . . . . . . . .9
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK . . . . . 10
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS . . . . . 11
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. . . . . . . . . . . 12
4.6. SUPERSEDING ADJUSTMENT. . . . . . . . . . . . . . . . . 13
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. . . . . . . . . . . . . . . . . . . . . . 13
(a) COMPUTATION OF CONSIDERATION. . . . . . . . . . . . 13
(b) WHEN ADJUSTMENTS TO BE MADE . . . . . . . . . . . . 14
(c) FRACTIONAL INTERESTS. . . . . . . . . . . . . . . . 15
(d) WHEN ADJUSTMENT NOT REQUIRED. . . . . . . . . . . . 15
(e) ESCROW OF WARRANT STOCK . . . . . . . . . . . . . . 15
(f) CHALLENGE TO GOOD FAITH DETERMINATION . . . . . . . 15
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS . . . . . . . . 16
4.9. OTHER ACTION AFFECTING COMMON STOCK . . . . . . . . . . 17
4.10. TAKING OF RECORD: STOCK AND WARRANT TRANSFER
BOOKS . . . . . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANT HOLDERS. . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION. . . . . . . . . . . 17
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. PUT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . 19
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . 19
9.1. RESTRICTIVE LEGEND. . . . . . . . . . . . . . . . . . . 19
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION. . . . . . . . . . . . . . . . . . . . . 19
10. LOSS OR MUTILATION. . . . . . . . . . . . . . . . . . . . . . 20
11. FINANCIAL AND BUSINESS INFORMATION. . . . . . . . . . . . . . 20
12. APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.1. NONWAIVER AND EXPENSES . . . . . . . . . . . . . . . . 21
14.2. NOTICE GENERALLY . . . . . . . . . . . . . . . . . . . 21
14.3 VOTING . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 22
14.5. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . 22
14.7. OFFICE OF THE COMPANY. . . . . . . . . . . . . . . . . 22
14.8. INFORMATION. . . . . . . . . . . . . . . . . . . . . . 23
14.9. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 23
14.10. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . 23
14.11. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . 23
14.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
FOURTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF SEPTEMBER [1]
18, 1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES H-2 WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT [2] NAS PARTNERS [3] I.L.L.C,. a limited [4]
Liability Company organized under the laws of the State of Delaware (" [5]
NAS"), or registered assigns (such person, together with any permitted
transferee, is referred to herein as the "Holder"), is entitled, beginning on
the Effective Date and at any time prior to the Expiration Date, to purchase
from DeCRANE AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that
number of shares of Common Stock which shall be initially equal to the Warrant
Value, and which is subject to adjustment as provided herein, at a purchase
price equal to the Current Warrant Price, which shall be initially equal to
$0.01 per share and which is subject to adjustment as provided herein. This
Warrant is issued in connection with the Holder's purchase on the date hereof of
Series E Convertible Preferred Stock pursuant to the Securities Purchase
Agreement. Capitalized terms used hut not otherwise defined in this Warrant
shall have the meanings ascribed to such terms in the Securities Purchase
Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions
<PAGE>
2
contemplated by the Electra Agreement, (y) the Series E, F and G warrants issued
in connection with the transactions contemplated by the Securities Purchase
Agreement, dated as of February 20, 1996 and (z) the Series H and I warrants
issued in connection with the transactions contemplated by the Securities
Purchase Agreement, (iii) shares of Common Stock issuable under the Common Stock
Purchase [6] Warrants, dated as of November 2, 1994 and September 18, 1996,
respectively, of the Company in favor of Internationale Nederlanden (U.S.)
Capital Corporation, (iv) shares of Common Stock issuable under the Common Stock
Purchase [7] Warrants, dated as of November 2, 1994 and September 18, 1996,
respectively, of the Company in favor of The Provident Bank, (v) shares of
Common Stock issuable under the Senior Subordinate Loan and Warrant Purchase
Agreement, dated October 15, 1991, as amended, among Banc One Capital Partners
Corporation, the Company and certain of its Subsidiaries, (vi) shares of Common
Stock issuable upon conversion or exercise of the Company's convertible
preferred stock and warrants outstanding on the Closing Date and (vii) Common
Stock issued to or issuable upon conversion, exercise of options to directors,
officers, employees or consultants of the Company, provided that the aggregate
amount of all such Common Stock shall not exceed 17.05% of the Common Stock
outstanding on a Fully Diluted basis as of the Closing Date [8].
"Appraised Value" shall mean, in respect of any share of Common Stock
as of any date herein specified, (y) the price that would be paid for the entire
common equity interest in the Company on a going concern basis in a single arm's
length transaction between a willing buyer and a willing seller (neither acting
under compulsion), using valuation techniques then prevailing in the securities
industry and always determined in accordance with the valuation procedures set
forth in Section 12, and assuming full disclosure and understanding of all
relevant information and a reasonable period of time for effectuating such sale,
divided by (z) the number of shares of Common Stock outstanding on a Fully
Diluted basis. For purposes of determining the Appraised Value, (i) the
exercise price of options or warrants to acquire Common Stock which are deemed
to have been exercised for the purpose of determining the number of shares of
Common Stock outstanding on a Fully Diluted basis shall be deemed to have been
received by the Company, (ii) the liquidation preference or indebtedness, as the
case may be, represented by securities which are deemed exercised for or
converted into Common Stock for the purpose of determining the number of shares
of Common Stock outstanding on a Fully Diluted basis, (iii) any contract
limitation in respect of the shares of Common Stock, including their transfer,
voting and other rights and (iv) any illiquidity arising by contract law in
respect of the shares of Common Stock and any voting rights or control rights
amongst the shareholders of the Company shall be deemed to have been eliminated
or cancelled.
<PAGE>
3
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain amended and Restated Credit
Agreement, dated as of [9] September 18, 1996 between the Company, the
Subsidiary Guarantors named therein, the Lenders named therein, The Provident
Bank (as Cash Management Agent) and Internationale Nederlanden (U.S.) Capital
Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial statements
for the most recently ended fiscal quarter, or (ii) a valuation per share of
Common Stock in an amount equal to (y) the product of (A) [5.67] times (B) the
Company's EBITDA less Capital Expenditures (each as defined in the Electra
Agreement) permitted under the Electra Agreement, in each event for the
twelve-month period preceding the most recently ended fiscal quarter, with such
product reduced by (z) principal amounts outstanding under the Credit Agreement
and the Electra Agreement or (iii) the Appraised Value per share of Common
Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at
<PAGE>
4
which a share of Common Stock may be purchased pursuant to this Warrant on such
date.
"Effective Date" shall mean the Closing Date.
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Exercise Date" shall have the meaning set forth in Section 2.2
hereof.
"Expiration Date" shall mean December 31, 2006.
"Fully-Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Private Financing" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
<PAGE>
5
"Private Financing Price" shall mean the effective price per share of
Common Stock received by the Company in connection with a Private Financing,
which Private Financing price shall be equal to the sum of the aggregate value,
at the date of closing, of equity invested pursuant to such Private Financing
divided by the sum of the aggregate number of shares of Common Stock issued on
such closing date plus the number of shares of Common Stock issuable upon the
exercise or exchange of Convertible Securities issued in connection with such
Private Financing.
"RPO Price" shall mean the effective price per share of Common Stock
received by the Company in connection with a Registered Public Offering, whether
the consideration for such shares is paid in cash or otherwise.
"Registered Public Offering" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of September [10] 18, 1996, by and among the
Company, Nassau Capital, NAS Partners I L.L.C. [13] and Electra Investment Trust
P.L.C.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Value" shall have the meaning set forth in Section 2.1.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. WARRANT VALUE. The number of shares for which this Warrant
shall be exercisable (the "WARRANT VALUE") shall be determined in accordance
with the following, subject to adjustment as provided in Section 4 hereof:
<PAGE>
6
(a) if as of any Exercise Date no Registered Public Offering shall have
occurred, the Warrant Value shall be [13] 1,021 shares;
(b) if one or more Private Financings shall have occurred prior to any
Exercise Date and no Registered Public Offering shall have occurred, the Warrant
Value on such Exercise Date shall be the greater of (i) [14] 1,021 shares or
(ii) the number of shares determined pursuant to the following formula:
[15] $17,751.00
- -----------------------------------------------
80% of the lowest Private Financing Price - 4,438 shares; or
(c) if one or more Registered Public Offerings shall have occurred prior to
any Exercise Date, the Warrant Value on such Exercise Date shall be the greater
of (i) [16] 1,021 shares or (ii) the number of shares determined pursuant to the
following formula:
[17] $17,751.00
- ---------------------------------
80% of the lowest RPO Price - 4,438 shares; or
2.2. MANNER OF EXERCISE. From and after the date hereof, and until
5:00 P.M. New York time on the Expiration Date, the Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President, and also at 155 Montrose
West Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer,
or at the office or agency designated by the Company pursuant to Section 14.7,
(i) a written notice of the Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
the Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
<PAGE>
7
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check and this Warrant, is received by the
Company as described above and all taxes, if any, required to be paid prior to
the issuance of such shares have been paid pursuant to Section 2.2 (the
"Exercise Date"). If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder.
2.3. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.4. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.5. CONTINUED VALIDITY. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
<PAGE>
8
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company referred to in Section 2.2 or the office or
agency designated by the Company pursuant to Section 14.7, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by the Holder or its agent or attorney. Upon such surrender, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
<PAGE>
9
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the occurrence of such event would own
or be entitled to receive after the occurrence of such event, and (ii) the
Current Warrant Price shall be adjusted to equal the product of (A) the
Current Warrant Price prior to the occurrence of such event multiplied by
(B) a fraction, the numerator of which is the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
adjustment and the denominator of which is the number of shares for which
this Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market
<PAGE>
10
Price per share of Common Stock minus the amount allocable to one share of
Common Stock of any such cash so distributable and of the fair value (as
determined pursuant to Section 4.7(a), including as to an opinion from an
investment banking firm) of any and all such evidences of indebtedness, shares
of stock, other than securities or property or warrants or other subscription or
purchase rights so distributable; and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by (B) a fraction,
the numerator of which shall be the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for
<PAGE>
11
which this Warrant is exercisable shall be adjusted to equal the product of (A)
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale multiplied by (B) a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale and the denominator of which shall be the
sum of (x) the number of shares of Common Stock outstanding immediately prior to
such issue or sale plus (y) the number of shares which the aggregate offering
price of the total number of such Additional Shares of Common Stock would
purchase at the then Current Market Price; and (ii) the Current Warrant Price as
to the number of shares for which this Warrant is exercisable prior to such
adjustment shall be adjusted by multiplying (A) such Current Warrant Price by
(B) a fraction, the numerator of which shall be the number of shares for which
this Warrant is exercisable immediately prior to such issue or sale and the
denominator of which shall be the number of shares of Common Stock for which
this Warrant is exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided) shall
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the
<PAGE>
12
exercise of such warrants, options or other rights or upon conversion or
exchange of such Convertible Securities shall be less than the Current Warrant
Price or the Current Market Price in effect immediately prior to such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of actual issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of such
warrants, options or other rights or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall he made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of
<PAGE>
13
Section 4, no further adjustments of the number of Shares for which this Warrant
is exercisable and the Current Warrant Price shall be made by reason of such
issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall he
made of the effect of such warrants, options or rights or Convertible Securities
on the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price,
<PAGE>
14
or, if such Additional Shares of Common Stock or Convertible Securities are
sold to underwriters or dealers for public offering without a subscription
offering, the public offering price (in any such case subtracting any amounts
paid or receivable for accrued interest or accrued dividends and without
taking into account any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in connection
with, the issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed to be the fair
value of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Company. In case any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options
or other rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any merger
in which the Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair value, as determined in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board in good faith shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants, options or other rights, as the case may
be. The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for
issuing such warrants, options or other rights plus the additional
consideration payable to the Company upon exercise of such warrants, options
or other rights. The consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Convertible Securities shall be the
consideration received by the Company for issuing warrants, options or other
rights to subscribe for or purchase of such Convertible Securities, plus the
consideration paid or payable to the Company in respect of the subscription
for or such Convertible Securities, plus the additional consideration, if
any, payable to the Company upon the exercise of the right of conversion or
exchange of such Convertible Securities. In case of the issuance at any time
of any Additional Shares of Common Stock or Convertible Securities in payment
or satisfaction of any dividends upon any class of stock other than Common
Stock, the Company shall be deemed to have received for such Additional
Shares of Common Stock or Convertible Securities a consideration equal to the
amount of such dividend so paid or satisfied. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any consideration, such determination shall, if
requested by the Holder, be supported by an opinion of an investment banking
firm selected by the Company and reasonably acceptable to such Holder (or, if
more than one Warrant is outstanding, by holders of a majority of the Warrant
Stock issuable upon exercise of the Warrants).
<PAGE>
15
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
<PAGE>
16
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm selected by the Company and reasonably acceptable to
such Holder (or, if more than one Warrant is outstanding, to holders of a
majority of Warrant Stock issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (herein referred to as "Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every term and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereof, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
<PAGE>
17
immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrants, options or other rights to subscribe for or
purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassification, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Banc One Warrant (as defined in the Electra Agreement) and the Warrants,
then the Company will promptly make proportional, equitable and corresponding
adjustments in the number of shares of Common Stock issuable upon exercise of
the Warrants to protect the holders thereof against dilution as a result of such
events.
4.10. TAKING OF RECORD: STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
<PAGE>
18
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for issuance
upon the exercise of this Warrant such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding warrants. The Company covenants that all shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
<PAGE>
19
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 9.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS: REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
<PAGE>
20
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of [18] NAS and subsequent institutional transferees, if any,
shall be sufficient indemnity) and, in case of mutilation, upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a new
Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 7.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a majority of the Warrant Stock issuable upon exercise of the
Warrants) within thirty (30) days following the event requiring such
determination or (ii) in the absence of such an agreement, by an Appraiser (as
defined below) selected as set forth below. If required, an Appraiser shall be
selected within ten (10) days following the expiration of the 30-day period
referred to above, either by agreement among the Company and the Holder (or, if
there is more than one Warrant outstanding, to holders of a majority of the
Warrant Stock issuable upon exercise of the Warrants) or, in the absence of such
agreement, by lot from a list of four potential Appraisers remaining after the
Company nominates three, the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) nominates three, and each side eliminates one
potential Appraiser. The Appraiser shall be instructed by the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) to make
its determination within thirty (30) days of its selection. All fees and
expenses of an Appraiser selected hereunder shall be borne solely by the
Company. As used herein, "Appraiser" shall mean a nationally recognized
investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no
<PAGE>
21
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of such Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings. Inc.
155 Montrose West Ave.,
Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
<PAGE>
22
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of [19] NAS or any other holder hereof. The provisions of this
Warrant are intended to be for the benefit of all holders from time to time of
this Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
<PAGE>
23
14.8. INFORMATION. The Company shall cooperate with each Holder of a
Warrant and each holder of Warrant Stock in supplying such information as may be
reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: September [20] 18, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ___________ shares of Common Stock of DeCrane
Aircraft Holdings, Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _____________ whose address is _____________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
Dated: ________________________
------------------------------------
(Name of Registered Owner)
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- -------------------------------- ----------------
and does hereby irrevocably constitute and appoint _________________
attorney-in-fact to register such transfer on the books of Decrane Aircraft
Holdings, Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated: _____________________
----------------------------------
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
-------------------- DELETIONS --------------------
[1]
[2] NASSAU CAPITAL
[3] L.P.,
[4] partnership
[5] Nassau Capital
[6] Warrant
[7] Warrant
[8] or (viii) shares of Common Stock issuable [in connection with the senior
debt financing portion of the ADS asset purchase]
[9] November 2, 1994,
[10] ___
[11]
[12] and Electra Associates, Inc.
[13] ________________
[14] ___________
[15] [$3 million] - 750,000
[16] __________
[17] [$3 million] - 750,000
[18] Nassau Capital Partners L.P.
[19) Nassau Capital
[20] ____
[21] 1
[22]_______________
-iii-
<PAGE>
WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
Warrant No. H-[21] 3
Number of Shares of Common Stock: [22] 57,704
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT. . . . . . . . . . . . . . . . . . . . . . 5
2.1. WARRANT VALUE. . . . . . . . . . . . . . . . . . . . . . 5
2.2. MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . 6
2.3. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . 7
2.4. FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . 7
2.5. CONTINUED VALIDITY . . . . . . . . . . . . . . . . . . . 7
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . 7
3.1. TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. DIVISION AND COMBINATION. . . . . . . . . . . . . . . . . 8
3.3. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4. MAINTENANCE OF BOOKS. . . . . . . . . . . . . . . . . . . 8
4 ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS . . . . . 8
4.2. CERTAIN OTHER DISTRIBUTIONS. . . . . . . . . . . . . . . 9
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. . . . . . 10
4.4. ISSUANCE OF WARRANTS OPTIONS OR OTHER RIGHTS . . . . . . 11
4.5. ISSUANCE OF CONVERTIBLE SECURITIES . . . . . . . . . . . 12
4.6. SUPERSEDING ADJUSTMENT . . . . . . . . . . . . . . .[23] 12
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. . . . . . . . . . . . . . . . . . . . . . 13
(a) COMPUTATION OF CONSIDERATION. . . . . . . . . . . . 13
(b) WHEN ADJUSTMENTS TO BE MADE . . . . . . . . . . . . 14
(c) FRACTIONAL INTERESTS. . . . . . . . . . . . . . . . 15
(d) WHEN ADJUSTMENT NOT REQUIRED. . . . . . . . . . . . 15
(e) ESCROW OF WARRANT STOCK . . . . . . . . . . . . . . 15
(f) CHALLENGE TO GOOD FAITH DETERMINATION . . . . . . . 15
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. . . . . . . . . 16
4.9. OTHER ACTION AFFECTING COMMON STOCK. . . . . . . . . . . 17
4.10. TAKING OF RECORD, STOCK AND WARRANT TRANSFER
BOOKS. . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANT HOLDERS . . . . . . . . . . . . . . . . . . 17
5.1. NOTICE OF ADJUSTMENTS. . . . . . . . . . . . . . . . . . 17
5.2. NOTICE OF CERTAIN CORPORATE ACTION . . . . . . . . . . . 17
6. NO IMPAIRMENT. . . . . . . . . . . . . . . . . . . . . . . . . 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK,
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. PUT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-i-
<PAGE>
9. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . 19
9.1. RESTRICTIVE LEGEND . . . . . . . . . . . . . . . . . . . 19
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION. . . . . . . . . . . . . . . . . . . . . . 19
10. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . 20
11. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . . 20
12. APPRAISAL. . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . 20
14. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 21
14.1. NONWAIVER AND EXPENSES . . . . . . . . . . . . . . . . 21
14.2. NOTICE GENERALLY . . . . . . . . . . . . . . . . . . . 21
14.3. VOTING . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 22
14.5. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 22
14.6. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . 22
14.7. OFFICE OF THE COMPANY. . . . . . . . . . . . . . . . . 22
14.8. INFORMATION. . . . . . . . . . . . . . . . . . . . . . 23
14.9. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 23
14.10. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . 23
14.11. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . 23
14.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
DELETIONS
[1] ___
[2] NASSAU CAPITAL PARTNERS L.P., a limited partnership
[3] State of Delaware ("Nassau Capital
[4] Warrant
[5] Warrant
[6] or (viii) shares of Common Stock issuable [in connection with the senior
debt financing portion of the ADS asset purchase]
[7] November 2, 1994,
[8] __
[9] ,
[10] and Electra Associates, Inc.
[11] ___________
[12] ________
[13] [$3
[14] ] - 750,000
[15] _______
[16] [$3
[17] ] - 750,000
[18] Nassau Capital Partners L.P.
[19] Nassau Capital
[20] __
[21] 1
[22] _______
[23] 13
-iii-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
FOURTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF SEPTEMBER [1]
18, 1996, AMONG THE COMPANY AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
SERIES H-3 WARRANT
To Purchase Common Stock
of
DeCRANE AIRCRAFT HOLDINGS, INC.
THIS IS TO CERTIFY THAT [2] ELECTRA INVESTMENT TRUST P.L.C., a
corporation organized under the laws of the [3] United Kingdom ("EIT"), or
registered assigns (such person, together with any permitted transferee, is
referred to herein as the "Holder"), is entitled, beginning on the Effective
Date and at any time prior to the Expiration Date, to purchase from DeCRANE
AIRCRAFT HOLDINGS, INC., an Ohio corporation (the "Company"), that number of
shares of Common Stock which shall be initially equal to the Warrant Value, and
which is subject to adjustment as provided herein, at a purchase price equal to
the Current Warrant Price, which shall be initially equal to $0.01 per share and
which is subject to adjustment as provided herein. This Warrant is issued in
connection with the Holder's purchase on the date hereof of Series E Convertible
Preferred Stock pursuant to the Securities Purchase Agreement. Capitalized
terms used but not otherwise defined in this Warrant shall have the meanings
ascribed to such terms in the Securities Purchase Agreement.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than (i) Warrant
Stock, (ii) shares of Common Stock issuable to the holders of (x) the Series A,
Series B, Series C and Series D warrants, issued in connection with the
transactions contemplated by the Electra Agreement, (y) the Series E, F and G
<PAGE>
2
warrants issued in connection with the transactions contemplated by the
Securities Purchase Agreement, dated as of February 20, 1996 and (z) the Series
H and I warrants issued in connection with the transactions contemplated by the
Securities Purchase Agreement, (iii) shares of Common Stock issuable under the
Common Stock Purchase [4] Warrants, dated as of November 2, 1994 and September
18, 1996, respectively, of the Company in favor of Internationale Nederlanden
(U.S.) Capital Corporation, (iv) shares of Common Stock issuable under the
Common Stock Purchase [5] warrants, dated as of November 2, 1994 and September
18, 1996. respectively, of the Company in favor of The Provident Bank, (v)
shares of Common Stock issuable under the Senior Subordinate Loan and Warrant
Purchase Agreement, dated October 15, 1991, as amended, among-Banc One Capital
Partners Corporation, the Company and certain of its Subsidiaries, (vi) shares
of Common Stock issuable upon conversion or exercise of the Company's
convertible preferred stock and warrants outstanding on the Closing Date and
(vii) Common Stock issued to or issuable upon conversion, exercise of options to
directors, officers, employees or consultants of the Company, provided that the
aggregate amount of all such Common Stock shall not exceed 17.05% of the Common
Stock outstanding on a Fully Diluted basis as of the Closing Date [6].
"Appraised Value" shall mean, in respect of any share of Common
Stock as of any date herein specified, (y) the price that would be paid for
the entire common equity interest in the Company on a going concern basis in
a single arm's-length transaction between a willing buyer and a willing
seller (neither acting under compulsion), using valuation techniques then
prevailing in the securities industry and always determined in accordance
with the valuation procedures set forth in Section 12, and assuming full
disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale, divided by (z) the number of
shares of Common Stock outstanding on a Fully Diluted basis. For purposes of
determining the Appraised Value, (i) the exercise price of options or
warrants to acquire Common Stock which are deemed to have been exercised for
the purpose of determining the number of shares of Common Stock outstanding
on a Fully Diluted basis shall be deemed to have been received by the
Company, (ii) the liquidation preference or indebtedness, as the case may be,
represented by securities which are deemed exercised for or converted into
Common Stock for the purpose of determining the number of shares of Common
Stock outstanding on a Fully Diluted basis, (iii) any contract limitation in
respect of the shares of Common Stock, including their transfer, voting and
other rights and (iv) any illiquidity arising by contract law in respect of
the shares of Common Stock and any voting rights or control rights amongst
the shareholders of the Company shall be deemed to have been eliminated or
cancelled.
<PAGE>
3
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which commercial banks are required or authorized to be closed in
the City of New York.
"Closing Date" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Common Stock" shall mean (except where the context otherwise
indicates) the common stock, without par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" shall mean that certain Amended and Restated Credit
Agreement, dated as of (7] September 18, 1996 between the Company, the
Subsidiary Guarantors named therein, the Lenders named therein, The Provident
Bank (as Cash Management Agent) and Internationale Nederlanden (U.S.) Capital
Corporation (as Agent).
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the greater of (i) net book value per share
of Common Stock as determined by reference to the Company's financial statements
for the most recently ended fiscal quarter, or (ii) a valuation per share of
Common Stock in an amount equal to (y) the product of (A) [5.67] times (B) the
Company's EBITDA less Capital Expenditures (each as defined in the Electra
Agreement) permitted under the Electra Agreement, in each event for the twelve
month period preceding the most recently ended fiscal quarter, with such product
reduced by (z) principal amounts outstanding under the Credit Agreement and the
Electra Agreement or (iii) the Appraised Value per share of Common Stock.
"Current Warrant Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the price at
<PAGE>
4
which a share of Common Stock may be purchased pursuant to this Warrant on such
date.
"Effective Date" shall mean the Closing Date.
"Electra Agreement" shall mean that certain Securities Purchase
Agreement, dated as of November 2, 1994, by and among the Company, Electra
Investment Trust P.L.C. and Electra Associates, Inc.
"Exercise Date" shall have the meaning set forth in Section 2.2
hereof.
"Expiration Date"-shall mean December 31, 2006.
"Fully Diluted" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable in respect of this Warrant increased by all common equivalent shares
issuable at any time pursuant to any stock options, warrants, convertible
securities, and any other security or instrument that could result in additional
common shares being issued at any time in the future, outstanding on such date.
"QAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or statements by
such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, corporation, limited liability organization, association,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Private Financing" shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
<PAGE>
5
"Private Financing Price" shall mean the effective price per share of
Common Stock received by the Company in connection with a Private Financing,
which Private Financing Price shall be equal to the sum of the aggregate value,
at the date of closing, of equity invested pursuant to such Private Financing
divided by the sum of the aggregate number of shares of Common Stock issued on
such closing date plus the number of shares of Common Stock issuable upon the
exercise or exchange of Convertible Securities issued in connection with such
Private Financing.
"RPO Price" shall mean the effective price per share of Common Stock
received by the Company in connection with a Registered Public Offering,-whether
the consideration for such shares is paid in cash or otherwise.
"Registered Public Offering" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of September [8] 18, 1996, by and among the
Company, Nassau Capital, NAS Partners I L.L.C. [9] and Electra Investment Trust
P.L.C.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant" or "Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination, or in exchange or substitution
therefor.
"Warrant Value" shall have the meaning set forth in Section 2.1.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock received by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. WARRANT VALUE. The number of shares for which this Warrant
shall be exercisable (the "WARRANT VALUE") shall be determined in accordance
with the following, subject to adjustment as provided in Section 4 hereof:
<PAGE>
6
(a) if as of any Exercise Date no Registered Public Offering shall have
occurred, the Warrant Value shall be [11] 57,704 shares;
(b) if one or more Private Financings shall have occurred prior to any
Exercise Date and no Registered Public Offering shall have occurred, the Warrant
Value on such Exercise Date shall be the greater of (i) [12] 57,704 shares or
(ii) the number of shares determined pursuant to the following formula:
[13] $1 million
-------------------------------------- [14] - 250,000
shares; or
80% of the lowest Private Financing Price
(c) if one or more Registered Public Offerings shall have occurred prior to
any Exercise Date, the Warrant Value on such Exercise Date shall be the greater
of (i) [15] 57,704 shares or (ii) the number of shares determined pursuant to
the following formula:
[16] $1 million
------------------------------ [17] - 250,000 shares; or
80% of the lowest RPO Price
2.2. MANNER OF EXERCISE. From and after the date hereof, and until
5:00 P.M. New York time on the Expiration Date, the Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its principal office at 2201 Rosecrans Avenue,
El Segundo, California 90245, Attention: President, and also at 155 Montrose
West Avenue, Suite 210, Copley, Ohio 44321, Attention: Chief Executive Officer,
or at the office or agency designated by the Company pursuant to Section 14.7,
(i) a written notice of the Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
the Holder's check in payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by the Holder or its agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to the Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall request and shall be registered in the name
of the Holder or, subject to Section 9, such other name as shall be designated
in the notice.
<PAGE>
7
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check and this Warrant, is received by the
Company as described above and all taxes, if any, required to be paid prior to
the issuance of such shares have been paid pursuant to Section 2.2 (the
"Exercise Date"). If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder.
2.3. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such taxes or
charges are income taxes or otherwise imposed upon income of the Holder.
2.4. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.5. CONTINUED VALIDITV. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the 1933 Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10, 11 and
14 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
<PAGE>
8
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to Section 9, transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company referred to in Section 2.2 or the office or
agency designated by the Company pursuant to Section 14.7, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by the Holder or its agent or attorney. Upon such surrender, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation thereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder or its agent or attorney. Subject to Section 3.1 and
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver the new
Warrant or Warrants and pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of such Warrants, unless
such taxes or charges are income taxes or otherwise imposed upon income of the
Holder.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
<PAGE>
9
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in or to receive any other
distribution of Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the occurrence of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the product of (A) the Current Warrant Price prior to
the occurrence of such event multiplied by (B) a fraction, the numerator of
which is the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment and the denominator of which is
the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a regular cash dividend payable out of surplus
or net profits legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants, options or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of (A) the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by (B) a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and the denominator of which shall be such Current Market
<PAGE>
10
Price per share of Common Stock minus the amount allocable to one share of
Common Stock of any such cash so distributable and of the fair value (as
determined pursuant to Section 4.7(a), including as to an opinion from an
investment banking firm) of any and all such evidences of indebtedness, shares
of stock, other than securities or property or warrants or other subscription or
purchase rights so distributable; and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by (B) a fraction,
the numerator of which shall be the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, in exchange for consideration in an amount
per Additional Share of Common Stock which is less than the Current Warrant
Price at the time the Additional Shares of Common Stock are issued, then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined by
dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Current Warrant Price plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product of (A) the Current Warrant Price in effect immediately
prior to such issue or sale multiplied by (B) the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such issue or
sale, and dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If at any time the Company shall (except as hereinafter provided)
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Market Price at the time the Additional Shares of Common Stock
are issued, then (i) the number of shares of Common Stock for
<PAGE>
11
which this Warrant is exercisable shall be adjusted to equal the product of (A)
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale multiplied by (B) a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale and the denominator of which shall be the
sum of (x) the number of shares of Common Stock outstanding immediately prior to
such issue or sale plus (y) the number of shares which the aggregate offering
price of the total number of such Additional Shares of Common Stock would
purchase at the then Current Market Price; and (ii) the Current Warrant Price as
to the number of shares for which this Warrant is exercisable prior to such
adjustment shall be adjusted by multiplying (A) such Current Warrant Price by
(5) a fraction, the numerator of which shall be the number of shares for which
this Warrant is exercisable immediately prior to such issue or sale and the
denominator of which shall be the number of shares of Common Stock for which
this Warrant is exercisable immediately after such issue or sale.
(c) If at any time the Company (except as hereinafter provided) shall
issue or sell any Additional Shares of Common Stock, in exchange for
consideration in an amount per Additional Share of Common Stock which is less
than the Current Warrant Price and the Current Market Price at the time the
Additional Shares of Common Stock are issued, the adjustment required under this
Section 4.3 shall be made in accordance with the formula in paragraph (a) or (b)
above which results in the lower Current Warrant Price following such
adjustment. The provisions of paragraphs (a) and (b) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or Section 4.2. No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of this Section 4.3 upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Section
4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the
<PAGE>
12
exercise of such warrants, options or other rights or upon conversion or
exchange of such Convertible Securities shall be less than the Current Warrant
Price or the Current Market Price in effect immediately prior to such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants, options or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such warrants, options or other rights. No further adjustment of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants, options or other
rights or upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant, option or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of
<PAGE>
13
Section 4, no further adjustments of the number of Shares for which this Warrant
is exercisable and the Current Warrant Price shall be made by reason of such
issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
of the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, options, rights or
Convertible Securities, such warrants, options or rights, or the right of
conversion or exchange of such Convertible Securities, shall expire, and all or
a portion of such warrants, options or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be, shall not have been exercised, then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such warrants, options or rights or Convertible Securities
on the basis of (a) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants, options or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and (b) treating any such warrants, options or rights or any such Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants,
options or rights or other Convertible Securities, whereupon a new adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription, the
subscription price,
<PAGE>
14
or, if such Additional Shares of Common Stock or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants, options or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants, options or other rights, as
the case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants, options or other rights plus the additional consideration payable
to the Company upon exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants, options or other rights to subscribe for or
purchase of such Convertible Securities, plus the consideration paid or payable
to the Company in respect of the subscription for or such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied. Whenever the Board of Directors of the Company shall be
required to make a determination in good faith of the fair value of any
consideration, such determination shall, if requested by the Holder, be
supported by an opinion of an investment banking firm selected by the Company
and reasonably acceptable to such Holder (or, if more than one Warrant is
outstanding, by holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants).
<PAGE>
15
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a divided or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the Holder
by the Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
<PAGE>
16
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm selected by the Company and reasonably acceptable to
such Holder (or, if more than one Warrant is outstanding, to holders of a
majority of Warrant Stock issuable upon exercise of the Warrants).
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with respect to the
Common Stock of the Company other than a subdivision, combination or exchange
otherwise provided for herein), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (herein referred to as "Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of such
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every term and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereof, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
<PAGE>
17
immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrants, options or other rights to subscribe for or
purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassification, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock which gives rise to antidilution adjustments under any option, warrant,
convertible security or other right to acquire Common Stock, whether outstanding
at the Closing Date or hereafter issued and together with any agreements related
thereto, but excluding antidilution or other adjustment rights with respect to
the Banc One Warrant (as defined in the Electra Agreement) and the Warrants,
then the Company will promptly make proportional, equitable and corresponding
adjustments in the number of shares of Common Stock issuable upon exercise of
the Warrants to protect the holders thereof against dilution as a result of such
events.
4.10. TAKING OF RECORD: STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time close its stock transfer books or warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. (a) Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was calculated
and specifying the Current Warrant Price and the number of shares of Common
Stock for which this Warrant is exercisable after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 14.7
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder thereof.
<PAGE>
18
5.2. NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for issuance
upon the exercise of this Warrant such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding warrants. The Company covenants that all shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
<PAGE>
19
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith, as expeditiously as possible and at its own expense, endeavor to
cause such shares to be duly registered or qualified, as the case may be.
8. PUT RIGHTS
The Holder shall have the right to require the Company to repurchase
all or any portion of the Warrants held by the Holder upon the terms and as
provided in Section 9.3 of the Securities Purchase Agreement.
9. RESTRICTIONS ON TRANSFER
The Warrants and the Warrant Stock may not be transferred or assigned
before satisfaction of the conditions specified in this Section 9, which are
intended to ensure compliance with the provisions of the 1933 Act with respect
to the Transfer of any Warrant or any Warrant Stock. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. This Warrant, and all shares of Warrant
Stock issued upon exercise hereof, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
9.2. NOTICE OF PROPOSED TRANSFERS: REQUESTS FOR REGISTRATION. Prior
to any Transfer of any Warrant, the holder of such Warrant shall give five days'
prior written notice (a "Transfer Notice") to the Company of such holder's
intention to effect such Transfer, including a description of the manner and
circumstances of the proposed Transfer and, if requested by the Company, an
opinion from counsel to such holder that the proposed Transfer of such Warrant
may be effected without registration under the 1933 Act. After delivery of the
Transfer Notice, the holder shall be entitled to Transfer such Warrant in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1, unless such
legend is not required in order to ensure compliance with the 1933 Act.
<PAGE>
20
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and, in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (it being understood and agreed that the
written agreement of [18] EIT and subsequent institutional transferees, if any,
shall be sufficient indemnity) and, in case of mutilation, upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a new
Warrant of like tenor in replacement.
11. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver or cause to be delivered to each Holder, as
provided in Section 7.1 of the Securities Purchase Agreement, certain financial
information, financial analyses, notices, reports, statements and certificates,
all to the extent and in the manner provided therein.
12. APPRAISAL
The determination of Appraised Value shall be a determination (which
shall be final and binding on the parties) made (i) by agreement among the
Company and the Holder (or, if there is more than one Warrant outstanding, to
holders of a majority of the Warrant Stock issuable upon exercise of the
Warrants) within thirty (30) days following the event requiring such
determination or (ii) in the absence of such an agreement, by an Appraiser (as
defined below) selected as set forth below. If required, an Appraiser shall be
selected within ten (10) days following the expiration of the 30-day period
referred to above, either by agreement among the Company and the Holder (or, if
there is more than one Warrant outstanding, to holders of a majority of the
Warrant Stock issuable upon exercise of the Warrants) or, in the absence of such
agreement, by lot from a list of four potential Appraisers remaining after the
Company nominates three, the Holder (or, if there is more than one Warrant
outstanding, to holders of a majority of the Warrant Stock issuable upon
exercise of the Warrants) nominates three, and each side eliminates one
potential Appraiser. The Appraiser shall be instructed by the Company and the
Holder (or, if there is more than one Warrant outstanding, to holders of a
majority of the Warrant Stock issuable upon exercise of the Warrants) to make
its determination within thirty (30) days of its selection. All fees and
expenses of an Appraiser selected hereunder shall be borne solely by the
Company. As used herein, "Appraiser" shall mean a nationally recognized
investment banking firm.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no
<PAGE>
21
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of such Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any provision of this Warrant, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose;
(b) If to the Company at:
DeCrane Aircraft Holdings. Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: President
DeCrane Aircraft Holdings. Inc.
155 Montrose West Ave., Suite 210
Copley, Ohio 44321
Attention: Chief Executive Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been postmarked in the United States mail.
<PAGE>
22
14.3. VOTING. To the extent permitted by applicable law, the
Warrants shall entitle the Holder to vote with the Common Stock of the Company
that number of votes equal to the number of shares of Common Stock issuable from
time to time upon exercise of this Warrant on any matters upon which the holders
of Common Stock are entitled to vote; provided, however, that solely for
purposes of this Section 14.3, the Effective Date shall be deemed to be the date
of issue of this Warrant.
14.4. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of (i) the
Holder's exercise of this Warrant and/or ownership of any shares of Warrant
Stock issued in connection therewith, or (ii) any litigation to which the Holder
is made a party in its capacity as a stockholder of the Company; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from the Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.5. REMEDIES. Each holder of this Warrant and any Warrant Stock
issuable upon exercise of this Warrant, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under Section 8 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of Section 8 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.6. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of [19] EIT or any other holder hereof. The provisions of this
Warrant are intended to be for the benefit of all holders from time to time of
this Warrant, and shall be enforceable by any such holder.
14.7. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
<PAGE>
23
14.8. INFORMATION. The Company shall cooperate with each Holder of a
Warrant and each holder of Warrant Stock in supplying such information as may be
reasonably requested by such holder to comply with any filings or information
reporting forms presently or hereafter required as a condition to the
availability of an exemption from the 1933 Act for the sale of any Warrant or
Warrant Stock.
14.9. AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder
(or, if there is more than one Warrant outstanding, to holders of a majority of
the Warrant Stock issuable upon exercise of the Warrants).
14.10. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.11. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.12. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of New York, without regard to the provisions thereof relating to
conflict of laws.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary.
Date of Issuance: September [20] 18, 1996
DeCRANE AIRCRAFT HOLDINGS, INC.
By: _______________________________
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ________________ shares of Common Stock of
DeCrane Aircraft Holdings, Inc., and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to ________________ whose address is _____________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
Dated: ______________________
___________________________________
(Name of Registered Owner)
___________________________________
(Signature of Registered Owner)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
NOTE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Number of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- -----------------
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of Decrane Aircraft Holdings, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: ________________________
_______________________________
(Registered Owner)
NOTE: The signature on this assignment must correspond with the name as written
upon the face of the Warrant in every particular, without alteration or any
change whatsoever.
<PAGE>
------------------------------- DELETIONS -----------------------------------
[1] __
[2] Warrant
[3] Warrant
[4] or (viii) shares of Common Stock issuable [in connection with the senior
debt financing portion of the ADS asset purchase]
[5] November 2, 1994,
[6] ___
[7] ,
[8] and Electra Associates, Inc.
[9] _________________
[l0] ________________
[11] [$3 million] - 750,000
[12) ____________
[13] [$3 million] - 750,000
[14] __
[15] ______________
[16] 7
[17] 7
[18] 14
[19] 15
[20] 17
-iii-
<PAGE>
- --------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
Among
DeCRANE AIRCRAFT HOLDINGS, INC.
and
THE SEVERAL PURCHASERS NAMED IN ANNEX I HERETO
Dated as of November 2, 1994
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I THE SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Purchase and Sale of Shares . . . . . . . . . . 1
SECTION 1.02. Closing Date. . . . . . . . . . . . . . . . . . 1
ARTICLE 11 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01. Organization, Qualifications
and Corporate Power . . . . . . . . . . . . . . 2
SECTION 2.02. Authorization of Agreement,
Etc.. . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Validity. . . . . . . . . . . . . . . . . . . . 3
Section 2.04. Capital Stock . . . . . . . . . . . . . . . . . 3
Section 2.05. Financial Statements. . . . . . . . . . . . . . 6
Section 2.06. Offering of the Shares. . . . . . . . . . . . . 6
Section 2.07. Governmental Approvals. . . . . . . . . . . . . 6
Section 2.08. Disclosure. . . . . . . . . . . . . . . . . . . 7
Section 2.09. Litigation. . . . . . . . . . . . . . . . . . . 7
Section 2.10. Performance . . . . . . . . . . . . . . . . . . 7
Section 2.11. Title to Assets . . . . . . . . . . . . . . . . 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. . . . . . . 8
SECTION 3.01. Investment Representations. . . . . . . . . . . 8
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE
PURCHASERS AND THE COMPANY. . . . . . . . . . . . . . . . . . 8
SECTION 4.01. Conditions to the Obligations
of the Purchasers at Closing. . . . . . . . . . 8
SECTION 4.02. Conditions to the Obligations of
the Company at the Closing. . . . . . . . . . . 9
ARTICLE V MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.01. Expenses. . . . . . . . . . . . . . . . . . . . 10
SECTION 5.02. Survival of Agreements. . . . . . . . . . . . . 10
SECTION 5.03. Brokerage . . . . . . . . . . . . . . . . . . . 10
SECTION 5.04. Parties in Interest . . . . . . . . . . . . . . 11
SECTION 5.05. Covenants Concerning Corporate
Opportunity . . . . . . . . . . . . . . . . . . 11
SECTION 5.06. [Intentionally Deleted] . . . . . . . . . . . . 11
SECTION 5.07. Notices . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.08. Governing Law . . . . . . . . . . . . . . . . . 12
SECTION 5.09. Entire Agreement; Amendment . . . . . . . . . . 12
SECTION 5.10. Counterparts. . . . . . . . . . . . . . . . . . 12
SECTION 5.11. Descriptive Headings. . . . . . . . . . . . . . 12
<PAGE>
INDEX TO ANNEXES, EXHIBITS AND SCHEDULES
Item Description
- ---- -----------
ANNEXES
Annex I Names, Addresses and Capital
Contributions of Purchasers
EXHIBITS
Exhibit 4.01(d) Second Amended and Restated
Registration Rights Agreement
Exhibit 4.01(e) Second Amended and Restated
Shareholders Agreement
Exhibit 4.01(f) Amended and Restated Articles of
Incorporation
SCHEDULES
Schedule 2.04 Capital Stock Matters
Schedule 2.07 Governmental Consents
Schedule 2.09 Litigation
Schedule 2.11 Title to Assets
-ii-
<PAGE>
THIS SHARE PURCHASE AGREEMENT (this "Agreement"), dated as of November
2, 1994, is made by and among DECRANE AIRCRAFT HOLDINGS, INC., an Ohio
corporation (the "Company"), and the several Purchasers named in Annex I hereto
(each individually a "Purchaser" and collectively the "Purchasers").
PRELIMINARY STATEMENTS:
A. The Company wishes to issue to the Purchasers, severally and not
jointly, an aggregate of 271,471 Series C Convertible Preferred Shares,
without par value (the "Shares"), on and subject to the terms and conditions
contained herein.
B. The Purchasers, severally and not jointly, wish to purchase, and
exercise certain rights to receive, the Shares, all on the terms and subject to
the conditions hereinafter set forth.
AGREEMENT:
ARTICLE I
THE SHARES
SECTION 1.01. PURCHASE AND SALE OF SHARES.
(a) On the Closing Date (as hereinafter defined) the Company shall
issue and sell to each Purchaser, and each Purchaser shall purchase from the
Company, the number of Shares set forth opposite the name of such Purchaser
under the caption "Series C Convertible Preferred Shares to Be Purchased" on
Annex I hereto at a purchase price of $1.50 per Share, and the Company shall
issue and deliver to each Purchaser a share certificate or certificates in
definitive form, registered in the name of the Purchaser, evidencing the Shares
being purchased by it hereunder.
(b) As payment in full for the Shares being purchased by it
hereunder, and against delivery of the certificate or certificates therefor as
aforesaid, each Purchaser shall deliver to the Company on the Closing Date a
certified or official bank check payable to the order of the Company in the
amount set forth opposite the name of such Purchaser under the caption "Cash
Amount to Be Paid on the Closing Date" on Annex I hereto, or shall transfer such
sum to the account of the Company by wire transfer.
SECTION 1.02. CLOSING DATE. The closing of the sale and purchase of
the Shares (the "Closing") shall take place at the offices of Mayer, Brown &
Platt, 787 7th Avenue, New York, N.Y. 10019, on November 2, 1994 or on such
other date as may be
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<PAGE>
mutually agreed upon by the Purchasers and the Company (such date of closing
being herein called the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and agrees with, the
Purchasers' as follows:
SECTION 2.01. ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER.
(a) (i) The Company, and (ii) Tri-Star Holdings, Inc., an Ohio
corporation ("TSH"), Tri-Star Electronics International, Inc., an Ohio
corporation ("TSE"), Cory Holdings, Inc., an Ohio corporation ("CHI"), Tri-Star
Technologies, Inc., an Ohio corporation ("Tech"), Unidec, S.A., a Swiss
corporation ("Unidec"), Cory Components, Inc., a California corporation
("CCI"), Hollingshead International, Inc., a California corporation ("HII"), and
Hollingshead International Limited, a private company incorporated in England
("Limited") (collectively, the "Subsidiaries"), are corporations duly
incorporated, validly existing and in good standing under the laws of the
jurisdictions of their respective incorporations. Tri-Star Technologies, a
California general partnership ("TST [caad 214]Partnership") and together with
the Subsidiaries, the "Affiliates"), is duly formed and validly existing under
the laws of the State of California. Each of the Affiliates is duly licensed
or qualified to do business as a foreign corporation or partnership, as the
case may be, and is in good standing in each other jurisdiction in which, on the
date hereof, it owns or leases any real property or in which the nature of
business transacted by it makes such licensing or qualification necessary and
where the failure to be so licensed or qualified would have a material adverse
effect on the operations or financial condition of the Company or the Affiliate,
as the case may be (except that no representation or warranty is made with
respect to the qualification or good standing of Unidec or Limited). The
Company and each of the Affiliates has the corporate or partnership, as the case
may be, power and authority to own and hold its respective properties and to
carry on its respective businesses as currently conducted, and, with respect to
the Company, to execute, deliver and perform this Agreement and the other
agreements and transactions contemplated hereby, and to issue, sell and deliver
the Shares and, upon conversion thereof, to issue and deliver the number of the
Company's Common Shares, without par value (the "Common Shares"), issuable upon
such conversion (the "Conversion Shares").
(b) Except for the Affiliates, the Company does not own of record or
beneficially, directly or indirectly, (i) any shares of outstanding capital
stock or securities convertible
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into capital stock of any other corporation, or (ii) any participating interest
in any partnership, joint venture or other noncorporate business enterprise.
SECTION 2.02. AUTHORIZATION OF AGREEMENT, ETC.
(a) The execution, delivery and performance by the Company of this
Agreement and the other agreements and transactions contemplated hereby, and the
issuance, sale and delivery of the Shares and the delivery of the Conversion
Shares upon conversion of the Shares have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Amended and Restated Articles of
Incorporation ("Articles of Incorporation") or Code of Regulations of the
Company, or any provision of any indenture, agreement or other instrument by
which the Company or any of its properties or assets is bound or affected, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the Company.
(b) The Shares have been duly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued and
outstanding, fully paid and nonassessable. The Conversion Shares have been duly
reserved for issuance upon conversion of the Shares and, when so issued, will be
duly authorized, validly issued and outstanding, fully paid and non-
assessable Common Shares. Neither the issuance, sale and delivery of the Shares
nor the issuance and delivery of the Conversion Shares upon conversion thereof
are subject to any preemptive rights of shareholders of the Company or to any
right of first refusal or other similar right in favor of any person.
SECTION 2.03. VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
conveyance and other similar laws and principles of equity affecting creditors'
rights and remedies generally.
SECTION 2.04. CAPITAL STOCK. After giving effect to the filing of
the Articles of Incorporation referred to in Section 4.01(f), and assuming the
consummation of the transactions contemplated herein, in the Credit Agreement
(as defined in that certain Securities Purchase Agreement dated the date hereof
among the Company, the Affiliates, Electra Associates, Inc., a Delaware
corporation ("Electra") and Electra Investment Trust P.L.C., a corporation
formed under the laws of England ("EIT") (the "Loan Agreement")), in the Loan
Agreement,
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and in that certain Stock Purchase Agreement dated as of the date hereof
between Key Equity Capital Corporation ("KEC"), EIT and Electra (the "Electra
Agreement"):
(a) The authorized capital stock of the Company consists of Eight
Million (8,000,000) Common Shares, without par value, of which Two Hundred
Ninety-Three Thousand Eight Hundred Forty (293,840) shares are issued and
outstanding and held of record and beneficially as shown on Schedule 2.04
hereto; One Hundred Sixty-Seven Thousand Seven Hundred Two (167,702) shares of
Series A Convertible Preferred Shares, all of which are issued and outstanding
and held of record and beneficially as shown on Schedule 2.04 hereto; One
Million Six Hundred Fifteen Thousand Two Hundred Two (1,615,202) shares of
Series B Convertible Preferred Shares, of which One Million Five Hundred
Eighty-Three Thousand Five Hundred Thirty-Two (1,583,532) are issued and
outstanding and held of record and beneficially as set forth on Schedule 2.04
hereto; and Three Million (3,000,000) shares of Series C Convertible Preferred
Shares, Two Million Two Hundred Seventy One Thousand Four Hundred and
Seventy-One (2,271,471) of which are issued and outstanding and held of record
and beneficially as set forth on Schedule 2.04 hereto. All of such issued and
outstanding capital stock is fully paid and nonassessable.
(b) The authorized capital stock of TSH consists of Seven Hundred
Fifty (750) Common Shares, without par value, of which One Hundred (100) shares
are issued and outstanding and held of record and beneficially as shown on
Schedule 2.04 hereto. All of such issued and outstanding capital stock is fully
paid and nonassessable.
(c) The authorized capital stock of TSE consists of Seven Hundred
Fifty (750) Common Shares, without par value, of which One Hundred (100) shares
are issued and outstanding and held of record and beneficially as shown on
Schedule 2.04 hereto. All of such issued and outstanding capital stock is fully
paid and nonassessable.
(d) The authorized capital stock of TST consists of Seven Hundred
Fifty (750) Common Shares, without par value, of which One Hundred (100) shares
are issued and outstanding and held of record and beneficially as shown on
Schedule 2.04 hereto. All of such issued and outstanding capital stock is fully
paid and nonassessable.
(e) The authorized capital stock of CHI consists of Seven Hundred
Fifty (750) Common Shares, without par value, of which One Hundred (100) shares
are issued and outstanding and held of record and beneficially as shown on
Schedule 2.04 hereto. All of such issued and outstanding capital stock is fully
paid and nonassessable.
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<PAGE>
(f) The authorized capital stock of CCI consists of One Hundred
Thousand (100,000) Common Shares, without par value, of which One Thousand
(1,000) shares are issued and outstanding and held of record and beneficially as
shown on Schedule 2.04 hereto. All of such issued and outstanding capital
stock is fully paid and nonassessable.
(g) The authorized capital stock of Unidec consists of Two Hundred
(200) fully paid-in bearer shares of par value, of which Two Hundred (200)
shares are issued and outstanding and held of record and beneficially as shown
on Schedule 2.04 hereto. All of such issued and outstanding capital stock is
fully paid and nonassessable.
(h) Schedule 2.04 hereto describes the percentage ownership interest
of each of the partners of TST Partnership in TST Partnership.
(i) The authorized capital stock of HII consists of Twenty-Five
Thousand (25,000) Common Shares, without par value, of which Three Thousand
(3,000) shares are issued and outstanding and held of record and beneficially
as shown on Schedule 2.04 hereto. All of such issued and outstanding capital
stock is fully paid and nonassessable.
(j) The authorized capital stock of Limited consists of Fifty Thousand
(50,000) ordinary one-pound shares, of which One Thousand (1,000) shares are
issued and outstanding and held of record and beneficially as shown on Schedule
2.04 hereto. All of such issued and outstanding capital stock is fully paid and
nonassessable.
(k) Other than as disclosed on Schedule 2.04 hereto, there are no
outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or other agreements or commitments of any nature relating to
any capital stock of the Company or any Affiliate.
Except as disclosed in Schedule 2.04 or set forth in the Loan Agreement, the
Articles of Incorporation, or the Shareholders Agreement (as defined below) (i)
no subscription, warrant, option, convertible security or other right,
contingent or otherwise, to purchase or acquire any shares of any class of
capital stock of the Company or any Affiliate is authorized or outstanding,
(ii) there is not any commitment of the Company to issue any shares, warrants,
options or other such rights or to distribute to holders of any class of its
capital stock any evidence of indebtedness or assets, and (iii) neither the
Company nor any Affiliate has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or to make any other distribution in
respect thereof.
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<PAGE>
SECTION 2.05. FINANCIAL STATEMENTS. The Company has delivered to the
Purchasers the audited balance sheets of the Company, as of December 31, 1993,
and audited statements of income and cash flows for the Company for the fiscal
year ended December 31, 1993; the unaudited balance sheets of the Company,
Tri-Star Electronics, Inc., an Ohio corporation ("Tri-Star"), HII, CCI, TST
Partnership and the Company as of December 31, 1993, and statements of income
and cash flows for Tri-Star, CCI, TST Partnership and the Company for the
eight-month period ended August 31, 1994; and the audited balance sheet of
Unidec as of December 31, 1993 and a statement of income and cash flow for
Unidec for the eight-month period ended August 31, 1994. Such financial
statements are true and correct in all material respects and fairly and
accurately present the results of the operations of the entities to which they
relate as of the dates and for the respective periods indicated therein. None
of the Company, TST Partnership, CCI or Unidec has any material contingent
liabilities, liabilities for taxes, material forward or long-term commitments,
or unrealized or anticipated losses from any unfavorable commitments not
previously disclosed in writing to the Purchasers. There has been no material
adverse change in the business, condition (financial or otherwise), operations,
prospects, or properties of the Company or TST Partnership, CCI or Unidec since
the effective date of the most recent financial statements referred to in this
Section 2.05, and there has been no material adverse change in the business
condition (financial or otherwise); operations, prospects or properties of TSH,
TSE, CHI or Tech since the date of their respective incorporations.
SECTION 2.06. OFFERING OF THE SHARES. Neither the Company nor any
person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Shares or any similar
security of the Company has offered the Shares or any such security for sale to,
or solicited any offers to buy the Shares or any similar security of the Company
from, or otherwise approached or negotiated with respect thereto with, any
person or persons other than the Purchasers, and neither the Company nor any
person acting on its behalf has taken or will take any action (including,
without limitation, any offer, issuance or sale of any security of the Company
under circumstances which might require the integration of such security with
the Shares under the Securities Act of 1933 (the "Securities Act") or the rules
and regulations of the Securities and Exchange Commission thereunder) which
might subject the offering, issuance or sale of the Shares to the registration
provisions of the Securities Act.
SECTION 2.07. GOVERNMENTAL APPROVALS. Assuming the correctness and
completeness of all representations and warranties made on behalf of the
Purchasers herein, to the best of the Company's knowledge, no registration or
filing with, or consent or approval of, or other action by, any federal, state
or
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<PAGE>
other governmental agency or instrumentality is or will be necessary for the
valid execution, delivery and performance of this Agreement or the issuance,
sale and delivery of the Shares or the Conversion Shares, except as disclosed on
Schedule 2.07 hereto.
SECTION 2.08. DISCLOSURE. Nothing contained in this Agreement nor any
Schedule annexed hereto, nor any certificate or other instrument referred to
herein and furnished to the Purchasers by the Company, or any other materials
delivered to the Purchasers in connection with the transactions contemplated
herein, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein or
herein, in the light of the circumstances under which they were made, not
misleading.
SECTION 2.09. LITIGATION. Except as set forth on Schedule 2.09
hereto, in the Loan Agreement or in the Credit Agreement (or the schedules,
exhibits or attachments to the Loan Agreement or the Credit Agreement
(collectively, the "Attachments")), there are no actions, suits, proceedings,
orders, investigations or claims pending or, to the best of the Company's
knowledge, threatened against or affecting the Company, any Affiliate, or any of
their respective properties at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
that would materially adversely affect the business or operations of the Company
or any Affiliate.
SECTION 2.10. PERFORMANCE. To the best of the Company's knowledge, the
Company and each of the Affiliates have performed all material obligations
required to be performed by them and are not in default in any material respect
under or in breach in any material respect under any contract, agreement or
instrument to which the Company or any Affiliate is a party or is subject, and
no event has occurred which with the passage of time or the giving of notice or
both would result in a material default, breach or event of noncompliance under
any such contract, agreement or instrument.
SECTION 2.11. TITLE TO ASSETS. Except as set forth on Schedule 2.11
hereto, the Company and each Affiliate have good and marketable title to, or
valid leasehold interests in, their respective assets free and clear of all
liens, security interests, charges and encumbrances, except for (i) liens for
taxes not yet due and payable, (ii) reservations, exceptions, encroachments,
easements, rights-of-way, covenants and conditions and restrictions affecting
any real property, and (iii) deposits under workmen's compensation,
unemployment insurance, social security and other similar laws.
Notwithstanding anything to the contrary contained in this Article II,
the representations and warranties made by the
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<PAGE>
Company with respect to Unidec, Tech and CCI are made and limited to the actual
knowledge of the Company with respect to the subject matter thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 3.01. INVESTMENT REPRESENTATIONS. Each Purchaser represents
and warrants to the Company that it is acquiring the Shares for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof. Each Purchaser further represents that it
understands that (i) the Shares have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof, (ii) the
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Shares will bear a legend to such effect and (iv) the Company will make a
notation on its transfer books to such effect. Each Purchaser further
understands that the exemption from registration afforded by Rule 144 under the
Securities Act depends on the satisfaction of various conditions and that, if
applicable, Rule 144 affords the basis of sales of the Shares in limited amounts
under certain conditions. Each Purchaser (i) acknowledges that it has had a
full opportunity to request from the Company and to review and has received all
information which it deems relevant in making a decision to purchase the Shares
being purchased by it hereunder, (ii) will comply with the restrictions on
transferability of the Shares contained in the Registration Rights Agreement (as
defined below) and the Shareholders Agreement (as defined below), (iii) is an
accredited investor (as defined in the Securities Act) and has the experience in
making investments to make its own investment decision, and (iv) is able to
withstand the total loss of its investment in the Company.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF
THE PURCHASERS AND THE COMPANY
SECTION 4.01. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS AT
CLOSING. The obligations of each Purchaser to perform its obligations
hereunder on the Closing Date are subject to the satisfaction, on or before
such date, of the following conditions:
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<PAGE>
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II hereof shall be true and
correct on and as of the Closing Date.
(b) PERFORMANCE. The Company shall have performed and complied with
all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing Date.
(c) ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their special counsel, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
(d) REGISTRATION RIGHTS AGREEMENT. Each other Purchaser, DeCrane,
Banc One Capital Partners Corporation, a Texas Corporation ("Banc One"),
Brantley, Internationale Nederlanden (U.S.) Capital Corporation, a Delaware
corporation ("ING"), The Provident Bank, a banking association organized under
the laws of the State of Ohio ("Provident") and the Company shall have executed
and delivered the Second Amended and Restated Registration Rights Agreement in
the form attached hereto as Exhibit 4.01(d) (the "Registration Rights
Agreement").
(e) SHAREHOLDERS AGREEMENT. Each other Purchaser, DeCrane, Banc One,
Brantley, ING, Provident and the Company shall have executed and delivered the
Second Amended and Restated Shareholders Agreement in the form attached hereto
as Exhibit 4.01(e) (the "Shareholders Agreement").
(f) AMENDED AND RESTATED ARTICLES OF INCORPORATION. The Company shall
have filed with the Secretary of State of the State of Ohio the Amended and
Restated Articles of Incorporation in the form of Exhibit 4.01(f) attached
hereto.
(g) CLOSING OF TRANSACTIONS. The closing of the transactions
contemplated by the Credit Agreement, the Loan Agreement and the Electra
Agreement shall have occurred or shall occur simultaneously with the Closing.
(h) OPINION OF COUNSEL. The Company shall have delivered to the
Purchasers an opinion of counsel satisfactory to the Purchasers and their
respective special counsel.
All such documents shall be satisfactory in form and substance to the
Purchasers and their respective special counsel.
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<PAGE>
SECTION 4.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AT THE
CLOSING. The obligations of the Company to perform its obligations hereunder on
the Closing Date are, at its option, subject to the satisfaction, on or before
such date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article III hereof shall be true and
correct on and as of the Closing Date.
(b) PERFORMANCE. Each Purchaser shall have performed and complied
with all agreements and conditions contained herein required to be performed or
complied with by such Purchaser prior to or at the Closing Date.
(c) REGISTRATION RIGHTS AGREEMENT. The Purchasers, DeCrane, Banc
One, Brantley, Provident and ING shall have executed and delivered the
Registration Rights Agreement.
(d) SHAREHOLDERS AGREEMENT. The Purchasers, DeCrane, Banc One,
Brantley, Provident and ING and shall have executed and delivered the
Shareholders Agreement.
(e) CLOSING OF TRANSACTIONS. The closing of the transactions
contemplated by the Credit Agreement, the Loan Agreement and the Electra
Agreement shall have occurred or shall occur simultaneously with the Closing.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. EXPENSES. Each party hereto will pay its own expenses
in connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated; provided that all reasonable legal fees and
costs of the parties in connection with the transactions contemplated hereby
shall be paid by the Company, whether or not such transactions shall be
consummated.
SECTION 5.02. SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the issuance, sale and delivery of the Shares
pursuant hereto, and the Conversion Shares upon conversion of the Shares, and
all statements contained in any certificate or other instrument delivered by the
Company hereunder shall be deemed to constitute representations and warranties
made by the Company.
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<PAGE>
SECTION 5.03. BROKERAGE. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 5.04. PARTIES IN INTEREST. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
SECTION 5.05. COVENANTS CONCERNING CORPORATE OPPORTUNITY.
(a) Each Purchaser agrees that, until the first to occur of (i)
January 1, 2001, (ii) the date upon which such Purchaser ceases to own any
Shares or Conversion Shares, or (iii) an underwritten public offering
covering the sale of Common Shares in which net proceeds to the Company are
at least $25,000,000.00, such Purchaser shall be obligated to present to the
Company, prior to making any commitment or investment on its own behalf, any
opportunity for acquisitions, joint ventures or other forms of equity
investment in any business or businesses engaged in the "Defined Aviation
Business," as such term is defined in paragraph (b) hereof.
(b) The term "Defined Aviation Business" shall mean and be limited
to (i) the avionics manufacturing business, (ii) the business of maintaining,
repairing and/or overhauling aircraft, and (iii) the business of manufacturing
secondary hydraulics for the aviation industry.
(c) Notwithstanding anything to the contrary in this Section 5.05, a
Purchaser shall not be required to present any opportunity to the Company with
respect to a Purchaser's stock ownership of less than 10% (on a fully diluted
basis) in a privately held or publicly traded corporation, partnership, limited
liability company or other business entity engaged in the Defined Aviation
Business.
SECTION 5.06. [intentionally deleted)
SECTION 5.07. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by first-class
registered mail, postage prepaid, addressed as follows:
(a) if to the Company, at 115 West Montrose Avenue, Suite 210,
Copley, Ohio 44321, attention of R. Jack DeCrane;
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<PAGE>
(b) if to any Purchaser, at its address set forth in Annex I hereto;
(c) if to any other party hereto, to such party at its address
appearing on the stock transfer records of the Company; and
(d) if to any subsequent holder of Shares, Conversion Shares, to such
holder at its address appearing on the stock transfer records of the Company;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others, and shall be deemed to have
been given upon delivery, if delivered personally, three business days after
mailing, if mailed, or one business day after delivery to the courier, if
delivered by overnight courier service.
SECTION 5.08. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
SECTION 5.09. ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter hereof and may not be modified or amended except in writing and with the
consent of (i) the holders of a majority of the outstanding Shares, and (ii) so
long as any Purchaser holds any Shares, by each such Purchaser.
SECTION 5.10. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 5.11. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute a
part of and shall not be utilized in interpreting this Agreement.
[The remainder of this page is
intentionally left blank]
* * * *
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<PAGE>
* * * *
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Share Purchase Agreement as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
-----------------------------------
R. Jack DeCrane, Chief Executive
Officer
ELECTRA INVESTMENT TRUST P.L.C.
By:
-----------------------------------
Its:
-----------------------------------
ELECTRA ASSOCIATES, INC.
By:
-----------------------------------
Its:
-----------------------------------
DSV PARTNERS, IV
By: DSV Management Ltd., its
general partner
By: /s/James R. Bergman
---------------------------------
James R. Bergman, General Partner
<PAGE>
* * * *
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Share Purchase Agreement as of the day and year first above written.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
-----------------------------------
R. Jack DeCrane, Chief Executive
Officer
ELECTRA INVESTMENT TRUST P.L.C.
By: /s/ H.A.L.H. Mumford
-----------------------------------
Its: H.A.L.H. MUMFORD, Director
-----------------------------------
DSV PARTNERS, IV
By: DSV Management Ltd., its
general partner
By:
--------------------------------
James R. Bergman, General Partner
BANC ONE CAPITAL PARTNERS CORPORATION
By:
--------------------------------
Suzanne Kriscunas, President
BRANTLEY VENTURE PARTNERS II, L.P.
By: Brantley Venture Management II,
L.P., its general partner
By: Pinkas Family Partners, L.P.,
its general partner
By:
---------------------------------
Raymond J. Rund, general partner
KEY EQUITY CAPITAL CORPORATION
By:
--------------------------------
Raymond A Lancaster, President
-----------------------------------
R. JACK DECRANE, in his individual
capacity
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC.
CALCULATION OF EARNINGS PER COMMON SHARE
PRO FORMA FOR RECAPITALIZATION
<TABLE>
<CAPTION>
Year Ended Nine Months
31-Dec-95 30-Sep-96
<S> <C> <C>
Common shares outstanding at beginning of the year 301,840 301,840
Common stock equivalents 5,368,483 5,368,483
Impact of cheap stock for options, warrants & preferred stock 4,065,938 4,065,938
Treasury stock repurchase (115,177) (115,177)
-------------- --------------
Pro forma weighted average number of shares outstanding 9,621,084 9,621,084
Reverse stock split (.28357 for 1) 0.28357 0.28357
-------------- --------------
Pro forma weighted average number of shares outstanding 2,728,251 2,728,251
Net loss (4,003,000) (1,941,000)
Pro forma net loss per common share $ (1.47) $ (0.71)
-------------- --------------
-------------- --------------
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Tri-Star Holdings, Inc., an Ohio corporation
Tri-Star Electronics International, Inc., an Ohio corporation
Tri-Star Technologies, Inc., an Ohio corporation
Cory Holdings, Inc., an Ohio corporation
Cory Components, Inc., a California corporation
Elsinore Aerospace Services, Inc., a California corporation
Elsinore Engineering, Inc., a Selaware corporation
Tri-Star Electronic Europe S.A., a Swiss corporation
Tri-Star Technologics, Inc., a California general partnership
Hollingsead International, Inc., a California corporation
Hollingsead International, Ltd., a U.K. corporation
Aerospace Display Systems, Inc., a Delaware corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports dated (i) April 9, 1996,
relating to the consolidated financial statements of DeCrane Aircraft Holdings,
Inc. and (ii) August 2, 1996, relating to the financial statements of Aerospace
Display Systems, which appear in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedule for the three
years ended December 31, 1995 listed under Item 16(b) of this Registration
Statement when such schedule is read in conjunction with the financial
statements referred to in our report. The audits referred to in such report also
included this schedule. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Cleveland, Ohio
January 16, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 305 81
<SECURITIES> 0 0
<RECEIVABLES> 9,051 11,112
<ALLOWANCES> 259 362
<INVENTORY> 14,116 15,801
<CURRENT-ASSETS> 23,575 27,234
<PP&E> 16,887 20,139
<DEPRECIATION> 9,500 11,047
<TOTAL-ASSETS> 36,329 54,228
<CURRENT-LIABILITIES> 10,992 16,043
<BONDS> 0 0
0 0
5,549 13,850
<COMMON> 58 62
<OTHER-SE> (7,304) (8,176)
<TOTAL-LIABILITY-AND-EQUITY> 36,329 54,228
<SALES> 55,839 43,059
<TOTAL-REVENUES> 55,839 43,059
<CGS> 43,463 35,277
<TOTAL-COSTS> 65,265 40,506
<OTHER-EXPENSES> 1,115 381
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,821 2,821
<INCOME-PRETAX> (2,368) (832)
<INCOME-TAX> 1,078 265
<INCOME-CONTINUING> (3,446) (1,097)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,446) (1,097)
<EPS-PRIMARY> (1.48) (.72)<F1>
<EPS-DILUTED> 0 0
<FN>
<F1>IS COMPUTED ON A PRO FORMA BASIS. SEE NOTE 1 TO THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
