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<SEC-DOCUMENT>0000950135-98-003605.txt : 19980601
<SEC-HEADER>0000950135-98-003605.hdr.sgml : 19980601
ACCESSION NUMBER: 0000950135-98-003605
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 18
CONFORMED PERIOD OF REPORT: 19980228
FILED AS OF DATE: 19980529
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BE AEROSPACE INC
CENTRAL INDEX KEY: 0000861361
STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC BUILDING AND RELATED FURNITURE [2531]
IRS NUMBER: 061209796
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0222
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-18348
FILM NUMBER: 98634251
BUSINESS ADDRESS:
STREET 1: 1400 CORPORATE CTR WY
CITY: WELLINGTON
STATE: FL
ZIP: 33414
BUSINESS PHONE: 5617915000
MAIL ADDRESS:
STREET 1: 1300 CORPORATE CENTER WAY
STREET 2: 1300 CORPORATE CENTER WAY
CITY: WELLINGTON
STATE: FL
ZIP: 33414
FORMER COMPANY:
FORMER CONFORMED NAME: BE AVIONICS INC
DATE OF NAME CHANGE: 19920608
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>BE AEROSPACE, INC.
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-18348
BE AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 06-1209796
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1400 CORPORATE CENTER WAY, WELLINGTON, FLORIDA 33414
(Address of principal executive offices) (Zip Code)
</TABLE>
(561) 791-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes[X] No[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $696,357,028 on May 20, 1998 based on the
closing sales price of the registrant's Common Stock as reported on the Nasdaq
National Market as of such date.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of May 20, 1998 was 23,192,600 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Those sections of the Registrant's Proxy Statement to be filed with the
Commission in connection with its 1998 Annual Meeting of Stockholders to be held
on August 5, 1998, described in Part III hereof, are incorporated by reference
in this report.
1
<PAGE> 2
INDEX
PART I
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 1. Business..........................................................................................3
ITEM 2. Properties.......................................................................................15
ITEM 3. Legal Proceedings................................................................................17
ITEM 4. Submission of Matters to a Vote of Security Holders..............................................17
Executive Officers of the Registrant.............................................................18
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters..........................................................................................21
ITEM 6. Selected Financial Data..........................................................................22
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................24
ITEM 8. Financial Statements and Supplementary Data......................................................29
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................................................29
PART III
ITEM 10. Directors and Executive Officers of the Registrant...............................................30
ITEM 11. Executive Compensation...........................................................................30
ITEM 12. Security Ownership of Certain Beneficial Owners and Management...................................30
ITEM 13. Certain Relationships and Related Transactions...................................................30
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................30
Index to Consolidated Financial Statements and Schedule.........................................F-1
</TABLE>
2
<PAGE> 3
PART I
This Item 1 "Business" includes forward-looking statements which involve risks
and uncertainties. The Company's actual experience may differ materially from
that discussed in such statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors" contained in
Exhibit 99.1 hereto, as well as future events that have the effect of reducing
the Company's operating income and available cash balances, such as unexpected
operating losses or delays in the integration of the Company's acquired
businesses, the delivery of the Company's MDDS interactive video system,
customer delivery requirements, new or expected refurbishments, or cash
expenditures related to possible future acquisitions.
ITEM 1. BUSINESS
INTRODUCTION
B/E Aerospace, Inc. ("B/E" or the "Company") is the world's largest
manufacturer of interior products for commercial and general aviation aircraft
cabins, serving virtually all major airlines and commercial and general aviation
original equipment manufacturers with a broad line of products, including a full
range of aircraft seating products, a full line of food and beverage preparation
and storage equipment, cabin interior structures, oxygen delivery systems, and
in-flight entertainment systems. In addition, B/E provides upgrade, maintenance
and repair services for the products that it manufactures as well as for those
supplied by other manufacturers.
On April 13, 1998, the Company acquired Puritan Bennett Aero Systems Co.
("PBASCO"). PBASCO is the leading manufacturer of commercial aircraft oxygen
delivery systems and a leading manufacturer of passenger service unit components
and systems, and is a major supplier of air valves, overhead lights and
switches, crew masks and protective breathing devices for both commercial and
general aviation aircraft.
On April 21, 1998, the Company acquired substantially all of the assets
and assumed certain liabilities of Aircraft Modular Products ("AMP"). AMP is the
leading manufacturer of cabin interior products for general aviation (business
jet) and commercial type VIP aircraft, providing a broad line of products,
including seating, side walls, bulkheads, credenzas, closets, galley structures,
lavatories, tables, and sofas, along with related spare parts.
Management believes that the Company has leading global market positions
in each of its major product categories. B/E is the largest manufacturer of
aircraft seating products in the world, offering an extensive line of commercial
aircraft first class, business class, tourist class and commuter seats and a
complete line of general aviation seating products. The Company is also the
world's largest manufacturer of equipment for the preparation and preservation
of food and beverages on aircraft, including a wide selection of coffee and
beverage makers, water boilers, liquid containers, ovens, and refrigeration
equipment. In addition, the Company manufacturers a broad range of interior
structures, including galleys, lavatories, sidewalls, credenzas, and closets.
The Company is also a worldwide leader in the manufacturer of oxygen delivery
systems, passenger service units, air valves, lighting and switches, and is a
leading manufacturer of passenger entertainment and service systems, including
passenger control systems and individual-passenger in-flight entertainment
systems.
B/E's substantial installed base provides significant ongoing revenues
from replacements, upgrades, repairs and spare parts. Approximately 61% of B/E's
revenues for the year ended February 28, 1998 were derived from refurbishment,
retrofit and upgrade orders.
In the late 1980s and early 1990s, the airline industry suffered a
significant downturn, which resulted in a deferral of cabin interior maintenance
expenditures. Since early 1994, the airlines have experienced a turnaround in
operating results, leading the domestic airline industry to record operating
earnings during calendar years 1995 through 1997. Deterioration of cabin
interior product functionality and aesthetics occurred within the commercial
airline fleets during the industry downturn because of maintenance deferrals.
Since the turnaround began, the airlines have experienced greater utilization
resulting from higher load factors, which has encouraged airlines to increase
spending on refurbishments and upgrades. The Company believes that it is well
positioned to benefit over the next several years from the airlines'
dramatically improved financial condition and liquidity and the need to
refurbish, retrofit and upgrade cabin interiors. A significant portion of the
Company's recent growth in backlog, revenues and operating earnings has been
from refurbishment, retrofit and upgrade programs, and the Company is currently
experiencing a high level of new order quote activity related to such programs.
3
<PAGE> 4
Airlines have recently been purchasing a significant number of new
aircraft in part due to current high load factors and the projected growth in
worldwide air travel. According to the "Current Market Outlook" published by the
Boeing Commercial Airplane Group in 1997 (the "Boeing Report"), worldwide air
travel is projected to increase by 75% by calendar 2006, and the worldwide fleet
of commercial passenger aircraft is projected to expand from approximately
10,300 at the end of 1996 to approximately 15,300 by the end of 2006 and to more
than 21,200 by 2016. In 1997, Boeing shipped 375 aircraft versus 218 in 1996. In
addition, Boeing has stated plans to ship 550 aircraft in each of calendar years
1998 and 1999. Furthermore, according to the July 1997 "Airline Monitor", the
percentage of new Boeing aircraft deliveries projected to be widebody aircraft
for 1997 through 2001 is 39% as compared to 33% for the five year period ended
December 31, 1996. This shift toward widebody aircraft is significant to the
Company since these aircraft require as much as seven times the dollar value of
the type of products manufactured by the Company as those used in narrowbody
aircraft.
INDUSTRY OVERVIEW
The commercial and general aviation aircraft cabin interior products industry
encompasses a broad range of products and services, including not only aircraft
seating products, passenger entertainment and service systems, food and beverage
preparation and storage systems, and oxygen delivery systems, but also
lavatories, side walls, overhead bins, closets, lighting systems and evacuation
equipment. Management estimates that the industry had sales in excess of $1.5
billion during fiscal 1998.
Historically, revenues in the commercial aircraft cabin interior products
industry have been derived from five sources: (i) refurbishment and retrofit
programs in which airlines purchase new components to substantially overhaul the
interiors of aircraft already in service; (ii) refurbishment programs in which
the interior components of the aircraft are substantially overhauled to improve
the appearance and functionality; (iii) new installation programs to outfit
newly delivered aircraft; (iv) spare parts; and (v) equipment to upgrade the
functionality or appearance of the aircraft interior. The retrofit and
refurbishment cycles for commercial aircraft cabin interior products differ by
product category.
Historically, revenues in the general aviation cabin interior products
industry have been derived from four sources: (i) retrofit and refurbishment
programs in which the interior components of the aircraft are substantially
overhauled to improve the appearance and functionality; (ii) new installation
programs to outfit newly delivered aircraft; (iii) spare parts; and (iv)
equipment to upgrade the functionality or appearance of the aircraft interior.
The various product categories currently manufactured by the Company include:
- - Aircraft Seats. This is the largest single product category in the industry
and includes first class, business class, tourist class and commuter seats.
Management estimates that the aggregate size of the worldwide aircraft seat
market (including spare parts) during fiscal 1998 was in excess of $530
million. Approximately ten companies worldwide, including the Company,
supply aircraft seats, although the Company (which has an approximately 50%
market share) and two competitors share approximately 90% of the market.
- - Passenger Entertainment and Service Systems ("PESS"). This product category
includes individual seat video systems, overhead video projection systems,
audio distribution systems, passenger control units ("PCUs") and related
wiring and harness assemblies and sophisticated interactive
telecommunications and entertainment systems. Management estimates that the
aggregate size of the worldwide PESS market was approximately $325 million
during fiscal 1998. Industry sources expect the PESS market to increase
substantially in the near term as individual-passenger entertainment
systems become standard in-flight entertainment equipment in first,
business and tourist classes on widebody aircraft, and with the further
development of LiveTV(TM) on many narrowbody aircraft. PESS products are
currently supplied by approximately five companies worldwide. The Company
has a market share of approximately 30% in individual-passenger in-flight
entertainment systems, determined on the basis of installed units as of
February 28, 1998.
- - Interior Systems Products. This product category includes interior systems
for both narrowbody and widebody commercial aircraft and general aviation /
VIP aircraft, including a wide selection of coffee and beverage
4
<PAGE> 5
makers, water boilers, ovens, liquid containers, air chillers, wine coolers
and other refrigeration equipment, oxygen delivery systems, air valves,
lighting and switches, and other interior systems components. The Company
is the only manufacturer with a complete line of interior systems products
and the only supplier with the capability to fully integrate overhead
passenger service units with either chemical or gaseous oxygen equipment.
- - General Aviation and VIP Products. The Company entered this line of
business with its acquisition of AMP in April 1998. By combining AMP's
substantial presence in the general aviation and VIP aircraft cabin
interior products industry with that of PBASCO, B/E has become the
industry's leading manufacturer with a broad product line, including a
complete line of seating products, sidewalls, bulkheads, credenzas,
closets, galley structures, lavatories, tables, sofas, oxygen delivery
systems, air valves and lighting. B/E has the capability to provide
complete interior packages, including all design services, all interior
components and program management services for executive aircraft
interiors. B/E is the preferred supplier of seating products of essentially
every general aviation airframe manufacturer.
Through February 28, 1998, the Company operated primarily in the commercial
aircraft cabin interior products segment of the commercial airlines supplier
industry. Revenues for similar classes of products or services within this
business segment for the fiscal years ended February 1998, 1997 and 1996 are
presented below:
<TABLE>
<CAPTION>
Fiscal Year
(dollars in millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Seating products .......................... $252 $217 $ 97
Interior systems products ................. 126 101 79
Passenger entertainment and service systems 81 52 33
Services .................................. 29 42 23
---- ---- ----
Total revenues ............................ $488 $412 $232
==== ==== ====
</TABLE>
RECENT INDUSTRY CONDITIONS
The Company's principal customers are the world's commercial airlines. The
airlines, particularly the U.S. carriers, incurred record losses during the
three-year period ended December 31, 1993. The losses incurred during the
downturn seriously impaired airline balance sheets and negatively influenced
airline purchasing decisions with respect to both new aircraft and refurbishment
programs. The domestic airlines in large part returned to profitable operations
during calendar year 1994 have achieved record operating earnings during
calendar years 1995 through 1997 and have substantially restored their balance
sheets since then through cash generated from operations and debt and equity
placements. This improvement in the airlines' profitability and liquidity has,
in turn, led to an increase in refurbishment and retrofit programs, which
coupled with spares revenues, generated approximately 61% of the Company's
revenues in fiscal 1998. Further, throughout calendar year 1997, the aircraft
manufacturers continued to experience a significant increase in new aircraft
orders. Among those factors expected to affect the cabin interior products
industry are the following:
- - Large Existing Installed Base. According to the Boeing Report, the world
commercial passenger aircraft fleet, as of the end of 1996, consisted of
approximately 10,300 aircraft, including 3,000 aircraft with fewer than 120
seats, 4,511 aircraft with between 120 and 240 seats and 2,760 aircraft
with more than 240 seats. Based on such fleet numbers, management estimates
that the total worldwide installed base of commercial aircraft cabin
interior products, valued at replacement prices, was approximately $9.5
billion at the end of 1997. This existing installed base will generate
continued retrofit, refurbishment and spare parts revenue, particularly in
light of the deterioration of existing interior cabin functionality and
aesthetics resulting from the airlines' deferral of refurbishment programs
in recent years.
- - Expanding Worldwide Fleet. Worldwide air traffic has grown in every year
since 1946 (except in 1990) and, according to the Boeing Report, is
projected to grow at a compounded average rate of approximately five
percent per year through 2016, increasing annual revenue passenger miles
from approximately 1.7 trillion in 1996 to approximately 4.4 trillion by
2016. According to the Boeing Report, the worldwide fleet of commercial
passenger aircraft is projected to expand from approximately 10,300 at the
end of 1996 to approximately 15,300 by 2006 and 21,200 by 2016. In 1997,
Boeing shipped 375 aircraft versus 218 in 1996. In addition,
5
<PAGE> 6
Boeing has stated plans to ship 550 aircraft in each of calendar years 1998
and 1999. According to Airbus Industrie "Global Market Forecast" published
in March 1997 (the "Airbus Industrie Report"), the worldwide installed seat
base, which management considers to be a good indicator for potential
growth in the aircraft cabin interior products industry, is expected to
increase from approximately 1.7 million passenger seats at the end of 1996
to approximately 4.0 million passenger seats at the end of 2016. The
expanding worldwide fleet will generate additional revenues from new
installation programs, and the increase in the size of the installed base
will generate additional and recurring retrofit, refurbishment and spare
parts revenue. According to industry sources, the worldwide fleet of
general aviation and VIP commercial type jets at the end of calendar 1997
consisted of more than 10,000 aircraft, of which approximately two-thirds
were located domestically. The average age of the domestic fleet is
approximately 15 years, which should provide the Company a continuing large
market for its products and services as business jet owners move toward the
lighter weight, more modern, FAA-compliant products offered by the Company.
The general aviation and VIP airframe manufacturers are experiencing a
surge in new aircraft deliveries similar to that occurring in the
commercial aircraft industry. According to industry sources, executive
aircraft deliveries amounted to 222 units in calendar 1994 and were
approximately 348 in calendar 1997, an increase of 57%. Industry sources
indicate that executive aircraft deliveries are expected to be
approximately 450 in calendar 1998 and should reach 550 per year by the
year 2000. The Company believes it is well positioned to meet the cabin
interior product requirements for general aviation and VIP aircraft arising
from both the retrofit and upgrade of cabin interiors of the existing
10,000 general aviation / VIP aircraft fleet and the anticipated increase
in new aircraft deliveries over the next several years.
- - Widebody Aircraft Orders. Orders for widebody, long-haul aircraft
constitute an increasing share of total new airframe orders. According to
the July 1997 "Airline Monitor", the percentage of Boeing aircraft
deliveries projected to be widebody aircraft for 1997 through 2001 is 39%,
as compared to 33% for the three-year period ended December 31, 1995.
Widebody aircraft currently carry up to three times the number of seats as
narrowbody aircraft, and because of multiple classes of service, including
large first class and business class configurations, the Company's average
revenue per seat on widebody aircraft is significantly higher. Aircraft
crews on widebody aircraft may make and serve between 300 and 900 meals and
may brew and serve more than 2,000 cups of coffee on a single flight. As a
result, widebody aircraft may require as much as seven times the dollar
value of cabin interior products as narrowbody aircraft, as well as
products which are technically more sophisticated and typically more
expensive. Further, individual-passenger in-flight entertainment systems
are installed principally on widebody aircraft. Airlines are increasingly
demanding such systems for long-haul flights to attract and retain
customers, especially as the quality of in-flight entertainment has become
a differentiating factor in passengers' airline selection decisions. Such
systems also provide the airlines with the opportunity to increase revenues
per passenger mile, without raising ticket prices, by charging individually
for services used. For these reasons, management believes that in the
future, interactive in-flight entertainment systems will be installed on
essentially all widebody aircraft and, with the further development of live
broadcast in-flight television, many narrowbody planes.
- - New Product Development. The commercial and general aviation aircraft cabin
interior products industries are engaged in intensive development and
marketing efforts for a number of new products, including full electric
"sleeper" seats, convertible seats, interactive individual-passenger
entertainment systems, live broadcast television, advanced
telecommunications equipment, crew masks, protective breathing equipment,
oxygen generating systems, and new galley equipment. Interactive video
technology provides passengers with a wide range of computer capabilities,
which are designed to accept information generated by the passenger and
communicate such information to the cabin crew for assisting passengers and
crew with food service selection, the purchase of duty-free goods,
information in connection with arrival time, connecting flights, gate and
other passenger information, as well as facilitate effective on-board
inventory control and provide individual entertainment. LiveTV(TM), a new
product line being developed by a joint venture between the Company and
Harris Corporation, will provide live broadcast television via satellite to
passenger aircraft, allowing passengers the capability to view up to 48
different channels of television service. New cabin interior products will
generate new installation and retrofit revenues as well as service revenues
from equipment maintenance, inspection and repair.
- - Growing Upgrade, Maintenance, Inspection and Repair Service Markets.
Historically, the airlines have relied on their airframe and engine
mechanics to repair or replace cabin interior products that have become
6
<PAGE> 7
damaged or otherwise non-functional. As cabin interior product
configurations have become increasingly sophisticated and the airline
industry increasingly competitive, the airlines have begun to outsource
such services to increase productivity and reduce costs and overhead.
Outsourced services include product upgrades (such as the installation of a
telecommunications module or individual-passenger entertainment unit in an
aircraft seat not originally designed to accommodate such equipment), cabin
interior product maintenance and inspection, as well as other repair
services.
COMPETITIVE STRENGTHS AND BUSINESS STRATEGY
The Company believes that it has a strong competitive position attributable
to a number of factors including the following:
- - Leading Market Share and Significant Installed Base. Management believes
that the Company has achieved a leading global market position in each of
its major product categories with market shares, based upon industry
sources, of approximately 50% in commercial aircraft seats, 90% in coffee
makers, 60% in executive aircraft seats, 90% in refrigeration equipment,
90% in air valves, 50% in oxygen delivery systems, 50% in ovens, and 30% in
individual-passenger in-flight entertainment systems. The Company believes
these market shares provide it with significant competitive advantages in
serving its customers, including economies of scale and the ability to
commit greater product development, global product support and marketing
resources. Furthermore, because of economies of scale, in part attributable
to its large market shares and its approximate $3.7 billion installed base
of commercial aircraft cabin interior equipment (valued at replacement
prices as of February 28, 1998), the Company believes it is among the
lowest-cost producers in the cabin interior products industry. The Company
also believes that its large installed base provides B/E with a significant
advantage over competitors in obtaining orders for retrofit and
refurbishment programs. Finally, B/E is well positioned to obtain ongoing
upgrade, maintenance, inspection and repair service contracts due to the
breadth of its product line and the size of its installed base.
- - Broadest Product Line in the Industry. Management believes the Company
offers the broadest and most technologically advanced line of products for
the cabin interiors of commercial aircraft. With an established reputation
for quality, service and product innovation, the Company enjoys broad
recognition among the world's commercial airlines. The Company maintains a
constant dialogue with a wide array of existing and potential customers,
enabling it to become aware of emerging industry trends and needs and
thereby play a leading role in product development. The Company has
continued to expand its product line, believing that the airline industry
increasingly will seek an integrated approach to the development, testing
and sourcing of the aircraft's cabin interior.
- - Technological Leadership/New Product Development. Management believes that
the Company is a technological leader in its industry, with the largest R&D
organization in the industry, currently comprised of 500 engineers. The
Company believes that its R&D effort and its on-site engineers at both the
airlines and airframe manufacturers enable B/E to consistently introduce
innovative products and thereby gain early entrant advantages and
substantial market shares. Examples of such product development include:
the introduction of several premium and main cabin class seats, which the
Company believes provide greater comfort and are lighter in weight as a
result of their ergonomic design and pre-engineered individual-passenger
comfort features; the Company's family of in-flight entertainment systems,
which it believes to be superior to existing operational systems in terms
of performance, reliability, weight, heat generation and flexibility to
adapt to changing technology; a cappuccino/espresso maker; a quick-chill
wine cooling system; and a constant-pressure, steam cooking oven, which the
Company believes substantially improves the appearance, aroma and taste of
airline food.
- - Proven Track Record of Integration. The Company has demonstrated the
ability to make strategic acquisitions and successfully integrate such
acquired businesses by identifying opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. The Company has purchased 12 businesses over
the last nine years, for an aggregate purchase price of approximately $489
million. Since 1989, the Company has integrated its acquisitions by
reducing the number of operating facilities acquired from 20 to nine and
substantially improving productivity, efficiency and quality at the
acquired businesses.
7
<PAGE> 8
GROWTH OPPORTUNITIES
B/E believes that it is benefiting from four major growth trends.
- - Increase in Refurbishment and Upgrade Orders. B/E's substantial installed
base provides significant ongoing revenues from replacements, upgrades,
repairs and spare parts. Approximately 61% of B/E's revenues for the year
ended February 28, 1998 were derived from refurbishment and upgrade orders.
In the late 1980s and early 1990s, the airline industry suffered a
significant downturn, which resulted in a deferral of cabin interior
maintenance expenditures. Since early 1994, the airlines have experienced a
turnaround in operating results, leading the domestic airline industry to
record operating earnings during 1995 and 1997. Deterioration of cabin
interior product functionality and aesthetics occurred within the
commercial airline fleets during the industry downturn because of
maintenance deferrals. Since the turnaround began, the airlines have
experienced greater utilization resulting from higher load factors, which
has encouraged airlines to increase spending on refurbishments and
upgrades. The Company believes that it is well positioned to benefit over
the next several years as a result of the airlines' dramatically improved
financial condition and liquidity and the need to refurbish and upgrade
cabin interiors. The Company's recent growth in backlog, revenues and
operating earnings has been primarily from refurbishment and upgrade
programs, and the Company is currently experiencing a high level of new
order quote activity related to such programs.
- - Expansion of Worldwide Fleet and Shift Toward Widebody Aircraft. Airlines
have recently purchased a significant number of new aircraft due in part to
current high load factors and the projected growth in worldwide air travel.
According to the Boeing Report, worldwide air travel is projected to
increase by 75% by calendar 2006 and the worldwide fleet of commercial
passenger aircraft is projected to expand from approximately 10,300 at the
end of 1996 to approximately 15,300 by the end of 2006 and to more than
21,200 by 2016. Related growth in aircraft interior product shipments
associated with new aircraft deliveries began during calendar 1996. In
1997, Boeing shipped 375 aircraft versus 218 in 1996. In addition, Boeing
has stated plans to ship 550 aircraft in each of calendar years 1998 and
1999. Furthermore, according to the July 1997 "Airline Monitor", the
percentage of new Boeing aircraft deliveries projected to be widebody
aircraft for 1997 through 2001 is 39% as compared to 33% for the five-year
period ended December 31, 1996. This shift toward widebody aircraft is
significant to the Company since these aircraft require as much as seven
times the dollar value of cabin interior products as narrowbody aircraft,
including substantially more seats, galley equipment and in-flight
entertainment products.
- - General Aviation and VIP Aircraft Fleet Expansion and Related Retrofit
Opportunities. General aviation and VIP airframe manufacturers are
experiencing a surge in new aircraft deliveries similar to that occurring
in the commercial aircraft industry. According to industry sources,
executive aircraft deliveries amounted to 222 units in calendar 1994 and
were approximately 348 in calendar 1997, an increase of 57%. Industry
sources indicate that executive aircraft deliveries are expected to be
approximately 450 in calendar 1998 and should reach 550 per year by the
year 2000. Several new aircraft models including the Visionaire Vantage,
Cessna Citation Excel, the Boeing Business Jet, Global Express and Airbus
Business Jet have been, or will be introduced over the next several years.
The overall strength of the global economy, advances in engine and avionics
and emergence of fractional ownership of executive aircraft are all
important growth factors. In addition, the general aviation and VIP
aircraft fleet consists of approximately 10,000 aircraft with an average
age of approximately 15 years. As aircraft age or ownership changes,
operators retrofit and upgrade the cabin interior, including seats, sofas
and tables, sidewalls, headliners, structures such as closets, lavatories
and galleys, and related equipment including lighting and oxygen delivery
systems. The installed value of a new interior can range from $1 million
for smaller models to up to $7 million for a long haul aircraft. In
addition, operators generally reupholster or replace seats every five to
seven years. Management believes the Company is well positioned to benefit
from the retrofit opportunities due to (i) the 15-year average age of the
executive jet fleet; (ii) operators who have historically reupholstered
their seats are now more inclined to replace these seats with lighter
weight, more modern and 16g- compliant seating models; and (iii) the
Company is the only manufacturer with the capability for cabin interior
design services, a broad product line for essentially all cabin interior
products and program management services, for true "one-stop shopping."
- - Emergence of Individual Passenger In-Flight Entertainment Systems. Airlines
increasingly are demanding individual-passenger in-flight entertainment
systems in order to attract and retain customers, as the availability of
such service affects passengers' decisions on airline selection. These
systems also provide the
8
<PAGE> 9
airlines with the opportunity to generate increased revenues, without
raising ticket prices, by charging passengers for the services used. In
June 1997, the Company announced a joint venture with Harris Corporation to
develop and deliver live-broadcast television (LiveTV(TM)), to domestic
narrowbody commercial aircraft. The Company expects that in-flight
entertainment systems will be one of the fastest growing, and among the
largest, product categories in the commercial aircraft cabin interior
products industry.
The Company has developed a number of individual in-flight entertainment
systems that are designed to meet the varying technological and price
specifications of the airlines. The Company's three current systems are:
(i) the B/E 2000, with an installed base of approximately 28,000 units,
which is a system that provides non-interactive video programming, (ii) the
B/E 2000M, with an installed base of approximately 6,000 units, which
offers similar functionality to the B/E 2000 but can be upgraded to the
Company's Multimedia Digital Distribution System ("MDDS") product and (iii)
the MDDS product, which is in its final development stage, is an
interactive entertainment system with the capacity to provide movies on
demand, telecommunications, gaming and other services. The Company
completed the initial development and testing of the MDDS product and
delivered the first MDDS system to its launch customer, Japan Airlines
("JAL"), in April 1998. The Company also completed the engineering
necessary to enable installation of the MDDS as a line-fit option on Boeing
aircraft in April 1998.
Business Strategy
The Company's business strategy is to maintain its leadership position and
best serve its customers by: (i) offering the broadest and most integrated
product line in the industry for both new product sales and follow-on products
and services; (ii) pursuing a worldwide marketing approach focused by airline
and encompassing the Company's entire product line; (iii) pursuing the highest
level of quality in every facet of its operations, from the factory floor to
customer support; (iv) remaining the technological leader in its industry; (v)
enhancing its position in the growing upgrade, maintenance, inspection and
repair services market; and; (vi) pursuing selective strategic acquisitions in
the aircraft cabin interior products industry.
PRODUCTS AND SERVICES
Seating Products
The Company is the world's leading manufacturer of aircraft seats, offering a
wide selection of first class, business class, tourist class and commuter seats.
A typical seat manufactured and sold by the Company includes the seat frame,
cushions, armrests and tray table, together with a variety of optional features
such as in-flight entertainment systems, oxygen masks and telephones. Management
estimates that the Company has an aggregate installed base as of February 28,
1998 of aircraft seats, valued at replacement prices, of approximately $2
billion comprised of more than 1,000,000 seats.
- - Tourist Class. The Company is the leading worldwide manufacturer of tourist
class seats. B/E has designed tourist class seats that incorporate features
not previously utilized in that class, such as top-mounted passenger
control units, footrests and improved oxygen systems.
- - First and Business Classes. Based upon major airlines program selection and
orders on hand the Company is the leading worldwide manufacturer of premium
class seats. First class and business class seats are generally larger,
heavier and more complicated in design and are substantially more expensive
than tourist class aircraft seats. The Company's first class seats and
certain of its business class seats are equipped with articulating bottom
cushion suspension systems, sophisticated hydraulic legrests, lumbar
massage devices, adjustable thigh support cushions, reading lights,
adjustable head and neck supports and large tables.
- - Commuter Seats. The Company is the leading manufacturer of commuter seats
in both the U.S. and worldwide markets. The Company's Silhouette(TM)
Composite commuter seats are similar to commercial jet seats in comfort and
performance, but are lightweight and require minimal maintenance.
- - Spares. Aircraft seats are exposed to significant stress in the course of
normal passenger activity, and certain seat parts are particularly
susceptible to damage from continued use. As a result, a significant market
exists for spare parts.
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<PAGE> 10
Passenger Entertainment and Service Systems
Management estimates that the Company has one of the largest installed bases
of PESS products in the world, which, valued at replacement prices, is
approximately $360 million. The Company has the leading share of the market for
PCUs and related wiring and harness assemblies, and has developed products aimed
at other portions of the PESS market, including individual seat video systems,
advanced multiplexer and hard-wired distribution systems and other products. The
Company believes that it is a market leader in individual-passenger in-flight
entertainment systems and that this product category will be the fastest
growing, and among the largest, product categories in the commercial aircraft
cabin interior products industry in the future.
- - Individual Passenger Entertainment. The Company has developed a number of
in-flight entertainment systems designed to meet the technological and
price specifications of the airlines:
B/E 2000. The B/E 2000, introduced in 1992, is one of the Company's
first-generation individual in-flight video systems and offers
centralized electronic distribution of a limited range of programming.
Since its introduction, the Company has installed approximately 28,000
units of the B/E 2000 and earlier generation individual-passenger video
systems for 10 airlines.
MDDS Family. The Company has developed a family of next-generation,
individual-passenger in-flight entertainment products, which includes
the 2000M and the MDDS:
B/E 2000M . The B/E 2000M is an in-flight entertainment system that
offers similar functionality to the B/E 2000 but can be upgraded to
the Company's fully interactive MDDS. Since its introduction in
1995, the Company has installed approximately 6,000 units.
MDDS. B/E's MDDS is a state-of-the-art, fully interactive
individual-passenger in-flight entertainment system which has the
capacity to offer numerous movies on demand, telecommunications,
gaming, Nintendo(TM), Sega(TM) and PC-based games, in-flight
shopping and, in the future, live television, among other services.
The Company has completed the initial development and testing of
the MDDS product and delivered the first MDDS product to its launch
customer, JAL, in April 1998. The Company also completed the
engineering necessary to enable installation of the MDDS as a line
fit option on Boeing aircraft in conjunction with the JAL delivery.
LiveTV(TM). In June 1997, the Company announced a joint venture with
Harris Corporation to develop and market a system that will allow
airline passengers to receive in-flight, live broadcast television
aboard narrowbody commercial aircraft at each individual-passenger seat.
The Company controls a 51 percent voting interest in the joint venture.
B/E will provide its individual-seat video distribution system as its
part of the overall LiveTV(TM) reception system, while Harris
Corporation will provide the specialized aircraft antenna and receiver
system to enable in-the-air reception.
- - PCUs, Wiring and Harness Assemblies. The Company's PCU product line is the
broadest in the industry, including over 300 different designs that are
functionally similar but differ widely due to the style preferences and
technical requirements of the various airlines. Wiring and harness
assemblies (which stabilize installed wiring) are sold as a package with
PCUs and vary as widely as PCU types.
- - Distribution Systems. The Company has manufactured hard-wired audio (since
1963) and video distribution systems (since 1992) and is currently the
principal supplier of such systems to the airline industry. The Company
also offers frequency division multiplex distribution systems, which
deliver substantially improved audio performance compared to competitors'
multiplex systems.
Interior Systems Products
The Company is the world's largest manufacturer of interior systems products
for both narrowbody and widebody aircraft, offering a wide selection of
structures, coffee and beverage makers, water boilers, liquid containers, ovens,
refrigeration equipment, oxygen delivery systems, passenger service units, air
valves, lighting and switches, and a variety of other interior components.
Management estimates that the Company has an aggregate installed base of such
equipment valued at replacement prices, of approximately $1.2 billion.
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<PAGE> 11
- - Coffee Makers. The Company is the leading manufacturer of aircraft coffee
makers, with the Company's equipment currently installed in virtually every
type of aircraft for almost every major airline. The Company manufactures a
broad line of coffee makers, coffee warmers and water boilers including the
Flash Brew Coffee Maker, with the capability to brew 54 ounces of coffee in
one minute, a Combi(TM) unit which will both brew coffee and boil water for
tea while utilizing 25% less electrical power than traditional 5,000 watt
water boilers, and a recently introduced next-generation coffee maker.
- - Ovens. The Company is the leading supplier of a broad line of specialized
ovens, including high-heat efficiency ovens, high-heat convection ovens,
and warming ovens. The Company's newest offering, the DS-2000 Steam Oven,
represents a new method of preparing food in-flight by maintaining constant
temperature and moisture in the food. It addresses the airlines' need to
provide a wider range of foods than can be prepared by convection ovens.
- - Refrigeration Equipment. The Company is the worldwide industry leader in
the design, manufacture, and supply of commercial aircraft refrigeration
equipment. The Company recently introduced a self-contained wine and
beverage chiller, the first unit specifically designed to rapidly chill
wine and beverages on board an aircraft.
- - Galley Structures. Galley structures are generally custom designed to
accommodate the unique specifications and features required by a particular
carrier. Galley structures require intensive design and engineering work
and are among the most sophisticated and expensive of the aircraft's cabin
interior products. The Company provides a variety of galley structures,
closets and class dividers, emphasizing sophisticated and higher
value-added galleys for widebody aircraft.
- - Oxygen Delivery Systems. The Company is a leading manufacturer of oxygen
delivery systems, passenger service units, air valves, lighting and
switches for both commercial and general aviation aircraft. B/E is the only
manufacturer with the capability to fully integrate its own manufactured
components with overhead passenger service units with either chemical or
gaseous oxygen equipment. The Company's oxygen and passenger service unit
equipment has been approved for use on all Boeing and Airbus aircraft and
is also found on essentially all general aviation and VIP aircraft.
General Aviation
- - General Aviation and VIP Products. The Company entered this line of
business with its acquisition of AMP in April 1998. By combining AMP's
substantial presence in the general aviation and VIP aircraft cabin
interior products industry with that of PBASCO, B/E is now the leading
manufacturer of a broad product line including a complete line of seating
products, sidewalls, bulkheads, credenzas, closets, galley structures,
lavatories, tables, sofas, oxygen delivery systems, air valves and
lighting. B/E has the capability to provide complete interior packages,
including all design services, all interior components and program
management services for executive aircraft interiors. B/E is the preferred
supplier of seating products at essentially every general aviation airframe
manufacturer.
Services and Specialty Products
The Company is an active participant in the growing service and custom
products markets. Management believes that the Company's broad and integrated
product line and close relationships with its airline and leasing customers
position the Company to become a leading service provider in this market. Most
participants in this market are small, and management believes that the Company
is the only major product manufacturer in the industry currently participating
in this market.
- - Services. The Company provides a comprehensive complement of services for
cabin interior products on board aircraft either between flights or on an
overnight basis, or at one of eight service centers in the worldwide
service network. The spectrum of services includes systems check and
components repair, parts inventory and management, refurbishment of seating
products, on-board surveys regarding status and product installations, as
well as data support functions such as loading and updating of in-flight
systems entertainment software, direct satellite broadcast systems support
and systems integration.
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<PAGE> 12
- - Specialty Products. The Company manufacturers several specialty products
for the commercial airline industry including flight attendant seats,
observer seats and custom products in the passenger seating area. The
Company maintains a staff of engineers to design and certify various
modules and kits to accommodate individual-passenger video and
telecommunications modules in seat backs and center consoles. The Company
believes it is able to provide such unique custom products more rapidly
than original manufacturers.
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company works closely with commercial airlines to improve existing
products and identify customers' emerging needs. B/E's expenditures in research,
development and engineering totaled $45.7 million, $37.1 million, and $58.3
million for the fiscal years ended February 28, 1998, February 22, 1997 and
February 24, 1996, respectively. The increase in expenses during the current
period is the result of the substantial completion of Boeing line-fit
certification activities for MDDS as well as ongoing product development
activity in the Seating Products Group and Interior Systems Group. B/E employs
approximately 500 professionals in the engineering and product development
areas. The Company believes that it has the largest engineering organization in
the cabin interior products industry, with not only software, electronic,
electrical and mechanical design skills, but also substantial expertise in
materials composition and custom cabin interior layout design.
MARKET AND CUSTOMERS
The Company markets and sells its products directly to virtually all of the
world's major airlines and commercial and general aviation aircraft
manufacturers. The Company markets its general aviation products directly to all
of the world's general aviation airframe manufacturers, modification centers and
operators. B/E has a sales and marketing organization of 110 people, along with
22 independent sales representatives. B/E sales to all customers in foreign
countries were $232.7 million, $203.4 million and $124.5 million for the fiscal
years ended February 28, 1998, February 22, 1997 and February 24, 1996,
respectively, or approximately 43%, 49% and 54%, respectively, of net sales
during such periods.
Airlines select manufacturers of cabin interior products primarily on the
basis of product quality and performance, custom design capabilities, on-time
delivery, after-sales service and price. B/E believes that its large installed
base, its timely responsiveness in connection with the custom design,
manufacture, delivery and after-sales service of its products and its broad
product line and stringent customer and regulatory requirements all present
barriers to entry for potential new competitors in the cabin interior products
market.
The Company believes that its integrated worldwide marketing approach,
focused by airline, modification center and general aviation airframe
manufacturer and encompassing the Company's entire product line, is preferred by
its customers. Led by a B/E senior executive, teams representing each product
line serve designated airlines, which together account for approximately 60% of
the purchases of products manufactured by B/E during fiscal 1998. These customer
teams have developed customer-specific strategies to meet each airline's product
and service needs.
The Company also staffs "on-site" customer engineers at major airlines and
airframe manufacturers to represent its entire product line and work closely
with the customers to develop specifications for each successive generation of
products required by the airlines. These engineers help customers integrate the
wide range of cabin interior products and assist in obtaining the applicable
regulatory certification for each particular product or cabin configuration.
Through its on-site customer engineers, the Company expects to be able to more
efficiently design and integrate products which address the requirements of its
customers. The Company provides program management services, integrating all
on-board cabin interior equipment and systems, including installation and FAA
certification, allowing airlines to substantially reduce costs. The Company
believes that it is the only supplier in the commercial aircraft cabin interior
products industry with the size, resources, breadth of product line and global
product support capability to operate in this manner.
The Company markets its general aviation products directly to all of the
world's general aviation airframe manufacturers, modification centers and
operators.
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<PAGE> 13
During the latter part of fiscal 1997, the Company initiated a program
management discipline under which a program manager is assigned for each
significant contract. The program manager is responsible for all aspects of the
specific contract, including management of change orders and negotiation of
related non-recurring engineering charges, monitoring the progress of the
contract through its scheduled delivery dates, and overall profitability
associated with the contract. The Company believes that it and its customers
derive substantial benefit from its program management approach, including
better on-time delivery and higher service levels. The Company also believes its
program management approach results in better customer satisfaction and higher
profitability over the life of the contract.
During the fiscal year ended February 28, 1998, one customer accounted for
approximately 18% of the Company's total revenues, and no other customer
accounted for more than 10% of such revenues. There were no major customers in
fiscal 1997 or 1996. Because of differing schedules of various airlines for
purchases of new aircraft and for retrofit and refurbishment of existing
aircraft, the portion of the Company's revenues attributable to particular
airlines varies from year to year.
BACKLOG
Management estimates that B/E's backlog at February 28, 1998 was
approximately $560 million, approximately 52% of which management believes to be
deliverable in fiscal 1999, compared with a backlog of $420 million on February
22, 1997 (as adjusted for the debooking of the British Airways MDDS program in
August 1997).
CUSTOMER SERVICE
The Company believes that it provides the highest level of customer
service and product support available in the commercial aircraft cabin interior
products industry and that such service is a critical factor in the Company's
success. The key elements of such service include (i) rapid response to requests
for engineering designs, proposal requests and technical specifications; (ii)
flexibility with respect to customized features; (iii) on-time delivery; (iv)
immediate availability of spare parts for a broad range of products; and (v)
prompt attention to customer problems, including on-site customer training.
Customer service is particularly important to airlines due to the high cost to
the airlines of late delivery, malfunctions and other problems.
WARRANTY AND PRODUCT LIABILITY
The Company warrants its products, or specific components thereof, for
periods ranging from one to ten years, depending upon product type and
component. The Company generally establishes reserves for product warranty
expense on the basis of the ratio of warranty costs incurred by the product over
the warranty period to sales of the product over the warranty period. Actual
warranty costs reduce the warranty reserve as they are incurred. Management
periodically reviews the adequacy of accrued product warranty reserves and
revisions of such reserves are recognized in the period in which such revisions
are determined.
The Company also carries product liability insurance. The Company believes
that its insurance is generally sufficient to cover product liability claims.
COMPETITION
The commercial aircraft cabin interior products market is relatively
fragmented with a number of competitors in each of the individual product
categories. Due to the global nature of the commercial airline industry,
competition in product categories comes from both U.S. and foreign
manufacturers. However, as aircraft cabin interiors have become increasingly
sophisticated and technically complex, airlines have demanded increased levels
of engineering support and customer service than many smaller cabin interior
products suppliers can provide. At the same time, airlines have recognized that
cabin interior product suppliers must be able to integrate a wide range of
products, including sophisticated electronic components, particularly in
widebody aircraft. Management believes that the increasing demands airlines
place upon remaining suppliers will result in a number of suppliers leaving the
cabin interior products industry and a consolidation of those suppliers. The
Company has participated in this consolidation through strategic acquisitions
and internal growth and intends to continue to participate in the consolidation.
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The Company's principal competitors for seating products include Group
Zodiac S.A., Keiper Recaro GmbH, and a limited number of other producers in the
European community and Japan. The Company's principal competitors for PESS
products are MAS and Rockwell Collins. The Company's primary competitors for
interior systems products are JAMCO Limited, Britax PLC, Scott Aviation and
Intertechnique.
MANUFACTURING AND RAW MATERIALS
The Company's manufacturing operations consist of both the in-house
manufacturing of component parts and sub-assemblies and the assembly of Company
specified and designed component parts purchased from outside vendors. The
Company maintains state-of-the-art facilities, and management has an ongoing
strategic manufacturing improvement plan utilizing focused factories and
cellular production technologies. Management expects that continuous improvement
from implementation of this plan for each of its product lines will occur over
the next several years and should lower production costs, cycle times and
inventory requirements and at the same time improve product quality and customer
satisfaction.
GOVERNMENT REGULATION
The FAA prescribes standards and licensing requirements for aircraft
components and licenses component repair stations within the United States.
Comparable agencies regulate such matters in other countries.
The Company holds several FAA component certificates and performs component
repairs at a number of its U.S. facilities under FAA repair station licenses.
The Company also holds an approval issued by the U.K. Civil Aviation Authority
to design, manufacture, inspect and test aircraft seating products in Leighton
Buzzard, England and in Kilkeel, Northern Ireland and the necessary approvals to
design, manufacture, inspect, test and repair its interior systems products in
Nieuwegein, The Netherlands and to inspect, test and repair products at its
eight service centers throughout the world.
In March 1992, the FAA adopted Technical Standard Order C127 requiring that
all seats on certain new generation commercial aircraft installed after such
date be certified to meet a number of new safety requirements, including an
ability to withstand a 16G force. Management understands that the FAA plans to
adopt additional regulations in the near future that will require that within
the next five years all seats, including those on existing older commercial
aircraft that are subject to the FAA's jurisdiction, will have to comply with
similar seat safety requirements. At February 28, 1998, the Company had
developed eleven different seat models meeting these new seat safety
regulations.
PATENTS
B/E currently holds 52 United States patents and 21 international patents,
covering a variety of products. However, the Company believes that the
termination, expiration or infringement of one or more of such patents would not
have a material adverse effect on the Company.
EMPLOYEES
As of February 28, 1998, B/E had approximately 3,600 employees.
Approximately 73% of these employees are engaged in manufacturing, 14% in
research, development and engineering, and 13% in sales, marketing, product
support and general administration. Approximately 13% of the employees are
represented by unions. On April 25, 1997, the Company completed negotiations
with its only domestic union which represents 11% of the Company's employees.
This contract, which covers a period of three years, was ratified by the members
of the union on April 26, 1997. B/E considers its employee relations to be good.
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<PAGE> 15
ITEM 2. PROPERTIES
B/E currently has 21 principal facilities, comprising an aggregate of
approximately 1.4 million square feet of space. The following table describes
the principal facilities and indicates the location, function, approximate size
and ownership status of each:
<TABLE>
<CAPTION>
FACILITY
LOCATION PRODUCTS AND FUNCTION SIZE OWNERSHIP
-------- --------------------- ---- ---------
(SQ. FEET)
<S> <C> <C> <C>
CORPORATE:
Wellington, Florida Corporate headquarters, finance, marketing and 17,700 Owned
sales
SEATING PRODUCTS:
Litchfield, Connecticut Manufacturing, service and warehousing 147,700 Owned
Winston-Salem, North Seating Products Group headquarters, research and 264,800 Owned
Carolina development, finance, marketing, sales and
manufacturing
Leighton Buzzard, Manufacturing, service, research and development, 114,000 Owned (a)
England sales support, finance and warehousing
Kilkeel, Northern Ireland Manufacturing, sales support and warehousing 38,500 Owned
INTERIOR SYSTEMS:
Anaheim, Manufacturing, service, research and development, 57,100 Leased
California sales support, finance and warehousing
Fountain Valley, Manufacturing, service, research and 26,000 Owned
California development, sales support, finance and
warehousing
Delray Beach, Florida Manufacturing, service, research and development,
sales support, finance and warehousing; Interior
Systems Group headquarters 52,000 Owned
Jacksonville, Florida Manufacturing, service, engineering, and
warehousing 75,000 Owned
Lenexa, Kansas Manufacturing, service, engineering, and 80,000 Leased
Warehousing
Nieuwegein, The Manufacturing, service, research and development,
Netherlands sales support, finance and warehousing 39,000 Leased
PESS PRODUCTS:
Irvine, California Manufacturing, service, research and development,
sales support, finance and warehousing; In-flight
Entertainment Group headquarters 106,700 Leased
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
FACILITY
LOCATION PRODUCTS AND FUNCTION SIZE OWNERSHIP
-------- --------------------- ---------- ---------
(SQ. FEET)
<S> <C> <C> <C>
GENERAL AVIATION AND
VIP PRODUCTS:
Miami, Florida Manufacturing, service, research and development, 84,300 Leased
sales support, finance and warehousing; General 71,700 Owned
Aviation Headquarters
SERVICES:
Orange, California Upgrade, maintenance, inspection and repair, 106,300 Leased
finance, sales support and warehousing; Service
Group Headquarters
Longwood, Florida Upgrade, maintenance, inspection and repair 5,300 Leased
Burnsville, Minnesota Upgrade, maintenance, inspection and repair 7,200 Leased
Woodinville, Washington Upgrade, maintenance, inspection and repair 26,800 Leased
Chesham, England Upgrade, maintenance, inspection and repair 34,000 Owned (a)
Toulouse, France Upgrade, maintenance, inspection and repair 400 Leased
Houston, Texas Upgrade, maintenance, inspection and repair 45,000 Owned
Schipol, The Netherlands Upgrade, maintenance, inspection and repair 3,600 Leased
</TABLE>
(a) B/E's owned properties in England are mortgaged to Barclays Bank PLC to
collateralize credit facilities of BE Aerospace (U.K.) Ltd. in aggregate amounts
of up to approximately pound sterling 5.0 million.
The Company believes that its facilities are suitable for their present
intended purposes and adequate for the Company's present and anticipated level
of operations. As a result of recent conditions in the airline industry as
described in "Industry Overview-Recent Industry Conditions," B/E's facilities
have been substantially underutilized for the past several years. The Company
believes that its ongoing facility integration program, together with
anticipated continued growth in airline profitability, should result in
significant improvement in the degree of utilization in the Company's
facilities.
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<PAGE> 17
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to litigation or other legal proceedings which the
Company believes could reasonably be expected to have a material adverse effect
on the Company's business, financial condition and results of operations.
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The dispute
centered on shipments of aircraft seats and related spare parts for five
civilian aircraft operated by Iran Air. Iran Air purchased the seats in 1992 and
arranged for them to be installed by a contractor in France. At the time, Iran
was not the subject of a U.S. trade embargo. In connection with its sale of
seats to Iran Air, B/E applied for and was granted a validated export license by
the U.S. Department of Commerce (the "DOC"). The dispute with the U.S.
Government centered on whether seats were delivered to Iran Air before the
formal license was issued by the DOC, some seven months after B/E first applied
for the license. This action resolved all disputes between B/E Aerospace and the
Department of Justice as well as the DOC's Bureau of Export Enforcement. As part
of the settlement, B/E pleaded guilty to a violation of the International
Economic Emergency Powers Act and was placed on probation for a three-year
period. In addition, B/E entered into a consent order with the DOC under which
the DOC has agreed to suspend the imposition of a three-year export denial order
on PTC Aerospace, a member of B/E's U.S. Seating Products Group, provided no
further violations of the export laws occur. The Company recorded a charge of
approximately $4.7 million in the quarter ended February 28, 1998, related to
fines, civil penalties and associated legal fees arising from the settlement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the last quarter of the fiscal year covered by this report, the
Company did not submit any matters to a vote of security holders, through the
solicitation of proxies or otherwise.
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<PAGE> 18
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information regarding the directors and
executive officers of the Company. Officers of the Company are elected annually
by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Amin J. Khoury 59 Chairman of the Board
Robert J. Khoury 56 Vice Chairman of the Board and Chief Executive Officer and Director
Paul E. Fulchino 51 President, Chief Operating Officer and Director
Marco C. Lanza 41 Executive Vice President, Marketing and Product Development
Thomas P. McCaffrey 44 Corporate Senior Vice President of Administration, Chief Financial Officer and
Assistant Secretary
E. Ernest Schwartz 61 Corporate Senior Vice President, Development and Planning
Edmund J. Moriarty 54 Corporate Vice President-Law, General Counsel and Secretary
Jeffrey P. Holtzman 42 Corporate Vice President, Treasurer and Assistant Secretary
Sam G. Ayoub 55 Group Vice President and General Manager, Services Group
Roman G. Ptakowski 49 Group Vice President and General Manager, Interior Systems Products Group
Scott A. Smith 43 Group Vice President and General Manager, In-flight Entertainment Group
Jim C. Cowart 46 Director**
Richard G. Hamermesh 50 Director*
Brian H. Rowe 66 Director**
Hansjoerg Wyss 62 Director*
</TABLE>
* Member, Audit Committee.
** Member, Stock Option and Compensation Committee.
The Company's Restated Certificate of Incorporation provides that the
Board of Directors is classified into three classes, as nearly as equal in
number as possible, so that each director (after a transitional period) will
serve for three years, with one class of directors being elected each year. The
Board is currently comprised of three Class I Directors (Brian H. Rowe, Jim C.
Cowart and Paul E. Fulchino), two Class II Directors (Robert J. Khoury and
Hansjoerg Wyss) and two Class III Directors (Amin J. Khoury and Richard G.
Hamermesh). The terms of the Class I, Class II and Class III Directors expire
upon the election and qualification of successor directors at annual meetings of
stockholders held following the end of fiscal years 1998, 1997 and 1996,
respectively. The executive officers of the Company are elected annually by the
Board of Directors following the annual meeting of stockholders and serve at the
discretion of the Board of Directors.
Amin J. Khoury has been Chairman of the Board of the Company since July
1987 and was Chief Executive Officer until April 1, 1996. Since 1986, Mr. Khoury
has also been the Managing Director of The K.A.D. Companies, Inc., an
investment, venture capital and consulting firm. Mr. Khoury is currently the
Chairman of the Board of Directors of Applied Extrusion Technologies, Inc., a
manufacturer of oriented polypropylene films used in consumer products labeling
and packaging applications, and a member of the Board of Directors of Brooks
Automation, Inc., the leading manufacturer in the U.S. of vacuum central wafer
handling systems for semiconductor manufacturing. Mr. Khoury is employed by the
Company pursuant to an Employment Agreement extending through December 31, 2001.
Mr. Khoury is the brother of Robert J. Khoury.
Robert J. Khoury has been a Director of the Company since July 1987. Mr.
Khoury was elected Vice Chairman and Chief Executive Officer effective April 1,
1996; from July 1987 until that date, Mr. Khoury served as the Company's
President and Chief Operating Officer. From 1986 to 1987, Mr. Khoury was Vice
President of The K.A.D. Companies, Inc. The Company has entered into an
Employment Agreement with Mr. Khoury, extending through February 28, 2001. Mr.
Khoury is the brother of Amin J. Khoury.
Paul E. Fulchino was elected a Director and President and Chief Operating
Officer of the Company effective April 1, 1996. From 1990 to 1996, Mr. Fulchino
served as President and Vice Chairman of Mercer Management Consulting, Inc.
("Mercer"), an international general management consulting firm with over 1,100
employees. In addition to his management responsibilities as President of
Mercer, Mr. Fulchino also had responsibility for advising clients throughout the
world, particularly with respect to the transportation industry, including a
number of
18
<PAGE> 19
major airlines. The Company has entered into an Employment Agreement with Mr.
Fulchino extending through March 31, 1999.
Marco C. Lanza has been the Executive Vice President, Marketing and
Product Development since January 1994. From March 1992 through January 1994,
Mr. Lanza was Vice President and General Manager of the In-flight Entertainment
Group of the Company. From 1987 through February 1992, Mr. Lanza was Vice
President, Marketing and Product Development of the Company. The Company has
entered into an Employment Agreement with Mr. Lanza extending through December
31, 1999.
Thomas P. McCaffrey has been Corporate Senior Vice President of
Administration, Chief Financial Officer and Assistant Secretary since May 1993.
From August 1989 through May 1993, Mr. McCaffrey was an Audit Director with
Deloitte & Touche LLP, and from 1976 through 1989 served in several capacities,
including Audit Partner, with Coleman & Grant. The Company has entered into an
Employment Agreement with Mr. McCaffrey extending through December 31, 1999.
E. Ernest Schwartz has been Corporate Senior Vice President, Development
and Planning since December 1997. From March 1992 through November 1997, Mr.
Schwartz was Group Vice President and General Manager of the Interior Systems
Products Group. From 1986 through February 1992, Mr. Schwartz was President of
Aircraft Products Company, which was acquired by the Company in 1992.
Edmund J. Moriarty has been Corporate Vice President, General Counsel and
Secretary since November 1995. From 1991 to 1995, Mr. Moriarty served as Vice
President and General Counsel to Rollins, Inc., a national service company. From
1982 through 1991, Mr. Moriarty served as Vice President and General Counsel to
Old Ben Coal Company, a wholly owned coal subsidiary of The Standard Oil
Company.
Jeffrey P. Holtzman has been Treasurer since September 1993 and Vice
President since November 1996. From June 1986 to July 1993, Mr. Holtzman served
in several capacities at FPL Group, Inc., including Assistant Treasurer and
Manager of Financial Planning. Mr. Holtzman previously worked for Mellon Bank,
Gulf Oil and Arthur Young & Company.
Sam G. Ayoub has been Group Vice President and General Manager of the
Company's Services Group since May 1996 and from November 1994 through April
1996, was Executive President-Services. From 1984 to 1994 Mr. Ayoub served in
several capacities with AAR Corporation including Corporate Vice President
Marketing and President-Technical Services Division. Prior to that Mr. Ayoub was
with United Airlines for 20 years with his last position being General Manager
of their Cargo Division.
Roman G. Ptakowski has been the Group Vice President and General Manager
of the Interior Systems Group since December 1997. From September 1995 through
December 1997, Mr. Ptakowski was Vice President, Sales and Marketing of the
Interior Systems Group of the Company. From January 1995 through August 1995,
Mr. Ptakowski served as Senior Vice President, Marketing for Farrel Corporation.
Prior to that he was with the ABB Power T&D Company Inc. and Westinghouse
Electric Corp. for 25 years with his last position being General Manager of
their Protective Relay Division.
Scott A. Smith has been the Vice President and General Manager of the
In-flight Entertainment Group since April 1998. From December 1995 through March
1998, Mr. Smith was with Toshiba American Information Electronics with his last
position being Senior Vice President, Sales of the Americas. From December 1992
to February 1994, Mr. Smith served as Corporate Vice President of Engineering
and from February 1994 to September 1995 served as the General Manager of the
Desktop and Server Product Division of AST Research. Prior to that, Mr. Smith
was with IBM for 16 years and served in numerous capacities, including Systems
Manager of the engineering team which developed IBM's first PC Server and
advanced desktop, Staff Assistant to the Chairman of the Board and Director of
Visual Subsystems Group.
19
<PAGE> 20
Jim C. Cowart has been a Director of the Company since November 1989. Mr.
Cowart is currently an independent investor and has been a principal of Cowart &
Co. LLC and EOS Capital, Inc. private capital firms retained by the Company for
strategic planning, competitive analysis, financial relations and other
services. From January 1993 to November 1997, Mr. Cowart was the Chairman of the
Board and Chief Executive Officer of Aurora Electronics Inc. From 1987 until
1991, Mr. Cowart was a founding General Partner of Capital Resource Partners, a
private investment capital manager. Prior to such time, Mr. Cowart held various
positions in investment banking and venture capital with Lehman Brothers,
Shearson Venture Capital and Kidder, Peabody & Co.
Richard G. Hamermesh has been a Director of the Company since July 1987.
Since August 1987, Dr. Hamermesh has been the Managing Partner of the Center for
Executive Development, an independent management consulting company, and, from
December 1986 to August 1987, Dr. Hamermesh was an independent consultant. Prior
to such time, Dr. Hamermesh was on the faculty at the Harvard Business School.
Dr. Hamermesh is also a Director of Applied Extrusion Technologies, Inc.
Brian H. Rowe has been a Director of the Company since July 1995. Mr. Rowe
is currently Chairman Emeritus of GE Aircraft Engines, a principal business unit
of the General Electric Company, where he also served as Chairman from September
1993 through January 1995 and as President from 1979 through 1993. From March
1994 to November 1995, Mr. Rowe served as a Director of Astrostructures Hamble
Limited, a manufacturer of military and civil aircraft components. Since March
1995, Mr. Rowe has also been a Director of Atlas Air Inc., an air cargo carrier.
Since January 1980, Mr. Rowe has been a Director of Fifth Third Bank, an Ohio
banking corporation. Since October 1995, Mr. Rowe has been a Director of
Cincinnati Bell Inc., a communications services company. Since December 1996,
Mr. Rowe has also been a Director of Stewart & Stevenson Services, Inc., a
custom packager of engine systems, and Textron Inc., a manufacturer of
mechanical devices for aircraft and other applications. Since January 1996, Mr.
Rowe has served as Executive Vice Chairman of American Regional Aircraft
Industries, Inc.
Hansjoerg Wyss has been a Director of the Company since October 1989.
Since 1977, Mr. Wyss has been a Director and the Chairman and Chief Executive
Officer of Synthes (U.S.A.) and Synthes (Canada), Ltd., manufacturers and
distributors of orthopedic implants and instruments.
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20
<PAGE> 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Nasdaq National Market under
the symbol "BEAV." The following table sets forth, for the periods indicated,
the range of high and low per share closing prices for the Common Stock as
reported by Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED FEBRUARY 24, 1996
First Quarter 8 5/8 5 1/4
Second Quarter 9 1/4 7 1/4
Third Quarter 9 9/16 7 1/2
Fourth Quarter 13 5/8 8 7/8
FISCAL YEAR ENDED FEBRUARY 22, 1997
First Quarter 16 1/4 9 7/8
Second Quarter 16 3/4 12 3/8
Third Quarter 25 1/8 15 1/2
Fourth Quarter 29 22 3/4
FISCAL YEAR ENDED FEBRUARY 28, 1998
First Quarter 27 1/2 19 1/2
Second Quarter 37 23 5/8
Third Quarter 41 1/2 27 1/8
Fourth Quarter 32 1/4 20 1/2
</TABLE>
On May 20, 1998 the closing price of the Common Stock as reported by
Nasdaq was $30.31 per share. As of such date, the Company had 531 shareholders
of record, and management estimates that there are approximately 14,300
beneficial owners of the Company's common stock. The Company has not paid any
cash dividends in the past, and management has no present intention of doing so
in the immediate future. The Company's Board of Directors intends, for the
foreseeable future, to retain any earnings to finance the future growth of the
Company, but expects to review its dividend policy regularly. The Indentures
pursuant to which the Company's 8% and 9 7/8% Senior Subordinated Notes were
issued and the terms of the Company's credit facilities permit the declaration
or payment of cash dividends only in certain circumstances described therein.
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21
<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data)
During fiscal 1994, B/E completed the following acquisitions: (i) on April 29,
1993, B/E acquired all of the stock of Royal Inventum, B.V. ("Inventum"); (ii)
on August 23, 1993, B/E acquired all of the stock of Nordskog Industries
("Nordskog"); (iii) on August 26, 1993, B/E acquired all of the stock of Acurex
Corporation ("Acurex"); and (iv) on October 13, 1993, B/E acquired substantially
all of the assets of Philips Airvision ("Airvision"). On January 24, 1996, the
Company acquired all of the stock of Burns Aerospace Corporation ("Burns"). The
financial data as of and for the fiscal years ended February 28, 1998, February
22, 1997, February 24, 1996, February 25, 1995 and February 26, 1994 have been
derived from financial statements which have been audited by B/E's independent
auditors. The following financial information is qualified by reference to, and
should be read in conjunction with, the B/E financial statements, including
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------
Feb. 28, Feb. 22, Feb. 24, Feb. 25, Feb. 26,
1998 1997 1996 (c) 1995 1994
---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales ...................................... $ 487,999 $ 412,379 $ 232,582 $ 229,347 $ 203,364
Cost of sales .................................. 309,094 270,557 160,031 154,863 136,307
--------- --------- --------- --------- ---------
Gross profit ................................... 178,905 141,822 72,551 74,484 67,057
Operating expenses:
Selling, general and administrative .......... 58,622 51,734 42,000 31,787 28,164
Research, development and engineering ........ 45,685 37,083 58,327 (d) 12,860 9,876
Amortization ................................. 11,265 10,607 9,499 9,954 7,599
Other expenses ............................... 4,664(a) -- 4,170 (e) 23,736 (e) --
--------- --------- --------- --------- ---------
Operating earnings (loss) ...................... 58,669 42,398 (41,445) (3,853) 21,418
Interest expense, net .......................... 22,765 27,167 18,636 15,019 12,581
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes (benefit),
extraordinary item and cumulative effect of
accounting change .......................... 35,904 15,231 (60,081) (18,872) 8,837
Income taxes (benefit) ......................... 5,386 1,522 -- (6,806) 3,481
--------- --------- --------- --------- ---------
Earnings (loss) before extraordinary item and
cumulative effect of accounting change ..... 30,518 13,709 (60,081) (12,066) 5,356
Extraordinary item ............................. 8,956 (b) -- -- -- --
--------- --------- --------- --------- ---------
Earnings (loss) before cumulative effect of
accounting change ........................... 21,562 13,709 (60,081) (12,066) 5,356
Cumulative effect of accounting change ......... -- -- (23,332) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) ............................ $ 21,562 $ 13,709 $ (83,413) $ (12,066) $ 5,356
========= ========= ========= ========= =========
Basic earnings (loss) per share (f):
Earnings (loss) before extraordinary Item and
cumulative effect of change in accounting
principle ................................... $ 1.36 $ .77 $ (3.71) $ (.75) $ .35
Extraordinary item ............................. (.40) -- -- -- --
Cumulative effect of accounting change ......... -- -- (1.44) (d) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) ............................ $ .96 $ .77 $ (5.15) $ (.75) $ .35
========= ========= ========= ========= =========
Weighted average common shares ................ 22,442 17,692 16,185 16,021 15,438
Diluted earnings (loss) per share (f):
Earnings (loss) before extraordinary Item and
cumulative effect of change in accounting
principle .................................... $ 1.30 $ .72 $ (3.71) $ (.75) $ .34
Extraordinary item ............................. (.38) -- -- -- --
Cumulative effect of accounting change ......... -- -- (1.44) (d) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) ............................ $ .92 $ .72 $ (5.15) $ (.75) $ .34
========= ========= ========= ========= =========
Weighted average common shares ................ 23,430 19,097 16,185 16,021 15,623
BALANCE SHEET DATA (END OF PERIOD):
Working capital ................................ $ 262,504 $ 122,174 $ 41,824 $ 76,563 $ 76,874
Total assets ................................... 681,757 491,089 433,586 379,954 375,009
Long-term debt ................................. 349,557 225,402 273,192 172,693 159,170
Stockholders' equity ........................... 196,775 165,761 44,157 125,331 133,993
</TABLE>
22
<PAGE> 23
SELECTED FINANCIAL DATA (CONTINUED)
FOOTNOTES TO TABLE
(a) In fiscal 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The
Company recorded a charge of $4,664 in fiscal 1998 related to fines,
civil penalties and associated legal fees arising from the settlement.
(b) The Company incurred an extraordinary charge of $8,956 during fiscal 1998
for unamortized debt issue costs, tender and redemption premiums and fees
and expenses related to the repurchase of its 9 3/4% Senior Notes.
(c) On January 24, 1996, the Company acquired all of the stock of Burns, an
industry leader in commercial aircraft seating. The acquisition of Burns
was accounted for as a purchase, and the results of Burns are included in
B/E's historical financial data from the date of acquisition.
(d) In fiscal 1996, the Company changed its method of accounting relating to
the capitalization of precontract engineering costs that were previously
included as a component of inventories and amortized to earnings as the
product was shipped. Effective February 24, 1995, such costs have been
charged to research, development and engineering and expensed as incurred
and, as a result, periods prior to fiscal 1996 are not comparable. In
connection with such change in accounting, the Company recorded a charge
to earnings of $23,332. See Note 2 of Notes to Consolidated Financial
Statements.
(e) In fiscal 1996, in conjunction with the Company's rationalization of its
seating business and as a result of the Burns acquisition, the Company
recorded a charge to earnings of $4,170 related to costs associated with
the integration and consolidation of the Company's European seating
operations. In fiscal 1995, the Company charged to earnings $23,736 of
expenses primarily related to intangible assets and inventories
associated with the Company's earlier generations of passenger
entertainment systems.
(f) During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standard No. 128, Earnings per Share, and, accordingly, has
restated earnings per share for all periods presented.
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23
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations" includes forward-looking statements which involve risks
and uncertainties. The Company's actual experience may differ materially from
that anticipated in such statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors" contained in
Exhibit 99.1 hereto, as well as future events that have the effect of reducing
the Company's operating income and available cash balances, such as unexpected
operating losses or delays in the integration of the Company's seating business,
the delivery of the Company's MDDS interactive video system, customer delivery
requirements, new or expected refurbishments, or cash expenditures related to
possible future acquisitions.
(In thousands, except share and per share data)
INTRODUCTION
B/E is the world's largest manufacturer of interior products for
commercial and general aviation aircraft cabins, serving virtually all major
airlines and general aviation aircraft owners and original equipment
manufacturers with a broad line of products, including aircraft seats, a full
line of food and beverage preparation and storage equipment, Interior Systems
structures, oxygen delivery systems and related products, and in-flight
entertainment systems. In addition, B/E provides upgrade, maintenance and repair
services for the products which it manufactures as well as for those supplied by
other manufacturers.
B/E's revenues are generally derived from two primary sources: refurbishment
or upgrade programs for the existing worldwide fleets of commercial and general
aviation aircraft, and new aircraft deliveries. B/E believes its large installed
base of products, estimated to be approximately $3.7 billion (valued at
replacement prices as of February 28, 1998), gives it a significant advantage
over competitors in obtaining orders for refurbishment programs, principally due
to the airlines' tendency to purchase equipment for such programs from the
original supplier. With the exception of spare parts sales, B/E's revenues are
generated from programs which may vary significantly from year to year in terms
of size, mix of products and length of delivery. As a result, B/E's revenues and
margins may fluctuate from period to period based upon the size and timing of
the programs and the type of products sold. Historically, B/E experienced
certain trends in its two revenue drivers: as the airlines took deliveries of
large numbers of new aircraft, refurbishment programs as a percentage of
revenues declined and, similarly, when new aircraft deliveries declined,
refurbishment programs tended to increase in number and size. During the most
recent airline industry recession, which ended in 1994, the airlines
significantly depleted their cash reserves and incurred record losses. In an
effort to improve their liquidity, the airlines conserved cash by reducing or
deferring cabin interior refurbishment and upgrade programs and purchases of new
aircraft. As a result, in contrast with historical experience, B/E experienced
declines in the number of both new orders and refurbishments.
Since early 1994, the airlines have experienced a significant turnaround in
operating results, with the domestic airline industry achieving record operating
earnings during calendar years 1995 through 1997. Consequently, during fiscal
1998, B/E has experienced significant growth in backlog of seating and interior
systems products, and has experienced significant growth in revenues and
operating earnings. This growth is a reflection of the airlines' need to begin
refurbishing worn fleets and their ability to do so as a result of the
strengthening of the airlines' balance sheets.
B/E has substantially expanded the size, scope and nature of its
business as a result of a number of acquisitions. During the fiscal year ended
February 26, 1994, B/E completed the following acquisitions: (i) on April 29,
1993, the Company acquired, through a Dutch holding company, all of the capital
stock of Inventum, a supplier of galley inserts including ovens, beverage makers
and water boilers to airlines located primarily in Europe and the Pacific Rim;
(ii) on August 23, 1993, the Company acquired all of the capital stock of
Nordskog, an industry pioneer in galley structures and inserts; (iii) on August
26, 1993, the Company acquired all of the capital stock of Acurex, the leading
worldwide supplier of commercial aircraft refrigeration products; and (iv) on
October 13, 1993, the Company acquired substantially all of the assets and
certain of the liabilities of Airvision, a manufacturer of in-flight
entertainment equipment. On January 24, 1996, the Company acquired all of the
stock of Burns, an industry
24
<PAGE> 25
leader in commercial aircraft seating. On April 13, 1998, the Company acquired
substantially all of the assets and assumed certain of the liabilities of
Puritan Bennett Aero Systems Co., the leading manufacturer of commercial
aircraft oxygen delivery systems, a leading manufacturer of passenger service
unit components and systems, and a major supplier of air valves, overhead lights
and switches, crew masks and protective breathing devices. On April 21, 1998,
the Company acquired substantially all of the assets and assumed certain of the
liabilities of Aircraft Modular Products, the leading manufacturer of cabin
interior products for general aviation (business jet) and commercial type VIP
aircraft. While the Company will continue to be susceptible to industry-wide
conditions, management believes that the Company's significantly more
diversified product line and revenue base achieved through acquisitions has
reduced its exposure to demand fluctuations in any one product area.
The Burns acquisition has had a significant impact on B/E's results of
operations. Burns, with calendar 1995 revenues of $99,800, was one of the three
leading North American suppliers of commercial aircraft passenger seats and had
a base of airline customers that was largely complementary to that of B/E. B/E's
and Burns' approximate share of the worldwide seating products market at the
time of acquisition were approximately 30% and 20%, respectively, based on
fiscal 1995 unit sales. By consolidating engineering, marketing, administration
and manufacturing operations of the two companies, B/E has been able to reduce
fixed costs, thereby enhancing its low-cost position.
Over the last two fiscal years, the Company's gross margins have improved
substantially, increasing from 31.2% in fiscal 1996 to 34.4% in fiscal 1997 and
to 36.7% in fiscal 1998. The primary reasons for the improvement in gross
margins include: (i) a Company-wide re-engineering program, which has resulted
in higher employee productivity and better manufacturing efficiency; (ii) higher
unit volumes; and (iii) a shift in product mix in all Groups toward higher
margin products and services.
B/E's business strategy is to maintain its market leadership position through
various initiatives, including new product development. In fiscal 1998,
research, development and engineering expenses totaled $45,685, or 9.4% of net
sales, primarily consisting of costs related to the development of the MDDS and
related Boeing line-fit expenditures, with the balance attributable to its
seating and interior systems products businesses.
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25
<PAGE> 26
RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 28, 1998 COMPARED TO YEAR ENDED
FEBRUARY 22, 1997
Sales for the year ended February 28, 1998 were $487,999 or 18% higher than
sales of $412,379 in the prior year and reflected a 24% increase in product
sales, offset by a $13,305 decline in service revenues (attributable to
discontinued service lines of business). The increase in sales is attributable
to substantially higher unit volume shipments of all the Company's products.
Gross profit was $178,905 or 36.7% of sales, for the year ended February
28, 1998 and was $37,083 or 26% greater than the prior year's gross profit of
$141,822 which represented 34.4% of sales. The increase in gross profit, while
primarily the result of the higher sales volume, was also positively impacted by
the 230 basis point improvement in gross margin.
Selling, general and administrative expenses were $58,622 or 12% of sales
for the year ended February 28, 1998. This was $6,888 or 13%, higher than the
selling, general and administrative expenses for the prior year of $51,734
(12.5% of sales) and is primarily due to the higher level of sales and quotation
activity as well as a higher level of customer service, product support and
information technology activities.
Research, development and engineering expenses were $45,685 or 9.4% of
sales, for the fiscal year ended February 28, 1998. For the prior year,
research, development and engineering expenses were $37,083 or 9.0% of sales.
The increase in research, development and engineering was attributable to B/E's
ongoing new product development programs, including costs related to the
development of the MDDS and related Boeing line-fit expenditures.
Amortization expense for the fiscal year ended February 28, 1998 of $11,265
was $658 or 6%, higher than the amount recorded in the prior year.
Other expenses for the fiscal year ended February 28, 1998 consisted of a
non-recurring charge of $4,664 related to the settlement of a dispute with the
U.S. Government over certain export sales between 1992 and 1995. (See Item 3.
"Legal Proceedings")
Net interest expense was $22,765 for the year ended February, 28, 1998, or
$4,402 less than the net interest expense of $27,167 recorded for the prior
year, and is due to the decrease in the Company's long-term debt.
The increase in gross profit offset by somewhat higher operating expenses
and lower interest expenses in the current year resulted in earnings before
income taxes, extraordinary item and cumulative effect of change in accounting
principle of $35,904, an increase of $20,673 over the prior year.
Income taxes for the year ended February 28, 1998 were $5,386 or 15% of
earnings before income taxes as compared to $1,522 or 10% of earnings before
income taxes in the prior year.
Earnings before extraordinary item were $30,518 or $1.30 per share
(diluted), which includes the $4,664 non-recurring charge related to the
settlement of the dispute with the U.S. government, for the year ended February
28, 1998, as compared to $13,709 or $.72 per share (diluted) for the prior year.
The Company incurred an extraordinary charge of $8,956 during fiscal 1998
for unamortized debt issue costs, tender and redemption premiums and fees and
expenses related to the repurchase of its 9 3/4% Senior Notes.
Net earnings were $21,562, or $.96 per share (basic) and $.92 per share
(diluted), for the year ended February 28, 1998 as compared to $13,709, or $.77
per share (basic) and $.72 per share (diluted), for the prior year.
26
<PAGE> 27
RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 22, 1997 COMPARED TO YEAR ENDED
FEBRUARY 24, 1996
Sales for the year ended February 22, 1997 were $412,379, or 77% higher
than sales of $232,582 for the comparable period in the prior year. The increase
in sales is attributable to substantially higher volume shipments of all the
Company's products and services as a result of improving industry conditions. Of
the $179,797 increase in sales for the year, $103,800 was due to increased
seating and services revenues directly related to the acquisition of Burns.
Excluding the effect of the Burns acquisition, sales increased 33% year over
year.
Gross profit was $141,822, or 34.4% of sales, for the year ended February
22, 1997 and was $69,271 higher than gross profit for the comparable period in
the prior year of $72,551, which represented 31.2% of sales. The increase in
gross profit was primarily the result of the higher sales volumes and the mix of
products and services sold.
Selling, general and administrative expenses were $51,734, or 12.5% of
sales, for the year ended February 22, 1997. This was $9,734 higher than
selling, general and administrative expenses for the prior year of $42,000, or
18.1% of sales, principally due to the substantial increases in revenues and the
acquisition of Burns.
Research, development and engineering expenses were $37,083, or 9.0% of
sales, for the year ended February 22, 1997. For the comparable period in the
prior year, research and development expense was $58,327, or 25.1% of sales. The
decrease in expenses during the current year is the result of a decrease in the
level of activity associated with the MDDS interactive entertainment system,
offset somewhat by an increase in product development activity in the Seating
Products Group.
Amortization expense for the year February 22, 1997 of $10,607 was $1,108
more than the amount recorded in fiscal 1996 as a result of the Burns
acquisition.
Net interest expense was $27,167 for the year ended February 22, 1997, or
$8,531 higher than the net interest expense of $18,636 recorded for the
comparable period in the prior year, and is due to the increase in the Company's
long-term debt outstanding throughout most of fiscal 1997 as a result of the
9 7/8% Senior Subordinated Notes issued at the time of the Burns acquisition.
Earnings before income taxes of $15,231 for the year ended February 22,
1997 were $75,312 more than the loss before income taxes of $60,081 in the prior
year.
Income taxes for the year ended February 22, 1997 were $1,522, or 10% of
earnings before income taxes, as compared to no tax provision in fiscal 1996.
Net earnings were $13,709, or $.77 per share (basic) and $.72 per share
(diluted), for the year ended February 22, 1997 as compared to a net loss of
$(83,413), or $(5.15) per share (basic and diluted) for the comparable period in
the prior year, which included the cumulative effect of an accounting change of
$23,332.
27
<PAGE> 28
BOOKINGS AND BACKLOG INFORMATION
On September 15, 1997, British Airways ("BA") notified the Company of its
decision not to conduct a flight trial of B/E's MDDS interactive video system.
BA ultimately selected a competitor's system for their in-flight entertainment
equipment needs.
As a result of BA's decision not to move forward with the interactive program,
as of August 1997, the Company debooked approximately $155,000 of backlog
related to the MDDS program. At February 28, 1998, the Company's backlog, after
debooking the BA backlog, stood at approximately $560,000, which represents a
year-to-year increase of approximately $140,000 or 33% versus the Company's
backlog at the end of fiscal 1997, as similarly adjusted to exclude the amount
then attributable to the BA MDDS backlog.
Although the Company has debooked the BA backlog, the Company is continuing to
complete the initial development and testing of the MDDS product and has
completed line fit certification of its MDDS system on Boeing 747-400 aircraft
and has delivered the first MDDS product to its launch customer, JAL, in April
1998. See "Business -- Products and Services."
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist of working capital needs, for
ongoing capital expenditures and scheduled payments of interest on its
indebtedness. B/E's primary requirements for working capital have been directly
related to increased accounts receivable and inventory levels as a result of
revenue growth. B/E's working capital was $262,504 as of February 28,1998
(including approximately $136,000 of cash from the net proceeds from the Senior
Subordinated Notes offering described below), as compared to $122,174 as of
February 22, 1997.
At February 28,1998 the Company's cash and cash equivalents were $164,685, as
compared to $44,149 at February 22, 1997. Cash provided from operating
activities during fiscal 1998 was $9,598 and cash used in operating activities
during fiscal 1997 was $(10,591). The primary source of cash during fiscal 1998
was net earnings of $21,562, the extraordinary item of $8,956, non-cash charges
for depreciation and amortization of $24,160 and increases in accounts payable
of $3,972, offset by a use of cash of $43,262 related to increases in
inventories and receivables and $31,627 related to net increases in other
current and non-current assets and liabilities.
In February 1998, the Company sold $250,000 of 8% Senior Subordinated Notes,
(the "8% Notes"). In conjunction with the sale of the 8% Notes, the Company
initiated a tender offer for the $125,000 of 9 3/4% Senior Notes due 2003 (the
"9 3/4% Notes"). The net proceeds from the offering of approximately $240,419
were used (i) for the tender offer (which expired on February 25, 1998) in which
approximately $101,800 of the 9 3/4% Notes were retired, (ii) to call the
remaining 9 3/4% notes on March 16, 1998, and (iii) together with the proceeds
from the Bank Credit Facility, to fund the acquisitions of AMP and PBASCO. The
Company incurred an extraordinary charge of $8,956 for unamortized debt issue
costs, tender and redemption premiums and fees and expenses related to the
repurchase of the 9 3/4% Notes. Long term debt at February 28, 1998 consists of
the remaining 9 3/4% Notes not retired in the tender offer, the 8% Notes and
9 7/8% Senior Subordinated Notes due 2006.
In April 1998 the Company amended its credit facilities with The Chase
Manhattan Bank by increasing the aggregate principal amount that may be borrowed
thereunder to $200,000 (the "Bank Credit Facility"). The Bank Credit Facility
consists of a $100,000 revolving credit facility and an acquisition facility of
up to $100,000. The acquisition facility is amortizable over five years
beginning in April 1999; the revolving credit facility expires in April 2004.
The Bank Credit Facility is collateralized by the Company's accounts receivable
and inventories and by substantially all of its other personal property. The
Bank Credit Facility contains customary affirmative covenants, negative
covenants and conditions of borrowing. At February 28, 1998, indebtedness under
the then-existing Bank Credit Facility consisted of letters of credit amounting
to approximately $4,500.
The Company's capital expenditures were $28,923 and $14,471 during fiscal 1998
and 1997, respectively. The increase in capital expenditures was primarily
attributable to (i) the development of a new management information system to
replace the Company's existing systems, many of which were inherited in
acquisitions, and (ii) expenditures for plant modernization. The management
information system is expected to be installed over the
28
<PAGE> 29
next 18 months and will be year 2000 compliant. The Company anticipates ongoing
annual capital expenditures of approximately $30,000 for the next several years
to be in line with the expanded growth in business and the recent acquisitions.
The Company believes that the cash flow from operations, proceeds from the 8%
Notes and availability under the Bank Credit Facility will provide adequate
funds for its working capital needs, planned capital expenditures and debt
service requirements through the term of the Bank Credit Facility. The Company
believes that it will be able to refinance the Bank Credit Facility prior to its
termination, although there can be no assurance that it will be able to do so.
The Company's ability to fund its operations, make planned capital expenditures,
make scheduled payments and refinance its indebtedness depends on its future
operating performance and cash flow, which, in turn, are subject to prevailing
economic conditions and to financial, business and other factors, some of which
are beyond its control.
YEAR 2000 COSTS
The Company has recognized the need to ensure that its computer systems
will not be adversely affected by the upcoming calendar year 2000. The Company
has assessed how it may be impacted by Year 2000 and has formulated and
commenced implementation of a comprehensive plan to address known issues as they
relate to its information systems. The plan, as it relates to information
systems, involves a combination of software modification, upgrades and
replacement. The Company estimates that the cost of Year 2000 compliance for its
information systems will not have a material adverse effect on the future
consolidated results of operations of the Company. However, the Company cannot
measure the impact that the Year 2000 issue will have on its vendors, suppliers,
customers and other parties with which it conducts its business.
INDUSTRY CONDITIONS
The Company's principal customers are the world's commercial airlines. As a
result, the Company's business is directly dependent upon the conditions in the
commercial airline industry. In the late 1980s and early 1990s the world airline
industry suffered a severe downturn which resulted in record losses and several
air carriers seeking protection under bankruptcy laws. As a consequence, during
such period, airlines sought to conserve cash by reducing or deferring scheduled
cabin interior refurbishment and upgrade programs and delaying purchases of new
aircraft. This led to a significant contraction in the commercial aircraft cabin
interior products industry, and a decline in the Company's business and
profitability. The airline industry has now experienced five consecutive years
of profitability including record profitability in each of the last three
calendar years. This financial turnaround has, in part, been driven by record
load factors, rising fare prices and declining fuel costs. The airlines have
substantially restored their balance sheets through cash generated from
operations and debt and equity placements. As a result, the levels of airline
spending on refurbishment and new aircraft purchases have expanded. However, due
to the volatility of the airline industry there can be no assurance that the
current profitability of the airline industry will continue or that the airlines
will maintain or increase expenditures on cabin interior products for
refurbishments or new aircraft.
In addition, the airline industry is undergoing a process of consolidation and
significantly increased competition. Such consolidation could result in a
reduction in future aircraft orders as overlapping routes are eliminated and
airlines seek greater economics through higher aircraft utilization. Increased
airline competition may also result in airlines seeking to reduce costs by
producing greater price competition from airline cabin interior products
manufacturers, thereby adversely affecting the Company's margins.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information required by this section is set forth on pages F-1 through F-20
of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth under the caption "Election of Directors" in the
Proxy Statement to be filed with the Commission in connection with Company's
1998 Annual Meeting of Stockholders (the "Proxy Statement") is incorporated by
reference herein.
Information relating to the executive officers of the Company is set forth
in Part I of this report under the caption "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information set forth under the caption "Executive Compensation" in the
Proxy Statement is incorporated by reference herein. The Compensation Committee
Report and the Performance Graph included in the Proxy Statement are not
incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information set forth under the caption "Beneficial Ownership of Shares"
in the Proxy Statement is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information set forth under the caption "Certain Transactions" in the
Proxy Statement is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements (See page F-1).
Consolidated Balance Sheets, February 28, 1998 and February 22, 1997.
Consolidated Statements of Operations for the Years Ended February 28,
1998, February 22, 1997 and February 24, 1996.
Consolidated Statements of Stockholders' Equity for the Years Ended
February 28, 1998, February 22, 1997 and February 24, 1996.
Consolidated Statements of Cash Flows for the Years Ended February 28,
1998, February 22, 1997 and February 24, 1996.
Notes to Consolidated Financial Statements for the Years Ended February
28, 1998, February 22, 1997 and February 24, 1996.
2. Financial Statement Schedules (See page F-20).
Schedule II - Valuation and Qualifying Accounts for the Years Ended
February 28, 1998, February 22, 1997 and February 24, 1996.
30
<PAGE> 31
Exhibits - The following is a list of exhibits.
Exhibit Number Description
Exhibit 3 Articles of Incorporation and By-Laws
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Certificate of Amendment of the Restated Certificate of
Incorporation (2)
3.3 Amended and Restated By-Laws
Exhibit 4 Instruments defining the rights of security holders,
including debentures
4.1 Specimen Common Stock Certificate (1)
4.2 Form of Note for the Registrant's Series B 9-7/8% Senior
Subordinated Notes (3)
4.3 Indenture dated January 24, 1996 between Fleet National
Bank, as trustee, and the Registrant relating to the
Registrant's 9-7/8% Senior Subordinated Notes and Series B
9-7/8% Senior Subordinated Notes (3)
4.4 Indenture dated February 13, 1998 for the Registrant's issue
of 8% Senior Subordinated Notes (4)
4.5 Form of Note for the Registrant's 8% Senior Subordinated
Notes (4)
4.6 Form of Stockholders' Agreement by and among the Registrant,
Summit Ventures II, L.P., Summit Investors II, L.P. and
Wedbush Capital Partners (5)
Exhibit 10(i) Material Contracts
10.1 Supply Agreement dated as of April 17, 1990 between the
Registrant and Applied Extrusion Technologies, Inc. (1)
10.2 Amended and Restated Credit Agreement (the "Chase Credit
Agreement"), dated as of May 18, 1994 among the Registrant,
the banks named therein and The Chase Manhattan Bank, N.A.
as Agent (6)10.3
10.3 Amendment No. 1 dated May 18, 1994 to the Chase Credit
Agreement (7)
10.4 Second Amended and Restated Chase Credit Agreement dated
January 19, 1996 (3)
10.5 Third Amended and Restated Chase Credit Agreement dated May
29, 1997 (4)
10.6 Fourth Amended and Restated Chase Credit Agreement dated
April 3, 1998
31
<PAGE> 32
10.7 Receivables Sales Agreement dated January 24, 1996 among the
Registrant, First Trust of Illinois, N.A. and Centrally Held
Eagle Receivables Program, Inc. (3)
10.8 Escrow Agreement dated January 24, 1996 among the
Registrant, Eagle Industrial Product Corporation and First
Trust of Illinois, N.A. as Escrow Agent (3)
10.9 Acquisition Agreement dated as of December 14, 1995 by and
among the Registrant, Eagle Industrial Products Corporation,
Eagle Industries, Inc. and Great American Management and
Investment, Inc. (8)
10.10 Asset Purchase Agreement dated as of April 16, 1998 by and
between Stanford Aerospace Group, Inc. and the Registrant
(9)
10.11 Stock Purchase Agreement dated as March 31, 1998 by and
between the Registrant and Puritan-Bennet Corporation (10)
Exhibit 10(ii) Leases
10.12 Lease dated May 15, 1992 between McDonnell Douglas Company,
as lessor, and the Registrant, as lessee, relating to the
Irvine, California property (2)
10.13 Lease dated September 1, 1992 relating to the Wellington,
Florida property (2)
10.14 Chesham, England Lease dated October 1, 1973 between
Drawheath Limited and The Peninsular and Oriental Steam
Navigation Company (assigned in February 1985)
10.15 Utrecht, The Netherlands Lease dated December 15, 1988
between the Pension Fund Foundation for Food Supply
Commodity Boards and Inventum
10.16 Utrecht, The Netherlands Lease dated January 31, 1992
between G.W. van de Grift Onroerend Goed B.V. and Inventum
10.17 Lease dated October 25, 1993 relating to the property in
Longwood, Florida (6)
Exhibit 10(iii) Executive Compensation Plans and Arrangements
10.18 Amended and Restated 1989 Stock Option Plan (11)
10.19 Directors' 1991 Stock Option Plan (11)
10.20 1990 Stock Option Agreement with Richard G. Hamermesh (11)
32
<PAGE> 33
10.21 1990 Stock Option Agreement with B. Martha Cassidy (11)
10.22 1990 Stock Option Agreement with Jim C. Cowart (11)
10.23 1990 Stock Option Agreement with Petros A. Palandjian (11)
10.24 1990 Stock Option Agreement with Hansjorg Wyss (11)
10.25 1991 Stock Option Agreement with Amin J. Khoury (11)
10.26 1991 Stock Option Agreement with Jim C. Cowart (11)
10.27 1992 Stock Option Agreement with Amin J. Khoury (11)
10.28 1992 Stock Option Agreement with Jim C. Cowart (11)
10.29 1992 Stock Option Agreement with Paul W. Marshall (11)
10.30 1992 Stock Option Agreement with David Lahar (11)
10.31 United Kingdom 1992 Employee Share Option Scheme (2)
10.32 1994 Employee Stock Purchase Plan (12)
10.33 Employment Agreement dated as of January 1, 1992 between the
Registrant and Amin J. Khoury (the "A. Khoury Agreement")
10.34 Amendment No. 2 dated as of April 1, 1996 to the A. Khoury
Agreement (13)
10.35 Employment Agreement dated as of March 1, 1992 between the
Registrant and Robert J. Khoury (the "R. Khoury Agreement")
10.36 Amendment No. 2 dated as of January 1, 1996 to the R. Khoury
Agreement (13)
10.37 Employment Agreement dated as of March 1, 1992 between the
Registrant and Marco Lanza (the "Lanza Agreement")
10.38 Amendment No. 1 dated as of January 1, 1996 to the Lanza
Agreement (13)
10.39 Employment Agreement dated as of April 1, 1992 between the
Registrant and G. Bernard Jewell
10.40 Employment Agreement dated as of May 1, 1994 between the
Registrant and Thomas P. McCaffrey (the "McCaffrey
Agreement") (6)
10.41 Amendment No. 1 dated as of January 1, 1996 to the McCaffrey
Agreement (13)
10.42 Employment Agreement dated as of May 1, 1994 between the
Registrant and Paul E. Fulchino (13)
33
<PAGE> 34
10.43 BE Aerospace, Inc. Savings and Profit Sharing Plan and Trust
- - Financial Statements for the Ten Months Ended December
31, 1995 and the Year Ended February 28, 1995, Supplemental
Schedules and Independent Auditors' Report
10.44 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan --
Financial Statements as of February 29, 1996 and February
26, 1995; and for the Year Ended February 29, 1996 and the
period from May 15, 1994 (inception) to February 28, 1995
and Independent Auditors' Report
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Deloitte & Touche LLP
Exhibit 27 Financial Data Schedule for the Fiscal Year Ended
February 28, 1998
Exhibit 99.1 Risk Factors
(b) Reports on
Form 8-K None
- ------------------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1, as amended (No. 33-33689), filed with the Commission on March
7, 1990.
(2) Incorporated by reference to the Company's Registrant's Registration
Statement on Form S-1, as amended (No. 33-54146), filed with the
Commission on November 3, 1992.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-4 (No. 333-00433), filed with the Commission on January 26,
1996.
(4) Incorporated by reference to the Company's Registration Statement on
Form S-4 (No. 333-47649) filed with the Commission on March 10, 1998.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-2 (No. 33-66490) filed with the Commission on July 23, 1993.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K
as amended for the Fiscal year ended February 26, 1994, filed with
Commission on May 25, 1994.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K,
for the Fiscal year ended February 25, 1995, filed with the Commission
on May 26, 1995.
(8) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 14, 1995 filed with the Commission on December 28, 1995.
(9) Incorporated by reference to the Company's Current Report on Form 8-K
dated May 8, 1998, filed with the Commission on May 8, 1998.
(10) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 31, 1998, filed with the Commission on April 27, 1998.
(11) Incorporated by reference to the Company's Registration Statement on
Form S-8 (No. 33-48119), filed with the Commission on May 26, 1992.
(12) Incorporated by reference to the Company's Registration Statement on
Form S-8 (No. 33-82894), filed with the Commission on August 16, 1994.
(13) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 26, 1996, filed with the Commission on April 5, 1996.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
B/E AEROSPACE, INC.
By /s/ Robert J. Khoury
-----------------------------------------
Robert J. Khoury
Vice Chairman and Chief Executive Officer
Dated: May 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on May 27, 1998 by the following persons on behalf of the
registrant in the capacities indicated.
Signature Title
/s/ Amin J. Khoury Chairman
----------------------
Amin J. Khoury
/s/ Robert J. Khoury Vice Chairman and Chief Executive Officer
---------------------- and Director
Robert J. Khoury
/s/ Paul E. Fulchino President and Chief Operating Officer
---------------------- and Director
Paul E. Fulchino
/s/ Thomas P. McCaffrey Corporate Senior Vice President of
---------------------- Administration, Chief Financial Officer and
Thomas P. McCaffrey Assistant Secretary (principal financial and
accounting officer)
/s/ Jim C. Cowart Director
----------------------
Jim C. Cowart
/s/ Richard G. Hamermesh Director
----------------------
Richard G. Hamermesh
/s/ Brian H. Rowe Director
----------------------
Brian H. Rowe
/s/ Hansjorg Wyss Director
----------------------
Hansjorg Wyss
35
<PAGE> 36
EXHIBIT INDEX
Exhibit No. Description Page
3.3 Amended and Restated By-Laws
10.6 Fourth Amended and Restated Chase Credit Agreement dated
April 3, 1998
10.14 Chesham, England Lease dated October 1, 1973 between
Drawheath Limited and The Peninsular and Oriental Steam
Navigation Company (assigned in February 1985)
10.15 Utrecht, The Netherlands Lease dated December 15, 1988
between the Pension Fund Foundation for Food Supply
Commodity Boards and Inventum
10.16 Utrecht, The Netherlands Lease dated January 31, 1992
between G.W. van de Grift Onroerend Goed B.V. and Inventum
10.33 Employment Agreement dated as of January 1, 1992 between the
Registrant and Amin J. Khoury (the "A. Khoury Agreement")
10.35 Employment Agreement dated as of March 1, 1992 between the
Registrant and Robert J. Khoury (the "R. Khoury Agreement")
10.37 Employment Agreement dated as of March 1, 1992 between the
Registrant and Marco Lanza (the "Lanza Agreement")
10.39 Employment Agreement dated as of April 1, 1992 between the
Registrant and G. Bernard Jewell
10.43 BE Aerospace, Inc. Savings and Profit Sharing Plan and Trust
-- Financial Statements for the Ten Months Ended December
31, 1995 and the Year Ended February 28, 1995, Supplemental
Schedules and Independent Auditors' Report
10.44 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan --
Financial Statements as of February 29, 1996 and February
26, 1995; and for the Year Ended February 29, 1996 and the
period from May 15, 1994 (inception) to February 28, 1995
and Independent Auditors' Report
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Deloitte & Touche LLP
Exhibit 27 Financial Data Schedule for the Fiscal Year Ended
February 28, 1998
Exhibit 99.1 Risk Factors
<PAGE> 37
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE.
Page
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheets, February 28, 1998 and
February 22, 1997. F-3
Consolidated Statements of Operations for the
Years Ended February 28, 1998, February 22,
1997 and February 24, 1996. F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended February 28, 1998,
February 22, 1997 and February 24, 1996. F-5
Consolidated Statements of Cash Flows for the
Years Ended February 28, 1998, February 22,
1997 and February 24, 1996. F-6
Notes to Consolidated Financial Statements for the
Years Ended February 28, 1998, February 22,
1997 and February 24, 1996. F-7
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
for the Years Ended February 28, 1998,
February 22, 1997 and February 24, 1996. F-20
[Remainder of page intentionally left blank]
F-1
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
B/E Aerospace, Inc.
Wellington, Florida
We have audited the accompanying consolidated balance sheets of B/E
Aerospace, Inc. and subsidiaries as of February 28, 1998 and February 22, 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended February 28, 1998.
Our audits also included the financial statement schedule on page F-21. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of B/E Aerospace, Inc. and
subsidiaries as of February 28, 1998 and February 22, 1997 and the results of
their operations and their cash flows for each of the three years in the period
ended February 28, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 15, 1998
F-2
<PAGE> 39
CONSOLIDATED BALANCE SHEETS, FEBRUARY 28, 1998 AND FEBRUARY 22, 1997
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1998 1997
- ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 164,685 $ 44,149
Accounts receivable - trade, less allowance for doubtful
accounts of $2,190 (1998) and $4,864 (1997) 87,931 73,489
Inventories, net 121,728 92,900
Other current assets 7,869 2,781
--------- --------
Total current assets 382,213 213,319
--------- --------
PROPERTY AND EQUIPMENT, net 103,821 87,888
INTANGIBLES AND OTHER ASSETS, net 195,723 189,882
--------- ---------
$ 681,757 $ 491,089
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 47,858 $ 42,889
Accrued liabilities 38,566 43,837
Current portion of long-term debt 33,285 4,419
---------- ---------
Total current liabilities 119,709 91,145
---------- ---------
LONG-TERM DEBT 349,557 225,402
DEFERRED INCOME TAXES 1,207 1,667
OTHER LIABILITIES 14,509 7,114
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding - -
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,891,918 (1998) and 21,893,392 (1997)
shares issued and outstanding 229 219
Additional paid-in capital 240,289 228,710
Accumulated deficit (40,724) (62,286)
Cumulative foreign exchange translation adjustment (3,019) (882)
----------- ------------
Total stockholders' equity 196,775 165,761
---------- -----------
$ 681,757 $ 491,089
========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 40
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended
---------------------------------------------
February 28, February 22, February 24,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES $ 487,999 $ 412,379 $ 232,582
COST OF SALES 309,094 270,557 160,031
--------- --------- ---------
GROSS PROFIT 178,905 141,822 72,551
OPERATING EXPENSES:
Selling, general and administrative 58,622 51,734 42,000
Research, development and engineering 45,685 37,083 58,327
Amortization of intangible assets 11,265 10,607 9,499
Other expenses 4,664 -- 4,170
--------- --------- ---------
Total operating expenses 120,236 99,424 113,996
--------- --------- ---------
OPERATING EARNINGS (LOSS) 58,669 42,398 (41,445)
INTEREST EXPENSE, net 22,765 27,167 18,636
--------- --------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 35,904 15,231 (60,081)
INCOME TAXES 5,386 1,522 --
--------- --------- ---------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 30,518 13,709 (60,081)
EXTRAORDINARY ITEM 8,956 -- --
--------- --------- ---------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 21,562 13,709 (60,081)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- -- (23,332)
--------- --------- ---------
NET EARNINGS (LOSS) $ 21,562 $ 13,709 $ (83,413)
========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting principle $ 1.36 $ .77 $ (3.71)
Extraordinary item (.40) -- --
Cumulative effect of change in accounting principle -- -- (1.44)
--------- --------- ---------
Net earnings (loss) $ .96 $ .77 $ (5.15)
========= ========= =========
Weighted average common shares 22,442 17,692 16,185
========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting principle $ 1.30 $ .72 $ (3.71)
Extraordinary item (.38) -- --
Cumulative effect of change in accounting principle -- -- (1.44)
--------- --------- ---------
Net earnings (loss) $ .92 $ .72 $ 5.15)
========= ========= =========
Weighted average common shares 23,430 19,097 16,185
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 41
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Retained Currency Total
------------ Paid-in Earnings Translation Stockholders'
Shares Amount Capital (Deficit) Adjustment Equity
------ ------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 25, 1995 16,096 $ 160 $ 119,209 $ 7,418 $ (1,456) $ 125,331
Sale of stock under
employee stock purchase plan 74 1 403 -- -- 404
Exercise of stock options 121 2 896 -- -- 898
Employee benefit plan
matching contribution 102 1 858 -- -- 859
Net loss -- -- -- (83,413) -- (83,413)
Foreign currency translation
adjustment -- -- -- -- 78 78
--------- --------- --------- --------- --------- ---------
Balance, February 24, 1996 16,393 164 121,366 (75,995) (1,378) 44,157
Sale of stock under
employee stock purchase plan 58 -- 482 -- -- 482
Exercise of stock options 1,362 14 11,650 -- -- 11,664
Employee benefit plan
matching contribution 75 1 1,316 -- -- 1,317
Sale of common stock
under public offering 4,005 40 93,896 -- -- 93,936
Net earnings -- -- -- 13,709 -- 13,709
Foreign currency translation
adjustment -- -- -- -- 496 496
--------- --------- --------- --------- --------- ---------
Balance, February 22, 1997 21,893 219 228,710 (62,286) (882) 165,761
Sale of stock under
employee stock purchase plan 88 1 1,796 -- -- 1,797
Exercise of stock options 852 9 8,106 -- -- 8,115
Employee benefit plan
matching contribution 59 -- 1,677 -- -- 1,677
Net earnings -- -- -- 21,562 -- 21,562
Foreign currency translation
adjustment -- -- -- -- (2,137) (2,137)
--------- --------- --------- --------- --------- ---------
Balance, February 28, 1998 22,892 $ 229 $ 240,289 $ (40,724) $ (3,019) $ 196,775
========= ========= ========= ========= ========= =========
See notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 42
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net earnings (loss) $ 21,562 $ 13,709 $ (83,413)
Adjustments to reconcile net earnings (loss) to
net cash flows provided by (used in) operating activities:
Extraordinary item 8,956 -- --
Cumulative effect of accounting change -- -- 23,332
Depreciation and amortization 24,160 24,147 18,435
Deferred income taxes (460) 410 (3,453)
Non cash employee benefit plan contributions 1,677 1,317 859
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable (14,665) (19,366) 6,068
Inventories (28,597) (19,536) (11,929)
Other current assets (5,141) 5,059 (638)
Accounts payable 3,972 (4,767) 3,008
Accrued and other liabilities (1,866) (11,564) 13,169
--------- --------- ---------
Net cash flows provided by (used in) operating activities 9,598 (10,591) (34,562)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment (28,923) (14,471) (13,656)
Change in intangible and other assets (15,686) (1,331) (5,914)
Acquisitions -- -- (42,500)
--------- --------- ---------
Net cash flows used in investing activities (44,609) (15,802) (62,070)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving lines of credit 5,450 (38,882) 2,000
Proceeds from issuance of stock, net of expenses 11,611 106,082 1,302
Principal payments on long-term debt (101,808) (11,968) (942)
Proceeds from long-term debt 240,419 -- 101,252
--------- --------- ---------
Net cash flows provided by financing activities 155,672 55,232 103,612
--------- --------- ---------
Effect of exchange rate changes on cash flows (125) (66) 77
--------- --------- ---------
Net increase in cash and cash equivalents 120,536 28,773 7,057
Cash and cash equivalents, beginning of year 44,149 15,376 8,319
--------- --------- ---------
Cash and cash equivalents, end of year $ 164,685 $ 44,149 $ 15,376
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during year for:
Interest, net $ 25,065 $ 26,097 $ 16,967
Income taxes 5,012 1,209 (3,292)
SCHEDULE OF NON-CASH TRANSACTIONS:
Liabilities assumed and accrued acquisition
costs incurred in connection with the
acquisitions -- -- 27,532
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation -- B/E Aerospace, Inc. ("B/E" or the
"Company") operates in a single business segment and designs, manufactures,
sells and services a broad line of commercial aircraft cabin interior products
consisting of a broad range of aircraft seating products, passenger
entertainment and service systems, and interior systems products, including
structures as well as all food and beverage storage and preparation equipment.
The Company's customers are the world's commercial airlines. As a result, the
Company's business is directly dependent upon the conditions in the commercial
airline industry.
Consolidation -- The accompany consolidated financial statements include the
accounts of B/E Aerospace, Inc., its wholly owned and majority owned
subsidiaries. All intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Income Taxes -- In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, the Company provides deferred income taxes for
temporary differences between amounts of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for income tax
purposes.
Warranty Costs -- Estimated costs related to product warranties are accrued
at the time products are sold.
Revenue Recognition -- Sales of assembled products, equipment or services are
recorded on the date of shipment or, if required, upon acceptance by the
customer. Revenues and costs under certain long-term contracts are recognized
using contract accounting. The Company sells its products primarily to airlines
worldwide, including occasional sales collateralized by letters of credit. The
Company performs ongoing credit evaluations of its customers and maintains
reserves for potential credit losses. Actual losses have been within
management's expectations.
Cash Equivalents -- The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Intangible Assets -- The Company accounts for the impairment and disposition
of long-lived assets in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". In
accordance with SFAS No. 121, long-lived assets to be held are reviewed for
events or changes in circumstances which indicate that their carrying value may
not be recoverable. The Company periodically evaluates the carrying value of the
intangible assets versus the cash benefit expected to be realized and adjusts
for any impairment of value.
Research and Development -- Research and development expenditures are
expensed as incurred.
Stock-Based Compensation -- In October 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which became effective for the Company beginning during fiscal
1997. SFAS No. 123 requires extended disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply Accounting Principles
Board ("APB") Opinion No. 25, which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company continues to apply
APB Opinion No. 25 to its stock-based compensation awards to employees and
discloses the required pro forma effect on net income and earnings per share.
See Note 12.
F-7
<PAGE> 44
Earnings (Loss) Per Share -- In fiscal 1998, the Company adopted SFAS No.
128, "Earnings Per Share". Basic earnings per common share calculations are
determined by dividing earnings available to common shareholders by the weighted
average number of shares of common stock. Diluted earnings per share are
determined by dividing earnings available to common shareholders by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding (all related to outstanding stock options discussed in Note 12). The
Company's reported primary earnings per share for fiscal 1997 have been restated
to comply with the requirements of SFAS No. 128. The effect on previously
reported earnings per share for fiscal 1997 was as follows:
Primary earnings per share as reported $ .72
Effect of SFAS No. 128 .05
-------
Basic EPS as restated $ .77
======
SFAS No. 128 had no impact on the Company's reported loss per share for fiscal
1996.
Comprehensive Income - During 1997 the FASB issued SFAS No. 130, "Reporting
Comprehensive Income", which established standards for the reporting and
displaying of comprehensive income. Comprehensive income is defined as all
changes in a Company's net assets except changes resulting from transactions
with shareholders. It differs from net income in that certain items currently
recorded to equity would be a part of comprehensive income. Comprehensive income
must be reported in a financial statement with the cumulative total presented as
a component of equity. This statement will be adopted by the Company in its
fiscal 1999 quarterly financial statements.
Segment Information - In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
will be effective for the Company beginning March 1, 1998. SFAS No. 131
redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. The Company believes the segment information required to be disclosed
under SFAS No. 131 will be more comprehensive than previously provided,
including expanded disclosure of income statement and balance sheet items. The
Company has not yet completed its analysis of which operating segments it will
report on.
Pensions and Other Postretirement Benefits -- In February 1998, FASB issued
SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits", which is effective for annual and interim periods beginning after
December 15, 1997. This statement standardizes the disclosure requirements for
pensions and other postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis and eliminates certain
disclosures that are no longer as useful as they were under previous statements.
Foreign Currency Translation -- In accordance with the provisions of SFAS No.
52, "Foreign Currency Translation", the assets and liabilities located outside
the United States are translated into U.S. dollars at the rates of exchange in
effect at the balance sheet dates. Income and expense items are translated at
the average exchange rates prevailing during the period. Gains and losses
resulting from foreign currency transactions are recognized currently in income,
and those resulting from translation of financial statements are accumulated as
a separate component of stockholders' equity.
2. ACCOUNTING CHANGE
In fiscal 1996, the Company undertook a comprehensive review of the
engineering capitalization policies followed by its competitors and others in
its industry peer group. The results of this study and an evaluation of the
Company's policy led the Company to conclude that it should adopt the accounting
method that it believes is followed by most of its competitors and certain
members of its industry peer group. Previously, the Company had capitalized
precontract engineering costs as a component of inventories, which were then
amortized to earnings as the product was shipped. The Company now expenses such
costs as they are incurred. While the accounting policy for precontract
engineering expenditures previously followed by the Company was in accordance
with generally accepted accounting principles, the changed policy is preferable.
F-8
<PAGE> 45
3. ACQUISITIONS
On January 24, 1996, the Company acquired all of the outstanding capital
stock of Burns Aerospace Corporation, which designs, manufactures, sells and
services aircraft seating products to commercial airlines worldwide. The
aggregate acquisition cost of $70,032 includes the payment of $42,500 to the
seller and the assumption of approximately $27,532 of liabilities, including
related acquisition costs and certain liabilities arising from the acquisition.
Funds for the acquisition were obtained from proceeds of the long-term debt
issuance described in Note 8.
The aggregate purchase price for the Burns acquisition has been allocated to
the net assets acquired based on appraisals and management's estimates as
follows:
Receivables $ 11,396
Inventories 12,624
Other current assets 806
Property and equipment 21,695
Intangible and other assets 23,511
---------
$ 70,032
=========
4. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the weighted average cost method. Finished goods and work in process
inventories include material, labor and manufacturing overhead costs.
Inventories consist of the following:
1998 1997
---- ----
Raw materials $ 56,100 $ 45,947
Work-in-process 59,036 39,024
Finished goods 6,592 7,929
--------- -------
$ 121,728 $ 92,900
========= ========
[Remainder of page intentionally left blank]
F-9
<PAGE> 46
5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated and amortized
generally on the straight-line method over their estimated useful lives of two
to thirty years (term of lease as to leasehold improvements). Property and
equipment consist of the following:
<TABLE>
<CAPTION>
Years 1998 1997
----- ---- ----
<S> <C> <C> <C>
Land, buildings and improvements 10-30 $ 45,951 $ 42,966
Machinery 3-13 54,178 45,444
Tooling 3-10 24,771 17,179
Furniture and equipment 2-10 26,815 18,327
---------- ---------
151,715 123,916
Less accumulated depreciation and amortization (47,894) (36,028)
---------- ---------
$ 103,821 $ 87,888
========= =========
</TABLE>
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
Straight-line
Amortization
Period (Years) 1998 1997
-------------- ---- ----
<S> <C> <C> <C>
Covenants not-to-compete 14 $ 10,195 $ 10,198
Product technology, production plans and drawings 7-20 60,577 59,484
Replacement parts annuity 20 29,652 29,778
Product approvals and technical manuals 20 22,942 18,331
Goodwill 30 77,452 78,913
Debt issue costs 10 16,789 13,431
Trademarks and patents 20 10,491 10,820
Other intangible assets 5-20 16,540 7,527
Other assets 4,277 6,744
------- ---------
248,915 235,226
Less accumulated amortization (53,192) (45,344)
---------- ----------
$ 195,723 $ 189,882
========= =========
</TABLE>
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accrued product warranties $ 4,353 $ 5,231
Accrued salaries, vacation and related benefits 17,022 12,868
Accrued acquisition expenses 1,190 5,488
Accrued interest 2,995 6,585
Accrued income taxes 5,373 6,563
Other accrued liabilities 7,633 7,102
----------- ----------
$ 38,566 $ 43,837
========== =========
</TABLE>
F-10
<PAGE> 47
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
8% Senior Subordinated Notes $ 249,375 $ --
9 7/8% Senior Subordinated Notes 100,000 100,000
9 3/4% Senior Notes 23,192 124,411
Revolving lines of credit 10,093 4,419
Other long-term debt 182 991
---------
382,842 229,821
Less current portion of long-term debt (33,285) (4,419)
--------- ---------
$ 349,557 $ 225,402
========= =========
</TABLE>
8% SENIOR SUBORDINATED NOTES
In February 1998, the Company sold $250,000 of 8% Senior Subordinated Notes,
priced to yield 8.02% (the "8% Notes"). In conjunction with the sale of the 8%
Notes, the Company initiated a tender offer for its 9 3/4% Notes. The net
proceeds from the offering of approximately $240,419 were used for the tender
offer (which expired on February 25, 1998) in which approximately $101,808 of
the 9 3/4% Notes were retired; the remaining $23,192 of the 9 3/4% Notes were
called on March 16, 1998. The Company incurred an extraordinary charge of $8,956
for unamortized debt issue costs, tender and redemption premiums and fees and
expenses related to the repurchase of the 9 3/4% Notes.
The 8% Senior Notes are unsecured senior subordinated obligations of the
Company, are subordinated to all senior indebtedness of the Company and mature
on March 1, 2008. Interest on the 8% Notes is payable semi-annually in arrears
on March 1 and September 1 of each year. The 8% Notes are redeemable at the
option of the Company, in whole or in part, on or after March 1, 2003 at
predetermined redemption prices together with accrued and unpaid interest
through the date of redemption. In addition, at any time prior to March 1, 2001,
the Company may, at predetermined prices together with accrued and unpaid
interest through the date of redemption, redeem up to 35% of the aggregate
principal amount of the Notes originally issued with the net proceeds of one or
more equity offerings, provided that at least 65% of the aggregate principal
amount of the 8% Notes originally issued remains outstanding after the
redemption. Upon a change of control (as defined), each holder of the 8% Notes
may require the Company to repurchase such holder's 8% Notes at 101% of the
principal amount thereof, plus accrued interest to the date of such purchase.
The 8% Notes contain certain covenants, all of which were met by the Company as
of February 28, 1998, including limitations on future indebtedness, restricted
payments, transactions with affiliates, liens, dividends, mergers and transfers
of assets.
9 7/8% SENIOR SUBORDINATED NOTES
The 9 7/8% Senior Subordinated Notes (the "9 7/8% Notes") are unsecured
senior subordinated obligations of the Company and are subordinated to all
senior indebtedness of the Company and mature on February 1, 2006. Interest on
the 9 7/8% Notes is payable semi-annually in arrears on February 1 and August 1
of each year. The 9 7/8% Notes are redeemable at the option of the Company, in
whole or in part, at any time after February 1, 2001 at predetermined redemption
prices together with accrued and unpaid interest through the date of redemption.
Upon a change of control (as defined), each holder of the 9 7/8% Notes may
require the Company to repurchase such holder's 9 7/8% Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of such
purchase. The 9 7/8% Notes contain certain restrictive covenants, all of which
were met by the Company as of February 28, 1998, including limitations on future
indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers and transfers of assets.
9 3/4% SENIOR NOTES
The 9 3/4% Senior Notes (the "9 3/4% Notes") are senior unsecured obligations
of the Company, ranking equally with any future senior obligations of the
Company. As described above, at February 28, 1998, $101,808 of the 9 3/4% Notes
had been repurchased; the balance of the 9 3/4% Notes were redeemed in March
1998.
F-11
<PAGE> 48
CREDIT FACILITIES
In April 1998, the Company amended its credit facilities with the Chase
Manhattan Bank by increasing the aggregate principal amount that may be borrowed
thereunder to $200,000 (the "Bank Credit Facility"). The Bank Credit Facility
consists of a $100,000 revolving credit facility and an acquisition facility of
up to $100,000. The acquisition facility is amortizable over five years
beginning April 1999; the revolving facility expires in April 2004. The Bank
Credit Facility is collateralized by the Company's accounts receivable and
inventories and by substantially all of its other personal property. The Bank
Credit Facility contains customary affirmative covenants, negative covenants and
conditions of borrowing, all of which were met by the Company as of February 28,
1998. At February 28, 1998, indebtedness under the then-existing Bank Credit
Facility consisted of letters of credit amounting to approximately $4,500.
Borrowings under the Bank Credit Facility currently bear interest at LIBOR
plus 1.25% or prime (as defined). The interest to be charged on the Bank Credit
Facility can increase or decrease based upon specified operating performance
criteria set forth in the Bank Credit Facility Agreement. Amounts may be
borrowed or repaid in $1,000 increments.
FEEL, a subsidiary of the Company, has a short-term revolving line of credit
agreement (the "FEEL Credit Agreement") which is collateralized by substantially
all of the assets of FEEL. Aggregate borrowings outstanding under the FEEL
Credit Agreement were approximately $10,093 as of February 28, 1998. The Company
has guaranteed a portion of the indebtedness outstanding under the FEEL Credit
Agreement.
Inventum, another subsidiary of the Company, has a revolving line of credit
agreement for approximately $1 million (the "Inventum credit agreement"). The
Inventum Credit Agreement is collateralized by substantially all of the assets
of Inventum. There were no borrowings outstanding under the Inventum Credit
Agreement as of February 28, 1998.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal year ending February:
<S> <C>
1999 $ 33,285
2000 182
2001 -
2002 -
2003 -
Thereafter 349,375
---------
$ 382,842
=========
</TABLE>
Interest expense amounted to $25,834, $28,369 and $18,788 for the years ended
February 28, 1998, February 22, 1997 and February 24, 1996, respectively.
9. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ (920) $ -- $ 1,972
State -- -- 818
Foreign 6,766 1,112 663
------- ------- -------
5,846 1,112 3,453
Deferred:
Federal (3,666) 2,703 (2,635)
State (716) 1,550 (818)
Foreign (460) 410 --
------- ------- -------
(4,842) 4,663 (3,453)
Change in Valuation Allowance 4,382 (4,253) --
------- ------- -------
$ 5,386 $ 1,522 $ --
======= ======= =======
</TABLE>
F-12
<PAGE> 49
The difference between income tax expense (benefit) and the amount computed
by applying the statutory U.S. federal income tax rate (35%) to the pretax
earnings before change in accounting principle consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory U.S. federal income tax expense (benefit) $ 9,432 $ 5,331 $(21,028)
Operating loss (with)/without tax benefit (6,114) (6,164) 14,569
Foreign tax rate differential 1,309 1,267 3,324
Goodwill amortization 537 566 558
Penalties 1,050 -- --
Other, net (828) 522 2,577
-------- -------- --------
$ 5,386 $ 1,522 $ --
======== ======== ========
</TABLE>
The tax effects of temporary differences and carryforwards that give rise to
the Company's deferred income tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Accrued vacation $ 1,172 $ 1,117
Inventory reserves 3,987 3,145
Acquisition reserves (1,220) (1,740)
Inventory costs capitalized for tax purposes 1,327 1,236
Bad debt reserves 579 948
Warranty reserve 2,440 1,452
Other 1,731 1,723
-------- --------
Net current deferred income tax asset 10,016 7,881
-------- --------
Intangible assets (12,576) (13,565)
Depreciation (1,853) (2,074)
Net operating loss carryforward 27,462 26,309
Research credit carryforward 3,285 2,941
-------- --------
Net noncurrent deferred income tax asset 16,318 13,611
-------- --------
Valuation allowance (27,541) (23,159)
-------- --------
Net deferred tax liabilities $ (1,207) $ (1,667)
======== ========
</TABLE>
Due to uncertainty surrounding the realization of the benefits of its net
deferred tax asset, the Company has established a valuation allowance of $27,541
against its otherwise recognizable net deferred tax asset.
As of February 28, 1998, the Company had approximately $66,104 of federal
operating loss carryforwards, which expire at various dates through 2011,
federal research credit carryforwards of $3,285, which expire at various dates
through 2011, and alternative minimum tax credit carryforwards of $410, which
have no expiration date. Approximately $15,000 of the Company's net operating
loss carryforward related to non-qualified stock options will be credited to
additional paid-in-capital rather than income tax expense when utilized.
The Company has not provided for any residual U.S. income taxes on the
approximately $6,005 of earnings from its foreign subsidiaries because such
earnings are intended to be indefinitely reinvested. Such residual U.S. income
taxes, if provided for, would be immaterial.
The Company's federal tax returns for the years ended February 24, 1996 and
February 25, 1995 are currently under examination by the Internal Revenue
Service. Management believes that the resolution of this examination will not
have a material adverse effect on the Company's results of operations or its
financial condition.
F-13
<PAGE> 50
10. COMMITMENTS AND CONTINGENCIES
Leases -- The Company leases certain of its office, manufacturing and service
facilities and equipment under operating leases, which expire at various times
through February 2007. Rent expense for fiscal 1998, 1997 and 1996 was
approximately $8,848, $7,021 and $2,943, respectively. Future payments under
operating leases with terms currently greater than one year are as follows:
<TABLE>
<CAPTION>
Year ending February:
<S> <C>
1999 $ 7,658
2000 6,398
2001 5,079
2002 2,495
2003 2,041
Thereafter 796
--------
$ 24,467
========
</TABLE>
Litigation -- The Company is a defendant in various legal actions arising in
the normal course of business, the outcome of which, in the opinion of
management, neither individually nor in the aggregate are likely to result in a
material adverse effect to the Company's financial statements.
Employment Agreements -- The Company has employment and compensation
agreements with two key officers of the Company. One of the agreements provides
for an officer to earn a minimum of $550 adjusted annually for changes in the
consumer price index (as defined) per year through 2002, as well as a deferred
compensation benefit equal to the aggregate annual compensation earned through
termination and payable thereafter. Such deferred compensation will be payable
in equal monthly installments over the same number of years it was earned. The
other agreement provides for an officer to receive annual minimum compensation
of $550, and an incentive bonus not to exceed 100% of the officer's then-current
salary through 2001. In addition, when the officer terminates his employment,
the Company is obligated to pay the officer annually, as deferred compensation,
an amount equal to 100% of the officer's annual salary (as defined) for a period
of ten years from the date of termination. Such deferred compensation has been
accrued at the present value of the obligation at February 28, 1998.
The Company has other employment agreements with certain key members of
management that provide for aggregate minimum annual base compensation of $1,825
expiring on various dates through 1999.
Supply Agreement -- The Company had a supply agreement with Applied
Extrusion Technologies, Inc. ("AET"), a related party by way of common
management. Under this agreement, which was terminated in September 1997, the
Company agreed to purchase its requirements for certain component parts through
March 1998 at a price that results in a 33 1/3% gross margin to AET. The
Company's purchases under this contract for the years ended February 28, 1998,
February 22, 1997 and February 24, 1996, were $1,743, $1,642 and $1,301,
respectively.
F-14
<PAGE> 51
11. EMPLOYEE RETIREMENT PLAN
In August 1988, the Company established a non-qualified contributory
profit-sharing plan. This plan was amended to incorporate a 401(k) Plan which
permits the Company to match a portion of employee contributions. Commencing in
1995, the Company's 401(k) Plan, was amended to permit the Company's matching
contribution to be made in common stock of the Company. The Company recognized
expenses of $1,677, $1,317 and $859 related to this plan for the years ended
February 28, 1998, February 22, 1997 and February 24, 1996, respectively.
12. STOCKHOLDERS' EQUITY
Earnings (Loss) Per Share. The Company adopted No. SFAS No. 128 Earnings Per
Share during fiscal year 1998. SFAS No. 128 establishes standards for computing
and presenting basic and diluted earnings (loss) per share. All prior period
earnings (loss) per share data have been restated to conform with SFAS No. 128.
The following table sets forth the computation of basic and diluted earnings
(loss) per share for the years ended February 28, 1998, February 22, 1997 and
February 26, 996:
<TABLE>
<CAPTION>
1998 1997 1996
======== ======== ========
<S> <C> <C> <C>
Numerator - Net earnings (loss) $ 21,562 $ 13,709 $(83,413)
======== ======== ========
Denominator:
Denominator for basic earnings (loss) per share -
Weighted average shares 22,442 17,692 16,185
Effect of dilutive securities -
Employee stock options 988 1,405 -
-------- -------- --------
Denominator for diluted earnings (loss) per share -
Adjusted weighted average shares 23,430 19,097 16,185
======== ======== ========
Basic earnings (loss) per share $ .96 $ .77 $ (5.15)
======== ======== ========
Diluted earnings (loss) per share $ .92 $ .72 $ (5.15)
======== ======== ========
</TABLE>
Stock Option Plans. The Company has various stock option plans, including the
1989 Stock Option Plan, the 1991 Directors Stock Option Plan, the 1992 Share
Option Scheme and the 1996 Stock Option Plan (collectively, the "Option Plans"),
under which shares of the Company's Common Stock may be granted to key employees
and directors of the Company. The Option Plans provide for granting key
employees options to purchase the Company's Common Stock. Options are granted at
the discretion of the compensation and stock option committee of the Board of
Directors. Options granted generally vest at the rate of 25% per year from the
date of grant and are exercisable to the extent vested and the option term
cannot exceed ten years.
The following table sets forth options granted, canceled, forfeited and
outstanding:
<TABLE>
<CAPTION>
February 28, 1998 February 22, 1997 February 26, 1996
---------------------------- ----------------------------- ------------------------------
Option Price Option Price Option Price
Per Share Per Share Per Share
Options (in dollars) Options (in dollars) Options (in dollars)
--------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of 2,447,425 .081-24.93 2,720,350 0.81-13.00 2,871,287 0.81-13.00
period
Options granted 1,394,250 21.50-31.50 1,313,500 10.25-24.94 731,925 7.37-10.37
Options exercised (852,174) 0.81-29.875 (1,361,925) 0.81-16.125 (139,750) 0.81-8.75
Options forfeited (58,000) 7.63-29.875 (224,500) 7.38-16.13 (743,112) 7.00-13.00
--------- ---------- --------
Outstanding, end
of period 2,931,501 7.00-31.50 2,447,425 0.81-24.9 2,720,350 0.81-13.00
========= ========== ========= =========== ========= ==========
Exercisable at end
of year 1,317,503 7.00-31.50 1,374,927 0.81-4.9 2,223,225 0.81-13.00
========= ========== ========= =========== ========= ==========
</TABLE>
F-15
<PAGE> 52
At February 28, 1998, options were available for grant under each of the
Company's option plans.
<TABLE>
<CAPTION>
Options Outstanding
at February 28, 1998
--------------------------------------------------------------------------------------------------------
Weighted Weighted Average Options
Range of Options Average Remaining Exercisable Weighted Average
Exercise Price Outstanding Exercise Price Contractual Life at February 28, 1998 Exercise Price
-------------- ----------- -------------- ---------------- -------------------- --------------
(years)
<S> <C> <C> <C> <C> <C>
$ 7.00-$ 8.875 $691,800 $ 8.36 5.82 623,675 $ 8.35
$ 10.00-$19.00 $798,826 $ 17.27 8.45 313,328 $ 18.14
$ 21.50-$25.8125 $511,625 $ 23.02 9.41 149,125 $ 23.38
$ 29.875-$31.50 $929,250 $ 29.89 9.46 231,375 $ 29.89
</TABLE>
The estimated fair value of options granted during fiscal 1998 was $13.56 per
share. The estimated fair value of options granted during fiscal 1997 was $16.60
per share. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock option and purchase plans. Accordingly, no compensation
cost has been recognized for its stock option plans and its stock purchase plan
other than that described above. Had compensation cost for the Company's stock
option plans and its stock purchase plans been determined consistent with SFAS
No. 123, the Company's net earnings and net earnings per share for the year
ended February 28, 1998 and February 22, 1997 would have been reduced to the pro
forma amounts indicated in the following table:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net earnings - as reported $21,562 $ 13,709
Net earnings - pro forma $13,232 $ 10,709
Net earnings per share - as reported $ .92 $ .72
Net earnings per share - pro forma $ .56 $ .56
Weighted average and pro forma
weighted average common shares 23,430 19,097
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for options granted in 1998 and 1997: risk-free interest rates
of 7.0% and 6.4%; expected dividend yields of 0.0%; expected lives of 3 years
and 4 years; and expected volatility of 40% and 43%, respectively.
The impact of outstanding non-vested stock options granted prior to fiscal
1997 has been excluded from the pro forma calculation; accordingly, the 1998 and
1997 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation will apply to all applicable stock options.
13. EMPLOYEE STOCK PURCHASE PLAN
The Company has established a qualified Employee Stock Purchase Plan, the
terms of which allow for qualified employees (as defined) to participate in the
purchase of designated shares of the Company's Common Stock at a price equal to
the lower of 85% of the closing price at the beginning or end of each
semi-annual stock purchase period. The Company issued 87,561 and 58,490 shares
of common stock during fiscal 1998 and 1997 pursuant to this plan at an average
price per share of $20.52 and $9.70, respectively.
F-16
<PAGE> 53
14. EXPORT SALES AND MAJOR CUSTOMERS
Export sales from the United States to customers in foreign countries
amounted to approximately $132,831, $153,423 and $61,717 in fiscal 1998, 1997
and 1996, respectively. Total sales to all customers in foreign countries
amounted to approximately $232,691, $203,388 and $124,469 in fiscal 1998, 1997
and 1996, respectively. Total sales to Europe amounted to 23%, 29% and 18% in
fiscal 1998, 1997 and 1996, respectively. Total sales to Asia amounted to 18%,
16% and 20% in fiscal 1998, 1997 and 1996, respectively. Major customers (i.e.,
customers representing more than 10% of total sales) change from year to year
depending on the level of refurbishment activity and/or the level of new
aircraft purchases by such customers. During the fiscal year ended February 28,
1998, one customer accounted for approximately 18% of the Company's sales. There
were no major customers in fiscal 1997 or 1996.
15. OTHER EXPENSES
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The dispute
centered on shipments of aircraft seats and related spare parts for five
civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and
arranged for them to be installed by a contractor in France. At the time, Iran
was not the subject of a U.S. trade embargo. In connection with its sale of
seats to Iran Air, B/E applied for and was granted a validated export license by
the U.S. Department of Commerce. Other expenses for the year ended February 28,
1998 relate to fines, civil penalties and associated legal fees arising from the
settlement. Other expenses for the year ended February 24, 1996 relate to costs
associated with the integration and consolidation of the Company's European
seating business.
16. FOREIGN OPERATIONS
Geographic Area -- The Company operated principally in two geographic
areas, the United States and Europe during the years ended February 28, 1998,
February 22, 1997 and February 24, 1996. There were no significant transfers
between geographic areas during the period. Identifiable assets are those assets
of the Company that are identified with the operations in each geographic area.
The following table presents net sales and operating income for the years
ended February 28, 1998, February 22, 1997 and February 24, 1996, and
identifiable assets as of February 28, 1998, February 22, 1997 and February 24,
1996 by geographic area.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Sales:
United States $ 365,957 $ 312,497 $ 169,830
Europe 122,042 99,882 62,752
--------- --------- ---------
Total: $ 487,999 $ 412,379 $ 232,582
========= ========= =========
OPERATING EARNINGS (LOSS):
United States $ 38,928 $ 33,834 $ (35,822)
Europe 19,741 8,564 (5,623)
--------- --------- ---------
Total: $ 58,669 $42,398 $ (41,445)
========= ========= =========
IDENTIFIABLE ASSETS:
United States $ 541,675 $ 380,273 $ 332,832
Europe 140,082 110,816 100,754
--------- --------- ---------
Total: $ 681,757 $ 491,089 $ 433,586
========= ========= =========
</TABLE>
F-17
<PAGE> 54
17. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial instruments
at February 28, 1998 and February 22, 1997 is made in accordance with the
requirements of SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments". The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
The carrying amounts of cash and cash equivalents, accounts receivable-trade,
and accounts payable are a reasonable estimate of their fair values. At February
28, 1998, the Company's 8% Notes have a carrying value of $249,375 and fair
value of $248,750, while the Company's 9 7/8% Notes have a carrying value of
$100,000 and fair value of $107,500. Additionally, at February 28, 1998, the
Company's 9 3/4% Notes have a carrying value of $23,192 and fair value of
$24,410. The carrying amounts of other long-term debts approximate fair value
because the obligations either bear interest at floating rates or compare
favorably with fixed rate obligations that would be available to the Company.
The fair value information presented herein is based on pertinent information
available to management as of February 28, 1998. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these consolidated financial statements since that date, and current estimates
of fair value may differ significantly from the amounts presented herein.
18. SELECTED QUARTERLY DATA (Unaudited)
Summarized quarterly financial data for fiscal 1998 is as follows:
<TABLE>
<CAPTION>
Year Ended February 28, 1998
---------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $ 113,846 $ 119,843 $ 128,998 $ 125,312
Gross profit 41,063 44,149 46,650 47,043
Earnings before extraordinary item 6,943 8,077 9,432 6,066
Extraordinary item -- -- -- (8,956)
----------- --------- --------- ------------
Net earnings (loss) $ 6,943 $ 8,077 $ 9,432 $ (2,890)
=========== ========= ========= ============
Basic net earnings (loss) per share:
Before extraordinary item $ .32 $ .36 $ .41 $ 27
Extraordinary item -- -- (.40)
----------- --------- --------- ------------
Net earnings (loss) per share $ .32 $ .36 $ .41 $ (.13)
=========== ========= ========= ============
Diluted net earnings (loss) per share:
Before extraordinary item $ .30 $ .34 .40 $ .26
Extraordinary item -- -- -- (.38)
----------- --------- --------- ------------
Net earnings (loss) per share $ .30 $ .34 .40 (.12)
=========== ========= ========= ============
</TABLE>
Summarized quarterly financial data for fiscal 1997 is as follows:
<TABLE>
<CAPTION>
Year Ended February 22, 1997
----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 97,302 $ 103,026 $ 107,823 $ 104,228
Gross profit 32,547 34,439 36,510 38,326
Net earnings 1,433 1,863 4,131 6,282
Net earnings per share - Basic .09 .11 .24 .30
Net earnings per share - Diluted .08 .10 .22 .29
</TABLE>
F-18
<PAGE> 55
SUBSEQUENT EVENTS (UNAUDITED)
On April 13, 1998, the Company completed its acquisition of Puritan
Bennett Aero Systems Co. ("PBASCO") for approximately $69,700 in cash and
the assumption of liabilities aggregating approximately $2,810. PBASCO is
the leading manufacturer of commercial aircraft oxygen delivery systems
and passenger service unit components and systems, and is a major
supplier of air valves, overhead lights and switches, crew masks and
protective breathing devices for both commercial and general aviation
aircraft. Based upon management's assumptions, a portion of the purchase
price was allocated to purchased research and development that had not
reached technological feasibility and had no future alternative use.
During the first quarter of fiscal 1999, the Company will record a charge
of approximately $37,000 for the acquisition of in-process research and
development and acquisition related expenses.
On April 21, 1998, the Company acquired substantially all of the
Aircraft Modular Products (AMP) assets for approximately $118,000 in cash
and assumed certain liabilities aggregating approximately $2,840. AMP is
the leading manufacturer of cabin interior products for general aviation
(business jet) and commercial - type VIP aircraft, providing a broad line
of products including seating, sidewalls, bulkheads, credenzas, closets,
galley structures, lavatories, tables and sofas; along with related spare
parts. Based on management's assumptions, a portion of the purchase price
was allocated to purchased research and development that had not reached
technological feasibility and had no future alternative use. During the
first quarter of fiscal 1999, the Company will record a charge of
approximately $61,000 for the acquisition of in-process research and
development and acquisition related expenses.
F-19
<PAGE> 56
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
BALANCE BALANCE
AT BEGINNING AT END
OF YEAR EXPENSES OTHER DEDUCTIONS OF YEAR
<S> <C> <C> <C> <C> <C>
DEDUCTED FROM ASSETS:
Allowance for doubtful
accounts:
1998 $ 4,864 $ 481 $ -- $ 3,155 $ 2,190
1997 4,973 2,144 (69) 2,184 4,864
1996 4,034 162 1,449 (1) 672 4,973
Reserve for obsolete
inventories:
1998 $ 8,282 $ 9,973 $ -- $ 7,766 $10,489
1997 19,785 4,583 1,758 17,844(2) 8,282
1996 10,664 6,022 5,840(1) 2,741 19,785
INCLUDED IN LIABILITIES:
Accrued product
warranties:
1998 $ 5,231 $ 3,085 $ -- $ 3,963 $ 4,353
1997 3,455 6,325 (156) 4,393 5,231
1996 2,969 2,758 936 (1) 3,208 3,455
</TABLE>
(1) Balances associated with the Burns acquisition.
(2) During fiscal 1997, the Company disposed of substantially all of the
inventories which were fully reserved in fiscal years 1995 and 1996.
F-20
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>2
<DESCRIPTION>AMENDED AND RESTATED BY-LAWS
<TEXT>
<PAGE> 1
BY-LAWS
OF
BE AEROSPACE, INC.
(amended as of 5/27/92)
Section 1. LAW, CERTIFICATE OF INCORPORATION
AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of
the corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. ANNUAL MEETING. The annual meeting of stockholders shall be held
at 10:30 a.m. on the third Wednesday in July in each year, unless that day be a
legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may be
required by law or these bylaws or as may property come before the meeting.
2.2. SPECIAL MEETINGS. A special meeting of the stockholders may be
called at any time by the chairman of the board, if any, the president or the
board of directors. A special meeting of the stockholders shall be called by the
secretary, or in the case of the death, absence, incapacity or refusal of the
secretary, by an assistant secretary or some other officer, upon application of
a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3. PLACE OF MEETING. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place
within or without the State of Delaware as may be determined from time to time
by the chairman of the board, if any, the president or the board of directors.
Any adjourned session of any meeting of the stockholders shall be held at the
place designated in the vote of adjournment.
<PAGE> 2
2.4. NOTICE OF MEETINGS. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his address as it appears in the
records of the corporation. Such notice shall be given by the secretary, or by
an officer or person designated by the board of directors, or in the case of a
special meeting by the officer calling the meeting. As to any adjourned session
of any meeting of stockholders, notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more than thirty
days or if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be given in
the manner heretofore described. No notice of any meeting of stockholders or any
adjourned session thereof need be given to a stockholder if a written waiver of
notice, executed before or after the meeting or such adjourned session by such
stockholder, is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders or any adjourned session thereof need be specified
in any written waiver of notice.
2.5. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders a
quorum as to any matter shall consist of a majority of the votes entitled to be
cast on the matter, except where a larger quorum is required by law, by the
certificate of incorporation or by these by-laws. Any meeting may be adjourned
from time to time by a majority of the votes properly cast upon the question,
whether or not a quorum is present. If a quorum is present at an original
meeting, a quorum need not be present at an adjourned session of that meeting.
Shares of its own stock belonging to the corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of any corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
2.6. ACTION BY VOTE. When a quorum is present at any meeting, a
plurality of the votes properly cast for election to any office shall elect to
such office and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, by the certificate of incorporation or by these
by-laws. No ballot shall be required for any election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election.
-2-
<PAGE> 3
2.7. ACTION WITHOUT MEETINGS. Unless otherwise provided in the
certificate of incorporation, any action required or permitted to be taken by
stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
If action is taken by unanimous consent of stockholders, the writing or
writings comprising such unanimous consent shall be filed with the records of
the meetings of stockholders.
If action is taken by less than unanimous consent of stockholders and
in accordance with the foregoing, there shall be filed with the records of the
meetings of stockholders the writing or writings comprising such less than
unanimous consent. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those who have
not consented in writing and a certificate signed and attested to by the
secretary that such notice was given shall be filed with the records of the
meetings of stockholders.
In the event that the action which is consented to is such as would
have required the filing of a certificate under any of the provisions of the
General Corporation Law of Delaware, if such action had been voted upon by the
stockholders at a meeting thereof, the certificate filed under such provision
shall state that written consent has been given under Section 228 of said
General Corporation Law, in lieu of stating that the stockholders have voted
upon the corporate action in question, if such last mentioned statement is
required thereby.
2.8. PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
-3-
<PAGE> 4
2.9. INSPECTORS. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them.
2.10. LIST OF STOCKHOLDERS. The secretary shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. NUMBER. The number of directors which shall constitute the whole
board shall not be less than one in number. Thereafter, within the foregoing
limits, the stockholders at the annual meeting shall determine the number of
directors and shall elect the number of directors as determined. Within the
foregoing limits, the number of directors may be increased at any time or from
time to time by the stockholders or by the directors by vote of a majority of
the directors then in office. The number of directors may be decreased to any
number permitted by the foregoing at any time either by the stockholders or by
the directors by vote of a majority of the directors then in office, but only to
eliminate vacancies existing by reason of the death, resignation or removal of
one or more directors. Directors need not be stockholders.
3.2. CLASSIFICATION, ELECTION AND TENURE. The directors, other than
those who may be elected by the holders of any class or series of preference
stock voting separately by class or series, shall be classified, with respect to
the duration of the term for which they severally hold office, into three
classes, designated Class I, Class II, and Class III, which shall be as nearly
equal in number as possible and as provided by resolution of the board of
directors in connection with such election.
Each initial director in Class I shall hold office for a term expiring
at the 1992 annual meeting of stockholders; each initial director of Class II
shall hold office for a term expiring at the 1993 annual meeting of
stockholders; and each initial director of Class III shall hold office
-4-
<PAGE> 5
for a term expiring at the 1994 annual meeting of stockholders. Each director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation, removal or disqualification. At each annual meeting
of stockholders following the 1991 annual meeting, the stockholders shall elect
the successors to the class of directors whose term expires at that meeting to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election and until their successors
have been duly elected and qualified or until their earlier death, resignation,
removal or disqualification.
The board of directors shall increase or decrease the number of
directors in one or more classes as may be appropriate whenever it increases or
decreases the number of directors pursuant to Section 3.1, in order to ensure
that the three classes shall be as nearly equal in number as possible.
3.3. POWERS. The business and affairs of the corporation shall be
managed by or under the direction of the board of directors who shall have and
may exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4. VACANCIES. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
3.5. COMMITTEES. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, including the
power to authorize the seal of the corporation to be affixed to all papers which
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers which by law, by the
certificate of incorporation or by these by-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and his alternate, if any, the member or members thereof present at any meeting
and not disqualified
-5-
<PAGE> 6
from voting, whether or not constituting a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Except as the board of directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the board or such rules, its business
shall be conducted as nearly as may be in the same manner as is provided by
these by-laws for the conduct of business by the board of directors. Each
committee shall keep regular minutes of its meetings and report the same to the
board of directors upon request.
3.6. REGULAR MEETINGS. Regular meetings of the board of directors may
be held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7. SPECIAL MEETINGS. Special meetings of the board of directors may
be held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by one-third or more in number of the
directors, reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the president or any one of
the directors calling the meeting.
3.8. NOTICE. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.9. QUORUM. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
3.10. ACTION BY VOTE. Except as may be otherwise provided by law, by
the certificate of incorporation or by these by-laws, when a quorum is present
at any meeting the vote of a majority of the directors present shall be the act
of the board of directors.
-6-
<PAGE> 7
3.11. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.12. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.13. COMPENSATION. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.14. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of the corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the board of directors or
the committee, and the board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
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<PAGE> 8
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1. ENUMERATION; QUALIFICATION. The officers of the corporation shall
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2. POWERS. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3. ELECTION. The officers may be elected by the board of directors at
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4. TENURE. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND VICE PRESIDENT.
The chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors. Unless the board of
directors otherwise specifies, the chairman of the board, or if there is none
the chief executive officer, shall preside, or designate the person who shall
preside, at all meetings of the stockholders and of the board of directors.
Unless the board of directors otherwise specifies, the president shall
be the chief executive officer and shall have direct charge of all business
operations of the corporation and,
-8-
<PAGE> 9
subject to the control of the directors, shall have general charge and
supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set
forth in these by-laws or as shall be designated from time to time by the board
of directors or by the president.
4.6. TREASURER AND ASSISTANT TREASURERS. The treasurer shall be the
chief financial officer of the corporation and shall be in charge of its funds
and valuable papers, and shall have such other duties and powers as may be
designated from time to time by the board of directors or by the president. If
no controller is elected, the treasurer shall also have the duties and powers of
the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7. CONTROLLER AND ASSISTANT CONTROLLERS. If a controller is elected,
he shall be the chief accounting officer of the corporation and shall be in
charge of its books of account and accounting records, and of its accounting
procedures. He shall have such other duties and powers as may be designated from
time to time by the board of directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record
all proceedings of the stockholders, of the board of directors and of committees
of the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and transfer records of
the corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be
-9-
<PAGE> 10
effective at some other time, and without in either case the necessity of its
being accepted unless the resignation shall so state. Except as otherwise
provided in the certificate of incorporation or these by-laws relating to the
rights of the holders of any class or series of preference stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, but only for
cause and only by the affirmative vote, at any regular meeting or special
meeting of the stockholders, of not less than two-thirds of the total number of
votes of the then outstanding shares of capital stock of the corporation
entitled to vote generally in the election of directors, voting together as a
single class, but only if notice of such proposal was contained in the notice of
such meeting. Any vacancy in the board of directors resulting from any such
removal may be filed by vote of a majority of the directors then in office,
although less than a quorum, and any director or directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors shall be elected and qualified or until
their earlier death, resignation or removal. The board of directors may at any
time remove any officer either with or without cause. The board of directors may
at any time terminate or modify the authority of any agent. No director or
officer resigning and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the corporation)
no director or officer removed shall have any right to any compensation as such
director or officer for any period following his resignation or removal, or any
right to damages on account of such removal, whether his compensation be by the
month or by the year or otherwise; unless, in the case of a resignation, the
directors, or, in the case of removal, the body acting on the removal, shall in
their or its discretion provide for compensation.
Section 6. VACANCIES
6.1. If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the chairman
or vice chairman of the board, if any, or the president or a vice president and
by the treasurer or an assistant treasurer or by the secretary or an assistant
secretary. Any of or all
-10-
<PAGE> 11
the signatures on the certificate may be a facsimile. In case an officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the time of its issue.
7.2. LOSS OF CERTIFICATES. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
8.2. RECORD DATE AND CLOSING TRANSFER BOOKS. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days (or such longer period as may be required by law) before the date of such
meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
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<PAGE> 12
(a) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the
corporation shall consist of a flat-faced circular die with the word "Delaware"
and the name of the corporation cut or engraved thereon, together with such
other words, dates or images as may be approved from time to time by the
directors.
Section 10. EXECUTION OF PAPERS
10.1. Except as the board of directors may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall end on the last Saturday
of February of each year.
Section 12. AMENDMENTS
12.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the stock
outstanding and entitled to vote.
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<PAGE> 13
Any by-law, whether adopted, amended or repealed by the stockholders or
directors, may be amended or reinstated by the stockholders or the directors.
-13-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>3
<DESCRIPTION>FOURTH AMENDED AND RESTATED CHASE CREDIT AGREEMENT
<TEXT>
<PAGE> 1
Execution Counterpart
************************************************************
BE AEROSPACE, INC.
-----------------------------
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 29, 1993
Amended and Restated as of April 3, 1998
------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
NATIONSBANK, N.A.,
as Documentation Agent
************************************************************
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it
is attached but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
page
----
<S> <C>
Section 1. Definitions and Accounting Matters...............................................1
1.01 Certain Defined Terms............................................................1
1.02 Accounting Terms and Determinations.............................................19
1.03 Classes and Types of Loans......................................................20
Section 2. Commitments, Loans, Notes and Prepayments.......................................20
2.01 Loans...........................................................................20
2.02 Borrowings......................................................................21
2.03 Letters of Credit...............................................................21
2.04 Changes of Commitments..........................................................25
2.05 Commitment Fee..................................................................26
2.06 Lending Offices.................................................................26
2.07 Several Obligations; Remedies Independent.......................................26
2.08 Evidence of Debt................................................................26
2.09 Optional Prepayments and Conversions or Continuations of Loans..................27
2.10 Mandatory Prepayments and Reductions of Commitments.............................27
Section 3. Payments of Principal and Interest..............................................29
3.01 Repayment of Loans..............................................................29
3.02 Interest........................................................................30
Section 4. Payments; Pro Rata Treatment; Computations; Etc.................................31
4.01 Payments........................................................................31
4.02 Pro Rata Treatment..............................................................31
4.03 Computations....................................................................32
4.04 Minimum Amounts.................................................................32
4.05 Certain Notices.................................................................32
4.06 Non-Receipt of Funds by the Administrative Agent................................33
4.07 Sharing of Payments, Etc........................................................34
Section 5. Yield Protection, Etc...........................................................35
5.01 Additional Costs................................................................35
5.02 Limitation on Types of Loans....................................................37
5.03 Illegality......................................................................38
5.04 Treatment of Affected Loans.....................................................38
5.05 Compensation....................................................................39
5.06 Additional Costs in Respect of Letters of Credit................................40
5.07 U.S. Taxes......................................................................40
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
Section 6. Conditions Precedent............................................................41
6.01 Conditions to Effectiveness.....................................................41
6.02 Initial and Subsequent Extensions of Credit.....................................44
Section 7. Representations and Warranties..................................................44
7.01 Corporate Existence.............................................................44
7.02 Financial Condition.............................................................45
7.03 Litigation......................................................................45
7.04 No Breach.......................................................................45
7.05 Action..........................................................................46
7.06 Approvals.......................................................................46
7.07 Use of Credit...................................................................46
7.08 ERISA...........................................................................46
7.09 Taxes...........................................................................47
7.10 Investment Company Act..........................................................47
7.11 Public Utility Holding Company Act..............................................47
7.12 Material Agreements and Liens...................................................47
7.13 Environmental Matters...........................................................48
7.14 Capitalization..................................................................49
7.15 Subsidiaries, Etc...............................................................50
7.16 Title to Assets.................................................................50
7.17 Compliance with Law.............................................................51
7.18 True and Complete Disclosure....................................................51
7.19 Year 2000.......................................................................51
Section 8. Covenants of the Company........................................................52
8.01 Financial Statements, Etc.......................................................52
8.02 Litigation......................................................................55
8.03 Existence, Etc..................................................................55
8.04 Insurance.......................................................................56
8.05 Prohibition of Fundamental Changes..............................................56
8.06 Limitation on Liens.............................................................57
8.07 Indebtedness....................................................................58
8.08 Investments.....................................................................59
8.09 Restricted Payments.............................................................60
8.10 Leverage Ratio..................................................................60
8.11 Adjusted Net Worth..............................................................61
8.12 Interest Coverage Ratio.........................................................61
8.13 [Intentionally Omitted.]........................................................62
8.14 Lines of Business...............................................................62
8.15 Transactions with Affiliates....................................................62
8.16 Use of Proceeds.................................................................63
8.17 Certain Obligations Respecting Subsidiaries.....................................63
8.18 Modifications of Certain Documents..............................................64
8.19 Environmental Matters...........................................................64
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
8.20 Security for Loans..............................................................65
8.21 Redemption of Senior Subordinated Indebtedness..................................65
Section 9. Events of Default...............................................................65
Section 10. The Administrative Agent........................................................68
10.01 Appointment, Powers and Immunities..............................................68
10.02 Reliance by Administrative Agent................................................69
10.03 Defaults........................................................................69
10.04 Rights as a Lender..............................................................70
10.05 Indemnification.................................................................70
10.06 Non-Reliance on Administrative Agent and Other Lenders..........................71
10.07 Failure to Act..................................................................71
10.08 Resignation or Removal of Administrative Agent..................................71
10.09 Consents under Basic Documents..................................................72
10.10 Collateral Sub-Agents...........................................................72
10.11 Documentation Agent.............................................................72
Section 11. Miscellaneous...................................................................72
11.01 Waiver..........................................................................73
11.02 Notices.........................................................................73
11.03 Expenses, Etc...................................................................73
11.04 Amendments, Etc.................................................................74
11.05 Successors and Assigns..........................................................75
11.06 Assignments and Participations..................................................75
11.07 Survival........................................................................77
11.08 Captions........................................................................77
11.09 Counterparts....................................................................77
11.10 Governing Law; Submission to Jurisdiction.......................................78
11.11 Waiver of Jury Trial............................................................78
11.12 Treatment of Certain Information; Confidentiality...............................78
</TABLE>
(iii)
<PAGE> 5
Annex 1 - Commitments
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Hazardous Materials
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Approvals and Compliance
SCHEDULE V - Existing Letters of Credit
SCHEDULE VI - Taxes
SCHEDULE VII - Transactions with Affiliates
EXHIBIT A-1 - Form of Security Agreement
EXHIBIT A-2 - Form of In-Flight Guarantee and Security Agreement
EXHIBIT B - Form of Confidentiality Agreement
(iv)
<PAGE> 6
-1-
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of October
29, 1993, amended and restated as of April 3, 1998, among: BE AEROSPACE, INC., a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "COMPANY"); each of the lenders that is a signatory hereto
identified under the caption "LENDERS" on the signature pages hereto or which,
pursuant to Section 11.06(b) hereof, shall become a "Lender" hereunder
(individually, a "LENDER" and, collectively, the "LENDERS"); and THE CHASE
MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"ADMINISTRATIVE AGENT").
The Company, certain Lenders and the Administrative Agent are
party to a Third Amended and Restated Credit Agreement dated as of October 29,
1993, amended and restated as of May 29, 1997 (as modified and supplemented and
in effect immediately prior to the Amendment Effective Date referred to below,
the "EXISTING CREDIT AGREEMENT"). The Company has requested that the Lenders and
the Administrative Agent agree to amend and restate the Existing Credit
Agreement, and the Lenders and the Administrative Agent are willing to amend and
restate the Existing Credit Agreement, all on the terms and conditions herein
set forth.
Accordingly, the parties hereto agree to amend and restate the
Existing Credit Agreement so that, as amended and restated, it reads in its
entirety as provided herein.
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS.
As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1.01 or in other provisions of this
Agreement in the singular to have the same meanings when used in the plural and
VICE VERSA):
"ACQUISITION" shall mean any transaction, or any series of
related transactions, by which the Company and/or any of its Subsidiaries (a)
acquires any ongoing business or all or substantially all of the assets of any
Person, whether through purchase of assets, merger or otherwise, (b) directly or
indirectly acquires control of at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors or (c) directly or indirectly acquires control of a majority ownership
interest in any partnership, joint venture or similar arrangement. The terms
"ACQUIRE" and "ACQUIRED" used as a verb shall have a correlative meaning.
"ADJUSTED NET WORTH" shall mean, as at any date, the sum of (a)
total stockholders' equity of the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) PLUS (b) the
aggregate amount of Restricted Payments made since November 29, 1997 in respect
of the purchase, redemption, retirement or other acquisition of any shares of
any class of stock of the Company permitted under Section 8.09
CREDIT AGREEMENT
<PAGE> 7
-2-
hereof PLUS (c) the fair market value of any shares of capital stock of the
Company (determined as of the date such shares are issued) issued after November
29, 1997 which are utilized in any business combination accounted for using
pooling of interest accounting PLUS (d) an amount not to exceed $35,000,000 in
the aggregate of the after-tax amount (calculated using the then effective
corporate Federal tax rate, regardless of the after-tax amount determined in
accordance with GAAP) of any nonrecurring noncash write-offs of intangible
assets since November 29, 1997 PLUS (e) the amount of any purchased research and
development and related acquisition costs of a target company to the extent such
costs are or have been expensed after November 29, 1997.
"ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "CONTROL" (including, with its correlative meanings,
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), PROVIDED that, in any event, any
Person that owns directly or indirectly securities having 5% or more of the
voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or any of its
Subsidiaries and (b) none of the Subsidiaries of the Company shall be
Affiliates.
"AMENDMENT EFFECTIVE DATE" shall mean the date on which all of
the conditions set forth in Section 6.01 hereof shall have been satisfied or
waived by the Lenders and the Administrative Agent.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of
such Lender) designated for such Type of Loan in the Administrative
Questionnaire submitted by such Lender or such other office of such Lender (or
of an affiliate of such Lender) as such Lender may from time to time specify to
the Administrative Agent and the Company as the office by which its Loans of
such Type are to be made and maintained.
CREDIT AGREEMENT
<PAGE> 8
-3-
"APPLICABLE MARGIN" shall mean with respect to Base Rate Loans
and Eurodollar Loans, the rate for such Type of Loan for each level period set
forth in the schedule below:
Applicable Margin
Level Period Base Rate Loans Eurodollar Loans
- ------------------------ --------------- ----------------
Level I Period 0.00% 0.500%
Level II Period 0.00% 0.750%
Level III Period 0.00% 0.875%
Level IV Period 0.00% 1.000%
Level V Period 0.00% 1.250%
Level VI Period 0.25% 1.500%
Level VII Period 0.75% 2.000%
PROVIDED that notwithstanding anything herein to the contrary, the Applicable
Margin from the Amendment Effective Date through August 31, 1998 shall not be
less than the rate for a Level V Period.
"B/E SERVICES" shall mean B/E Services, Inc., a Delaware
corporation and Wholly Owned Subsidiary of the Company.
"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978,
as amended from time to time.
"BASE RATE" shall mean, for any day, a rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates
based upon the Base Rate.
"BASIC DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, the Letter of Credit Documents and the Security Documents.
"BUSINESS DAY" shall mean any day (a) on which commercial banks
are not authorized or required to close in New York City and (b) if such day
relates to a borrowing of, a payment or prepayment of principal of or interest
on, a Conversion of or into, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
CREDIT AGREEMENT
<PAGE> 9
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"CALCULATION PERIOD" shall mean, as at any date, the period of
four consecutive complete fiscal quarters of the Company ending on or most
recently ended prior to such date for which financial statements have been
delivered pursuant to Sections 7.02(a), 8.01(a), 8.01(b) or 8.01(h) hereof.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"CHASE" shall mean The Chase Manhattan Bank.
"CLASS" shall have the meaning assigned to such term in Section
1.03 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"COLLATERAL ACCOUNT" shall have the meaning assigned to such term
in Section 4.01 of the Security Agreement.
"COMMITMENT FEE RATE" shall mean (a) 0.2000% for any Level I
Period, (b) 0.2250% for any Level II Period, (c) 0.2500% for any Level III
Period, (d) 0.2750% for any Level IV Period, (e) 0.3250% for any Level V Period,
(f) 0.3750% for any Level VI Period and (e) 0.5000% for any Level VII Period,
PROVIDED that notwithstanding anything herein to the contrary, the Commitment
Fee Rate from the Amendment Effective Date through August 31, 1998 shall not be
less than the rate for a Level V Period. .
"COMMITMENTS" shall mean the Series A Commitments and the
Series B Commitments.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a
conversion pursuant to Section 2.09 hereof of one Type of Loans into another
Type of Loans, which may be
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accompanied by the transfer by a Lender (at its sole discretion) of a Loan from
one Applicable Lending Office to another.
"DEFAULT" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any Person excluding any sale, assignment,
transfer or other disposition of inventory in the ordinary course of business
and on ordinary business terms; PROVIDED that the term "Disposition" shall not
include (i) any Equity Issuance (as such term is defined in this Section 1.01
without giving effect to the proviso therein), (ii) any sale, assignment,
transfer or other disposition of Property by any Subsidiary of the Company to
the Company or to any other Subsidiary of the Company, in each case for
consideration that is not in excess of the fair market value of such Property as
determined in good faith by the chief financial officer of the Company or (iii)
any sale, assignment, transfer or other disposition of Property by the Company
or any Subsidiary of the Company to a joint venture, subject to the proviso in
Section 8.08(h) hereof. The creation of any Lien on any Property permitted under
Section 8.06 hereof shall not constitute a "DISPOSITION" of such Property. The
term "DISPOSE" shall have a correlative meaning.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"DOMESTIC SUBSIDIARY" shall mean any Subsidiary of the Company
that is incorporated under the law of any State of the United States of America.
"EBITDA" shall mean, for any period of four consecutive fiscal
quarters of the Company, for the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP), net operating
earnings (calculated before depreciation and amortization expense, non-recurring
non-cash write-offs of assets (to the extent deducted in computing net operating
earnings), Interest Expense, taxes and extraordinary and unusual items) for such
period.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, (a)
any written notice, claim, demand or other communication (collectively, a
"CLAIM") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any written claim by any governmental
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law, and any written claim
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
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"ENVIRONMENTAL LAWS" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the
Company or any of its Subsidiaries after the Restatement Date of (i) any capital
stock, (ii) any warrants or options exercisable in respect of capital stock
(other than any warrants or options issued to directors, officers, employees,
agents, consultants or advisors of the Company or any of its Subsidiaries and
any capital stock of the Company issued upon the exercise of such warrants or
options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the issuing or selling
Person or (b) the receipt by the Company or any of its Subsidiaries after
November 29, 1997 of any capital contribution (whether or not evidenced by any
equity security issued by the recipient of such contribution); PROVIDED that
Equity Issuance shall not include (x) any such issuance or sale by any
Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the
Company, (y) any capital contribution by the Company or any Wholly Owned
Subsidiary of the Company to any Subsidiary of the Company or (z) any such
issuance or sale by the Company in connection with a permitted Acquisition under
Section 8.05(b).
"EQUITY RIGHTS" shall mean, with respect to any Person, any
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of, or
outstanding securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Company is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which the
Company is a member.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/100 of 1%) of the respective rates per annum quoted
by each Reference Lender at approximately
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11:00 a.m. London time (or as soon thereafter as practicable) on the date two
Business Days prior to the first day of such Interest Period for the offering by
such Reference Lender to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the Eurodollar Loan to be made by such
Reference Lender for such Interest Period. If any Reference Lender is not
participating in any Eurodollar Loan during any Interest Period therefor, the
Eurodollar Base Rate for such Loan for such Interest Period shall be determined
by reference to the amount of the Eurodollar Loan to be made by Chase for such
Interest Period.
"EURODOLLAR LOANS" shall mean Loans the interest rates on which
are determined on the basis of rates referred to in the definition of
"Eurodollar Base Rate" in this Section 1.01.
"EURODOLLAR RATE" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement for such Loan for such Interest Period.
"EVENT OF DEFAULT" shall have the meaning assigned to such term
in Section 9 hereof.
"EXISTING CREDIT AGREEMENT" shall have the meaning assigned to
such term in the recitals hereto.
"EXISTING LENDERS" shall mean the lenders party to the Existing
Credit Agreement.
"EXISTING LETTERS OF CREDIT" shall have the meaning assigned to
such term in Section 2.03(l) hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, PROVIDED that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"FISCAL DATE" shall mean the last day of each fiscal quarterly
period of the Company.
"FOREIGN SUBSIDIARY" shall mean each Subsidiary of the Company
other than any Domestic Subsidiary.
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"FUNDED DEBT" shall mean, for any Person: (a) all Indebtedness of
such Person that should be reflected on a balance sheet of such Person in
accordance with GAAP; and (b) all Indebtedness of any other Person that should
be reflected on a balance sheet of such other Person in accordance with GAAP and
that is secured by a Lien on the Property of, is supported by a letter of credit
issued for account of, or is Guaranteed by, such Person.
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with those which, in accordance with the last
sentence of Section 1.02(a) hereof, are to be used in making the calculations
for purposes of determining compliance with this Agreement.
"GE LEASE AGREEMENT" shall mean the Master Lease Agreement dated
as of October 20, 1997 between the Company and General Electric Capital
Corporation, for itself and as Agent for Certain Participants.
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall
have a correlative meaning.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum
or petroleum products, flammable explosives, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of
CREDIT AGREEMENT
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the date the respective goods are delivered or the respective services are
rendered; (c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been assumed
by such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person.
"IN-FLIGHT" shall mean In-Flight Entertainment, LLC, a Delaware
limited liability company and Wholly Owned Subsidiary of the Company.
"IN-FLIGHT GUARANTEE AND SECURITY AGREEMENT" shall mean the
Amended and Restated Guarantee and Security Agreement dated as of the
Restatement Date between In-Flight and the Administrative Agent, substantially
in the form of Exhibit A-2 hereto, as the same shall be modified, supplemented
and in effect from time to time.
"INFORMATION MEMORANDUM" shall mean the Confidential Information
Memorandum dated March, 1998 distributed to the Lenders.
"INTEREST COVERAGE RATIO" shall mean, as at any date the ratio of
(i) EBITDA for the relevant Calculation Period to (ii) Interest Expense for such
Calculation Period; PROVIDED that, from and after the date of any Acquisition
occurring after February 28, 1998 until four full fiscal quarters of the Company
have elapsed since the date of such Acquisition, the Interest Coverage Ratio
shall be calculated on a PRO FORMA basis (reflecting, INTER ALIA, any amount
attributable to any operating expense that will be eliminated or cost reduction
that will be realized (in each case, net of any operating expense or other cost
increase) in connection with such Acquisition, as determined in good faith by
the chief financial officer of the Company in accordance with GAAP and the
rules, regulations and guidelines of the Securities and Exchange Commission, as
if such elimination of operating expense or the realization of such cost
reductions were achieved at the beginning of such four-quarter period) as though
such Acquisition had occurred, and any Funded Debt incurred or assumed by the
Company or any of its Subsidiaries in connection with, or in anticipation of,
such Acquisition had been incurred or assumed, on the first day of such
Calculation Period.
"INTEREST EXPENSE" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) PLUS (b) the net amounts payable (or MINUS
the net amounts receivable) under Interest Rate Protection Agreements accrued
during such period (whether or not actually paid or received during such period)
MINUS (c) interest income during such period.
"INTEREST PERIOD" shall mean, with respect to any Eurodollar
Loan, each period commencing on the date such Eurodollar Loan is made or
Converted from a Base Rate Loan or the last day of the next preceding Interest
Period for such Loan and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the Company
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may select as provided in Section 4.05 hereof, except that each Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (i) no Interest Period for any
Series A Loan may end after the Series A Commitment Termination Date; (ii) no
Interest Period for any Series B Loan may commence before and end after any
Series B Principal Payment Date unless, after giving effect thereto, the
aggregate principal amount of the Series B Loans having Interest Periods that
end after such Series B Principal Payment Date shall be equal to or less than
the aggregate principal amount of the Series B Loans scheduled to be outstanding
after giving effect to the payments of principal required to be made on such
Series B Principal Payment Date; (iii) each Interest Period that would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and (iv)
notwithstanding clauses (i) and (ii) above, no Interest Period shall have a
duration of less than one month and, if the Interest Period for any Eurodollar
Loan would otherwise be a shorter period, such Eurodollar Loan shall not be
available hereunder for such period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person,
an interest rate swap, cap or collar agreement or similar arrangement between
such Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes hereof, the "CREDIT EXPOSURE" at any time of any Person under an
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"INVESTMENT" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of, or capital contribution to, any other Person or any
agreement to make any such acquisition or capital contribution (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such short sale);
(b) the making of any deposit with, or advance, loan or other extension of
credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person, but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days representing the
purchase price of inventory or supplies sold by such Person in the ordinary
course of business); (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement.
"ISSUING LENDER" shall mean Chase, as the issuer of Letters of
Credit under Section 2.03 hereof, together with its successors and assigns in
such capacity.
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"LETTER OF CREDIT" shall have the meaning assigned to such term
in Section 2.03 hereof.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any
Letter of Credit, collectively, any application therefor and any other
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing
for (a) the rights and obligations of the parties concerned or at risk with
respect to such Letter of Credit or (b) any collateral security for any of such
obligations, each as the same may be modified and supplemented and in effect
from time to time.
"LETTER OF CREDIT INTEREST" shall mean, for each Series A Lender,
such Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at
any time and in respect of any Letter of Credit, the sum of (a) the undrawn
amount of such Letter of Credit PLUS (b) the aggregate unpaid principal amount
of all Reimbursement Obligations of the Company at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Series A Lender (other than the Issuing Lender) shall be deemed to
hold a Letter of Credit Liability in an amount equal to its participation
interest in the related Letter of Credit under Section 2.03 hereof, and the
Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount
equal to its retained interest in the related Letter of Credit after giving
effect to the acquisition by the Series A Lenders other than the Issuing Lender
of their participation interests under said Section 2.03.
"LEVEL I PERIOD" shall mean any period during which (a) no Event
of Default shall have occurred and be continuing, and (b) the Leverage Ratio is
less than 2.25 to 1; "LEVEL II PERIOD" shall mean any period, other than a Level
I Period, during which (a) no Event of Default shall have occurred and be
continuing and (b) the Leverage Ratio is greater than or equal to 2.25 to 1 but
less than 2.75 to 1; "LEVEL III PERIOD" shall mean any period, other than a
Level I Period or a Level II Period, during which (a) no Event of Default shall
have occurred and be continuing and (b) the Leverage Ratio is greater than or
equal to 2.75 to 1 but less than 3.25 to 1; "LEVEL IV PERIOD" shall mean any
period, other than a Level I Period, a Level II Period or a Level III Period
during which (a) no Event of Default shall have occurred and be continuing and
(b) the Leverage Ratio is greater than or equal to 3.25 to 1 but less than 3.75
to 1; "LEVEL V PERIOD" shall mean any period, other than a Level I Period, a
Level II Period, a Level III Period or Level IV Period during which (a) no Event
of Default shall have occurred and be continuing and (b) the Leverage Ratio is
greater than or equal to 3.75 to 1 but less than 4.25 to 1; "LEVEL VI PERIOD"
shall mean any period that is not a Level I Period, a Level II Period, a Level
III Period, a Level IV Period or a Level V Period during which (a) no Event of
Default shall have occurred and be continuing and (b) the Leverage Ratio is
greater than or equal to 4.25 to 1 but less than 4.75; and "LEVEL VII PERIOD"
shall mean any period that is not a Level I Period, a Level II Period, a Level
III Period, a Level IV Period, a Level V Period or a Level VI Period. Any change
in the Applicable Margin
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for any Type of Loan or any change in the Commitment Fee by reason of a change
in the Leverage Ratio shall become effective on the third Business Day following
receipt by the Administrative Agent of the financial statements of the Company
and its Subsidiaries delivered as required by Sections 8.01(a), (b) or (h)
hereof; PROVIDED that failure to deliver such financial statements as required
by Sections 8.01(a), (b) or (h) hereof shall result in the Applicable Margin and
Commitment Fee Rate being at the rates set forth opposite Level VII Period.
"LEVERAGE RATIO" shall mean, as at any date, the ratio of Total
Funded Debt at such date to EBITDA for the relevant Calculation Period; PROVIDED
that, from and after the date of any Acquisition occurring after February 28,
1998 until four full fiscal quarters of the Company shall have elapsed since the
date of such Acquisition, the Leverage Ratio shall be calculated on a PRO FORMA
basis (reflecting, INTER ALIA, any amount attributable to any operating expense
that will be eliminated or cost reduction that will be realized (in each case,
net of any operating expense or other cost increase) in connection with such
Acquisition, as determined in good faith by the chief financial officer of the
Company in accordance with GAAP and the rules, regulations and guidelines of the
Securities and Exchange Commission, as if such elimination of operating expense
or the realization of such cost reductions were achieved at the beginning of
such four-quarter period") as though such Acquisition had occurred, any Funded
Debt incurred or assumed by the Company or any of its Subsidiaries in connection
with, or in anticipation of, such Acquisition had been incurred or assumed, on
the first day of such Calculation Period.
"LIEN" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement and the other Basic Documents, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"LOANS" shall mean the Series A Loans and the Series B Loans.
"MAJORITY LENDERS" shall mean Majority Series A Lenders and
Majority Series B Lenders.
"MAJORITY SERIES A LENDERS" shall mean Series A Lenders having
more than 50% of the aggregate amount of the Series A Commitments or, if the
Series A Commitments shall have terminated, Lenders holding more than 50% of the
sum of (a) the aggregate unpaid principal amount of the Series A Loans PLUS (b)
the aggregate amount of all Letter of Credit Liabilities.
"MAJORITY SERIES B LENDERS" shall mean Series B Lenders having
more than 50% of the aggregate amount of the Series B Commitments or, if the
Series B Commitments shall have terminated, Lenders holding more than 50% of the
aggregate unpaid principal amount of the Series B Loans.
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"MARGIN STOCK" shall mean "margin stock" within the meaning of
Regulations U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of the Company to perform its obligations under any of
the Basic Documents to which it is a party, (c) the validity or enforceability
of any of the Basic Documents, (d) the rights and remedies of the Lenders and
the Administrative Agent under any of the Basic Documents or (e) the timely
payment of the principal of or interest on the Loans or the Reimbursement
Obligations or other amounts payable in connection therewith.
"MATERIAL SUBSIDIARY" shall mean at any date any Subsidiary of
the Company whose total assets equal or exceed 2% of the total assets of the
Company and its Subsidiaries on a consolidated basis as at the most recent
Fiscal Date; PROVIDED that, notwithstanding the above, each of B/E Services and
Royal Inventum B.V. shall at all times constitute a Material Subsidiary of the
Company so long as it is a Subsidiary of the Company.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made by the
Company or any ERISA Affiliate and which is covered by Title IV of ERISA.
"NET AVAILABLE PROCEEDS" shall mean:
(i) in the case of any Disposition, the amount of Net Cash
Payments received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation
received by the Company and its Subsidiaries in respect of such Casualty
Event net of (A) reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith and (B) contractually required
repayments of Indebtedness to the extent secured by a Lien on such
Property and any income and transfer taxes payable by the Company or any
of its Subsidiaries in respect of such Casualty Event;
(iii) in the case of any Equity Issuance, the aggregate amount of
all cash received by the Company and its Subsidiaries in respect of such
Equity Issuance net of reasonable expenses incurred by the Company and
its Subsidiaries in connection therewith; and
(iv) in the case of any Reversion, the aggregate amount of all
cash received by the Company or any of its Subsidiaries in respect of
such Reversion net of (A) reasonable expenses incurred by the Company
and its Subsidiaries in connection therewith and (B) any income and
excise taxes payable by the Company or any of its Subsidiaries in
respect of such Reversion.
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"NET CASH PAYMENTS" shall mean, with respect to any Disposition,
the aggregate amount of all cash payments, and the fair market value of any
non-cash consideration, received by the Company and its Subsidiaries directly or
indirectly in connection with such Disposition; PROVIDED that (a) Net Cash
Payments shall be net of (i) the amount of any legal, accounting and other
professional fees, title and recording tax expenses, commissions and other fees
and expenses paid by the Company and its Subsidiaries in connection with such
Disposition and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Company and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority within three
months of date of such Disposition or the Company or any of its Subsidiaries
uses any applicable tax benefit available to it as set forth on its balance
sheet to reduce such estimated taxes payable within such three month period),
(b) Net Cash Payments shall not include any cash payments of less than $100,000
from any one Disposition or a series of related Dispositions, and (c) Net Cash
Payments shall be net of any repayments by the Company or any of its
Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured
by a Lien on the Property that is the subject of such Disposition and (ii) the
transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"NOTES" shall mean the promissory notes (if any) executed and
delivered by the Company pursuant to Section 2.08 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENTS" shall mean any Investment in (i) direct
obligations of the United States of America or any agency thereof, or
obligations guaranteed by the United States of America, or of any agency
thereof; (ii) commercial paper rated at least A-1 by S&P or P-1 by Moody's;
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of America of any bank or trust company
which is organized under the laws of the United States of America or any state
thereof and has capital, surplus and undivided profits aggregating at least
$1,000,000,000; (iv) shares of any money market or mutual fund not less than 80%
of the assets of which are invested solely in securities or obligations of the
type described in clauses (i) through (iii) above and (v) repurchase agreements
with respect to securities described in clause (i) above entered into with an
office of a bank or trust company meeting the criteria specified in clause (iii)
above, PROVIDED in each case that such Investment matures within one year from
the date of acquisition thereof by the Company or a Subsidiary of the Company.
"PERSON" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government (or any agency, instrumentality or political
subdivision thereof).
"PLAN" shall mean an employee benefit plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
CREDIT AGREEMENT
<PAGE> 20
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"POST-DEFAULT RATE" shall mean, in respect of any principal of
any Loan, any Reimbursement Obligation or any other amount under this Agreement,
any Note or any other Basic Document that is not paid when due (whether at
stated maturity, by acceleration, by optional or mandatory prepayment or
otherwise), a rate per annum during the period from and including the due date
to but excluding the date on which such amount is paid in full equal to 2% PLUS
the Base Rate as in effect from time to time PLUS the Applicable Margin for Base
Rate Loans (PROVIDED that, if the amount so in default is principal of a
Eurodollar Loan and the due date thereof is a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" for such principal shall be,
for the period for and including such due date to but excluding the last day of
the Interest Period, 2% PLUS the interest rate for such Loan as provided in
Section 3.02 hereof and, thereafter, the rate provided for above in this
definition).
"PRIME RATE" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
"PRINCIPAL OFFICE" shall mean the principal office of Chase,
located on the date hereof at 270 Park Avenue, New York, New York 10017.
"PROPERTY" shall mean any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"QUARTERLY DATES" shall mean the quarterly anniversaries of the
Restatement Date; PROVIDED that, if any such date is not a Business Day, the
Quarterly Date shall be the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, the next
preceding Business Day).
"RECAPTURE DATE" shall mean the last day of the Recapture Period.
"RECAPTURE PERIOD" shall mean each period (a) commencing on the
later of (i) the Restatement Date and (ii) the day immediately following the
last day of the immediately preceding Recapture Period, and (b) ending on the
date on which the Company and/or its Subsidiaries receives Net Available
Proceeds which, together with all Net Available Proceeds received since the
first day of such Recapture Period, equal or exceeds in the aggregate
$1,000,000.
"REFERENCE LENDERS" shall mean Chase and NationsBank, N.A.
"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations
A, D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any
change after the date of this Agreement in Federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation,
CREDIT AGREEMENT
<PAGE> 21
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directive or request applying to a class of banks including such Lender of or
under any Federal, state or foreign law or regulations (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the
obligations of the Company then outstanding, or which may thereafter arise in
respect of all Letters of Credit then outstanding, to reimburse amounts paid by
the Issuing Lender in respect of any drawings under a Letter of Credit.
"RELEASE" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Materials through ambient air, soil, surface water,
groundwater, wetlands, land or subsurface strata. The terms "RELEASE" and
"RELEASED" used as a verb shall have a correlative meaning.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"RESTATEMENT DATE" shall mean April 3, 1998.
"RESTRICTED PAYMENT" shall mean, with respect to any Person, (a)
dividends (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of such Person or of any
warrants (other than of shares of common stock, warrants or options of such
Person as payment for the exercise price of options or warrants to purchase
common stock of such Person having a fair market value equal to such exercise
price), options or other rights to acquire the same (or to make any payments to
any other Person, such as "phantom stock" payments, where the amount thereof is
calculated with reference to the fair market or equity value of such Person or
any of its Subsidiaries), but excluding dividends payable solely in shares of
common stock or in options, warrants or other rights to purchase such common
stock of such Person or (b) any payment (whether made by such Person or any of
its Subsidiaries) on account of the purchase, redemption, prepayment, defeasance
or other acquisition or retirement of value of any Indebtedness (such
Indebtedness, "RETIRED INDEBTEDNESS") that is subordinated in right of payment
to the prior payment of the Loans, except any such payment made from the
proceeds of
CREDIT AGREEMENT
<PAGE> 22
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(x) the issuance of any equity securities or (y) any additional unsecured
Indebtedness that does not rank senior in right of payment to, and does not
mature or have any mandatory prepayment, which does not include required
prepayments as a result of a change of control or asset sale, prior to the
maturity of, such Retired Indebtedness.
"REVERSION" shall mean the termination by the Company or any of
its Subsidiaries of a Plan which results in a payment to the Company or any of
its Subsidiaries of any part of the over-funded portion of such Plan.
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended.
"SECURITY AGREEMENT" shall mean the Amended and Restated Security
Agreement dated as of the Restatement Date between the Company and the
Administrative Agent, substantially in the form of Exhibit A-1 hereto, as the
same shall be modified, supplemented and in effect from time to time.
"SECURITY DOCUMENTS" shall mean, collectively, the Security
Agreement and the In-Flight Guarantee and Security Agreement.
"SENIOR SUBORDINATED INDENTURES" shall mean the Senior
Subordinated 1996 Indenture and the Senior Subordinated 1998 Indenture.
"SENIOR SUBORDINATED 1996 INDENTURE" shall mean the Indenture
dated as of February 1, 1996 between the Company and Fleet National Bank
Connecticut, N.A., as Trustee, as the same shall be modified and supplemented
and in effect from time to time.
"SENIOR SUBORDINATED 1998 INDENTURE" shall mean the Indenture
dated as of February 13, 1998 between the Company and United States Trust
Company of New York as Trustee, as the same shall be modified and supplemented
and in effect from time to time.
"SERIES A COMMITMENT" shall mean, for each Series A Lender, the
obligation of such Lender to make Series A Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Series A Commitment" (as the
same may be reduced from time to time pursuant to Section 2.04 hereof or
increased or reduced from time to time pursuant to Section 11.06 hereof). The
original aggregate principal amount of the Series A Commitments is $100,000,000.
"SERIES A COMMITMENT PERCENTAGE" shall mean, with respect to any
Series A Lender, the ratio of (a) the amount of the Series A Commitment of such
Lender to (b) the aggregate amount of the Series A Commitments of all of the
Lenders.
"SERIES A COMMITMENT TERMINATION DATE" shall mean the sixth
anniversary of the Restatement Date; PROVIDED that if such day is not a Business
Day, the Series A Commitment Termination Date shall be the immediately preceding
Business Day.
CREDIT AGREEMENT
<PAGE> 23
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"SERIES A LENDERS" shall mean (a) on the Amendment Effective
Date, the Lenders having Series A Commitments as indicated on Annex 1 hereto and
(b) thereafter, the Lenders from time to time holding Series A Loans and Series
A Commitments after giving effect to any assignments thereof permitted by
Section 11.06 hereof.
"SERIES A LOANS" shall mean the loans provided for by Section
2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"SERIES A NOTES" shall mean the promissory notes (if any)
provided for by Section 2.08(a) hereof and all promissory notes delivered in
substitution or exchange therefor, in each case as the same shall be modified
and supplemented and in effect from time to time.
"SERIES B COMMITMENT" shall mean, for each Series B Lender, the
obligation of such Lender to make Series B Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Series B Commitment" (as the
same may be reduced from time to time pursuant to Section 2.04 hereof or
increased or reduced from time to time pursuant to Section 11.06 hereof). The
original aggregate principal amount of the Series B Commitments is $100,000,000.
"SERIES B COMMITMENT TERMINATION DATE" shall mean the date 364
days after the Restatement Date; PROVIDED that if such day is not a Business
Day, the Series B Commitment Termination Date shall be the immediately preceding
Business Day.
"SERIES B LENDERS" shall mean (a) on the Amendment Effective
Date, the Lenders having Series B Commitments as indicated on Annex 1 hereto and
(b) thereafter, the Lenders from time to time holding Series B Loans and Series
B Commitments after giving effect to any assignments thereof permitted by
Section 11.06 hereof.
"SERIES B LOANS" shall mean the loans provided for by Section
2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"SERIES B NOTES" shall mean the promissory notes provided for by
Section 2.08(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"SERIES B PRINCIPAL PAYMENT DATE" shall mean any Quarterly Date
on which payments of principal of Series B Loan are scheduled to be made
pursuant to Section 3.01(b) hereof.
"SPECIFIED SUBSIDIARY" shall mean each Subsidiary of the Company
identified as a "Specified Subsidiary" on Schedule III hereto, but only until
all (or, in the case of a Subsidiary that is not a Domestic Subsidiary, 65%) of
its shares that are owned by the Company become subject to the Lien of the
Security Agreement or are otherwise pledged to the Administrative
CREDIT AGREEMENT
<PAGE> 24
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Agent for the benefit of the Lenders pursuant to documentation in form and
substance reasonably satisfactory to the Majority Lenders.
"SUBSIDIARY" shall mean, for any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. "WHOLLY OWNED SUBSIDIARY" shall mean any such corporation,
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are so owned or controlled.
"TOTAL FUNDED DEBT" shall mean, as at any date, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of all Funded Debt.
"TYPE" shall have the meaning assigned to such term in Section
1.03 hereof.
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 8.01 hereof, shall mean the audited
financial statements as at February 22, 1997 referred to in Section 7.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 8.01 hereof
(or, prior to the delivery of the first financial statements under Section 8.01
hereof, used in the preparation of the audited financial statements as at
February 22, 1997, referred to in Section 7.02 hereof) unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Lenders shall so
object in writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the audited financial statements as at February 22, 1997 referred to
in Section 7.02 hereof).
CREDIT AGREEMENT
<PAGE> 25
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(b) The Company shall deliver to the Lenders at the same time as
the delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 8 hereof, the fiscal year of
the Company shall end on the last Saturday in February of each year, and the
last days of the first three fiscal quarters shall fall on the last Saturday in
each of May, August and November of each year, respectively.
1.03 CLASSES AND TYPES OF LOANS.
Loans hereunder are distinguished by "Class" and by "Type". The "Class" of a
Loan (or of a Commitment to make a Loan) refers to whether such Loan is a Series
A Loan or a Series B Loan, each of which constitutes a Class. The "Type" of a
Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each
of which constitutes a Type. Loans may be identified by both Class and Type.
Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 LOANS.
(a) SERIES A LOANS. Each Series A Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series A Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Series A Commitment of such Lender as in effect from time to time (such
Loans, together with the "Series A Loans" made under the Existing Credit
Agreement, being herein called "SERIES A LOANS"), PROVIDED that in no event
shall the aggregate principal amount of all Series A Loans, together with the
aggregate amount of all Letter of Credit Liabilities, exceed the aggregate
amount of the Series A Commitments. Subject to the terms and conditions of this
Agreement, the Company may borrow, repay and reborrow the amount of the Series A
Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert
Series A Loans of one Type into Series A Loans of another Type (as provided in
Section 2.09 hereof).
(b) SERIES B LOANS. Each Series B Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series B Commitment Termination Date in an aggregate
principal amount up to but not exceeding the amount of the Series B Commitment
of such Lender as in effect from time to time (such Loans being herein called
"SERIES B LOANS"). Subject to the terms and conditions of this Agreement, the
Company may borrow the amount of the Series B Commitments by means of
CREDIT AGREEMENT
<PAGE> 26
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Base Rate Loans and Eurodollar Loans and may Convert Series B Loans of one Type
into Series B Loans of another Type (as provided in Section 2.09 hereof) or
Continue Series B Loans of one Type as Series B Loans of the same Type (as
provided in Section 2.09 hereof). Series B Loans may be prepaid, but they may
not be reborrowed once prepaid.
(c) LIMIT ON EURODOLLAR LOANS. No more than six separate Interest
Periods in respect of Eurodollar Loans of either Class from each Lender may be
outstanding at any one time.
2.02 BORROWINGS. The Company shall give the Administrative Agent
(which shall promptly notify the Lenders) notice of each borrowing hereunder as
provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on the
date specified for each borrowing hereunder, each Lender shall make available
the amount of the Loan or Loans to be made by it on such date to the
Administrative Agent, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Chase
at the Principal Office designated by the Company.
2.03 LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, the Series A Commitments may be utilized, upon the request of
the Company, in addition to the Series A Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "LETTERS OF CREDIT") for account of the Company or any of its
Subsidiaries (as specified by the Company), PROVIDED that in no event shall (i)
the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Series A Loans, exceed the aggregate amount of
the Series A Commitments as in effect from time to time, (ii) the outstanding
aggregate amount of all Letter of Credit Liabilities exceed $15,000,000 and
(iii) the expiration date of any Letter of Credit extend beyond the earlier of
the Series A Commitment Termination Date and the date twelve months following
the issuance of such Letter of Credit. The following additional provisions shall
apply to Letters of Credit:
(a) The Company shall give the Administrative Agent at least
three Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than thirty days preceding
the Series A Commitment Termination Date) each Letter of Credit is to be issued
and the account party or parties therefor and describing in reasonable detail
the proposed terms of such Letter of Credit (including the beneficiary thereof)
and the nature of the transactions or obligations proposed to be supported
thereby (including whether such Letter of Credit is to be a commercial letter of
credit or a standby letter of credit). Upon receipt of any such notice, the
Administrative Agent shall advise the Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by
the Issuing Lender of any Letter of Credit and until such Letter of Credit shall
have expired or been terminated, the Series A Commitment of each Series A Lender
shall be deemed to be utilized for
CREDIT AGREEMENT
<PAGE> 27
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all purposes of this Agreement in an amount equal to such Lender's Series A
Commitment Percentage of the then undrawn face amount of such Letter of Credit.
Each Series A Lender (other than the Issuing Lender) agrees that, upon the
issuance of any Letter of Credit hereunder, it shall automatically acquire a
participation in the Issuing Lender's liability under such Letter of Credit in
an amount equal to such Lender's Series A Commitment Percentage of such
liability, and each Series A Lender (other than the Issuing Lender) thereby
shall absolutely, unconditionally and irrevocably assume, as primary obligor and
not as surety, and shall be unconditionally obligated to the Issuing Lender to
pay and discharge when due, its Series A Commitment Percentage of the Issuing
Lender's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Company (through the Administrative Agent) of the amount to
be paid by the Issuing Lender as a result of such demand and the date on which
payment is to be made by the Issuing Lender to such beneficiary in respect of
such demand. Notwithstanding the identity of the account party of any Letter of
Credit, the Company hereby unconditionally agrees to pay and reimburse the
Administrative Agent for account of the Issuing Lender for the amount of each
demand for payment under such Letter of Credit at or prior to the date on which
payment is to be made by the Issuing Lender to the beneficiary thereunder,
without presentment, demand, protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in clause
(c) of this Section 2.03, the Company shall advise the Administrative Agent
whether or not the Company intends to borrow hereunder to finance its obligation
to reimburse the Issuing Lender for the amount of the related demand for payment
and, if it does, submit a notice of such borrowing as provided in Section 4.05
hereof. In the event that the Company fails to so advise the Administrative
Agent, or if the Company fails to reimburse the Issuing Lender for a demand for
payment under a Letter of Credit by the date of such payment, the Administrative
Agent shall give each Series A Lender prompt notice of the amount of the demand
for payment, specifying such Lender's Series A Commitment Percentage of the
amount of the related demand for payment.
(e) Each Series A Lender (other than the Issuing Lender) shall
pay to the Administrative Agent for account of the Issuing Lender at the
Principal Office in Dollars and in immediately available funds, the amount of
such Lender's Series A Commitment Percentage of any payment under a Letter of
Credit upon notice by the Issuing Lender (through the Administrative Agent) to
such Series A Lender requesting such payment and specifying such amount;
PROVIDED that such Series A Lender shall not be obligated to reimburse the
Issuing Bank if such payment is the result of the willful misconduct or gross
negligence of the Issuing Bank in determining that the request or demand for
such payment complied with the terms of such Letter of Credit. Each such Series
A Lender's obligation to make such payments to the Administrative Agent for
account of the Issuing Lender under this clause (e), and the Issuing Lender's
right to receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, (i) the
failure of any other Series A Lender to make its payment under this clause (e),
the financial condition of the Company (or any
CREDIT AGREEMENT
<PAGE> 28
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other account party), the existence of any Default or (ii) the termination of
the Commitments. Each such payment to the Issuing Lender shall be made without
any offset, abatement, withholding or reduction whatsoever. If any Series A
Lender shall default in its obligation to make any such payment to the
Administrative Agent for account of the Issuing Lender, for so long as such
default shall continue the Administrative Agent shall at the request of the
Issuing Bank withhold from any payments received by the Administrative Agent
under this Agreement or any Note for account of such Series A Lender the amount
so in default and the Administrative Agent shall pay the same to the Issuing
Lender in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Series A Lender to the
Issuing Lender pursuant to clause (e) above in respect of any Letter of Credit,
such Lender shall, automatically and without any further action on the part of
the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a
participation in an amount equal to such payment in the Reimbursement Obligation
owing to the Issuing Lender by the Company hereunder and under the Letter of
Credit Documents relating to such Letter of Credit and (ii) a participation in a
percentage equal to such Lender's Series A Commitment Percentage in any interest
or other amounts payable by the Company hereunder and under such Letter of
Credit Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Lender pursuant
to clause (g) of this Section 2.03). Upon receipt by the Issuing Lender from or
for account of the Company of any payment in respect of any Reimbursement
Obligation or any such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) the Issuing Lender shall
promptly pay to the Administrative Agent for account of each Series A Lender
entitled thereto, such Series A Lender's Series A Commitment Percentage of such
payment, each such payment by the Issuing Lender to be made in the same money
and funds in which received by the Issuing Lender. In the event any payment
received by the Issuing Lender and so paid to the Series A Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Lender, each Series A
Lender shall, upon the request of the Issuing Lender (through the Administrative
Agent), repay to the Issuing Lender (through the Administrative Agent) the
amount of such payment paid to such Lender, with interest as specified in clause
(j) of this Section 2.03.
(g) The Company shall pay to the Administrative Agent for account
of the Series A Lenders in respect of each Letter of Credit a letter of credit
fee in an amount equal to the product of the Applicable Margin for Eurodollar
Loans TIMES the daily average undrawn amount of such Letter of Credit for the
period from and including the date of issuance of such Letter of Credit to and
including the date such Letter of Credit is drawn in full, expires or is
terminated (such fee to be non-refundable, to be paid in arrears on each
Quarterly Date and on the Series A Commitment Termination Date and to be
calculated, for any day, after giving effect to any payments made under such
Letter of Credit on such day). In addition, the Company shall pay to the
Administrative Agent for account of the Issuing Lender all commissions, charges,
costs and expenses in the amounts customarily charged by the Issuing Lender from
time to time in like circumstances with respect to the issuance of each Letter
of Credit and drawings and other transactions relating thereto.
CREDIT AGREEMENT
<PAGE> 29
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(h) Promptly following the end of each calendar month, the
Issuing Lender shall deliver (through the Administrative Agent) to each Series A
Lender and the Company a notice describing the aggregate amount of all Letters
of Credit outstanding at the end of such month. Upon the request of any Series A
Lender from time to time, the Issuing Lender shall deliver any other information
reasonably requested by such Lender with respect to each Letter of Credit then
outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 6 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be in
such form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Lender consistent with its then current practices
and procedures with respect to letters of credit of the same type and (ii) the
Company shall have executed and delivered such applications, agreements and
other instruments relating to such Letter of Credit as the Issuing Lender shall
have reasonably requested consistent with its then current practices and
procedures with respect to letters of credit of the same type, provided that in
the event of any conflict between any such application, agreement or other
instrument and the provisions of this Agreement or any Security Document, the
provisions of this Agreement and the Security Documents shall control.
(j) To the extent that any Series A Lender fails to pay any
amount required to be paid pursuant to clause (e) or (f) of this Section 2.03 on
the due date therefor, such Lender shall pay interest to the Issuing Lender
(through the Administrative Agent) on such amount from and including such due
date to but excluding the date such payment is made (i) during the period from
and including such due date to but excluding the date three Business Days
thereafter, at a rate per annum equal to the Federal Funds Rate (as in effect
from time to time) and (ii) thereafter, at a rate per annum equal to the Base
Rate (as in effect from time to time) plus 2%.
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new Letters of
Credit, and no such modification or supplement shall be issued hereunder unless
either (x) the respective Letter of Credit affected thereby would have complied
with such conditions had it originally been issued hereunder in such modified or
supplemented form or (y) each Series A Lender shall have consented thereto.
(l) Pursuant to Section 2.03 of the Existing Credit Agreement,
Chase has issued the Letters of Credit identified on Schedule V hereto (the
"EXISTING LETTERS OF CREDIT"). Each Series A Lender hereby agrees that each
Existing Letter of Credit shall constitute, on and after the Amendment Effective
Date, a Letter of Credit for all purposes of this Agreement.
The Company hereby indemnifies and holds harmless each Series A Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses which such Lender or the Administrative Agent may
incur (or which may be claimed against such Lender or the Administrative Agent
by any Person whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by the Issuing Lender under
any Letter of Credit; PROVIDED that the Company shall not be required
CREDIT AGREEMENT
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to indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) in the case of the Issuing
Lender, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the
other obligations of the Company, any Lender or the Administrative Agent under
this Agreement.
2.04 CHANGES OF COMMITMENTS.
(a) SERIES A COMMITMENTS.
(i) The Series A Commitments shall terminate on the Series A
Commitment Termination Date.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series A Loans or Letter of Credit Liabilities
are outstanding, to terminate the Series A Commitments and (y) to reduce
the aggregate unused amount of the Series A Commitments (for which
purpose use of the Series A Commitments shall be deemed to include the
aggregate amount of Letter of Credit Liabilities); PROVIDED that (A) the
Company shall give notice of each such termination or reduction as
provided in Section 4.05 hereof and (B) each partial reduction shall be
in an aggregate amount at least equal to $5,000,000 or in multiples of
$1,000,000 in excess thereof.
(b) SERIES B COMMITMENTS.
(i) The Series B Commitments shall terminate on the Series B
Commitment Termination Date.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series B Loans are outstanding, to terminate the
Series B Commitments and (y) to reduce the aggregate amount of the
Series B Commitments; PROVIDED that (A) the Company shall give notice of
each such termination or reduction as provided in Section 4.05 hereof;
(B) each partial reduction shall be in an aggregate amount at least
equal to $5,000,000 or in multiples of $1,000,000 in excess thereof; and
(C) to the extent that, after giving effect to any such reduction, the
aggregate principal amount of the Series B Loans would exceed the Series
B Commitments, the Company shall prepay the Series B Loans.
(c) ALL COMMITMENTS. The Commitments once terminated or reduced
may not be reinstated.
2.05 COMMITMENT FEE. The Company shall pay to the Administrative
Agent for account of (i) each Series A Lender a commitment fee on the daily
average unused amount of
CREDIT AGREEMENT
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such Lender's Series A Commitment (for which purpose Letter of Credit
Liabilities shall be deemed to be a use of any Lender's Series A Commitment) and
(ii) each Series B Lender a commitment fee on the daily average unused amount of
such Lender's Series B Commitment, for the period from and including the
Amendment Effective Date to but not including the date such Commitment is
terminated, at a rate per annum equal to the Commitment Fee Rate. Accrued
commitment fee shall be payable on each Quarterly Date and on the date the
relevant Commitments are terminated.
2.06 LENDING OFFICES. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither any Lender nor the Administrative Agent shall be responsible
for the failure of any other Lender to make a Loan to be made by such other
Lender, and no Lender shall have any obligation to the Administrative Agent
(except as provided in Section 4.06 hereof) or any other Lender for the failure
by such Lender to make any Loan required to be made by such Lender.
2.08 EVIDENCE OF DEBT.
(a) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the Company to
such Lender resulting from each Loan made or continued hereunder by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made or continued hereunder, the Class
and Type thereof and the Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender's
share thereof.
(c) The entries made in the accounts maintained pursuant to
paragraph (a) or (b) of this Section 2.08 shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Company
to repay the Loans in accordance with the terms of this Agreement.
(d) Any Lender may request that Loans made or continued by it
hereunder be evidenced by a promissory note(s). In such event, the Company, at
its own expense, shall prepare, execute and deliver to such Lender a promissory
note(s) payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and in a form approved by the
Administrative Agent and such note(s) shall be evidence of such Loans (and all
amounts payable in respect thereof).
CREDIT AGREEMENT
<PAGE> 32
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2.09 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF
LOANS. Subject to Sections 4.04 and 5.05 hereof, the Company shall have the
right to prepay Loans, or to Convert Loans of one Type into Loans of another
Type or Continue Loans of one Type as Loans of the same Type, at any time or
from time to time, PROVIDED that the Company shall give the Administrative Agent
notice of each such prepayment, Conversion or Continuation as provided in
Section 4.05 hereof (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder) and
PROVIDED further that any prepayment of the principal of the Series B Loans
shall be applied to reduce the then remaining installments thereof on a pro rata
basis (based on the then remaining principal amount of each such installment).
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Company to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) [Intentionally Omitted]
(b) CASUALTY EVENTS. Unless the Company or any of its
Subsidiaries, as the case may be, shall have irrevocably committed to repair or
replace any Property of the Company or such Subsidiary affected by a Casualty
Event, on the date 30 days following the receipt by the Company of the proceeds
of insurance, condemnation award or other compensation in respect of such
Casualty Event affecting such Property (or upon such earlier date as the Company
or such Subsidiary, as the case may be, shall have determined not to repair or
replace the Property affected by such Casualty Event), the Company shall prepay
the Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (f) below), and the Commitments shall be subject to automatic reduction,
in an aggregate amount, if any, equal to 75% of the Net Available Proceeds of
such Casualty Event not theretofore applied to the repair or replacement of such
Property (or reserved by the Company for application to such purposes), such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10. Nothing in this clause (b)
shall be deemed to limit any obligation of the Company or any of its
Subsidiaries pursuant to any of the Security Documents to remit to a collateral
or similar account (including, without limitation, the Collateral Account)
maintained by the Administrative Agent pursuant to any of the Security Documents
the proceeds of insurance, condemnation award or other compensation received in
respect of any Casualty Event.
(c) RECAPTURE OF PROCEEDS FROM ASSET SALES. In the event of a
Disposition, the Company shall deposit 75% of the Net Available Proceeds
therefrom into the Collateral Account no later than five Business Days after
receipt thereof; PROVIDED that prior to such deposit the Company may invest such
Net Available Proceeds, or after such deposit the Company may withdraw such Net
Available Proceeds from the Collateral Account within 270 days after such
CREDIT AGREEMENT
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Disposition so long as immediately thereafter such Net Available Proceeds are
invested, in Property to be used by the Company or any of its Subsidiaries in
the lines of business in which the Company or any of its Subsidiaries is engaged
as of the Restatement Date or in any business related thereto. No later than 270
days following the occurrence of any such Disposition, the Company will deliver
to the Lenders a statement, certified by the chief financial officer of the
Company, in form and detail satisfactory to the Administrative Agent, of the
amount of the Net Available Proceeds of such Disposition not applied as
contemplated by the immediately preceding sentence and, on the first Recapture
Date thereafter, the Company shall withdraw the remaining Net Available Proceeds
from the Collateral Account and prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in clause (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 75% of the Net Available Proceeds received or which become available
for prepayment or reduction during such Recapture Period ending on such
Recapture Date, such prepayment and reduction to be effected in each case in the
manner and to the extent specified in clause (e) of this Section 2.10. In
addition to the foregoing, to the extent the remaining 25% of the Net Available
Proceeds from such Disposition would become "Excess Proceeds" (as defined in the
Senior Subordinated Indenture[s]) under clause (b) of Section 1016 of the Senior
Subordinated Indenture[s] (the "REMAINDER AMOUNT"), the Company shall,
immediately prior to such Remainder Amount becoming "Excess Proceeds" as
aforesaid, prepay the Loans (and/or provide cover for Letter of Credit
Liabilities as specified in clause (f) below), and the Commitments shall be
subject to automatic reduction, in an aggregate amount equal to such Remainder
Amount, such prepayment and reduction to be effected in each case in the manner
and to the extent specified in clause (e) of this Section 2.10. Nothing in this
Section 2.10(c) shall be deemed to excuse or otherwise limit the obligation of
the Company to obtain the consent of the Majority Lenders pursuant to Section
8.05 hereof to any Disposition not otherwise permitted hereunder.
(d) REVERSIONS. Without limiting the obligation of the Company
under Section 8.01(c) hereof, upon any Reversion the Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (f) below), and the Commitments shall be subject to automatic reduction,
in an aggregate amount equal to 75% of the Net Available Proceeds thereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10.
(e) APPLICATION. Prepayments and reductions of Commitments
described in the above clauses of this Section 2.10 shall be effected as
follows:
(i) first, the Series B Loans shall be prepaid in an amount equal
to the prepayment or reduction specified in such clauses (such
prepayments shall be applied first to Base Rate Loans and then to
Eurodollar Loans) and shall be applied to the installments of the Series
B Loans on a pro rata basis (based on the then remaining principal
amount of each such installment); and
(ii) second, any excess over the amount referred to in the
foregoing clause (i) shall automatically reduce the Series A Commitments
(and to the extent that, after giving effect to such reduction, the
aggregate principal amount of Series A Loans, together with
CREDIT AGREEMENT
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the aggregate amount of all Letter of Credit Liabilities, would exceed
the Series A Commitments, the Company shall, first, prepay Series A
Loans (such prepayments shall be applied first to Base Rate Loans and
then to Eurodollar Loans) and, second, provide cover for Letter of
Credit Liabilities as specified in clause (f) below, in an aggregate
amount equal to such excess).
(f) COVER FOR LETTER OF CREDIT LIABILITIES. In the event that the
Company shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided therein as collateral security in the first
instance for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of the Letter of Credit Liabilities
paid in full.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF LOANS.
(a) The Company hereby promises to pay to the Administrative
Agent for account of each Series A Lender the entire outstanding principal
amount of such Lender's Series A Loans, and each Series A Loan shall mature, on
the Series A Commitment Termination Date.
(b) Subject to Sections 2.09 and 2.10 hereof, the Company hereby
promises to pay to the Administrative Agent for account of each Series B Lender
the principal amount of each of such Lender's Series B Loans in twenty (20)
consecutive quarterly installments, commencing on the Quarterly Date falling
approximately three (3) months after the Series B Commitment Termination Date
and on each of the nineteen (19) Quarterly Dates thereafter, the first eight (8)
of which shall each be in an amount equal to 2.5% of the initial principal
amount of such Series B Loan, the next four (4) of which shall each be in an
amount equal to 4% of the initial principal amount of such Series B Loan, the
next four (4) of which shall each be in an amount equal to 7% of the initial
principal amount of such Series B Loan, and the last four (4) of which shall
each be in an amount equal to 9% of the initial principal amount of such Series
B Loan.
3.02 INTEREST. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the
Base Rate (as in effect from time to time) PLUS the Applicable Margin (if any)
and
CREDIT AGREEMENT
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(b) during such periods as such Loan is a Eurodollar Loan, for
each Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period PLUS the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Company hereunder or under the Notes held by such Lender to or for account
of such Lender, which shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) in the case of any Loan, upon
the payment or prepayment thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal amount so paid, prepaid or Converted),
except that interest payable at the Post-Default Rate shall be payable from time
to time on demand. Promptly after the determination of any interest rate
provided for herein or any change therein, the Administrative Agent shall give
notice thereof to the Lenders to which such interest is payable and to the
Company.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest, Reimbursement Obligations and other amounts to be made
by the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Company under any
other Basic Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Company, not later than 1:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made
may (but shall not be obligated to) debit the amount of any such payment that is
not made by such time to any ordinary deposit account of the Company with such
Lender (with notice to the Company and the Administrative Agent).
(c) The Company shall, at the time of making each payment under
this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans, Reimbursement Obligations or other amounts payable by the Company
hereunder to which such payment is to be applied (and in the
CREDIT AGREEMENT
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event that the Company fails to so specify, or if an Event of Default has
occurred and is continuing, the Administrative Agent may distribute such payment
to the Lenders for application in such manner as it or the Majority Lenders,
subject to Section 4.02 hereof, may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence
of Section 2.03(e) hereof, each payment received by the Administrative Agent
under this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date shall
be extended to the next succeeding Business Day, and interest shall be payable
for any principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 hereof shall be made from the relevant Lenders, each payment of
commitment fee under Section 2.05 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular Class
under Section 2.04 hereof and under Section 2.10(e) hereof shall be applied to
the respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class; (b) the
making, Conversion and Continuation of Series A Loans and Series B Loans of a
particular Type (other than Conversions provided for by Section 5.04 hereof)
shall be made pro rata among the relevant Lenders according to the amounts of
their respective Series A and Series B Commitments (in the case of making of
Loans) or their respective Series A and Series B Loans (in the case of
Conversions and Continuations of Loans) and the then current Interest Period for
each Eurodollar Loan shall be coterminous; (c) each payment or prepayment of
principal of Series A Loans or Series B Loans by the Company shall be made for
account of the relevant Lenders pro rata in accordance with the respective
unpaid principal amounts of the Loans of such Class held by them; and (d) each
payment of interest on Series A Loans and Series B Loans by the Company shall be
made for account of the relevant Lenders pro rata in accordance with the amounts
of interest on such Loans then due and payable to the respective Lenders.
4.03 COMPUTATIONS. Interest on Eurodollar Loans and Reimbursement
Obligations and commitment fee and letter of credit fee shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each date that the Base Rate is calculated by
reference to the Federal Funds Rate, interest on Base Rate Loans shall be
computed on the basis of a year of 360 days and actual days elapsed.
CREDIT AGREEMENT
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4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made
pursuant to Section 2.10 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, (i) each borrowing, Conversion and partial prepayment of
principal of Series A Loans shall be in multiples of $1,000,000 and (ii) each
borrowing, Conversion or partial prepayment of principal of Series B Loans shall
be in multiples of $1,000,000 (borrowings, Conversions or prepayments of or into
Loans of different Types, or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period). Anything in this Agreement to the contrary notwithstanding,
the aggregate principal amount of Eurodollar Loans having the same Interest
Period shall be in an amount at least equal to $5,000,000 or in multiples of
$1,000,000 in excess thereof and, if any Eurodollar Loans would otherwise be in
a lesser principal amount for any period, such Loans shall be Base Rate Loans
during such period.
4.05 CERTAIN NOTICES. Notices by the Company to the
Administrative Agent of terminations or reductions of the Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans and of
Classes of Loans and of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent not later than 10:00 a.m. New York time on the number of
Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
Number of Business Notice Days Prior
- ------------------------------------- ----------
Termination or reduction 3
of Commitments
Borrowing or prepayment of, 1
or Conversions into,
Base Rate Loans
Borrowing or prepayment of, 3
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Company fails to select the Type of Loan, or the duration of any Interest Period
for any Eurodollar Loan, within the time period and otherwise as provided in
this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted
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into a Base Rate Loan on the last day of the then current Interest Period for
such Loan or (if outstanding as a Base Rate Loan) will remain as, or (if not
then outstanding) will be made as, a Base Rate Loan.
4.06 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"PAYOR") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender, or a participation in a Letter of Credit drawing to be
acquired by such Lender, hereunder or (in the case of the Company) a payment to
the Administrative Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "REQUIRED PAYMENT"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "ADVANCE DATE") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, PROVIDED that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made
by the Company to the Lenders, the Company and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (and, in case
the recipient(s) shall return the Required Payment to the Administrative
Agent, without limiting the obligation of the Company under Section 3.02
hereof to pay interest to such recipient(s) at the Post-Default Rate in
respect of the Required Payment) and
(ii) if the Required Payment shall represent proceeds of a loan
to be made by the Lenders to the Company, the Payor and the Company
shall each be obligated retroactively to the Advance Date to pay
interest in respect of the Required Payment at the rate of interest
provided for such Required Payment pursuant to Section 3.02 hereof (and,
in case the Company shall return the Required Payment to the
Administrative Agent, without limiting any claim the Company may have
against the Payor in respect of the Required Payment).
4.07 SHARING OF PAYMENTS, ETC.
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(a) The Company agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option, to offset balances
held by it for account of the Company at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Lender's
Loans, Reimbursement Obligations or any other amount payable to such Lender
hereunder, that is not paid when due (regardless of whether such balances are
then due to the Company), in which case it shall promptly notify the Company and
the Administrative Agent thereof, PROVIDED that such Lender's failure to give
such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from the Company payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Basic Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by the Company to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans of such Class or Letter of Credit Liabilities or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to each of the Lender. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
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Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Company shall pay directly to each Lender from time to
time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"ADDITIONAL COSTS"), resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(other than taxes imposed on or measured by the overall net income of
such Lender or of its Applicable Lending Office for any of such Loans by
the jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender
(including, without limitation, the Commitments of such Lender
hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.04 hereof shall be applicable), PROVIDED that
such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of paragraph
(a) of this Section 5.01, in the event that, by reason of any Regulatory Change,
any Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender that includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if such Lender so
elects by notice to the Company (with a copy to the
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Administrative Agent), the obligation of such Lender to make or Continue, or to
Convert Base Rate Loans into, Eurodollar Loans hereunder shall be suspended
until such Regulatory Change ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of
this Section 5.01 (but without duplication), the Company shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office or such bank holding company), pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law and whether or not failure to complete therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or other
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) heretofore or hereafter issued by
any government or governmental or supervisory authority implementing at the
national level the Basle Accord (including, without limitation, the Final
Risk-Based Capital Guidelines of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the
Final Risk-Based Capital Guidelines of the Office of the Comptroller of the
Currency (12 C.F.R. Part 3, Appendix A)), of capital in respect of its
Commitments or Loans (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of such
Lender (or any Applicable Lending Office or such bank holding company) to a
level below that which such Lender (or any Applicable Lending Office or such
bank holding company) could have achieved but for such law, regulation,
interpretation, directive or request). For purposes of this Section 5.01(c) and
Section 5.06 hereof, "BASLE ACCORD" shall mean the proposals for risk-based
capital framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
(d) Each Lender shall notify the Company of any event occurring
after the Amendment Effective Date entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within 45 days, after such Lender obtains actual knowledge thereof;
PROVIDED that (i) if any Lender fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States of
America. Each Lender will furnish to the Company a certificate setting forth the
basis and amount of each request by such Lender for compensation under paragraph
(a) or (c) of this Section 5.01. Determinations and allocations by any Lender
for purposes of this
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Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or
(b) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (c) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, PROVIDED that such determinations
and allocations are made on a reasonable basis.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Base Rate for any Interest Period:
(a) the Administrative Agent reasonably determines, which
determination shall be conclusive, that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Base Rate" in
Section 1.01 hereof are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Series A Loans, the Majority Series
A Lenders or, if the related Loans are Series B Loans, the Majority Series B
Lenders reasonably determine, which determination shall be conclusive, and
notify the Administrative Agent that the relevant rates of interest referred to
in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the
basis of which the rate of interest for Eurodollar Loans for such Interest
Period is to be determined are not likely adequately to cover the cost to such
Lenders of making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Company shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Administrative Agent) and such Lender's obligation to make
or Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall
be suspended until such time as such Lender may again make and maintain
Eurodollar Loans (in which case the provisions of Section 5.04 hereof shall be
applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender
to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof,
such Lender's Eurodollar Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest
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Period(s) for Eurodollar Loans (or, in the case of a Conversion required by
Section 5.01(b) or 5.03 hereof, on such earlier date as such Lender may specify
to the Company with a copy to the Administrative Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified in
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been
so Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Eurodollar Loans shall be applied instead to its Base
Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be Converted
into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, Types and Interest
Periods) in accordance with their respective Commitments.
5.05 COMPENSATION. The Company shall pay to the Administrative
Agent for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion
of a Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 9 hereof) on a
date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in Section
6 hereof to be satisfied) to borrow a Eurodollar Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period
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from the date of such payment, prepayment, Conversion or failure to borrow to
the last day of the then current Interest Period for such Loan (or, in the case
of a failure to borrow, the Interest Period for such Loan that would have
commenced on the date specified for such borrowing) at the applicable rate of
interest for such Loan provided for herein over (ii) the amount of interest that
otherwise would have accrued on such principal amount at a rate per annum equal
to the interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
5.06 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without
limiting the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing or maintaining participations in) or
maintaining its obligation hereunder to issue (or purchase participations in)
any Letter of Credit hereunder or reduce any amount receivable by any Lender
hereunder in respect of any Letter of Credit (which increases in cost, or
reductions in amount receivable, shall be the result of such Lender's or
Lenders' reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Lender or Lenders (through
the Administrative Agent), the Company shall pay immediately to the
Administrative Agent for account of such Lender or Lenders, from time to time as
specified by such Lender or Lenders (through the Administrative Agent), such
additional amounts as shall be sufficient to compensate such Lender or Lenders
(through the Administrative Agent) for such increased costs or reductions in
amount. A statement as to such increased costs or reductions in amount incurred
by any such Lender or Lenders, submitted by such Lender or Lenders to the
Company shall be conclusive in the absence of manifest error as to the amount
thereof, PROVIDED that the determination of such increased costs or reductions
are made on a reasonable basis.
5.07 U.S. TAXES.
(a) The Company agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, PROVIDED
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Lender hereunder unless such Lender is,
on the Amendment Effective Date (or on the date it becomes a Lender as
provided in Section 11.06(b) hereof) and on the date of any change in
the Applicable Lending Office of such Lender, either entitled to submit
a Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it
CREDIT AGREEMENT
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hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the
Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person to comply with applicable certification,
information, documentation or other reporting requirements concerning
the nationality, residence, identity or connections with the United
States of America of such non-U.S. Person if such compliance is required
by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes.
For the purposes of this Section 5.07(a), (w) "FORM 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "FORM 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. PERSON" shall mean a citizen, national or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "U.S. TAXES" shall mean any
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Company
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
Section 6. CONDITIONS PRECEDENT.
6.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of the
amendment and restatement of the Existing Credit Agreement provided for hereby
is subject to the receipt by the Administrative Agent of the following
documents, each of which shall be satisfactory to the Administrative Agent (and
to the extent specified below, to each Lender) in form and substance:
(a) CORPORATE DOCUMENTS. The following documents, each certified
as indicated below:
(i) a copy of the charter, as amended and in effect, of the
Company certified as of a recent date by the Secretary of State of the
State of Delaware (or, if there have been no
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modifications to such charter from the copy thereof delivered by the
Company pursuant to the Existing Credit Agreement, a certificate of the
Secretary or an Assistant Secretary of the Company to that effect), and
a certificate from such Secretary of State dated as of a recent date as
to the good standing of and charter documents filed by the Company;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated the Amendment Effective Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of the
Company as amended and in effect at all times from the date on which the
resolutions referred to in clause (B) below were adopted to and
including the date of such certificate (or if there have been no
modifications to such by-laws from the copy thereof delivered by the
Company pursuant to the Existing Credit Agreement, a certificate of the
Secretary or an Assistant Secretary of the Company to that effect), (B)
that attached thereto is a true and complete copy of resolutions duly
adopted by the board of directors of the Company authorizing the
execution, delivery and performance of the amendment and restatement of
the Existing Credit Agreement and such other of the Basic Documents to
which the Company is or is intended to be a party and the extensions of
credit hereunder, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (C) that the
charter of the Company has not been amended since the date of the
certification thereto furnished pursuant to clause (i) above, and (D) as
to the incumbency and specimen signature of each officer of the Company
executing the amendment and restatement of the Existing Credit Agreement
and such other of the Basic Documents to which the Company is intended
to be a party and each other document to be delivered by the Company
from time to time in connection therewith (and the Administrative Agent
and each Lender may conclusively rely on such certificate until it
receives notice in writing from the Company to the contrary); and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signature of the Secretary or Assistant
Secretary, as the case may be, of the Company.
(b) OFFICER'S CERTIFICATE. A certificate of a senior officer of
the Company, dated the Amendment Effective Date, to the effect that (i) no
Default shall have occurred and be continuing and (ii) the representations and
warranties made by the Company in Section 7 hereof, and in each of the other
Basic Documents, are true and correct on and as of the Amendment Effective Date
with the same force and effect as if made on and as of such date (or, if any
such representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).
(c) OPINION OF COUNSEL TO THE COMPANY. An opinion, dated the
Amendment Effective Date, of Ropes & Gray, counsel to the Company, in form and
substance satisfactory to the Administrative Agent (and the Company hereby
instructs such counsel to deliver such opinions to the Lenders and the
Administrative Agent).
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(d) OPINION OF SPECIAL NEW YORK COUNSEL TO CHASE. An opinion,
dated the Amendment Effective Date, of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, in form and substance satisfactory to the
Administrative Agent.
(e) FINANCIAL INFORMATION. True, correct and complete copies of
the financial statements, projections and other information referred to in
Section 7.02 hereof.
(f) APPROVALS AND CONSENTS. Evidence that all necessary
governmental and third party filings, licenses, permits, consents and approvals
have been obtained by the Company and are in full force and effect on the
Amendment Effective Date.
(g) PAYMENT OF FEES AND EXPENSES. Evidence that (i) all principal
of and interest on, and all other amount owing in respect of, the loans made by
the Existing Lenders under the Existing Credit Agreement shall have been paid in
full and (ii) all fees and expenses payable to the Existing Lenders and the
Administrative Agent under the Existing Credit Agreement accrued to the
Amendment Effective Date and unpaid and such fees as the Company shall have
agreed to pay or deliver to the Administrative Agent in connection herewith,
including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to Chase in connection with the
negotiation, preparation, execution and delivery of the amendment and
restatement of the Existing Credit Agreement and the Notes and the other Basic
Documents and the extensions of credit hereunder (to the extent that statements
for such fees and expenses have been delivered to the Company) shall have been
paid in full.
(h) GOVERNMENTAL PROCEEDINGS; ETC. Evidence that no litigation or
similar proceeding is threatened by any governmental agency or authority or any
other person with respect to the execution and delivery of the amendment and
restatement of the Existing Credit Agreement, the Notes and the other Basic
Documents, and the consummation of the transactions herein or therein
contemplated which, in each case, the Lenders shall reasonably determine is
likely to have a material adverse effect on (i) the assets, business,
operations, or condition (financial or otherwise) or prospects of the Company
and its Subsidiaries taken as a whole or (ii) the timely payment of the Loans
and interest thereon or the enforceability of the Basic Documents or the rights
and remedies thereunder.
(i) LEVERAGE RATIO. A certificate of a senior officer of the
Company, dated the Amendment Effective Date, setting forth the Leverage Ratio as
at the Amendment Effective Date.
(j) SECURITY DOCUMENTS. The Security Documents duly executed and
delivered by the parties thereto, together with (x) stock certificates
representing all of the shares of each Domestic Subsidiary that is a Material
Subsidiary directly owned by the Company (except for B/E Advanced Thermal
Technologies, Inc.) and not less than 65% of the shares of each Foreign
Subsidiary that is a Material Subsidiary directly owned by the Company, together
with undated stock powers (or the equivalent with respect to the Foreign
Subsidiaries) duly signed in blank, (y) the limited liability company
certificates representing all of the ownership interest in In-
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Flight Entertainment, LLC, together with an undated transfer power duly signed
in blank and (z) such Uniform Commercial Code financing statements as the
Administrative Agent shall request.
(k) SENIOR NOTES. A certificate of a senior financial officer of
the Company, dated the Amendment Effective Date, stating that the Company's
9-3/4% Senior Notes due 2003 have been fully redeemed.
(l) OTHER DOCUMENTS. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Chase may reasonably request.
6.02 INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The obligation
of the Lenders to make any Loan or otherwise extend any credit to the Company
upon the occasion of each borrowing or other extension of credit hereunder
(including the initial borrowing) is subject to the further conditions precedent
that:
(a) Both immediately prior to the making of such Loan or other
extension of credit and also after giving effect thereto and to the intended use
thereof: (i) no Default shall have occurred and be continuing; (ii) the
representations and warranties made by the Company in Section 7 hereof, and in
each of the other Basic Documents, shall be true and correct on and as of the
date of the making of such Loan or other extension of credit with the same force
and effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date). Each notice of borrowing or request for the issuance of a Letter
of Credit by the Company hereunder shall constitute a certification by the
Company to the effect set forth in the preceding sentence (both as of the date
of such notice or request and, unless the Company otherwise notifies the
Administrative Agent prior to the date of such borrowing or issuance, as of the
date of such borrowing or issuance); and
(b) The Administrative Agent shall have received a certificate of
a senior financial officer of the Company setting forth in reasonable detail the
computations necessary to demonstrate that both immediately prior to the making
of such Loan or other extension of credit and immediately after giving effect
thereto, the Company is or will be in compliance with Section 1010 of the Senior
Subordinated Indentures.
Section 7. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Lenders that:
7.01 CORPORATE EXISTENCE. Each of the Company and its
Subsidiaries: (a) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which
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the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify could have a Material Adverse Effect.
7.02 FINANCIAL CONDITION.
(a) The Company has heretofore furnished to each of the Lenders
(i) the consolidated balance sheet of the Company and its Subsidiaries as at
February 22, 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of Deloitte & Touche,
and (ii) the consolidated balance sheet of the Company and its Subsidiaries as
at November 29, 1997 and the related consolidated statements of earnings,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal quarters ended on such date and for the three fiscal quarters ended on
such date. All such financial statements present fairly, in all material
respects, the financial position of the Company and its Subsidiaries as at, and
the results of operations for the fiscal year and fiscal quarter, ended on said
date, all in accordance with generally accepted accounting principles and
practices applied on a consistent basis (subject, in the case of such financial
statements as at November 29, 1997, to normal year-end audit adjustments).
Neither the Company nor any of its Subsidiaries has on the Restatement Date any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheets as at said dates.
(b) Since February 22, 1997, there has been no material adverse
change in the financial condition, operations, business or prospects of the
Company and its Subsidiaries from that set forth in said financial statements as
at said date.
7.03 LITIGATION. Except as disclosed to the Lenders in writing
prior to the Amendment Effective Date, there are no legal or arbitral
proceedings, or any proceedings by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of the Company) threatened
against the Company or any of its Subsidiaries which, if adversely determined,
could have a Material Adverse Effect.
7.04 NO BREACH. None of the execution and delivery of this
Agreement and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of the Company, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which the Company or any of its Subsidiaries is a party (including, without
limitation, the Senior Subordinated Indentures) or by which any of them or any
of their Property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or (except for Liens created
pursuant to the Security Documents) result in the creation or imposition of any
Lien upon any Property of the Company or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
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7.05 ACTION. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents; the execution, delivery and performance by the
Company of each of the Basic Documents have been duly authorized by all
necessary corporate action on its part (including, without limitation, any
required shareholder approvals); and this Agreement has been duly and validly
executed and delivered by the Company and constitutes, and each of the Notes and
the other Basic Documents to which it is a party when executed and delivered (in
the case of the Notes, for value) will constitute, its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7.06 APPROVALS. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Company of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.
7.07 USE OF CREDIT. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
any extension of credit hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 8.01(f)
hereof.
7.09 TAXES. The Company and its Domestic Subsidiaries are members
of an affiliated group of corporations filing consolidated returns for Federal
income tax purposes, of which the Company is the "common parent" (within the
meaning of Section 1504 of the Code) of such group. Except as set forth in
Schedule VI hereto, the Company and its Domestic Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any of its Domestic
Subsidiaries. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. The Company has not given or been requested to
give a waiver of the statute of limitations relating to the payment of Federal,
state, local and foreign taxes or other impositions.
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7.10 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor
any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule I hereto is a complete and correct list,
as of the Restatement Date, of each credit agreement, loan agreement, indenture,
purchase agreement, guarantee, letter of credit or other arrangement providing
for or otherwise relating to any Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, the Company or any
of its Subsidiaries the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) $1,000,000, and the aggregate principal or face
amount outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list,
as of the Restatement Date, of each Lien securing Indebtedness the aggregate
principal or face amount of which equals or exceeds $1,000,000 of any Person and
covering any Property of the Company or any of its Subsidiaries, and the
aggregate amount of such Indebtedness secured (or which may be secured) by each
such Lien and the Property covered by each such Lien is correctly described in
Part B of said Schedule I.
7.13 ENVIRONMENTAL MATTERS. Except as set forth in Schedule II
hereto, each of the Company and its Subsidiaries has obtained all environmental,
health and safety permits, licenses and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license or
authorization would not have a Material Adverse Effect. All of the permits,
licenses and authorizations that have been obtained are in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not have a Material Adverse Effect.
In addition, except as set forth in Schedule II hereto:
(a) To the Company's knowledge after due inquiry, no written
notice, notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been assessed
and no investigation or review is pending
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or threatened by any governmental or other entity with respect to any alleged
failure by the Company or any of its Subsidiaries to have any environmental,
health or safety permit, license or other authorization required under any
Environmental Law in connection with the conduct of the business of the Company
or any of its Subsidiaries or with respect to any generation, treatment,
storage, recycling, transportation, discharge or disposal, or any Release of any
Hazardous Materials generated by the Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns,
operates or leases a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act of 1976, as amended, or under
any comparable state or local statute; and
(i) to the Company's knowledge after due inquiry, no PCB
Transformers (as defined in the Toxic Substances Control Act, 15 U.S.C.
ss.1601, et seq., as amended, and the regulations relating thereto) are
present at any site or facility owned, operated or leased by the Company
or any of its Subsidiaries;
(ii) to the Company's knowledge after due inquiry, no asbestos or
asbestos-containing materials is present at any site or facility owned,
operated or leased by the Company or any of its Subsidiaries;
(iii) to the Company's knowledge after due inquiry, there are no
underground storage tanks or surface impoundments for Hazardous
Materials, active or abandoned, at any site or facility owned, operated
or leased by the Company or any of its Subsidiaries; and
(iv) to the Company's knowledge after due inquiry, no Hazardous
Materials have been Released by the Company or any of its Subsidiaries
at, on or under any site or facility now owned, operated or leased by
the Company or any of its Subsidiaries in a reportable quantity
established by any Environmental Law.
(c) To the Company's knowledge after due inquiry, neither the
Company nor any of its Subsidiaries has transported or arranged for the
transportation of any Hazardous Material to any location that is listed on the
National Priorities List ("NPL") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the NPL by the Environmental Protection Agency, or listed
in the Comprehensive Environmental Response and Liability Information System, as
provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"), or on any similar state or
local list or that is the subject of Federal, state or local enforcement actions
or other investigations that may lead to Environmental Claims against the
Company or any of its Subsidiaries.
(d) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Laws on any site or facility
owned, operated or leased by the Company or any of its Subsidiaries, and to the
Company's knowledge no government action has been taken or is in process that
could subject any such site or facility to such Liens. Neither the Company nor
any of its Subsidiaries would be required to place any notice or restriction
relating
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to the presence of Hazardous Materials at any site or facility owned by it in
any deed to the real property on which such site or facility is located.
(e) There have been no environmental investigations, written
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Company or any of its Subsidiaries in relation to any site
or facility now or previously owned, operated or leased by the Company or any of
its Subsidiaries which have not been made available to the Lenders.
7.14 CAPITALIZATION. The authorized capital stock of the Company
consists, on the Restatement Date, of an aggregate of 31,000,000 shares
consisting of (i) 30,000,000 shares of common stock, par value $0.01 per share,
of which 22,891,918 shares were, as at February 28, 1998 duly and validly issued
and outstanding, each of which shares is fully paid and nonassessable and (ii)
1,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares were outstanding as at February 28, 1998. As of the Restatement Date the
Company is registered with the Securities and Exchange Commission under the
Securities Exchange Act, and its shares of common stock are publicly owned and
traded on the NASDAQ National Market System. As of the Restatement Date, (x)
except for options to purchase 2,902,001 shares of the common stock of the
Company, there are no outstanding Equity Rights with respect to the Company and
(y) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital
stock of the Company nor are there any outstanding obligations of the Company or
any of its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of the Company or any of its Subsidiaries.
7.15 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary, (iii) the nature of the ownership interests held by each such
Person and the percentage of ownership of such Subsidiary represented by such
ownership interests and (iv) the total book value of the assets of each such
Subsidiary as of November 29, 1997. Except as disclosed in Part A of Schedule
III hereto, (x) each of the Company and its Subsidiaries owns, free and clear of
Liens (other than Liens created pursuant to the Security Documents), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule III hereto, (y) all of the issued
and outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all Investments (other than
Investments disclosed in Part A of said Schedule III hereto) of $1,000,000 or
more held by the Company or any of its Subsidiaries in any Person and, for each
such Investment, (x) the identity of the Person or Persons in which such
Investment has been made, (y) the nature of such Investment and (z) the amount
of such
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Investment. Except as disclosed in Part B of Schedule III hereto, each of the
Company and its Subsidiaries owns, free and clear of all Liens (other than Liens
created pursuant to the Security Documents), all such Investments.
(c) Except as set forth in Schedule III hereto, none of the
Subsidiaries of the Company is, on the Restatement Date, subject to any
indenture, agreement, instrument or other arrangement of the type described in
the last sentence of Section 8.17 hereof.
7.16 TITLE TO ASSETS. The Company owns and has on the Restatement
Date, and will own and have on the Amendment Effective Date, good and marketable
title (subject only to Liens permitted by Section 8.06 hereof) to the Properties
shown to be owned in the most recent financial statements referred to in Section
7.02 hereof (other than Properties disposed of in the ordinary course of
business or otherwise permitted to be disposed of pursuant to Section 8.05
hereof). The Company owns and has on the Restatement Date, and will own and have
on the Amendment Effective Date, good and marketable title to, and enjoys on the
Restatement Date, and will enjoy on the Amendment Effective Date, peaceful and
undisturbed possession of, all Properties (subject only to Liens permitted by
Section 8.06 hereof) that are necessary for the operation and conduct of its
businesses.
7.17 COMPLIANCE WITH LAW. Except as set forth in Schedule IV
hereto, each of the Company and its Subsidiaries is in compliance with all
applicable laws, rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities or bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
Property (including Environmental Laws), except such noncompliance as would not,
in the aggregate, have a Material Adverse Effect on the business, properties,
assets, operations, condition (financial or otherwise), or prospects of the
Company and its Subsidiaries, taken as a whole.
7.18 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Lender prior to the
Amendment Effective Date in connection with the negotiation, preparation or
delivery of this Agreement and the other Basic Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole (together
with the Information Memorandum which the Lenders acknowledge contains
projections based on certain assumptions therein stated) do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished on or
after the Amendment Effective Date by the Company and its Subsidiaries to the
Administrative Agent and the Lenders in connection with this Agreement and the
other Basic Documents and the transactions contemplated hereby and thereby will
be true, complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to the Company that
could have a Material Adverse Effect that has not been disclosed herein, in the
other Basic Documents or in a report, financial statement, exhibit,
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schedule, disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby or thereby.
7.19 YEAR 2000. Substantially all reprogramming required to
permit the proper functioning, in and following the year 2000, of (i) the
Company's computer systems and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others or with which the Company's
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be materially completed by July 1, 1999. The cost to the
Company of such reprogramming and testing and of the reasonable foreseeable
consequences of year 2000 to the Company (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or a Material Adverse Effect. Nothing herein shall preclude
the Company from making the foregoing representation after the making of an
Acquisition of any Person that is not in compliance with the above, so long as
the Company has prepared a plan prior to such Acquisition that sets forth, in
the reasonable judgment of the chief financial officer of the Company, the
action that the Company has taken or proposes to take to bring such Person into
compliance with the above.
Section 8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by the Company hereunder:
8.01 FINANCIAL STATEMENTS, ETC. The Company shall deliver to each
of the Lenders:
(a) as soon as available and in any event within 60 days after
the end of each of the first three quarterly fiscal periods of each fiscal year
of the Company, consolidated statements of earnings, stockholders' equity and
cash flows of the Company and its Subsidiaries, for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, setting forth in each case in comparative form the corresponding
consolidated figures for the corresponding period in the preceding fiscal year,
and the related consolidated balance sheet of the Company and its Subsidiaries,
as at the end of such period, setting forth in comparative form the
corresponding consolidated figures for the last day of the preceding fiscal
year, accompanied by a certificate of a senior financial officer of the Company,
which certificate shall state that said consolidated financial statements
present fairly, in all material respects, the consolidated financial condition
and results of operations of the Company and its Subsidiaries, in accordance
with generally accepted accounting principles, consistently applied, as at the
end of, and for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 105 days after
the end of each fiscal year of the Company, consolidated and consolidating
statements of operations and stockholders' equity of the Company and its
Subsidiaries, and consolidated statements of cash flows of the Company and its
Subsidiaries, for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the end
of such fiscal
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year, setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the preceding fiscal year, and
accompanied, (i) in the case of said consolidated statements and balance sheet
of the Company, by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that said
consolidated financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations of the Company and
its Subsidiaries as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and a report of such accountants
stating that, in making the examination necessary for their opinion, nothing
came to their attention, except as specifically stated, that caused them to
believe that the Company had failed to comply with Sections 8.09, 8.10, 8.11 and
8.12 hereof, or any other provisions hereof, insofar as they relate to
accounting matters, and (ii) in the case of said consolidating statements and
balance sheets, by a certificate of a senior financial officer of the Company
which certificate shall state that said consolidating financial statements
fairly present the respective individual unconsolidated financial condition and
results of operations of the Company and of each of its Subsidiaries, in each
case in accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year;
(c) as soon as available and in any event within 105 days after
the end of each fiscal year of the Company, statements of information concerning
net sales, operating earnings, depreciation and amortization of each division of
the Company and its Subsidiaries (including, without limitation, the Seating
Products Division, Galley Products Division, In-Flight Entertainment Division
and Service Division) for such period setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities exchange;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) as soon as possible, and in any event within ten days after
the Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a senior financial officer of the Company setting
forth details respecting such event or condition and the action, if any, that
the Company or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to PBGC by the
Company or an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of
such event (PROVIDED that a failure to meet the minimum funding standard
of Section 412 of the Code or Section 302 of ERISA, including, without
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limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of ERISA,
shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a
waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by the Company or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241
or 4245 of ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in
the loss of tax-exempt status of the trust of which such Plan is a part
if the Company or an ERISA Affiliate fails to timely provide security to
the Plan in accordance with the provisions of said Sections;
(g) promptly after the Company knows or has reason to believe
that any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or proposes to
take with respect thereto;
(h) Within 10 Business Days after the date of any Acquisition and
at the time of delivery of the financial statements for the first four Fiscal
Dates thereafter, PRO FORMA consolidated statements of earnings of the Company
and its Subsidiaries for the relevant Calculation Period and related PRO FORMA
consolidated balance sheet items necessary for the PRO FORMA calculation of
compliance with the covenants in this Agreement of the Company and its
Subsidiaries as of the last day of each fiscal quarter of the Company occurring
during such Calculation Period, prepared as though such Acquisition had
occurred, and any Funded Debt
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incurred or assumed by the Company or any of its Subsidiaries in connection with
such Acquisition had been incurred or assumed, on the first day of such
Calculation Period;
(i) with the delivery of the financial statements pursuant to
Sections 8.01(a) and 8.01(b) hereof, a statement of a senior financial officer
of the Company (A) listing each Disposition by the Company and its Subsidiaries
that occurred during the quarterly fiscal period ending on the date of such
financial statements if the Net Available Proceeds thereof exceeded $100,000 and
(B) setting forth in reasonable detail the Net Available Proceeds of each such
Disposition and the aggregate Net Available Proceeds since the first day of the
then current Recapture Period; and
(j) from time to time such other information regarding the
financial condition, operations, business or prospects of the Company or any of
its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as any
Lender or the Administrative Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a), (b) or (h) above, a certificate
of a senior financial officer of the Company (i) to the effect that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
that the Company has taken or proposes to take with respect thereto) and (ii)
setting forth in reasonable detail (x) the computations necessary to determine
whether the Company is in compliance with Sections 8.07(e), 8.07(g), 8.08(f),
8.08(h), 8.09, 8.10, 8.11 and 8.12 hereof, and (y) the Interest Coverage Ratio
and the Leverage Ratio as of the end of the respective quarterly fiscal period,
fiscal year or Calculation Period.
8.02 LITIGATION. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Subsidiaries, except proceedings which, if adversely determined, would not
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company will give to each Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities of,
the Company or any of its Subsidiaries and notice of any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation which,
if adversely determined, would not have a Material Adverse Effect.
8.03 EXISTENCE, ETC. The Company will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (PROVIDED that nothing in
this Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
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(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure to
comply with such requirements could have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves are
being maintained;
(d) maintain all of its Properties used or useful in its business
in good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by such
Lender or the Administrative Agent (as the case may be).
8.04 INSURANCE. The Company will, and will cause each of its
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations.
8.05 PROHIBITION OF FUNDAMENTAL CHANGES. The Company will not,
nor will it permit any of its Subsidiaries to, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution) or Dispose of all or
substantially all of its Property. The Company will not, nor will it permit any
of its Subsidiaries to, to make any Acquisition except for Investments permitted
under Section 8.08 hereof. Notwithstanding the foregoing provisions of this
Section 8.05:
(a) any Subsidiary of the Company may be merged or consolidated
with or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) any other such Subsidiary; PROVIDED that (x) if
any such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving
corporation;
(b) subject to Section 8.14 hereof, the Company or any Subsidiary
of the Company may make any Acquisition; PROVIDED that immediately prior to and
after giving effect to any such Acquisition, (i) no Default shall have occurred
and be continuing, (ii) not more than $25,000,000 of the proceeds of the Series
A Loans then outstanding shall have been applied,
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directly by the Company or indirectly through a Subsidiary, to the purchase
price of one or more Acquisitions; and
(c) the Company or any Subsidiary of the Company may make any
Acquisition from any Subsidiary of the Company in each case for consideration
that is not in excess of the fair market value of the Property acquired in such
Acquisition as determined in good faith by the chief financial officer of the
Company.
8.06 LIMITATION ON LIENS. The Company will not, nor will it
permit any of its Domestic Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon any of its Property, whether now owned or hereafter
acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens outstanding on the Restatement Date and listed in Part
B of Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good faith
and by appropriate proceedings if, unless the amount thereof is not material
with respect to it or its financial condition, adequate reserves with respect
thereto are maintained on the books of the Company or the affected Domestic
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings and Liens securing judgments but
only to the extent, for an amount and for a period not resulting in an Event of
Default under Section 9(h) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not in any case materially detract from the
value of the Property subject thereto or interfere with the ordinary conduct of
the business of the Company or any of its Domestic Subsidiaries;
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(h) Liens on Property of any corporation which becomes a Domestic
Subsidiary of the Company after the Restatement Date, PROVIDED that such Liens
are in existence at the time such corporation becomes a Domestic Subsidiary of
the Company and were not created in anticipation thereof;
(i) subject to the restrictions contained in the Security
Documents, Liens upon real and/or tangible personal Property and/or software and
license rights with respect to software (including, without limitation, software
and license rights with respect to software under the GE Lease Agreement)
acquired after the Restatement Date (by purchase, construction or otherwise) by
the Company or any of its Domestic Subsidiaries other than in connection with
any Acquisition by the Company or any of its Domestic Subsidiaries, each of
which Liens either (A) existed on such Property before the time of its
acquisition and was not created in anticipation thereof, or (B) was created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction) of
such Property; PROVIDED that no such Lien shall extend to or cover any Property
of the Company or such Domestic Subsidiary other than the Property so acquired
and improvements thereon; and PROVIDED, FURTHER, that the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of the fair
market value (as determined in good faith by a senior financial officer of the
Company) of such Property at the time it was acquired (by purchase, construction
or otherwise);
(j) additional Liens upon real and/or tangible personal Property
of the Company or any of its Domestic Subsidiaries created after the Restatement
Date, PROVIDED that the aggregate Indebtedness secured thereby and incurred on
and after the Restatement Date shall not exceed $20,000,000 in the aggregate at
any one time outstanding; and
(k) any extension, renewal or replacement of the foregoing,
PROVIDED, however, that the Liens permitted hereunder shall not be spread to
cover any additional Indebtedness or Property (other than a substitution of like
Property).
8.07 INDEBTEDNESS. The Company will not, nor will it permit any
of its Subsidiaries to, create, incur or suffer to exist any Indebtedness
except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding or committed on the Restatement Date
and, if equal to or in excess of $1,000,000, listed in Part A of Schedule I
hereto and any extension, renewal or replacement thereof;
(c) Indebtedness of Subsidiaries of the Company to the Company to
the extent contemplated by Section 8.08(d) hereof;
(d) Indebtedness of the Company to its Subsidiaries and
Indebtedness of Subsidiaries of the Company to other Subsidiaries of the
Company;
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(e) Indebtedness of the Company and its Subsidiaries secured by
Liens permitted under Sections 8.06(i) and 8.06(j) hereof;
(f) Guarantees by any Subsidiary of the Company of Indebtedness
of the Company or any Subsidiary of the Company;
(g) unsecured Indebtedness that has no regularly scheduled
maturity or mandatory prepayments on or before the Series A Commitment
Termination Date, that does not include required prepayments (including, without
limitation, as a result of a change of control or asset sale) on terms less
favorable to the Lenders than the Senior Subordinated Indentures, and that is
subordinated in right of payment to the Loans at least to the extent provided in
the Senior Subordinated Indentures; and
(h) additional unsecured Indebtedness of the Company and its
Subsidiaries up to but not exceeding in the aggregate $40,000,000 at any one
time outstanding; PROVIDED that any such Indebtedness of any such individual
Subsidiary may not exceed $10,000,000 in the aggregate at any one time
outstanding.
8.08 INVESTMENTS. The Company will not, nor will it permit any of
its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the Restatement Date and
identified in Schedule III Part B hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company in Subsidiaries of the Company in
the ordinary course of business; PROVIDED that the aggregate amount of the
Investments by the Company or any of its Subsidiaries in the Specified
Subsidiaries shall not exceed $5,000,000 at any one time outstanding; PROVIDED
FURTHER, that the Company will not at any time transfer any Property to any one
or more Subsidiaries which, together with all Property so transferred since the
Restatement Date, has a book value at the time of such transfer in excess of 5%
of Adjusted Net Worth as of the most recent Fiscal Date (not including Property
that is subject to a Lien in favor of the Administrative Agent for the benefit
of the Lenders);
(e) subject to the first proviso to clause (d) above, Investments
by Subsidiaries of the Company in other Subsidiaries of the Company and in the
Company in the ordinary course of business;
(f) Interest Rate Protection Agreements so long as the aggregate
credit exposure under all Interest Rate Protection Agreements calculated at the
time any Interest Rate Protection Agreement is entered into does not exceed
$10,000,000;
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(g) Investments permitted by clause (b) of the last sentence of
Section 8.05 hereof; and
(h) Investments of the Company and its Subsidiaries (i) in
corporations, companies, limited liability companies, partnerships and other
entities in each case that are not, or do not thereby become, Subsidiaries of
the Company ("Minority-Owned Entities") or (ii) representing obligations of
customers owing to the Company and its Subsidiaries in respect of the deferred
purchase price of products or services sold or the leasing of products to
customers ("Customer Obligations"), in each case in the ordinary course of
business of the Company and its Subsidiaries as provided for in Section 8.14
hereof and on such terms as the management of the Company may determine in its
reasonable business judgment, PROVIDED that the aggregate amount of such
Customer Obligations that are not fully secured (whether by a perfected Lien on,
or an indefeasible title retention to, the products so sold or leased, or
otherwise) PLUS the aggregate fair market value of all Property (whether now
owned or hereafter acquired) of the Company or any of its Subsidiaries (as
determined in good faith by the chief financial officer of the Company) sold,
assigned, transferred or otherwise disposed of on or after the Restatement Date
to any such Minority-Owned Entities shall not exceed in the aggregate at any one
time outstanding the greater of (i) $25,000,000 and (ii) 5% of Adjusted Net
Worth.
8.09 RESTRICTED PAYMENTS. The Company will not, nor will it
permit any of its Subsidiaries to, declare or make any Restricted Payment at any
time; PROVIDED that (i) the Company may make Restricted Payments in an amount up
to but not exceeding (A) $25,000,000 in the aggregate PLUS (B) in any fiscal
year of the Company, an aggregate amount up to but not exceeding 25% of the net
earnings of the Company for the immediately preceding fiscal year ("AVAILABLE
NET EARNINGS"), PROVIDED that any portion of Available Net Earnings not used for
Restricted Payments in any fiscal year (the "CARRY-OVER AMOUNT") may be used for
Restricted Payments in the immediately succeeding fiscal year only, for which
purpose Restricted Payments in any fiscal year shall be deemed to have been made
first from Available Net Earnings, and only thereafter from any Carry-Over
Amount, such Restricted Payments set forth in clauses (i)(A) and (B) hereof not
to exceed $50,000,000 in the aggregate, and (ii) any Subsidiary of the Company
may make Restricted Payments to the Company from time to time.
8.10 LEVERAGE RATIO. The Company will not permit the Leverage
Ratio to exceed the following respective ratios at any time during the following
respective periods:
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Period Ratio
------ -----
From (but not including) the
Fiscal Date in November 1997
through the Fiscal Date in
August 1998 5.25 to 1
From (but not including) the
Fiscal Date in August 1998
through the Fiscal Date in
February 1999 4.90 to 1
From (but not including) the
Fiscal Date in February 1999
through the Fiscal Date in
February 2000 4.50 to 1
From (but not including) the
Fiscal Date in February 2000
through the Fiscal Date in
February 2001 4.00 to 1
Thereafter 3.50 to 1
8.11 ADJUSTED NET WORTH. The Company will not at any date permit
Adjusted Net Worth to be less than the sum of (a) $150,000,000 PLUS (b) 75% of
the aggregate amount of Net Available Proceeds of Equity Issuances received
after November 29,1997 PLUS (c) 75% of the sum of consolidated net earnings of
the Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) for each fiscal quarter of the Company
ending after November 29, 1997; PROVIDED that consolidated net earnings for any
fiscal quarter in which there is a consolidated net loss shall be deemed to be
zero.
8.12 INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio to be less than the following respective ratios during
the following respective periods:
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Period Ratio
------ -----
From (but not including) the
Fiscal Date in November 1997
through the Fiscal Date in
August 1998 2.00 to 1
From (but not including) the
Fiscal Date in August 1998
through the Fiscal Date in
February 1999 2.25 to 1
From (but not including) the
Fiscal Date in February 1999
through the Fiscal Date in
February 2000 2.50 to 1
From (but not including) the
Fiscal Date in February 2000
through the Fiscal Date in
February 2001 2.75 to 1
Thereafter 3.00 to 1
8.13 [INTENTIONALLY OMITTED.]
8.14 LINES OF BUSINESS. Neither the Company nor any of its
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than the business of designing, manufacturing,
distributing, selling, leasing and servicing products used in the interior of
airplanes, buses and trains and servicing and acting as a broker in the sales
and leases of such products together with any other business reasonably related
to the foregoing.
8.15 TRANSACTIONS WITH AFFILIATES. Except as set forth in
Schedule VII hereto or as expressly permitted by this Agreement, the Company
will not, nor will it permit any of its Subsidiaries to, directly or indirectly:
(a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or
otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate
with or purchase or acquire Property from an Affiliate; or (d) enter into any
other transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, guarantees and assumptions of obligations of an
Affiliate); PROVIDED that (x) any Affiliate who is an individual may serve as a
director, officer or employee of the Company or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and (y)
the Company and its Subsidiaries may enter into transactions (other than
extensions of credit by the Company or any of its Subsidiaries to an Affiliate)
providing for the leasing of Property, the rendering or receipt of services or
the purchase or sale of inventory and other Property in the
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ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Company and its
Subsidiaries as the monetary or business consideration which would obtain in a
comparable transaction with a Person not an Affiliate.
8.16 USE OF PROCEEDS. The Company will use the proceeds of (i)
the Series A Loans hereunder solely to finance ongoing working capital and other
capital requirements of the Company and to finance Acquisitions (subject to
clause (b) of the last sentence of Section 8.05) (in compliance with all
applicable legal and regulatory requirements) and (ii) the Series B Loans
hereunder solely to finance Acquisitions (subject to clause (b) of the last
sentence of Section 8.05); provided that neither the Administrative Agent nor
any Lender shall have any responsibility as to the use of any of such proceeds.
8.17 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES.
(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that the
Company and each of its Subsidiaries at all times owns (subject only to the Lien
of the Security Documents) at least the same percentage of the issued and
outstanding shares of each class of stock or partnership or other ownership
interest of each of its Subsidiaries as is owned on the Restatement Date (or,
with respect to any Subsidiary acquired or organized after the date hereof, as
of the date of such acquisition or organization). Without limiting the
generality of the foregoing, none of the Company nor any of its Subsidiaries
shall sell, transfer, pledge or otherwise dispose of any shares of stock or
partnership or other ownership interest in any Subsidiary owned by them, nor
permit any Subsidiary to issue any shares of stock of any class or partnership
or other ownership interest whatsoever to any Person (other than to the Company
or the immediate parent of such Subsidiary which is a Wholly Owned Subsidiary of
the Company). In the event that (a) any such additional shares of stock or
partnership or other ownership interest shall be issued by any such Subsidiary
or (b) the Company shall directly or indirectly create any new Material
Subsidiary or Acquire any additional Material Subsidiary and shall thereby
become the owner, directly or indirectly, of the shares of capital stock or
partnership or other ownership interest of such new or additional Material
Subsidiary, the Company agrees forthwith to deliver to the Administrative Agent
pursuant to security documents satisfactory to the Banks, any shares,
certificates of ownership, membership interests or other evidence of ownership,
or other securities received as a result therefrom (together with undated stock
or other powers executed in blank) and shall give, execute, deliver, file and/or
record any financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve or validate the security interest created therein,
including, without limitation, causing any or all of the Collateral (as defined
in the Security Agreement and the In-Flight Guarantee and Security Agreement,
respectively) to be transferred of record into the name of the Administrative
Agent; PROVIDED that if any such Material Subsidiary is organized under the laws
of a jurisdiction other than the United States of America or a State thereof,
the Company need not pledge to the Administrative Agent more than 65% of the
capital stock, partnership or other ownership interest in such Material
Subsidiary.
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(b) The Company will not permit any of its Subsidiaries to enter
into, after the Restatement Date, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.
8.18 MODIFICATIONS OF CERTAIN DOCUMENTS. The Company will not
consent to (i) any modification, supplement or waiver of any of the provisions
of the Senior Subordinated Indentures or (ii) to the creation of any class of
preferred stock that has a mandatory dividend or redemption date prior to the
Series A Commitment Termination Date; PROVIDED that any Senior Subordinated
Indenture may be amended in connection with, and to facilitate, the purchase,
redemption, prepayment, defeasance or other retirement in full of the
Indebtedness issued pursuant thereto, which purchase, redemption, prepayment,
defeasance or other retirement is permitted hereunder.
8.19 ENVIRONMENTAL MATTERS.
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Laws applicable to the Company and each of its
Subsidiaries, except to the extent that failure to comply with such laws would
not have a Material Adverse Effect, and shall obtain, at or prior to the time
required by applicable Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for its operations and
maintain such authorizations in full force and effect.
(b) If the Company discovers evidence of the presence of any
Hazardous Materials in any amount that is required to be reported under
Environmental Law, the Company will promptly clean-up such Hazardous Materials
or take such other remedial action as is (a) required by law or (b) deemed
necessary by the Company in its reasonable determination, such determination to
be based in part on the advice of independent environmental consultants
acceptable to the Company and the Administrative Agent.
(c) The Company shall promptly furnish to the Administrative
Agent all written notices of any Environmental Claims received by the Company or
any of its Subsidiaries with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations issued thereunder in connection with the ownership, operation or
use of any site or facility or the operation of their businesses or the presence
or Release of Hazardous Substances, which Environmental Claim if determined
adversely to the Company would have a Material Adverse Effect.
8.20 SECURITY FOR LOANS. The Company shall, no later than 90 days
following the request by the Majority Lenders, file in each governmental office
or agency in each appropriate jurisdiction as owner of record of each of the
Foreign Trademarks identified on Annex 4 to the Security Agreement.
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8.21 REDEMPTION OF SENIOR SUBORDINATED INDEBTEDNESS. Except as
permitted by Section 8.09 hereof, the Company will not prepay, redeem, effect a
defeasance or covenant defeasance or otherwise retire any of the Indebtedness
issued pursuant to the Senior Subordinated Indentures.
Section 9. EVENTS OF DEFAULT. If one or more of the following
events (herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Company shall (i) default in the payment of any principal
of any Loan or any Reimbursement Obligation when due (whether at stated maturity
or upon mandatory or optional prepayment) or (ii) default in the payment of any
interest on any Loan, any fee or any other amount payable by it hereunder or
under any other Basic Document when due (whether at stated maturity or upon
mandatory or optional prepayment or otherwise) and such default shall have
continued unremedied for three or more Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $5,000,000 or more, or in the payment when due of any
amount aggregating $5,000,000 or more under any Interest Rate Protection
Agreement; or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness or any event specified
in any Interest Rate Protection Agreement shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of time or
both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the interest
rate thereon reset to a level so that securities evidencing such Indebtedness
trade at a level specified in relation to the par value thereof or, in the case
of an Interest Rate Protection Agreement, to permit the payments owing under
such Interest Rate Protection Agreement to be liquidated in an amount
aggregating $5,000,000 or more; or
(c) Any representation, warranty or certification made or deemed
made herein or in any other Basic Document (or in any modification or supplement
hereto or thereto) by the Company, or any certificate furnished to any Lender or
the Administrative Agent pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the time
made or furnished; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10,
8.11 or 8.12 hereof or the Company shall default in the performance of any of
its obligations under Section 5.02 of the Security Agreement; or the Company
shall default in the performance of any of its other obligations in this
Agreement or any other Basic Document and such default shall continue unremedied
for a period of thirty days after notice thereof to the Company by the
Administrative Agent or any
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Lender (through the Administrative Agent); or In-Flight shall default in the
performance of any of its obligations under Section 6.02 of the In-Flight
Guarantee and Security Agreement; or
(e) The Company or any of its Subsidiaries shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a substantial
part of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement or winding-up,
or composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of the Company or any of its Subsidiaries, in any court
of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Company or such Subsidiary or of all or any
substantial part of its Property, or (iii) similar relief in respect of the
Company or such Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more days; or an order for relief
against the Company or such Subsidiary shall be entered in an involuntary case
under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in
excess of $5,000,000 in the aggregate (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect of such
judgment) or in excess of $20,000,000 in the aggregate (regardless of insurance
coverage) shall be rendered by one or more courts, administrative tribunals or
other bodies having jurisdiction against the Company or any of its Subsidiaries
and the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30 days
from the date of entry thereof and the Company or the relevant Subsidiary shall
not, within said period of 30 days, or such longer period during which execution
of the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 8.01(f) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the opinion of
the Majority Lenders shall be reasonably likely to incur a liability to a Plan,
a Multiemployer Plan or PBGC (or any combination of the foregoing) which would
constitute, in the determination of the Majority Lenders, a Material Adverse
Effect; or
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(j) A reasonable basis shall exist for the assertion against the
Company or any of its Subsidiaries of (or there shall have been asserted against
the Company or any of its Subsidiaries) claims or liabilities, whether accrued,
absolute or contingent, based on or arising from the generation, storage,
transport, handling or disposal of Hazardous Materials by the Company or any of
its Subsidiaries or Affiliates, or any predecessor in interest of the Company or
any of its Subsidiaries or Affiliates, or relating to any site or facility
owned, operated or leased by the Company or any of its Subsidiaries or
Affiliates, which claims or liabilities (insofar as they are payable by the
Company or any of its Subsidiaries but after deducting any portion thereof which
is reasonably expected to be paid by other creditworthy Persons jointly and
severally liable therefor), in the judgment of the Majority Lenders are
reasonably likely to be determined adversely to the Company or any of its
Subsidiaries, and the amount thereof is, singly or in the aggregate, reasonably
likely to have a Material Adverse Effect; or
(k) Any "person" or "group" (as such terms are defined in
Sections 13(d) and 14(d) of the Securities Exchange Act (other than Amin or
Robert Khoury, their lineal descendants or trusts established by such Persons
for their respective lineal descendants)) is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of 30%
or more of the aggregate voting rights of the outstanding capital stock of the
Company (on a fully diluted basis); or during any consecutive 25-month period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by the
stockholders of the Company was approved by a vote of 66-2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; or
(l) Except for expiration in accordance with its terms, any of
the Security Documents shall be terminated or shall cease to be in full force
and effect, for whatever reason;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Company, the
Administrative Agent may, by notice to the Company, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable (PROVIDED that (x) if so requested by the Majority
Series A Lenders, the Administrative Agent shall take such action with respect
to the Series A Commitments and/or the Series A Loans, Reimbursement Obligations
and such interest and other amounts to the extent owed to the Series A Lenders
and (y) if so requested by the Majority Series B Lenders, the Administrative
Agent shall take such action with respect to the Series B Commitments and the
Series B Loans and such interest and other amounts to the extent owed to the
Series B Lenders), whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities
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of any kind, all of which are hereby expressly waived by the Company; and (2) in
the case of the occurrence of an Event of Default referred to in clause (f) or
(g) of this Section 9 with respect to the Company, the Commitments shall
automatically be terminated and the principal amount then outstanding of, and
the accrued interest on, the Loans, the Reimbursement Obligations and all other
amounts payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company.
In addition, upon the occurrence and during the continuance of
any Event of Default (if the Administrative Agent has declared the principal
amount then outstanding of, and accrued interest on, the Series A Loans and all
other amounts payable by the Company hereunder and under the Notes to be due and
payable), the Company agrees that it shall, if requested by the Administrative
Agent or the Majority Series A Lenders through the Administrative Agent (and, in
the case of any Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Company, forthwith, without any demand or the
taking of any other action by the Administrative Agent or such Lenders) provide
cover for the Letter of Credit Liabilities by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit Liabilities and be subject to withdrawal
only as therein provided.
Section 10. THE ADMINISTRATIVE AGENT.
10.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Basic Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and of the other Basic Documents, together with such other powers as
are reasonably incidental thereto. The Administrative Agent (which term as used
in this sentence and in Section 10.05 and the first sentence of Section 10.06
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Basic Documents, and shall not by reason of this Agreement or any other
Basic Document be a trustee for any Lender; (b) shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement or in any other Basic Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Basic Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
Note or any other Basic Document or any other document referred to or provided
for herein or therein or for any failure by the Company or any other Person to
perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document; and (d) shall not be responsible
for any action taken or omitted to be taken by it hereunder or under any other
Basic Document or under any other document or instrument referred to or provided
for herein or therein or in
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connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent, together with the consent of the Company to such assignment or transfer
(to the extent provided in Section 11.06(b) hereof).
10.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Basic Document, the Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or, if provided herein, in accordance with the instructions given by the
Majority Series A Lenders, the Majority Series B Lenders or all of the Lenders
as is required in such circumstance, and such instructions of such Lenders and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
10.03 DEFAULTS. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received notice from a Lender or the Company specifying
such Default and stating that such notice is a "Notice of Default". In the event
that the Administrative Agent receives such a notice of the occurrence of a
Default, the Administrative Agent shall give prompt notice thereof to the
Lenders. The Administrative Agent shall (subject to Section 10.07 hereof) take
such action with respect to such Default as shall be directed by the Majority
Lenders or, if provided herein, the Majority Series A Lenders or the Majority
Series B Lenders, PROVIDED that, unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Majority Lenders, the Majority Series A Lenders, the Majority Series B Lenders
or all of the Lenders.
10.04 RIGHTS AS A LENDER. With respect to its Commitments and the
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase and its affiliates may accept fees and other consideration
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from the Company for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
10.05 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Company under said Section 11.03,
and including in any event any payments under any indemnity that the
Administrative Agent is required to issue to any bank referred to in Section
4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and
Security Agreement to which remittances in respect of Accounts, as defined
therein, are to be made) ratably in accordance with the aggregate principal
amount of the Loans and Reimbursement Obligations held by the Lenders (or, if no
Loans or Reimbursement Obligations are at the time outstanding, ratably in
accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Administrative Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Basic Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Company is obligated to pay under Section 11.03
hereof, and including also any payments under any indemnity that the
Administrative Agent is required to issue to any bank referred to in Section
4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and
Security Agreement to which remittances in respect of Accounts, as defined
therein, are to be made, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, PROVIDED that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
10.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent shall
not be required to keep itself informed as to the performance or observance by
the Company of this Agreement or any of the other Basic Documents or any other
document referred to or provided for herein or therein or to inspect the
Properties or books of the Company or any of its Subsidiaries. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company or any of its Subsidiaries (or any of their
affiliates) that may come into the possession of the Administrative Agent or any
of its affiliates.
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10.07 FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder and under the other Basic Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
10.08 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, after consultations with the Company, appoint a successor
Administrative Agent, that shall be a bank which has an office in New York, New
York with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 10 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
10.09 CONSENTS UNDER BASIC DOCUMENTS. Except as otherwise
provided in Section 11.04 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Basic Documents, PROVIDED that, without the consent of each Lender, the
Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under the
Security Agreement, or agree to additional obligations being secured by such
collateral security (unless the Lien for such additional obligations shall be
junior to the Lien in favor of the other obligations secured by such Security
Documents), except that no such consent shall be required, and the
Administrative Agent is hereby authorized, to release any Lien covering Property
which (a) is the subject of a Disposition of Property permitted hereunder or to
which the Majority Lenders have consented, (b) consists of the membership
interests in In-Flight to which release the Majority Lenders have consented or
(c) consists of shares of any Subsidiary of the Company that is no longer a
Material Subsidiary.
10.10 COLLATERAL SUB-AGENTS. Each Lender by its execution and
delivery of this Agreement agrees, as contemplated by Section 4.03 of the
Security Agreement and Section 5.02 of the In-Flight Guarantee and Security
Agreement, that, in the event it shall hold any Permitted
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Investments referred to therein, such Permitted Investments shall be held in the
name and under the control of such Lender, and such Lender shall hold such
Permitted Investments as a collateral sub-agent for the Administrative Agent
thereunder. The Company by its execution and delivery of this Agreement hereby
consents to the foregoing.
10.11 DOCUMENTATION AGENT. The Documentation Agent identified on
the front cover page of this Agreement shall have no duties or responsibilities
hereunder other than as a Bank hereunder.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Administrative Agent
or any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this Agreement or any Note
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement or any Note preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
11.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at (i) in the case of the Company and the
Administrative Agent, the "Address for Notices" specified below its name on the
signature pages hereof) and (ii) in the case of each of the Lenders, the address
(or telecopy number) set forth in its Administrative Questionnaire; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement, all
such communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11.03 EXPENSES, ETC. The Company agrees to pay or reimburse each
of the Lenders and the Administrative Agent for paying: (a) all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase), in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement and the other Basic
Documents and the extension of credit hereunder and (ii) any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Basic Documents; (b) all reasonable costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, reasonable counsels' fees)
in connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom or in connection with the negotiation of any restructuring
or "work-out" (whether or not consummated), or the obligations of the Company
hereunder and (ii) the enforcement of this Section 11.03; and (c) all transfer,
stamp, documentary, intangibles or other similar taxes, assessments or charges
levied by any
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governmental or revenue authority in respect of this Agreement or any of the
other Basic Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by any Basic Document or any other document referred to therein.
The Company hereby agrees (i) to indemnify the Administrative
Agent and each Lender and their respective directors, officers, employees,
attorneys and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them
(including, without limitation, any and all losses, liabilities, claims, damages
or expenses incurred by the Administrative Agent to any Lender, whether or not
the Administrative Agent or any Lender is a party thereto) arising out of or by
reason of any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified) and (ii) not to assert any claim against the
Administrative Agent, an