-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LRwU8zLV5j9P7Yr/ktFBEMaM036nyFwz5f3cC7kgQqQ6TDp6KtjQJZa9B94HUa/A Zcnsm5fUP99MyUTNNinNIg== 0000861361-00-000002.txt : 20000110 0000861361-00-000002.hdr.sgml : 20000110 ACCESSION NUMBER: 0000861361-00-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991127 FILED AS OF DATE: 20000107 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-Q SEC ACT: SEC FILE NUMBER: 000-18348 FILM NUMBER: 503566 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 10-Q 1 FDS BE AEROSPACE, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 27, 1999 Commission File No. 0-18348 BE AEROSPACE, INC. (Exact name of registrant as specified in its charter) Delaware 06-1209796 (State of Incorporation) (I.R.S. Employer Identification No.) 1400 Corporate Center Way Wellington, Florida 33414-2105 (Address of principal executive offices) (561) 791-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES[X] NO[ ] The registrant has one class of common stock, $.01 par value, of which 24,872,948 shares were outstanding as of January 5, 2000. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
November 27, February 27, 1999 1999 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 32,429 $ 39,500 Accounts receivable - trade, less allowance for doubtful accounts of $2,921 (November 27, 1999) and $2,633 (February 27, 1999) 121,746 140,782 Inventories, net 136,179 119,247 Other current assets 32,738 14,086 ------------ ----------- Total current assets 323,092 313,615 ------------ ----------- Property and equipment, net 151,226 138,730 Intangibles and other assets, net 424,756 451,954 ------------ ----------- $ 899,074 $ 904,299 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 69,355 $ 63,211 Accrued liabilities 110,548 97,065 Current portion of long-term debt 13,837 9,916 ------------ ----------- Total current liabilities 193,740 170,192 ------------ ----------- Long-term debt 599,086 583,715 Other liabilities 29,983 34,519 Stockholders' equity: Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding - - Common stock, $.01 par value; 50,000,000 shares authorized; 24,872,948 (November 27, 1999) and 24,602,915 (February 27, 1999) shares issued and outstanding 249 246 Additional paid-in capital 249,170 245,809 Accumulated deficit (164,980) (124,077) Accumulated other comprehensive loss (8,174) (6,105) ----------- ---------- Total stockholders' equity 76,265 115,873 ----------- ---------- $ 899,074 $ 904,299 =========== ==========
See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended November 27, November 28, November 27, November 28, 1999 1998 1999 1998 Net sales $ 164,578 $ 195,751 $ 541,505 $ 492,094 Cost of sales 166,586 120,141 406,589 305,004 ---------- ---------- ---------- ----------- Gross profit (loss) (2,008) 75,610 134,916 187,090 Operating expenses: Selling, general and administrative 27,253 21,674 70,576 58,715 Research, development and engineering 16,740 16,085 40,265 40,827 Amortization 6,147 6,624 17,699 16,038 Acquisition-related expenses - - - 79,155 ---------- ----------- ---------- ----------- Total operating expenses 50,140 44,383 128,540 194,735 ---------- ----------- ---------- ----------- Operating earnings (loss) (52,148) 31,227 6,376 (7,645) Equity in losses of unconsolidated subsidiary - - 1,289 - Interest expense, net 13,890 11,370 39,707 27,816 ---------- ---------- ---------- ----------- Earnings (loss) before income taxes (66,038) 19,857 (34,620) (35,461) Income taxes - 3,376 6,283 7,428 ---------- ----------- ---------- ----------- Net earnings (loss) $ (66,038) $ 16,481 $ (40,903) $ (42,889) =========== =========== ========== =========== Basic net earnings (loss) per common share $ (2.66) $ .61 $ (1.65) $ (1.72) =========== =========== ========== =========== Diluted net earnings (loss) per common share $ (2.66) $ .59 $ (1.65) $ (1.72) =========== =========== ========== ===========
See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
Nine Months Ended November 27, November 28, 1999 1998 Cash flows from operating activities: Net loss $ (40,903) $ (42,889) Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities: Acquisition-related expenses - 79,155 Depreciation and amortization 31,863 29,278 Deferred income taxes (172) (73) Non-cash employee benefit plan contributions 1,586 1,701 Changes in operating working capital, net of effects from acquisitions: Accounts receivable 19,041 (8,815) Inventories (17,307) (57,511) Other current assets (3,547) 2,201 Payables, accruals and current taxes 14,578 4,301 ----------- ---------- Net cash flows provided by operating activities 5,139 7,348 ----------- ---------- Cash flows from investing activities: Capital expenditures (27,457) (27,786) Change in intangible and other assets (6,622) (16,185) Acquisitions, net of cash acquired - (351,647) ----------- ---------- Net cash flows used in investing activities (34,079) (395,618) ----------- ---------- Cash flows from financing activities: Net borrowings under bank credit facilities 20,341 83,270 Proceeds from issuance of long-term debt - 200,000 Proceeds from issuances of stock, net of expenses 1,759 4,453 Principal payments on long-term debt - (30,097) ----------- ---------- Net cash flows provided by financing activities 22,100 257,626 ----------- ---------- Effect of exchange rate changes on cash flows (231) 507 ----------- ---------- Net decrease in cash and cash equivalents (7,071) (130,137) Cash and cash equivalents, beginning of period 39,500 164,685 ----------- ---------- Cash and cash equivalents, end of period $ 32,429 $ 34,548 =========== ========== Supplemental disclosures of cash flow information: Cash paid during period for: Interest, net $ 46,078 $ 19,937 Income taxes, net $ 2,163 $ 2,017 Schedule of non-cash transactions: Fair market value of assets acquired in acquisitions $ - $ 414,854 Cash paid for businesses acquired in acquisitions $ - $ 353,583 Liabilities assumed and accrued acquisition costs incurred in connection with acquisitions $ - $ 71,100
See accompanying notes to condensed consolidated financial statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOVEMBER 27, 1999 AND NOVEMBER 28, 1998 (UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Note 1. Basis of Presentation The condensed consolidated financial statements of BE Aerospace, Inc. and its wholly-owned subsidiaries (the "Company" or "B/E") have been prepared by the Company and are unaudited pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information related to the Company's organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of management, these unaudited condensed consolidated financial statements reflect all material adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. These results are not necessarily indicative of a full year's results of operations. Certain reclassifications have been made to the financial statements to conform to the November 27, 1999 presentation. Although the Company believes that the disclosures provided are adequate to make the information presented not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1999. Note 2. Acquisitions and Disposition On April 13, 1998, the Company completed its acquisition of Puritan-Bennett Aero Systems Co. ("PBASCO") for approximately $67,900 in cash and the assumption of approximately $9,200 of liabilities, including related acquisition costs and certain liabilities arising from the acquisition. PBASCO is a manufacturer of commercial aircraft oxygen delivery systems and "WEMAC" air valve components and, in addition, supplies overhead lights and switches, crew masks and protective breathing devices for both commercial and general aviation aircraft. On April 21, 1998, the Company acquired substantially all of the assets of Aircraft Modular Products ("AMP") for approximately $117,300 in cash and the assumption of approximately $12,800 of liabilities, including related acquisition costs and certain liabilities arising from the acquisition. AMP is a manufacturer of cabin interior products for general aviation (business jet) and commercial-type VIP aircraft, providing a broad line of products including seating, sidewalls, bulkheads, credenzas, closets, galley structures, lavatories, tables and sofas, along with related spare parts. On August 7, 1998, the Company acquired all of the capital stock of SMR Aerospace, Inc. and its affiliates, SMR Developers LLC and SMR Associates (together, "SMR") for an aggregate purchase price of approximately $141,500 in cash and the assumption of approximately $32,600 of liabilities, including related acquisition costs and certain liabilities arising from the acquisition. The Company paid for the acquisition of SMR by issuing four million shares (the "SMR Shares") of Company stock (then valued at approximately $30 per share) to the former stockholders of SMR and paying them $2,000 in cash. The Company also paid $22,000 in cash to the employee stock ownership plan ("ESOP") of a subsidiary of SMR Aerospace to purchase the minority equity interest in such subsidiary held by the ESOP. The Company agreed to register for sale the SMR Shares with the Securities and Exchange Commission. If the net proceeds from the sale of the shares, which included the $2,000 in cash already paid, was less than $120,000, the Company agreed to pay such difference in cash to the selling stockholders. Because of the market price for the Company's common stock and the Company's payment obligation to the selling stockholders described above, the Company decided to repurchase the SMR Shares with approximately $118,000 of the proceeds from the sale of 9 1/2% Senior Subordinated Notes instead of registering the shares for sale (the $118,000 payment represents the net proceeds of $120,000 the Company was obligated to pay the selling stockholders, less the $2,000 in cash the Company already paid them). SMR provides design, integration, installation and certification services for commercial aircraft passenger cabin interiors. SMR provides a broad range of interior reconfiguration services that allow airlines to change the size of certain classes of service, modify and upgrade the seating, install telecommunications or entertainment options, relocate galleys, lavatories, and overhead bins and install crew rest compartments. SMR is also a supplier of structural design and integration services, including airframe modifications for passenger-to-freighter conversions. In addition, SMR provides a variety of niche products and components that are used for reconfigurations and conversions. SMR's services are performed primarily on an aftermarket basis and its customers include major airlines such as United Airlines, Japan Airlines, British Airways, Air France, Cathay Pacific and Qantas, as well as Airborne Express, Federal Express and Boeing. On September 3, 1998, the Company acquired substantially all of the galley equipment assets and certain property and assumed related liabilities of C.F. Taylor Interiors Limited and acquired the common stock of C.F. Taylor (Wokingham) Limited (collectively "CF Taylor"), both wholly owned subsidiaries of EIS Group PLC, for a total cash purchase price of approximately $25,100, subject to adjustments, and the assumption of approximately $16,500 of liabilities, including related acquisition costs and certain liabilities arising from the acquisition. CF Taylor is a manufacturer of galley equipment for both narrow- and wide-body aircraft, including galley structures, crew rests and related spare parts. As a result of the acquisitions of PBASCO, AMP and SMR, the Company recorded a charge aggregating $79,155 for the write-off of acquired in-process research and development and acquisition-related expenses associated with these and other transactions. The Company determined that these projects ranged from 25% - 95% complete at November 27, 1999 and estimates that the cost to complete these projects will aggregate approximately $5,300 and be incurred over a three year period. The acquisitions of PBASCO, AMP, SMR and CF Taylor (the "1999 Acquisitions") have been accounted for using purchase accounting. On February 25, 1999, the Company sold a 51% interest in its In-Flight Entertainment ("IFE") subsidiary (the "IFE Sale") to a wholly-owned subsidiary of Sextant Avionique SA for an initial sale price of $62,000 (subject to adjustment based on the actual results of operations during the two years following the IFE Sale). As a result of the IFE Sale, the Company accounted for its remaining 49% interest in IFE using the equity method of accounting. On October 5, 1999, the Company completed the sale of its remaining 49% equity interest in IFE to Sextant. Total consideration for 100% of its equity interest in IFE, intra-entity obligations and for the provision of marketing, product and technical consulting services will range from a minimum of $93,600 up to $123,300 (inclusive of the $62,000 received in February 1999 for the sale of a 51% interest in IFE). Terms of the agreement provide for the Company to receive payments of approximately $15,800 on the first and second anniversary of the closing of this transaction. The third and final payment will be based on the actual sales and booking performances over the period from March 1, 1999 to December 31, 2001. The Company intends to use the proceeds from this transaction to reduce indebtedness. There was no gain or loss on the sale of the 49% equity interest and any ultimate gain on the sale of the 51% equity interest is dependent on the actual results of operations during the two years following the IFE Sale. Note 3. Comprehensive Income (Loss) Comprehensive income (loss) is defined as all changes in a company's net assets except changes resulting from transactions with shareholders. It differs from net income (loss) in that certain items currently recorded to equity would be a part of comprehensive income (loss). The following table sets forth the computation of comprehensive income (loss) for the periods presented:
Three Months Ended Nine Months Ended --------------------------- -------------------------- November 27, November 28, November 27, November 28, 1999 1998 1999 1998 ---- ---- ---- ---- Net earnings (loss) $ (66,038) $ 16,481 $ (40,903) $ (42,889) Other comprehensive income: Foreign exchange translation adjustment 385 (606) (2,069) (191) ---------- --------- ---------- --------- Comprehensive income (loss) $ (65,653) $ 15,875 $ (42,972) $ (43,080) ========== ========= ========== =========
Note 4. Segment Reporting The Company is organized based on customer-focused operating groups operating in a single segment. Each group reports its results of operations and makes requests for capital expenditures and acquisition funding to the Company's chief operation decision-making group. This group is presently comprised of the Chairman, the President and the Chief Executive Officer, and the Corporate Senior Vice President of Administration and Chief Financial Officer. Under this organizational structure, the Company's operating groups were aggregated into two reportable segments: the Aircraft Cabin Interior Products and Services segment and the In-Flight Entertainment segment. The Aircraft Cabin Interior Products and Services segment ("ACIPS") is comprised of four operating groups: the Seating Products Group, the Interior Systems Group, the Flight Structures and Integration Group and the Services Group, each of which have separate management teams and infrastructures dedicated to providing a full range of products to their commercial and general aviation operator customers. Each of these groups demonstrates similar economic performance and utilizes similar distribution methods and manufacturing processes. Customers are supported by a single worldwide after-sale service organization. As described in Note 2, the Company sold a 51% interest in IFE on February 25, 1999 and its remaining 49% interest in IFE on October 5, 1999. IFE was a separate, reportable segment. The Company evaluates the performance of its operating segments based primarily on sales, gross profit before special costs and charges, operating earnings before special costs and charges, and working capital management. The following table presents sales and other financial information by business segment for the three month and nine month periods ended:
Three Months Ended Nine Months Ended November 27, 1999 November 27, 1999 ------------------ ------------------ ACIPS ACIPS ----- ----- Net sales $ 164,578 $ 541,505 Gross profit (loss) (2,008) 134,916 Operating earnings (loss) as reported (52,148) 6,376 Operating earnings before special costs and charges 20,152 78,676 Working capital 129,352 129,352
Three Months Ended Nine Months Ended November 28, 1998 November 28, 1998 ------------------------------- --------------------------------- ACIPS IFE TOTAL ACIPS IFE TOTAL ----- --- ----- ----- --- ----- Net sales $ 180,576 $ 15,175 $ 195,751 $ 432,565 $ 59,529 $ 492,094 Gross profit 72,557 3,053 75,610 169,796 17,294 187,090 Operating earnings (loss) as reported 34,103 (2,876) 31,227 4,224 (11,869) (7,645) Operating earnings (loss) before special costs and charges 34,103 (2,876) 31,227 75,839 (4,329) 71,510 Working capital 195,427 30,307 225,734 195,427 30,307 225,734
Note 5. Earnings (Loss) Per Common Share Basic net earnings (loss) per common share is computed using the weighted average common shares outstanding during the period. Diluted net earnings (loss) per common share is computed by using the average share price during the period when calculating the dilutive effect of stock options. Shares outstanding for the periods presented were as follows:
Three Months Ended Nine Months Ended ----------------------------- ---------------------------- November 27, November 28, November 27, November 28, 1999 1998 1999 1998 ---- ---- ---- ---- Weighted average common shares outstanding 24,835 27,195 24,757 24,946 Dilutive effect of employee stock - 571 - ---------- ---------- ---------- ---------- Diluted shares outstanding 24,835 27,766 24,757 24,946 ========== ========== ========== ==========
Note 6. Restructuring Charge During the fourth quarter of fiscal 1999, the Company began to implement a restructuring plan designed to lower its cost structure and improve its long-term competitive position. This plan includes consolidating seven facilities reducing the total number from 21 to 14, reducing its employee base by approximately 8% and rationalizing its product offerings. The restructuring costs and charges are comprised of $61,089 related to impaired inventories and property, plant and equipment as a result of the rationalization of its product offerings, plus severance and related separation costs, lease termination and other costs of $4,949. The Company anticipates that it will be substantially complete with this restructuring by the end of the current fiscal year. The assets impacted by this program include inventories, factories, warehouses, assembly operations, administration facilities and machinery and equipment. The following table summarizes the utilization of the restructuring accrual:
Balance at Balance at Feb. 27, 1999 Utilized Nov. 27, 1999 ---------------------------------------------- Severance, lease termination and other costs $ 4,298 1,895 $ 2,403 Impaired inventories, property and equipment 19,911 11,323 8,588 ---------------------------------------------- $ 24,209 13,218 $10,991 ==============================================
Note 7. Cost of Sales and Operating Expenses During the latter part of fiscal 1999 and throughout fiscal 2000, the Company's operating results have been negatively impacted by operating inefficiencies at its seating products group. The operating inefficiencies have resulted in delayed deliveries to customers, increased re-work of seating products, claims for warranty, penalties, out of sequence charges, substantial increases in air freight and other expedite-related costs. Late customer deliveries have resulted in certain airlines diverting seating programs to other manufacturers and the deferral of other seating programs. During the current quarter, the Company incurred approximately $22,500 of costs associated with claims for penalties, out of sequence charges and warranties related to its poor delivery performance as described above. All of these costs have been included as a component of cost of sales in the accompanying statement of operations. During the three months ended November 27, 1999, the Company completed a review of its businesses, and has decided to discontinue certain product and service offerings. This product line rationalization will reduce the number of facilities by two, and is expected to result in a headcount reduction of approximately 700. The total cost of this product and service line rationalization is expected to be approximately $35,700, of which $32,600 was accrued during the current quarter. Approximately $29,800 of this accrual was included in cost of sales with the balance charged to selling, general and administrative expenses in the accompanying statement of operations. The balance of this charge of approximately $3,100 is expected to be included as a component of cost of sales during the fourth quarter of this fiscal year. The following summarizes the penalties, out of sequence claims and product line rationalization charges included in the accompanying statement of operations:
Cost of Operating Sales Expenses Total ----- -------- ----- Penalties, warranty and out of sequence claims $ 22,500 - $ 22,500 Product and service line rationalization costs-cash 4,900 2,800 7,700 Product and service line rationalization costs-non cash 24,900 - 24,900 -------- ------ -------- Total special costs $ 52,300 $2,800 $ 55,100 ======== ====== ========
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following discussion and analysis addresses the results of the Company's operations for the three months ended November 27, 1999, as compared to the Company's results of operations for the three months ended November 28, 1998. The discussion and analysis then addresses the results of the Company's operations for the nine months ended November 27, 1999, as compared to the Company's results of operations for the nine months ended November 28, 1998. The discussion and analysis then addresses the liquidity and financial condition of the Company and other matters. For comparability purposes, the Company has provided additional pro forma information giving effect to each of the acquisitions (the "1999 Acquisitions") and disposition (the "IFE Sale") the Company completed during fiscal 1999, exclusive of any acquisition-related expenses, as if they all occurred at the beginning of the year. THREE MONTHS ENDED NOVEMBER 27, 1999, AS COMPARED TO THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 28, 1998 Net sales for the three-month period ended November 27, 1999 of $164,578 were $31,173 and 15.9% less than sales of $195,751 for the comparable period in the prior year. The decrease in sales is primarily due to the impact of the sale of the Company's IFE business. On a pro forma basis, sales decreased by $15,998, or 8.9%. The decrease in pro forma sales is primarily due to a lower level of seating, service and galley structures revenues. Gross profit (loss) was $(2,008) or (1.2)% of sales for the three months ended November 27, 1999. This was $77,618, or 102.7%, less than the comparable period in the prior year of $75,610, which represented 38.6% of sales. The decrease in gross profit in the current period is primarily attributable to the poor performance of the Company's seating products group. During the latter part of fiscal 1999 and throughout fiscal 2000, the Company's operating results were negatively impacted by operating inefficiencies at its seating products group. The operating inefficiencies have resulted in delayed deliveries to customers, increased re-work of seating products, claims for warranty, penalties, out of sequence charges, substantial increases in air freight and other expedite-related costs. Late customer deliveries have resulted in certain airlines diverting seating programs to other manufacturers and the deferral of other seating programs. The current quarter's decrease in revenues, coupled with the operating inefficiencies described above have negatively impacted the current quarter's results of operations by approximately $17,200, which has been presented as a component of cost of sales and operating expenses. In addition, claims for penalties, out of sequence charges, and warranties related to its poor delivery performance during the current period aggregating approximately $22,500, were incurred during the quarter and been included as a component of cost of sales in the accompanying statement of operations. Further, during the current quarter, the Company announced that it will discontinue certain product and service offerings. This product and service line rationalization will reduce the number of facilities by two, and is expected to result in a headcount reduction of approximately 700. The total cost of this product and service line rationalization is expected to be approximately $35,700, of which $32,600 was accrued during the current quarter. Approximately $29,800 of this accrual was included in cost of sales with the balance charged to selling, general and administrative expenses in the accompanying statement of operations. The balance of this charge of approximately $3,100 is expected to be included as a component of cost of sales during the fourth quarter of this fiscal year. The aggregate impact of these operating inefficiencies, penalties, and product line rationalization costs was to increase cost of sales and operating expenses by approximately $72,300 during fiscal 2000. Future margin expansion will largely depend on the success of the seating business in four areas: achieving planned efficiencies for recently-introduced products, optimizing its manufacturing processes with the new management information system, successfully implementing lean manufacturing techniques and rationalizing facilities and personnel. While management expects its seating operations to improve over the next six months, there can be no assurance that the improvements will occur or that the future negative impact of operational inefficiencies will not be material. While management expects its seating operations to improve over the next six months, there can be no assurance that the improvements will occur or that the negative impact of operational inefficiencies will not be material. Selling, general and administrative expenses were $27,253 or 16.6% of sales for the current quarter ended November 27, 1999 as compared to $21,674 or 11.1% of sales in the prior year. The increase in selling, general and administrative expenses is primarily attributable to product and service line rationalization costs and related expenses. Research, development and engineering expenses were $16,740 or 10.2% of sales for the three months ended November 27, 1999, an increase of $655 over the comparable period in the prior year of $16,085 or 8.2% of sales. Research, development and engineering expenses as a percent of sales increased during the current quarter primarily due to the inefficiencies at the Company's seating products group. The Company generated an operating loss of $(52,148), or (31.7)% of sales as compared to operating earnings of $31,227 or 16% during the comparable period in the prior year. The operating loss in the current period is the result of the manufacturing inefficiencies and related costs described above. Interest expense, net was $13,890 for the three months ended November 27, 1999, or $2,520 greater than interest expense of $11,370 for the comparable period in the prior year. The increase in interest expense is due to the increase in the Company's long-term debt used, primarily, to finance the 1999 Acquisitions. The loss before income taxes in the current quarter was $(66,038), as compared to earnings before income taxes of $19,857 in the prior year's comparable period. Due to the current period loss, there was no income tax expense for the quarter ended November 27, 1999 as compared to $3,376 in the prior year's comparable period. The Company recorded a net loss and net loss per share of $(66,038) and $(2.66) (basic and diluted), respectively, as compared to net earnings and diluted net earnings per share in the prior year of $16,481 and $.59 respectively. On a pro forma basis, net earnings and net earnings per share in the prior year were $17,561 and $.63 (diluted), respectively. NINE MONTHS ENDED NOVEMBER 27, 1999, AS COMPARED TO THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 28, 1998 Net sales for the fiscal 2000 nine-month period were $541,505, an increase of $49,411 or 10.0% over the comparable period in the prior year. The year over year increase in sales is primarily attributable to a higher level of seating sales in the first half of the year together with higher sales of general aviation and interior systems product sales in fiscal 2000 over the prior year, offset by a lower level of galley structures sales and the sale of the IFE business. On a pro forma basis, sales increased by $36,719 or 7.3%. Gross profit was $134,916 (24.9% of sales) for the nine months ended November 27, 1999. This was $52,174 or 27.9%, lower than the comparable period in the prior year of $187,090, which represented 38.0% of sales. The decrease in gross profit in fiscal 2000 is primarily attributable to the poor performance of the company's seating products group as described above. During the latter part of fiscal 1999 and throughout fiscal 2000, the Company's operating results were negatively impacted by operating inefficiencies at its seating products group. The operating inefficiencies have resulted in delayed deliveries to customers, increased re-work of seating products, claims for warranty, penalties, out of sequence charges, substantial increases in air freight and other expedite-related costs. Late customer deliveries have resulted in certain airlines diverting seating programs to other manufacturers and the deferral of other seating programs. The current quarter's decrease in revenues, coupled with the operating inefficiencies described above have negatively impacted the current quarter's results of operations by approximately $17,200, which has been presented as a component of cost of sales and operating expenses. In addition, claims for penalties, out of sequence charges, and warranties related to its poor delivery performance during the current period aggregating approximately $22,500, were incurred during the quarter and been included as a component of cost of sales in the accompanying statement of operations. Further, during the nine months ended November 27, 1999, the Company announced that it will discontinue certain product and service offerings. This product and service line rationalization will reduce the number of facilities by two, and is expected to result in a headcount reduction of approximately 700. The total cost of this product and service line rationalization is expected to be approximately $35,700, of which $32,600 was accrued during the current quarter. Approximately $29,800 of this accrual was included in cost of sales with the balance charged to selling, general and administrative expenses in the accompanying statement of operations. The balance of this charge of approximately $3,100 is expected to be included as a component of cost of sales during the fourth quarter of this fiscal year. The aggregate impact of these operating inefficiencies, penalties, and product line rationalization costs was to increase cost of sales and operating expenses by approximately $72,300 during fiscal 2000. Future margin expansion will largely depend on the success of the seating business in four areas: achieving planned efficiencies for recently-introduced products, optimizing its manufacturing processes with the new management information system, successfully implementing lean manufacturing techniques and rationalizing facilities and personnel. While management expects its seating operations to improve over the next six months, there can be no assurance that the improvements will occur or that the negative impact of operational inefficiencies will not be material. Selling, general and administrative expenses during the current period were $70,576 or $11,861 higher than the prior year. Severance and other facility consolidation costs associated with the charges described above, together with increased operating expenses during the quarter at the Company's seating products group for consultants, and increased MIS training costs and related expenses were the principal reasons for the increase. Research, development and engineering expenses were $40,265 (7.4% of sales) for the nine months ended November 27, 1999, a decrease of $562 over the comparable period in the prior year. Amortization expense for the nine months ended November 27, 1999 of $17,699 was $1,661 greater than the amount recorded in the comparable period in the prior year. The increase is due to the 1999 Acquisitions. Based on management's assumptions, a portion of the 1999 Acquisitions' purchase price was allocated to purchased research and development that had not reached technological feasibility and had no future alternative use. During the first nine months of fiscal 1999, the Company recorded a charge of $79,155 for the write-off of the acquired in-process research and development and acquisition-related expenses. The Company generated operating earnings of $6,376 (1.2% of sales) for the nine months ended November 27, 1999, as compared to an operating loss of $(7,645) in the comparable period of the prior year. Pro forma operating earnings for the nine month period in fiscal 1999 were $77,291. Interest expense, net was $39,707 for the nine months ended November 27, 1999, or $11,891 greater than interest expense of $27,816 for the comparable period in the prior year and is due to the increase in the Company's long-term debt used, in part, to finance the 1999 Acquisitions. The net loss for the nine months ended November 27, 1999 was $(40,903) or $(1.65) per share (diluted), as compared to a net loss of $(42,889) or $(1.72) per share (diluted), for the comparable period in the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements consist of working capital needs, on-going capital expenditures and scheduled payments of interest and principal on its indebtedness. B/E's primary requirements for working capital have been directly related to accounts receivable and inventory levels as a result of both acquisitions and revenue growth. B/E's working capital was $129,352 as of November 27, 1999, as compared to $143,423 as of February 27, 1999. At November 27, 1999, the Company's cash and cash equivalents were $32,429, as compared to $39,500 at February 27, 1999. Cash provided by operating activities was $5,139 for the nine months ended November 27, 1999. The primary source of cash during the nine months ended November 27, 1999 was non-cash charges for depreciation and amortization of $31,863, a decrease in accounts receivable of $19,041 and an increase in payables, accruals and current taxes of $14,578, offset by a net loss of $40,903 and use of cash of $20,854 related to increases in inventories and other current assets. The Company's capital expenditures were $27,457 and $27,786 during the nine months ended November 27, 1999 and November 28, 1998, respectively. The gross increase in capital expenditures was primarily attributable to (1) acquisitions completed during fiscal 1999, (2) the purchase of previously leased facilities, (3) the development of a new management information system to replace the Company's existing systems, many of which were inherited in acquisitions and (4) expenditures for plant modernization. The Company anticipates on-going annual capital expenditures of approximately $28,000 for the next several years. The Company has credit facilities with The Chase Manhattan Bank (the "Bank Credit Facility"). The Bank Credit Facility consists of a $100,000 revolving credit facility (of which $50,000 may be utilized for acquisitions) and an acquisition facility of $34,200. The revolving credit facility expires in April 2004 and the acquisition facility is amortizable over five years beginning in August 1999. The Bank Credit Facility is collateralized by the Company's accounts receivable, inventories and by substantially all of its other personal property. Indebtedness under the existing Bank Credit Facility consisted of revolving credit facility outstanding borrowings of $19,000 (bearing interest at LIBOR plus 1%, or approximately 6.5%), letters of credit aggregating approximately $2,853 and outstanding borrowings under the acquisition facility aggregating $34,200 (bearing interest at LIBOR plus 1.0%, or approximately 7.1%) as of November 27, 1999. The Bank Credit Facility was amended on December 21, 1999 and contains customary affirmative covenants, negative covenants and conditions of borrowing, all of which were met by the Company as of November 27, 1999. The Company believes that the cash flow from operations and availability under the Bank Credit Facility will provide adequate funds for its working capital needs, planned capital expenditures and debt service requirements through the term of the Bank Credit Facility. The Company believes that it will be able to refinance the Bank Credit Facility prior to its termination, although there can be no assurance that it will be able to do so. The Company's ability to fund its operations, make planned capital expenditures, make scheduled payments and refinance its indebtedness depends on its future operating performance and cash flow, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond its control. Deferred Tax Assets The Company has established a valuation allowance related to the utilization of its deferred tax assets because of uncertainties that preclude it from determining that it is more likely than not that it will be able to generate taxable income to realize such assets during the operating loss carryforward period, which begins to expire in 2011. Such uncertainties include recent cumulative losses by the Company, the highly cyclical nature of the industry in which it operates, economic conditions in Asia which is impacting the airframe manufacturers and the airlines, the Company's high degree of financial leverage, risks associated with the implementation of its integrated management information system, risks associated with its seat manufacturing operations and risks associated with the integration of acquisitions. The Company monitors these uncertainties, as well as other positive and negative factors that may arise in the future, as it assesses the necessity for a valuation allowance for its deferred tax assets. Year 2000 Costs The "Year 2000" ("Y2K") issue is the result of computer programs using two digits rather than four to define the applicable year. Because of this programming convention, software, hardware or firmware may recognize a date using "00" as the year 1900 rather than the year 2000. Use of non-Y2K compliant programs could result in system failures, miscalculations or errors causing disruptions of operations or other business problems, including, among others, a temporary inability to process transactions and invoices or engage in similar normal business activities. B/E Technology Initiatives Program. The Company has experienced substantial growth as a result of having completed 15 acquisitions since 1989. Essentially all of the acquired businesses were operating on separate information systems, using different hardware and software platforms. In fiscal 1997, the Company analyzed its systems, both pre-existing and acquired, for Y2K compliance with a view to replacing non-compliant systems and creating an integrated Y2K compliant system. In addition, the Company has developed a comprehensive program to address the Y2K issue with respect to the following non-system areas: (1) network switching, (2) the Company's non-information technology systems (such as buildings, plant, equipment and other infrastructure systems that may contain embedded microcontroller technology) and (3) the status of major vendors, third-party network service providers and other material service providers (insofar as they relate to the Company's business). As explained below, the Company's efforts to assess its systems as well as non-system areas related to Y2K compliance involve: (1) a wide-ranging assessment of the Y2K problems that may affect the Company, (2) the development of remedies to address the problems discovered in the assessment phase and (3) testing of the remedies. Assessment Phase. The Company has identified substantially all of its major hardware and software platforms in use as well as the relevant non-system areas described above. The Company has determined its systems requirements on a company-wide basis and has begun the implementation of an enterprise resource planning ("ERP") system, which is intended to be a single system database onto which all the Company's individual systems will be migrated. In relation thereto, the Company has signed contracts with substantially all of its significant hardware, software and other equipment vendors and third-party network service providers related to Y2K compliance. Remediation and Testing Phase. In implementing the ERP system, the Company undertook and has completed a remediation and testing phase of all internal systems, LANs, WANs and PBXs. This phase was intended to address potential Y2K problems of the ERP system in relation to both information technology and non-information technology systems and then to demonstrate that the ERP software was Y2K compliant. ERP system software was selected and applications implemented by a team of internal users, outside system integrator specialists and ERP application experts. The ERP system was tested between June 1997 and March 1998 by this team of experts. To date, ten locations have been fully implemented on the ERP system. This company-wide solution has been deployed in a manner designed to meet full implementation for all remaining non-Y2K compliant sites. Program to Assess and Monitor Progress of Third Parties. As noted above, B/E has also undertaken an action plan to assess and monitor the progress of third-party vendors in resolving Y2K issues. To date, the Company has (1) obtained guidance from outside counsel to ensure legal compliance, (2) generated correspondence to each of its third-party vendors to assess the Y2K readiness of these vendors and (3) contracted a `Vendor Y2K' fully automated tracking program to track all correspondence to/from vendors, to track timely responses via an automatic computer generated `trigger' to provide an electronic folder for easy reference and retention and to specifically track internally identified `critical' vendors. The Company is also currently developing an internal consolidated database of the Company's vendors. To date, approximately 90% of the Company's critical vendors have responded. The Company is directly contacting those vendors who have not responded and will evaluate the feasibility of establishing second source parts to other vendors, where possible. Contingency Plans. The Company is analyzing contingency plans to handle the worst-case Y2K scenarios that the Company believes reasonably could occur and, if necessary, intends to develop a timetable for completing such contingency plans. Costs Related to the Y2K Issue. The Company has incurred approximately $41,000 in costs related to the implementation of the ERP system and for routine replacement of hardware and software. The Company currently estimates the total ERP implementation, including routine replacement of hardware and software, will cost approximately $49,000 and a portion of the costs have and will be capitalized to the extent permitted under generally accepted accounting principles. Risks Related to the Y2K Issue. The Company's efforts to be Y2K compliant are intended to minimize the adverse effects of the Y2K issue on the Company's business and operations. Difficulties in implementing the ERP system or failure by the Company to fully implement the ERP system or the failure of its major vendors, third-party network service providers, and other material service providers and customers to adequately address their respective Y2K issues in a timely manner would have a material adverse effect on the Company's business, results of operations and financial condition. The Company's capital requirements may differ materially from the foregoing estimate as a result of regulatory, technological and competitive developments (including market developments and new opportunities) in the Company's industry. Fiscal 1999 Acquisitions During fiscal 1999, the Company completed four major acquisitions and two smaller transactions. In April 1998, the Company acquired Puritan-Bennett Aero Systems Co., a manufacturer of commercial aircraft oxygen systems, "WEMAC" air valve components, overhead lights and switches, crew masks and protective breathing devices for both general aviation and commercial aircraft. Also during April 1998, the Company acquired Aircraft Modular Products, a manufacturer of business jet seating, cabinetry and structures. In August 1998, the Company acquired SMR Aerospace, Inc. and its affiliates, which is a leading supplier of design, integration, installation and certification services for the reconfiguration of aircraft allowing an airline to modify or upgrade the seating arrangements, install telecommunications, move galley structures or modify overhead containers or sidewalls, etc. SMR also manufactures and installs crew rest compartments, and performs the engineering required to make structural modifications and supplies the kits necessary for the conversion of passenger to freighter aircraft. In September 1998, the Company acquired CF Taylor, a leading manufacturer of galley equipment for both narrow and wide-body aircraft, including galley structures, crew rests. Fiscal 1999 Disposition In February 1999, the Company sold a 51% interest in its In-Flight Entertainment subsidiary (the "IFE Sale") to a wholly-owned subsidiary of Sextant Avionique SA for an initial sale price of $62,000 (subject to adjustment based on the actual results of operations during the two years following the IFE Sale). See Note 2 to the unaudited interim condensed consolidated financial statements for the period ended November 27, 1999. Fiscal 2000 Disposition On October 5, 1999, the Company announced that it had entered into an agreement to sell its remaining 49% equity interest in IFE to Sextant. Total consideration for 100% of its equity interest in IFE, and for the provision of marketing, product and technical consulting services will range from a minimum of $83,300 up to $123,300 (inclusive of the $62,000 received in February 1999 for the sale of a 51% interest in IFE - see Note 2). Terms of the agreement provide for the Company to receive payments of approximately $15,800 on the first and second anniversary of the closing of this transaction. The third and final payment will be based on the actual sales and booking performances over the period from March 1, 1999 to December 31, 2001. The Company intends to use the proceeds from this transaction to reduce indebtedness. Fiscal 1999 Restructuring Plan During the fourth quarter of fiscal 1999, the Company began to implement a restructuring plan designed to lower its cost structure and improve its long-term competitive position. This plan includes eliminating seven of its principal facilities, reducing the total number from 21 to 14, reducing its employee base by approximately eight percent and rationalizing its product offerings. The Company identified seven facilities, four domestic and three in Europe, for consolidation. The consolidation activities commenced during the first quarter of fiscal 2000 and will be substantially complete by the end of the fiscal year. When fully implemented, management expects that this program will generate pretax savings of approximately $15,000 - $20,000 annually. The worldwide reduction in facilities, personnel and product offerings is expected to aid the Company in several ways. It will strengthen the global business management focus on the core product categories, achieve a more effective leveraging of resources and improve the Company's ability to rapidly react to changing business conditions. The rationalization of product offerings, which was brought about as a result of the 1999 Acquisitions and the large number of new product introductions during the past year, will provide an on-going benefit of a generally lower cost structure. The assets impacted by this program include factories, warehouses, assembly operations, administration facilities, machinery and equipment and inventories. Management anticipates that the Company will continue to incur pressure on its gross margins during the upcoming year as it achieves learning-curve efficiencies associated with the introduction of new products in volume for the first time and as it implements its integrated management information system throughout the Company, and such costs could be material. Seating Manufacturing Inefficiencies During the latter part of fiscal 1999 and throughout fiscal 2000, the Company's operating results were negatively impacted by operating inefficiencies at its seating products group. The operating inefficiencies have resulted in delayed deliveries to customers, increased re-work of seating products, claims for warranty, penalties, out of sequence charges, substantial increases in air freight and other expedite-related costs. Late customer deliveries have resulted in certain airlines diverting seating programs to other manufacturers and the deferral of other seating programs. The current quarter's decrease in revenues, coupled with the operating inefficiencies described above have negatively impacted the current quarter's results of operations by approximately $17,200, which has been presented as a component of cost of sales and operating expenses. In addition, claims for penalties, out of sequence charges, and warranties related to its poor delivery performance during the current period aggregating approximately $22,500, were incurred during the quarter and been included as a component of cost of sales in the accompanying statement of operations. Further, during the current quarter, the Company announced that it will discontinue certain product and service offerings. This product and service line rationalization will reduce the number of facilities by two, and is expected to result in a headcount reduction of approximately 700. The total cost of this product and service line rationalization is expected to be approximately $35,700, of which $32,600 was accrued during the current quarter. Approximately $29,800 of this accrual was included in cost of sales with the balance charged to selling, general and administrative expenses in the accompanying statement of operations. The balance of this charge of approximately $3,100 is expected to be included as a component of cost of sales during the fourth quarter of this fiscal year. The aggregate impact of these operating inefficiencies, penalties, and product line rationalization costs was to increase cost of sales and operating expenses by approximately $72,300 during fiscal 2000. Future margin expansion will largely depend on the success of the seating business in four areas: achieving planned efficiencies for recently-introduced products, optimizing its manufacturing processes with the new management information system, successfully implementing lean manufacturing techniques and rationalizing facilities and personnel. While management expects its seating operations to improve over the next six months, there can be no assurance that the improvements will occur or that the negative impact of operational inefficiencies will not be material. Dependence upon Conditions in the Airline Industry The Company's principal customers are the world's commercial airlines. As a result, the Company's business is directly dependent upon the conditions in the highly cyclical and competitive commercial airline industry. In the late 1980s and early 1990s, the world airline industry suffered a severe downturn, which resulted in record losses and several air carriers seeking protection under bankruptcy laws. As a consequence, during such period, airlines sought to conserve cash by reducing or deferring scheduled cabin interior refurbishment and upgrade programs and by delaying purchases of new aircraft. This led to a significant contraction in the commercial aircraft cabin interior products industry and a decline in our business and profitability. Since early 1994, the airlines have experienced a turnaround in operating results, leading the domestic airline industry to record operating earnings during calendar years 1995 through 1998. This financial turnaround has, in part, been driven by record load factors, rising fare prices and declining fuel costs. The airlines have substantially improved their balance sheets through cash generated from operations and the sale of debt and equity securities. As a result, the levels of airline spending on refurbishment and new aircraft purchases have expanded. However, due to the volatility of the airline industry and the current general economic and financial turbulence, the current profitability of the airline industry may not continue and the airlines may not be able to maintain or increase expenditures on cabin interior products for either existing fleet or new aircraft. In addition, the airline industry is undergoing a process of consolidation and significantly increased competition. Such consolidation could result in a reduction of future aircraft orders as overlapping routes are eliminated and airlines seek greater economies through higher aircraft utilization. Increased airline competition may also result in airlines seeking to reduce costs by promoting greater price competition from airline cabin interior products manufacturers, thereby adversely affecting our revenues and margins. Recently, turbulence in the financial and currency markets of many Asian countries has led to uncertainty with respect to the economic outlook for these countries. Although not all carriers have been affected by the current economic events in the Pacific Rim, certain carriers, including non-Asian carriers that have substantial Asian routes, could cancel or defer their existing orders. In addition, Boeing has announced that in light of the continued severe economic conditions in Asia, it will be substantially scaling back production of a number of aircraft types, including particularly wide-body aircraft which require up to five times the dollar content for B/E's products as compared to narrow-body aircraft. This report includes forward-looking statements which involve risks and uncertainties. The Company's actual experience may differ materially from that anticipated in such statements. Factors that might cause such a difference include, but are not limited to, those discussed in the Company's most recent proxy statement and "Risk Factors" contained in Exhibit 99 of the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1999, as well as future events that may have the effect of reducing the Company's available operating income and cash balances, such as unexpected operating losses, delays in the integration of the Company's acquired businesses, conditions in the airline industry, customer delivery requirements, new or expected refurbishments, capital expenditures, cash expenditures related to possible future acquisitions, delays in the implementation of the Company's integrated management information system, labor disputes involving the Company, its significant customers or airframe manufacturers, delays or inefficiencies in the introduction of new products or fluctuations in currency exchange rates. Item 3. Quantitative and Qualitative Disclosures about Market Risk During the nine months ended November 27, 1999, there were no material changes to the disclosure about market risk included in the Company's Annual Report on Form 10-K for the fiscal year ended February 27, 1999. PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 1. Exhibit 10.8a Amendment No. 1 to the Chase Manhattan Bank credit facility 2. Exhibit 10.8b Amendment No. 2 to the Chase Manhattan Bank credit facility 3. Exhibit 10.8c Agreement with Thomson-CSF Sextant, Inc. for the sale of a 49% interest in the Company's In-Flight Entertainment ("IFE") business 4. Exhibit 27 Financial Data Schedule for the nine months ended November 27, 1999 b. Reports on Form 8-K 1. March 3, 1999 Sale of a 51% interest in the Company's IFE business 2. March 12, 1999 Sale of a 51% interest in the Company's IFE business 3. November 18, 1999 Resignation of Paul E. Fulchino, President and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BE AEROSPACE, INC. Date: January 7, 2000 By: /s/ Robert J. Khoury -------------------------------- President and Chief Executive Officer Date: January 7, 2000 By: /s/ Thomas P. McCaffrey ----------------------------- Corporate Senior Vice President of Administration and Chief Financial Officer EX-27 2
5 9-MOS FEB-27-2000 NOV-27-1999 32,429 0 124,667 (2,921) 136,179 323,092 217,527 (66,301) 899,074 193,740 599,086 0 0 249 76,016 899,074 541,505 541,505 406,589 535,129 1,289 0 39,707 (34,620) 6,283 (40,903) 0 0 0 (40,903) (1.65) (1.65)
EX-10.8C 3 PURCHASE AGREEMENT WITH THOMSON-CSF SEXTANT, INC. PURCHASE AGREEMENT dated as of September 1, 1999, among IFE SALES, LLC, BE AEROSPACE, INC., BE INTELLECTUAL PROPERTY, INC., PURITAN-BENNETT AEROSYSTEMS CO. and THOMSON-CSF SEXTANT, INC.
TABLE OF CONTENTS Page ARTICLE IDEFINITIONS 1.01. Incorporation by Reference...............................................2 1.02. Additional Defined Terms.................................................2 1.03. Other Additional Defined Terms...........................................4 1.04. Use of Defined Terms.....................................................5 ARTICLE IIPURCHASE AND SALE 2.01. Purchase and Sale........................................................5 2.02. Fixed Purchase Price.....................................................5 2.03. Closing..................................................................5 2.04. Contingent Purchase Price................................................6 2.05. Initial Purchase Agreement Purchase Price Adjustment.....................8 ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF THE SELLER AND BE AEROSPACE 3.01. Incorporation and Authority..............................................8 3.02. No Conflict..............................................................9 3.03. Consents, Approvals, Licenses, Etc.......................................9 3.04. Membership Interests of the Seller in the Company........................10 3.05. Absence of Litigation....................................................10 3.06. Brokers..................................................................10 ARTICLE IVREPRESENTATIONS AND WARRANTIES OF THE PURCHASER 4.01. Incorporation and Authority of the Purchaser.............................10 4.02. No Conflict..............................................................11 4.03. Consents and Approvals...................................................11 4.04. Absence of Litigation....................................................12 4.05. Investment Purpose.......................................................12 4.06. Financing................................................................12 4.07. Brokers..................................................................12 ARTICLE VADDITIONAL AGREEMENTS 5.01. Regulatory and Other Authorizations; Releases; Consents..................12 5.02. Further Action...........................................................13 5.03. Conveyance Taxes.........................................................13 5.04. Reports..................................................................13 5.05. Non-Competition..........................................................13 5.06. No Solicitation of Employees.............................................15
5.07. Transitional Services....................................................15 5.08. Conduct of the Business by the Purchaser.................................15 5.09. Access to Information....................................................16 5.10. Confidentiality..........................................................16 5.11. Governance...............................................................17 5.12. Guarantee of BE Aerospace................................................17 5.13. Assumption of BE Aerospace Obligations...................................19 ARTICLE VICONDITIONS TO CLOSING 6.01. Conditions to Obligations of the Seller and the Former Interest Holders..19 6.02. Conditions to Obligations of the Purchaser...............................20 ARTICLE VII INDEMNIFICATION 7.01. Survival.................................................................21 7.02. Indemnification by the Purchaser.........................................21 7.03. Indemnification by the Seller and BE Aerospace...........................23 7.04. Indemnification Procedures...............................................24 ARTICLE VIIITERMINATION, AMENDMENT AND WAIVER 8.01. Termination..............................................................27 8.02. Effect of Termination....................................................27 8.03. Waiver...................................................................27 ARTICLE IXGENERAL PROVISIONS 9.01. Expenses.................................................................28 9.02. Notices..................................................................28 9.03. Public Announcements.....................................................29 9.04. Headings.................................................................30 9.05. Severability.............................................................30 9.06. Entire Agreement.........................................................30 9.07. Assignment...............................................................30 9.08. No Third-Party Beneficiaries.............................................30 9.09. Waivers and Amendments...................................................30 9.10. Specific Performance.....................................................31 9.11. Governing Law; Dispute Resolution........................................31 9.12. Counterparts.............................................................31
PURCHASE AGREEMENT, dated as of September 1, 1999, among IFE SALES, LLC, a Delaware limited liability corporation (the "Seller"), BE AEROSPACE, INC., a Delaware corporation ("BE Aerospace"), BE INTELLECTUAL PROPERTY, INC., a Delaware corporation ("BE IP") and PURITAN-BENNETT AERO SYSTEMS CO., a Delaware corporation ("Puritan-Bennett" and, together with BE Aerospace and BE IP, the "Former Interest Holders"), and THOMSON-CSF SEXTANT, INC., a Florida corporation (the "Purchaser"). WHEREAS, the Seller owns 49% of the membership interests (the "Interests") in Sextant In-Flight Systems, LLC (formerly known as In-Flight Entertainment, LLC), a Delaware limited liability company (the "Company" or "SIFS"), such Interests consisting of 100% of the Class Two Interests in the Company; WHEREAS, the Purchaser previously purchased the Class One Interests in the Company from BE Aerospace pursuant to a Purchase Agreement dated as of January 25, 1999 (the "Initial Purchase Agreement"); WHEREAS, the Former Interest Holders transferred the Interests to the Seller pursuant to an Assignment and Assumption Agreement dated as of September 1, 1999 among the Former Interest Holders, the Seller and the Purchaser; WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, 100% of the Class Two Interests in the Company (the "Purchased Interest"), upon the terms and subject to the conditions set forth herein; and WHEREAS, pursuant to a Guaranty to be executed on the Closing Date in the form attached hereto as Exhibit 6.01(d) (the "Guaranty"), Thomson-CSF Sextant, a societe anonyme organized under the laws of France (the "Guarantor"), or, if the Board of Directors of the Guarantor has not had the opportunity to approve the Guaranty prior to the Closing Date (as defined in Section 2.03(a)), Aerospatiale Thomson Electronique de Vol, ATEV, S.A. ("ATEV"), has agreed to guarantee the obligations of the Purchaser under this Agreement until such approval is received; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants hereinafter set forth, the Purchaser, the Seller and the Former Interest Holders hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Incorporation by Reference. Capitalized terms used but not defined herein have the definitions given such terms in the Initial Purchase Agreement, except as specified in Section 1.02. Unless otherwise specified herein, section references in this Agreement are to Sections of this Agreement. Except for Sections 2.04, 5.03, 5.06, 5.07, 7.01(h) and 7.02(f) of the Initial Purchase Agreement, which are terminated in their entirety as of the Closing Date, and as otherwise provided herein, all terms of the Initial Purchase Agreement remain in full force and effect. SECTION 1.02. ADDITIONAL DEFINED TERMS. As used in this Agreement, the following additional terms have the following meanings: "AGREEMENT" means this Purchase Agreement, dated as of September 1, 1999, among the Seller, the Former Interest Holders and the Purchaser (including the Exhibits hereto and the Disclosure Schedule) and all amendments and modifications hereto made in accordance with Section 9.09. "ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and Assumption Agreement, dated as of the date of this Agreement, among the Former Interest Holders, the Seller and the Purchaser. "BOOKINGS" means, for any period, a written commitment consistent with industry practice by a customer of the Company or a firm purchase order, in either case accepted by the Company during such period, minus previously recorded orders canceled during such period, for SIFS Product Lines (excluding SIFS Product Lines of B/E Harris LiveTV LLC ("LiveTV")), provided that, with respect to Bookings in calendar year 1999, the term "Bookings" shall mean Bookings for the period from March 1 through December 31, 1999. "DISCLOSURE SCHEDULE" means the Disclosure Schedule dated as of the date of this Agreement and delivered to the Purchaser by the Seller herewith. "DISCLOSURE SCHEDULE OF THE INITIAL PURCHASE AGREEMENT" means the Disclosure Schedule dated as of the date of the Initial Purchase Agreement delivered to the Purchaser by BE Aerospace with the Initial Purchase Agreement. "LLC AGREEMENT" means the Amended and Restated Limited Liability Company Agreement of Sextant In-Flight Systems, LLC, dated as of February 25, 1999, among the Former Interest Holders and the Purchaser, as such Agreement may be amended from time to time. "PRODUCT LINES" means the lines of business, operations and activities conducted by or under development by any Person. "SALES" means, for any period, net sales for such period, determined in accordance with GAAP applied consistently with the current practice of the Company since February 25, 1999 through the date hereof, of SIFS Product Lines (excluding SIFS Product Lines of LiveTV), provided that, with respect to Sales in calendar year 1999, the term "Sales" shall mean net sales for the period from March 1 through December 31, 1999. "SIFS PRODUCT LINES" means the following Product Lines of the Company in existence, for which development was previously initiated or under development at the date of this Agreement, together with reasonable modifications thereof and derivative products therefrom: 1. In-Seat Power Distribution Systems; 2. Audio Distribution Systems - audio hardwired systems; 3. FDM Audio System; 4. Overhead Video System, in-seat audio (B/E 2020); 5. Distributed Video and Audio Systems (B/E 2000, BVS video system); 6. Distributed Video and Audio System, interactive games (B/E 4000); 7. Interactive Video, Audio, Telephony, Games-on-Demand System (MDDS); 8. Interactive Digital Video, Audio, Telephony and Games-on-Demand System (Panther); 9 Video Content Loading System; 10. Cameras: (a) Landscape Single Camera; (b) Landscape Dual Camera; (c) Down and Forward Camera; (d) Worldview Camera System; (e) Landing Gear Cameras; and (f) Cockpit, Cabin and Flight Attendant Cameras; 11. Passenger Control Systems (PCUs), mechanical and digital (various types); 12. Noise Canceling Devices; 13. Spares and individual system or product components to support the product lines in items (1) through (12) above; 14. Provision of services to support the product lines in items (1) through (12) above; 15. Test equipment to support the product lines in items (1) through (12) above; and 16. Non-recurring engineering related to the product lines in items (1) through (15) above, including installation, design and other related fee-generating activities. SECTION 1.03. OTHER ADDITIONAL DEFINED TERMS. The following additional terms have the meanings defined for such terms in the Sections set forth below:
TERM SECTION Adjustment Statement 2.04(a)(i) Adjustment Years 2.04(a)(i) ATEV Recitals Closing 2.03(a) Closing Date 2.03(a) Company Certificate 5.04(a) Company Debt 2.06 Confidential Information 5.10(a) Contingent Purchase Price 2.01 Fixed Purchase Price 2.01 Former Interest Holders Preamble Guaranteed Obligations 5.12(a) In-Flight Entertainment Business 5.05(a) In-Flight Entertainment Systems 5.05(a) Indemnified Party 7.04(a) Indemnifying Party 7.04(a) Initial Purchase Agreement Recitals Non-Competition Period 5.05(a) Non-Objecting Party 2.04(a)(ii) Pro Forma Company Certificate 5.04(c) Purchased Interest Recitals Seller Preamble SIFS Guarantees Section 5.13
SECTION 1.04. USE OF DEFINED TERMS. The meanings of the terms defined in this Agreement shall be applicable to the singular as well as the plural forms of such terms, unless otherwise stated. ARTICLE II PURCHASE AND SALE SECTION 2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions set forth in this Agreement, the Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Seller, the Purchased Interest. The purchase price shall consist of a fixed portion (the "Fixed Purchase Price"), payable as provided in Section 2.03(c), and a contingent portion (the "Contingent Purchase Price"), payable as provided in Section 2.04. SECTION 2.02. FIXED PURCHASE PRICE. The aggregate Fixed Purchase Price shall be $22,000,000. SECTION 2.03. CLOSING. (a) Subject to the terms and conditions of this Agreement, the sale and purchase of the Class Two Interests contemplated hereby shall take place at a closing (the "Closing") to be held at 10:00 a.m., local time, on the first Business Day that is not a Monday, after the later of the following occurs: (i) the expiration or termination of the applicable waiting periods under the HSR Act and (ii) the satisfaction or waiver of all other conditions to the obligations of the parties set forth in Article VI, at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such other time or on such other date or at such other place as the Seller, BE Aerospace and the Purchaser may mutually agree upon in writing (the day on which the Closing takes place being the "Closing Date"). (b) At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser: (i) such instruments and documents as shall be reasonably necessary to effect the transfer of the Purchased Interest to the Purchaser; and (ii) the certificate required to be delivered pursuant to Section 6.02(a). (c) At the Closing, the Purchaser shall deliver to the Seller: (i) a promissory note, substantially in the form of Exhibit 2.03(c) hereto, in favor of the Seller which provides for payments of $11,000,000, together with interest thereon from the Closing Date at a rate of 5% per annum, on each of the first and second anniversaries of the Closing Date; (ii) the Guaranty, substantially in the form of Exhibit 6.01(d) hereto; and (iii) the certificate required to be delivered pursuant to Section 6.01(a). SECTION 2.04. CONTINGENT PURCHASE PRICE. (a) Adjustment Statement. (i) As soon as practicable after the end of the Company's fiscal year in each of 1999, 2000 and 2001 (collectively, the "Adjustment Years"), but in any event no later than 60 days after the end of each Adjustment Year, the Company shall cause to be prepared and delivered to the Seller and BE Aerospace a preliminary statement (each, an "Adjustment Statement") setting forth the aggregate amount of Sales and Bookings of the Company during each such Adjustment Year or, if applicable, the aggregate Sales and Bookings of SIFS Product Lines as presented on any Pro Forma Company Certificate prepared pursuant to Section 5.04(c) during such Adjustment Year, and the amount of the Contingent Purchase Price, if any, credited with respect to such Adjustment Year pursuant to the provisions of Section 2.04 of the Disclosure Schedule. Each Adjustment Statement will be prepared in accordance with GAAP in accordance with the current practice of the Company since February 25, 1999 through the date hereof. (ii) In the event that neither the Purchaser nor BE Aerospace objects to the determination by the Company of any preliminary Adjustment Statement by Notice of Objection delivered to the Company and BE Aerospace or the Purchaser, as the case may be, (the "Non-Objecting Party") within thirty (30) days after the delivery of such Adjustment Statement (such Notice of Objection to describe in reasonable detail the proposed adjustments or objections to such preliminary Adjustment Statement), such Adjustment Statement shall be deemed final and binding on the parties hereto. (iii) If either the Purchaser or BE Aerospace delivers a Notice of Objection to such Adjustment Statement, then any dispute shall be resolved in accordance with Section 2.04(b). (iv) The Company will make available to the Purchaser and BE Aerospace all work papers and records used in the preparation of each Adjustment Statement. (b) Resolution of Disputes. (i) If either or both of the Purchaser or BE Aerospace delivers a Notice of Objection, then the Purchaser and BE Aerospace shall promptly endeavor to resolve any differences with respect to such Adjustment Statement. In the event that a written agreement as to the matters contained in such Adjustment Statement has not been reached within 30 days after the date of receipt by the Company and the Non-Objecting Party of the Notice of Objection, then the determination of the matters contained in such Adjustment Statement shall be submitted to PricewaterhouseCoopers LLP (or, in the event that PricewaterhouseCoopers LLP is unwilling or unable to act in such capacity or is not, at the time of such submission, independent of the Purchaser and BE Aerospace, to another Accounting Firm chosen by the Purchaser and BE Aerospace within 30 days of the determination that PricewaterhouseCoopers LLP is unavailable to determine such matters; provided that if the Purchaser and BE Aerospace are unable to agree on the appointment of an Accounting Firm within 30 days, either the Purchaser or BE Aerospace may apply to the American Arbitration Association to appoint another Accounting Firm within 30 days, which selection shall be binding on the parties). (ii) Nothing herein shall be construed to authorize or permit the Accounting Firm to determine any question or matter whatever under or in connection with this Agreement, except the determination of what adjustments, if any, should be made in one or more of the items reflected in an Adjustment Statement in order for the Sales and Bookings covered thereby to be determined in accordance with the provisions of this Agreement. In making its determination, the Accounting Firm shall act as an expert and not as an arbitrator in an arbitration proceeding. (iii) Within forty-five (45) days of the submission of any dispute concerning the determination of an Adjustment Statement to the Accounting Firm, the Accounting Firm shall render a decision in accordance with this Section 2.04(b) along with a statement of reasons therefor. The decision of the Accounting Firm shall be final and binding upon each party hereto. (iv) The fees and expenses of the Accounting Firm for any determination under this Section 2.04(b) shall be apportioned equally between the Purchaser and BE Aerospace. (c) Any payment required to be made by any party hereto pursuant to this Agreement shall bear interest from the date such payment is due through the date of payment at a rate equal to the one month London Interbank Offered Rate as announced in The Wall Street Journal plus 300 basis points. (d) Within 30 days of the final determination of the final Adjustment Statement, payment of the Contingent Purchase Price shall be made in accordance with Section 2.04 of the Disclosure Schedule. SECTION 2.05. INITIAL PURCHASE AGREEMENT PURCHASE PRICE ADJUSTMENT. BE Aerospace and the Purchaser agree that Section 2.04 of the Initial Purchase Agreement is deleted in its entirety and that any adjustments to the Purchase Price described therein shall not be made. In consideration of the elimination of such purchase price adjustments, BE Aerospace agrees to provide to or on behalf of the Purchaser, upon request, the consulting services specified in Section 2.05 of the Disclosure Schedule. SECTION 2.06. DEBT OF THE COMPANY. The Purchaser shall cause the Company to pay to BE Aerospace the debt of the Company to BE Aerospace in the aggregate principal amount of $9,350,289.15 outstanding as of the date hereof (the "Company Debt"). The Company Debt shall be repaid in two equal installments of $4,675,144.58, without interest thereon, on each of the first and second anniversaries of the Closing Date. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER AND BE AEROSPACE The representations of BE Aerospace made as of February 25, 1999 contained in Sections 3.02 through 3.04, 3.06 through 3.10, 3.12 through 3.16 and 3.18 through 3.30 of the Initial Purchase Agreement are incorporated herein by reference, with effect as of such date. In addition, the Seller and BE Aerospace, jointly and severally, represent and warrant as of the date hereof to the Purchaser as follows: SECTION 3.01. INCORPORATION AND AUTHORITY. Each of the Seller and BE Aerospace is a corporation validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. Each of the Seller and BE Aerospace is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such qualification necessary, except to the extent that the failure to be so qualified would not have a Material Adverse Effect. The execution and delivery of this Agreement by each of the Seller and BE Aerospace, the performance by each of the Seller and BE Aerospace of its obligations hereunder and the consummation by each of the Seller and BE Aerospace of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the Seller and BE Aerospace, respectively. This Agreement has been duly executed and delivered by each of the Seller and BE Aerospace, and (assuming due authorization, execution and delivery by the Purchaser) this Agreement constitutes a legal, valid and binding obligation of each of the Seller and BE Aerospace enforceable against each of the Seller and BE Aerospace in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 3.02. NO CONFLICT. Assuming all consents, approvals, authorizations and other actions described in Section 3.03 of this Agreement and Section 3.03 of the Initial Purchase Agreement have been obtained and all filings and notifications listed in Section 3.11 of the Disclosure Schedule of the Initial Purchase Agreement have been made, and except as may result from any facts or circumstances relating solely to the Purchaser, the execution, delivery and performance of this Agreement by each of the Seller and BE Aerospace does not and will not (a) violate, conflict with or result in a breach of any provision of the charter or by-laws (or similar organizational documents) of the Seller or BE Aerospace and, to the best knowledge of the Seller and BE Aerospace, the Company or any subsidiary; (b) conflict with or violate any Law or Governmental Order applicable to the Seller or BE Aerospace and, to the best knowledge of the Seller and BE Aerospace, the Company or any subsidiary, except as would not, individually or in the aggregate, (i) have a material adverse effect on the ability of the Seller or BE Aerospace to consummate, or (ii) delay the consummation of, the transactions contemplated by this Agreement; or (c) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Encumbrance on the Interests pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument to which the Seller or BE Aerospace, and to the best knowledge of BE Aerospace, the Company or any subsidiary is a party or by which any of such assets or properties is bound or affected, including, without limitation, the indenture dated as of November 2, 1998 between BE Aerospace and the Bank of New York, except as would not, individually or in the aggregate, (i) (A) have a material adverse effect on the ability of the Seller or BE Aerospace to consummate, or (B) delay the consummation of, the transactions contemplated by this Agreement, (ii) have a Material Adverse Effect or (iii) create any claim against the Purchaser. SECTION 3.03. CONSENTS, APPROVALS, LICENSES, ETC. No consent, approval, authorization, license, order or permit of, or declaration, filing or registration with, or notification to, any Governmental Authority, or any other Person, is required to be made or obtained by the Seller or BE Aerospace in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, except: (i) applicable requirements, if any, of the HSR Act; (ii) where the failure to obtain such consents, approvals, authorizations, licenses, orders or permits of, or to make such declarations, filings or registrations or notifications would not, individually or in the aggregate, prevent the Seller or BE Aerospace from performing its obligations under this Agreement and would not have a Material Adverse Effect; and (iii) as may be necessary as a result of any facts or circumstances relating solely to the Purchaser. SECTION 3.04. MEMBERSHIP INTERESTS OF THE SELLER IN THE COMPANY. The Class Two Interests constitute 49% of the Interests in the Company. The Interests have been duly authorized and validly issued, are fully paid and nonassessable, and were not issued in violation of or subject to any preemptive rights. The Seller owns all of the Interests, free and clear of all Encumbrances. There are no voting trusts, stockholder agreements, proxies or other similar such agreements or arrangements in effect with respect to the voting or transfer of Interests, other than the LLC Agreement. The delivery to the Purchaser of the Interests pursuant to the provisions of this Agreement will transfer to the Purchaser good and valid title thereto, free and clear of all Encumbrances arising through the Seller, the Former Interest Holders, the Company or their Affiliates. SECTION 3.05. ABSENCE OF LITIGATION. (a) There are no Actions pending or, to the knowledge of the Seller and BE Aerospace, threatened against the Seller, BE Aerospace or any of the assets or properties of the Seller or BE Aerospace that, individually or in the aggregate, would have a Material Adverse Effect or would restrain or prevent the Seller or BE Aerospace from consummating the transactions contemplated hereby or performing its obligations hereunder and (b) none of the Seller, BE Aerospace nor any subsidiary nor their respective assets and properties is subject to any Governmental Order having a Material Adverse Effect or that would restrain or prevent the Seller or BE Aerospace from consummating the transactions contemplated hereby or performing its obligations hereunder. SECTION 3.06. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or the Initial Purchase Agreement based upon arrangements made by or on behalf of the Seller or the Former Interest Holders. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Seller and the Former Interest Holders as follows: SECTION 4.01. INCORPORATION AND AUTHORITY OF THE PURCHASER. The Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Purchaser, the performance by the Purchaser of its obligations hereunder and the consummation by the Purchaser of the transactions contemplated hereby will have been duly authorized by all requisite corporate action on the part of the Purchaser prior to the Closing Date. This Agreement has been duly executed and delivered by the Purchaser, and (assuming due authorization, execution and delivery by the other parties hereto) at the Closing Date will constitute a legal, valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 4.02. NO CONFLICT. Except as may result from any facts or circumstances relating solely to the other parties hereto, the execution, delivery and performance of this Agreement by the Purchaser does not and will not: (a) conflict with or violate the Certificate of Incorporation or By-laws (or other similar applicable documents) of the Purchaser, the Company or any subsidiary; (b) conflict with or violate any Law or Governmental Order applicable to the Purchaser, the Company or any subsidiary, except as would not, individually or in the aggregate, have a material adverse effect on the ability of the Purchaser to consummate, or delay the consummation of, the transactions contemplated by this Agreement; or (c) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Encumbrance on any of the assets or properties of the Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument relating to such assets or properties to which the Purchaser, the Company or any subsidiary is a party or by which any of such assets or properties is bound or affected, except as would not, individually or in the aggregate, have a material adverse effect on the ability of the Purchaser to consummate, or delay the consummation of, the transactions contemplated by this Agreement. SECTION 4.03. CONSENTS AND APPROVALS. The execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser will not, require any consent, approval, authorization or other action by, or filing with or notification to, any governmental or regulatory authority, except (i) the notification and waiting period requirements of the HSR Act, (ii) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent or delay the Purchaser from performing any of its material obligations under this Agreement and (iii) as may be necessary as a result of any facts or circumstances relating solely to the other parties hereto. SECTION 4.04. ABSENCE OF LITIGATION. No Action is pending or, to the knowledge of the Purchaser, threatened against the Purchaser which seeks to delay or prevent the consummation of the transactions contemplated hereby or which would be reasonably likely materially and adversely to affect or restrict the Purchaser's ability to consummate the transactions contemplated hereby or to perform its obligations hereunder. SECTION 4.05. INVESTMENT PURPOSE. The Purchaser is acquiring the Class Two Interests solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof. SECTION 4.06. FINANCING. The Purchaser has all funds necessary to consummate the transactions contemplated by this Agreement. SECTION 4.07. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser. ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.01. REGULATORY AND OTHER AUTHORIZATIONS; RELEASES; CONSENTS. (a) Each party hereto shall use its best efforts to obtain all authorizations, consents, orders, permits, licenses and approvals of, and to give all notices to and make all filings with, all Governmental Authorities and other third parties that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and will cooperate fully with the other parties in promptly seeking to obtain all such authorizations, consents, orders and approvals, giving such notices, and making such filings. Each party hereto agrees to make, or cause to be made, an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable, but in no event later than September 15, 1999 and to supply promptly any additional information and documentary material that may be requested pursuant to the HSR Act. The parties hereto agree not to take any action that will have the effect of unreasonably delaying, impairing or impeding the receipt of any required authorizations, consents, orders or approvals. (b) Without limiting the generality of the parties' undertakings pursuant to Section 5.01(a), each of the parties hereto shall use all reasonable efforts to (i) respond to any inquiries by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement, (ii) avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement and (iii) in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement has been issued, to have such Governmental Order vacated or lifted. SECTION 5.02. FURTHER ACTION. Subject to the terms and conditions herein provided, each of the parties hereto covenants and agrees to use its best efforts to deliver or cause to be delivered such documents and other papers and to take or cause to be taken such further actions as may be necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated hereby. SECTION 5.03. CONVEYANCE TAXES. BE Aerospace and the Purchaser agree that each shall pay one-half of all sales, use, transfer, stamp, stock transfer, real property transfer or gains and similar taxes incurred as a result of the sale of the Purchased Interest contemplated hereby. SECTION 5.04. REPORTS. (a) Within 60 days after the end of each fiscal quarter of each Adjustment Year the Company shall prepare, at its expense, and deliver to BE Aerospace a certificate setting forth the Company's Sales and Bookings for such fiscal quarter (each, a "Company Certificate"). (b) Within 60 days after the end of each Adjustment Year, the Company shall prepare, at its expense, and deliver to BE Aerospace a reconciled Company Certificate for such fiscal year. (c) In the event that the Purchaser, or any of its successors or assigns, transfers any SIFS Product Line to another entity during an Adjustment Year, at the times set forth in Sections 5.04(a) and (b) the Purchaser shall prepare a pro forma Company Certificate (each, a "Pro Forma Company Certificate") aggregating Sales and Bookings for all such SIFS Product Lines, whether or not transferred, for each period set forth in Sections 5.04(a) and (b). (d) The Company Certificate and the Pro Forma Company Certificate, if any, delivered pursuant to Section 5.04(b) and (c) shall be the basis of preparation of Adjustment Statements pursuant to Section 2.04(a). SECTION 5.05. NON-COMPETITION. (a) The Seller and the Former Interest Holders agree that, from the date hereof until the date three years after the Closing Date or, if earlier, the date of the dissolution or liquidation of the Company (or any successor thereto) (the "Non-Competition Period"), within any jurisdiction or marketing area in which the Company or any of its Affiliates is doing business or is qualified to do business, directly or indirectly, they shall not own, manage, operate, control, or participate in the ownership, management, operation or control of, or be connected in any manner with any manufacturer of products, including systems, equipment, software, services, and support services related thereto, for entertainment, passenger information, passenger communication and monitoring purposes used solely by passengers and cabin crew on board commercial passenger transport aircraft ("In-Flight Entertainment Systems") (an "In-Flight Entertainment Business") other than the Company, other than with respect to the current business of the Seller and the Former Interest Holders in connection with (i) the provision of aircraft-specific engineering services to commercial airlines, (ii) the installation in aircraft of systems manufactured by third parties and (iii) the servicing of such systems on an ongoing basis; provided, that any of the Seller and the Former Interest Holders may incorporate goods and services produced by an In-Flight Entertainment Business other than the Company in such party's products if customers of such party request it to do so; and provided, further, that nothing contained in this Section 5.05 shall restrict or prohibit any of the Seller and the Former Interest Holders from providing repair or maintenance service to Persons manufacturing, selling or servicing In-Flight Entertainment Systems. (b) Each of the Seller and the Former Interest Holders also agrees for the duration of the Non-Competition Period not to persuade or attempt to persuade any potential customer to which the Company or any of its subsidiaries has made a presentation, or with which the Company or any of its subsidiaries has been having discussions, not to hire the Company or such subsidiary, or to hire another company. (c) Each of the Seller and the Former Interest Holders also agrees for the duration of the Non-Competition Period not to solicit for itself or any Person other than the Company or any of its subsidiaries the business of any Person, in connection with the sale of In-Flight Entertainment Systems, which is a customer, supplier or distributor of the Company or any of its subsidiaries, or was its customer, supplier or distributor within two years prior to the date of this Agreement. (d) Each of the Seller and the Former Interest Holders acknowledges that a breach of its covenants contained in Sections 5.05(a) through (c) may cause irreparable damage to the Purchaser, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, each of the Seller and the Former Interest Holders agrees that if it breaches any of the covenants contained in Sections 5.05(a) through (c) in addition to any other remedy which may be available at law or in equity, the Purchaser shall be entitled to specific performance and injunctive relief. (e) Each of the Seller and the Former Interest Holders further acknowledges that the time, scope, geographic areas and other provisions of Section 5.05(a) have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that the agreements in Section 5.05(a) shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, they shall be interpreted to extend only over the maximum period of time for which they may be enforceable and/or over the maximum geographical area as to which they may be enforceable and/or to the maximum extent in all other respects as to which they may be enforceable, all as determined by such court in such action. SECTION 5.06. NO SOLICITATION OF EMPLOYEES. Each of the Seller and the Former Interest Holders agrees that it shall not, during the period from the date hereof until the Closing Date and, if the Closing occurs, for a period of four (4) years from February 25, 1999, without the prior written consent of the Purchaser, directly or indirectly, solicit on a specific or targeted basis for employment or employ any person who is, at the time of such hiring or solicitation, an employee of the Company, provided that this Section 5.06 shall not prohibit any form of employment advertising or prevent the hiring of any individual who contacts the Seller or any Former Interest Holder after terminating his or her employment with the Company. This Section 5.06 replaces Section 5.07 of the Initial Purchase Agreement in its entirety. SECTION 5.07. TRANSITIONAL SERVICES. BE Aerospace agrees to continue to provide administrative services to the Company in accordance with Section 5.09 of the Initial Purchase Agreement for an additional 180 days after the expiration of the period specified therein. SECTION 5.08. CONDUCT OF THE BUSINESS BY THE PURCHASER. (a) The Purchaser agrees that from the date of this Agreement through the end of the final Adjustment Year, the Company will book orders and record sales and revenues of SIFS Product Lines in accordance with the current practice of the Company from February 25, 1999 through the date hereof; provided, that if an SIFS Product Line is transferred to another Person, the Company will secure from such Person an undertaking to provide the Company a statement of Sales and Bookings for such transferred SIFS Product Line for all remaining Adjustment Years prepared in accordance with the then-current practice of the Company. (b) The Purchaser agrees to use commercially reasonable efforts to maximize Sales and Bookings during the period from the date hereof until the end of the final Adjustment Year; provided, that if an SIFS Product Line is transferred to an Affiliate of the Purchaser prior to the end of the final Adjustment Year, the Purchaser will secure from such Affiliate an undertaking to use commercially reasonable efforts to maximize the Sales and Bookings of such transferred SIFS Product Line during the period from the date of transfer until the end of the final Adjustment Year. In the event that the Company or any Affiliate of the Purchaser acquires or develops new Product Lines after the date hereof, the Purchaser agrees to use commercially reasonable efforts to ensure that the business relating to SIFS Product Lines will be maintained and not be diverted to or disadvantaged by such subsequently acquired or developed Product Lines. SECTION 5.09. ACCESS TO INFORMATION. From the date of this Agreement through the second anniversary of the Closing, upon reasonable prior notice, the Purchaser shall, and the Purchaser shall cause the officers, employees, auditors and agents of the Company to, (a) afford the officers, employees and authorized agents and representatives of BE Aerospace reasonable access, during normal business hours, to the financial Books and Records of the Company to the extent that such financial Books and Records relate to a period prior to the Closing Date and (b) furnish to the officers, employees, agents and representatives of BE Aerospace, at the expense of BE Aerospace, such additional existing financial and operating data and other information regarding the assets, properties, goodwill and business of the Company with respect to Tax matters for all fiscal years of the Company through 1999 as BE Aerospace may from time to time reasonably request; provided, however, that BE Aerospace shall have reasonable access to information as outlined above at any time after such two-year period if such access is necessary to enable BE Aerospace to respond to audits and inquiries of any taxing authority and provided, further that BE Aerospace shall not unreasonably interfere with any of the businesses or operations of the Company. SECTION 5.10. CONFIDENTIALITY. (a) Any information relating to the business, operations, and finances of any party hereto or the Company which are proprietary to, or considered proprietary by, such party or the Company is hereinafter referred to as "Confidential Information". All Confidential Information in tangible form (plans, writings, drawings, computer software and programs, etc.) or provided to or conveyed orally or visually to a receiving party, shall be presumed to be proprietary at the time of delivery to the receiving party. All such proprietary information shall be protected by the receiving party from disclosure with the same degree of care with which the receiving party protects its own Confidential Information from disclosure. Each party hereto agrees: (i) not to disclose such Confidential Information to any Person except to those of its employees or representatives who need to know such Confidential Information in connection with the performance of such party's obligations hereunder and who have agreed to maintain the confidentiality of such Confidential Information; and (ii) neither it nor any of its employees or representatives will use the Confidential Information for any purpose other than the performance of such party's obligations hereunder; provided that such restrictions shall not apply if such Confidential Information: (x) is or hereafter becomes public, unless such publication is a breach of this Agreement; (y) was already in the receiving party's possession prior to any disclosure of the Confidential Information to the receiving party by the divulging party; or (z) has been or is hereafter obtained by the receiving party from a third party and the receiving party is not aware that such third party is bound by any confidentiality obligation to the divulging party with respect to the Confidential Information; provided further that nothing herein shall prevent any party hereto from disclosing any portion of such Confidential Information pursuant to judicial order, but only to the extent of such order and after reasonable notice to the original divulging party. (b) TERMINATION. The obligations contained in this Section 5.10 shall terminate two years after the final Adjustment Year. SECTION 5.11. Governance. The Seller agrees that during the period from the date hereof through the earlier to occur of the Closing Date and the termination of this Agreement pursuant to Section 8.01, the Seller's rights with respect to the governance of the Company contained in Section 10.6.1 and 10.7 of the LLC Agreement shall be suspended and the Purchaser shall be entitled to take any actions set forth in Section 10.6.1 without the approval of the Seller; provided that the Seller shall retain its rights with respect to the following items contained in Schedule 10.6.1 of the LLC Agreement: (a), (c), (h)(to the extent that such investment exceeds $500,000), (l), (o), (p), (r), (s), (t) and the making of any modifications to the items listed in this proviso. SECTION 5.12. GUARANTEE OF BE AEROSPACE. (a) BE Aerospace hereby unconditionally and irrevocably guarantees the punctual performance and payment when due of all obligations, amounts and other liabilities of the Seller now or hereafter existing under this Agreement, the LLC Agreement and the Assignment and Assumption Agreement (such obligations, amounts and other liabilities being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Purchaser in successfully enforcing any rights under this Section 5.12. Without limiting the generality of the foregoing, BE Aerospace's liability hereunder shall extend to all amounts and obligations that constitute part of the Guaranteed Obligations and would be owed by the Seller under this Agreement but for the fact that they are unenforceable or not allowable in either case due to the existence of a bankruptcy, reorganization or similar proceeding involving the Seller or any Former Interest Holder or any breach or failure to perform of the Seller or any Former Interest Holder under the Assignment and Assumption Agreement. (b) BE Aerospace guarantees that the Guaranteed Obligations will be paid or performed strictly in accordance with the terms of this Agreement, the LLC Agreement or the Assignment and Assumption Agreement, as the case may be, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Purchaser with respect thereto. The obligations of BE Aerospace under this Section 5.12 are independent of the Guaranteed Obligations or any other obligations of BE Aerospace pursuant to this Agreement, and a separate action or actions may be brought and prosecuted against BE Aerospace to enforce this Section 5.12, irrespective of whether any action is brought against the Seller or whether the Seller is joined in any such action or actions. The liability of BE Aerospace under this Section 5.12 shall be irrevocable, absolute and unconditional irrespective of, and BE Aerospace hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (i) any lack of validity or enforceability of this Agreement, the Assignment and Assumption Agreement or any agreement or instrument relating thereto arising from the failure of the Seller to properly authorize, execute and deliver this Agreement or the Assignment and Assumption Agreement; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of the Seller under this Agreement or any agreement or instrument relating thereto, or any other amendment or waiver of or any consent to departure from this Agreement; (iii) any change, restructuring or termination of the corporate structure or existence of the Seller, the Company or any of their respective subsidiaries; or (iv) any failure of the Purchaser to disclose to BE Aerospace any information relating to the financial condition, operations, properties or prospects of the Company or any of its subsidiaries now or in the future known to the Purchaser (BE Aerospace waiving any duty on the part of the Purchaser to disclose such information). This Section 5.12 shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Purchaser or any other Person upon the insolvency, bankruptcy or reorganization of the Seller, any Former Interest Holder or the Company or otherwise, all as though such payment had not been made. (c) (i) BE Aerospace hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Section 5.12 and any requirement that the Purchaser exhaust any right, pursue any remedy or take any action against the Seller, any Former Interest Holder or any other Person. (ii) BE Aerospace hereby waives any right to revoke this Section 5.12, and acknowledges that this Section 5.12 is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. SECTION 5.13. ASSUMPTION OF BE AEROSPACE OBLIGATIONS. As of the Closing Date, the Purchaser shall assume all obligations of BE Aerospace with respect to providing guarantees of SIFS obligations, including with respect to LiveTV, and any indemnities by BE Aerospace with respect to any obligations of SIFS post-Closing contained in any of the Material Contracts listed on Sections 3.13(b) and 3.16(a) of the Disclosure Schedule to the Initial Purchase Agreement ("SIFS Guarantees"); provided, that nothing in this Section 5.13 shall affect the indemnification obligations of BE Aerospace to SIFS with respect to any Material Contracts to which BE Aerospace or any Affiliate thereof and SIFS are the only parties. The Purchaser shall use its best efforts to assist in securing the consent to the assignment to it of all SIFS Guarantees and, in the event that consent to the assignment of any SIFS Guarantee is not received by the Purchaser, to indemnify BE Aerospace for the full amount of any payments under any SIFS Guarantee for liabilities arising after the Closing Date. ARTICLE VI CONDITIONS TO CLOSING SECTION 6.01. Conditions to Obligations of the Seller and the Former Interest Holders. The obligations of the Seller and the Former Interest Holders to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver, at or prior to the Closing, of each of the following conditions: (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all material respects as of the Closing, with the same force and effect as if made as of the Closing Date, other than such representations and warranties as are made as of another date, which shall be true and correct as of such date (provided, however, that if any portion of any representation or warranty is already qualified by materiality, for purposes of determining whether this Section 6.01(a) has been satisfied with respect to such portion of such representation or warranty, such portion of such representation or warranty as so qualified must be true and correct in all respects), (ii) the covenants and agreements contained in this Agreement to be complied with by the Purchaser at or prior to the Closing shall have been complied with in all material respects; and (iii) the Seller and the Former Interest Holders shall have received a certificate of the Purchaser as to the matters set forth in clauses (i) and (ii) above signed by a duly authorized officer of the Purchaser. (b) HSR ACT. Any waiting period (and any extension thereof) under the HSR Act applicable to the purchase of the Purchased Interest contemplated hereby shall have expired or shall have been terminated. (c) NO ORDER. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal or otherwise prohibiting consummation of such transactions. (d) GUARANTY. The Guarantor or, if the Board of Directors of the Guarantor has not had the opportunity to approve the Guaranty prior to such date, ATEV, shall have executed and delivered the Guaranty substantially in the form of Exhibit 6.01(d) hereto. (e) STATEMENT OF SALES AND BOOKINGS. The Purchaser shall have delivered a statement of the Sales and Bookings of the Company for the period from March 1, 1999 through June 30, 1999. SECTION 6.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver, at or prior to the Closing, of each of the following conditions: (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The representations and warranties of the Seller and BE Aerospace contained in this Agreement shall be true and correct in all material respects as of the Closing, with the same force and effect as if made as of the Closing Date, other than such representations and warranties as are made as of another date, which shall be true and correct as of such date (provided, however, that if any portion of any representation or warranty is already qualified by materiality, for purposes of determining whether this Section 6.02(a) has been satisfied with respect to such portion of such representation or warranty, such portion of such representation or warranty as so qualified must be true and correct in all respects); (ii) the covenants and agreements contained in this Agreement to be complied with by the Seller and the Former Interest Holders at or prior to the Closing shall have been complied with in all material respects; and (iii) the Purchaser shall have received a certificate of each of the Seller and BE Aerospace as to the matters set forth in clauses (i) and (ii) above signed by an officer of each such party. (b) HSR ACT. Any waiting period (and any extension thereof) under the HSR Act applicable to the purchase of the Purchased Interest contemplated hereby shall have expired or shall have been terminated. (c) NO ORDER. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, injunction or other Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal or otherwise prohibiting consummation of such transactions. ARTICLE VII INDEMNIFICATION SECTION 7.01. SURVIVAL. The provisions of Article VIII of the Initial Purchase Agreement remain in full force and effect. In addition, subject to the limitations and other provisions of this Agreement, the representations, warranties, covenants and agreements of the parties hereto contained herein shall survive the Closing and shall remain in full force and effect, regardless of any investigation made by or on behalf of the Seller, the Former Interest Holders or the Purchaser, (a) as to the representations and warranties incorporated herein by reference, for the periods set forth in Section 8.01 of the Initial Purchase Agreement and (b) as to the other representations, warranties, covenants and agreements set forth herein, for a period extending from the Closing Date until the earlier of March 31, 2000 and the date of the completion by the Company's auditors of the audit for the fiscal year ending December 31, 1999; provided, however, that the covenant set forth in Section 5.03 hereof shall survive until the expiration of the applicable statute of limitations for the Tax in question, the representations and warranties set forth in the last sentence of Section 3.04 hereof shall survive until the expiration of the applicable statute of limitations; and the covenants and agreements set forth in Sections 2.04, Article V (with the exception of Section 5.03), Articles VII and IX hereof shall remain in full force and effect for the applicable periods specified in the respective Sections or Articles or, if no such period is specified, until the expiration of the applicable statute of limitations. SECTION 7.02. INDEMNIFICATION BY THE PURCHASER. (a) The Purchaser agrees, subject to the other terms and conditions of this Agreement and on an after Tax basis, to indemnify each Seller Indemnified Party against and hold each Seller Indemnified Party harmless from all Losses arising out of (i) the breach of any representation or warranty contained in Article IV hereof, (ii) the breach of any covenant or agreement of the Purchaser herein and (iii) the conduct of the business of SIFS after the Closing Date. Anything in Section 7.01 hereof to the contrary notwithstanding, no claim may be asserted nor may any action be commenced against the Purchaser for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or action is received by the Purchaser describing in detail the facts and circumstances with respect to the subject matter of such claim or action on or prior to the date on which the representation, warranty, covenant or agreement on which such claim or action is based ceases to survive as set forth in Section 7.01 hereof, irrespective of whether the subject matter of such claim or action shall have occurred before or after such date. (b) The indemnification obligations of the Purchaser pursuant to Sections 7.02(a)(i) and (iii) hereof shall not be effective until the aggregate dollar amount of all Losses which would otherwise be indemnifiable pursuant to Sections 7.02(a)(i) and (iii) hereof and to Section 8.02(a)(i) of the Initial Purchase Agreement exceeds the Purchaser's Threshold Amount, in which event such claims shall be indemnifiable from the first dollar thereof. In addition, no claim may be made against the Purchaser for indemnification pursuant to Sections 7.02(a)(i) and (iii) hereof with respect to any individual item (or aggregation of similar items) of Loss, unless such item (or aggregation of similar items) exceeds $10,000, nor shall any such item (or aggregation of similar items) which does not exceed $10,000 be applied to or considered part of the Purchaser's Threshold Amount. The indemnification obligations of the Purchaser pursuant to Sections 7.02(a)(i) and (iii) hereof shall be effective only until the dollar amount paid in respect of all Losses indemnified against under Sections 7.02(a)(i) and (iii) hereof and to Section 8.02(a)(i) of the Initial Purchase Agreement aggregates to an amount equal to $15,000,000. For the purposes of this Section 7.02(b), in computing such individual or aggregate amounts of claims, the amount of each claim shall be deemed to be an amount (i) net of any Tax benefit actually realized by the Seller Indemnified Party making such claim on or prior to the date of an indemnification payment under this Section 7.02 and (ii) net of any insurance proceeds and any indemnity, contribution or other similar payment actually recovered by the Seller Indemnified Party making such claim from any third party with respect thereto (on an after Tax basis). (c) Payments by the Purchaser to any Seller Indemnified Party pursuant to Section 7.02(a) hereof shall be limited to the amount of any Losses that remains after deducting therefrom (i) any Tax benefit actually realized by such Seller Indemnified Party on or prior to the date of an indemnification payment under this Section 7.02 and (ii) any insurance proceeds and any indemnity, contribution or other similar payment actually recovered by such Seller Indemnified Party from any third party with respect thereto (on an after Tax basis). If a payment is made by the Purchaser to any Seller Indemnified Party in accordance with this Section 7.02, and if a Tax benefit subsequently is actually realized by such Seller Indemnified Party or any Affiliate of such Seller Indemnified Party (that was not previously taken into account to reduce an amount otherwise payable by the Purchaser to such Seller Indemnified Party under this Section 7.02), such Seller Indemnified Party shall promptly pay to the Purchaser at the time of such realization the amount of such Tax benefit to the extent that such amount would have resulted in a reduction in an obligation of the Purchaser under Section 7.02 hereof if the Tax benefit had been obtained at the time that such obligation was satisfied. SECTION 7.03. INDEMNIFICATION BY THE SELLER AND BE AEROSPACE. (a) The Seller and BE Aerospace agree, subject to the other terms and conditions of this Agreement and on an after Tax basis, jointly and severally to indemnify each Purchaser Indemnified Party against and hold each Purchaser Indemnified Party harmless from all Losses arising out of (i) the breach of any representation or warranty of the Seller or BE Aerospace contained in Article III, (ii) the breach by the Seller or any Former Interest Holders of any covenant or agreement of the Seller or such Former Interest Holders contained herein, (iii) the actions taken by the Company prior to February 25, 1999 and described in Section 3.20 of the Disclosure Schedule of the Initial Purchase Agreement and (iv) Taxes imposed on or with respect to the income, assets, or operations of the Company and its subsidiaries for taxable periods (or portions thereof) ending on or prior to February 25, 1999 to the extent such Taxes were required to have been paid to the appropriate taxing authority prior to February 25, 1999. Anything in Section 7.01 hereof to the contrary notwithstanding, no claim may be asserted nor any action commenced against the Seller or BE Aerospace for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or action is received by BE Aerospace describing in detail the facts and circumstances with respect to the subject matter of such claim or action within thirty days after the date on which the representation, warranty, covenant or agreement on which such claim or action is based ceases to survive as set forth in Section 7.01 hereof, irrespective of whether the subject matter of such claim or action shall have occurred before or after such date. (b) The indemnification obligations of the Seller and BE Aerospace pursuant to Section 7.03(a)(i) hereof shall not be effective until the aggregate dollar amount of all Losses which would otherwise be indemnifiable pursuant to Section 7.03(a)(i) hereof and to Section 8.03(a)(i) of the Initial Purchase Agreement exceeds the Seller's Threshold Amount, in which event such claims shall be indemnifiable from the first dollar thereof. In addition, no claim may be made against the Seller or BE Aerospace for indemnification pursuant to Section 7.03(a)(i) hereof with respect to any individual item of Loss (or aggregation of similar items), unless such item (or aggregation of similar items) exceeds $10,000, nor shall any such item (or aggregation of similar items) which does not exceed $10,000 be applied to or considered part of the Seller's Threshold Amount. The indemnification obligations of the Seller and BE Aerospace pursuant to Section 7.03(a)(i) hereof shall be effective only until the dollar amount paid by the Seller or BE Aerospace in respect of all Losses indemnified against under Section 7.03(a)(i) hereof together with the dollar amount paid by BE Aerospace under Section 8.03(a)(i) of the Initial Purchase Agreement aggregates to an amount equal to $15,000,000, provided, however, that with respect to claims relating to the representations and warranties contained in the last sentence of Section 3.04 hereof and the covenant set forth in Section 5.03 only, the indemnification obligations shall be effective until the dollar amount paid in respect of all Losses aggregates to an amount equal to the Fixed Purchase Price plus the Contingent Purchase Price, if any. For the purposes of this Section 7.03(b), in computing such individual or aggregate amounts of claims, the amount of each claim shall be deemed to be an amount (i) net of any Tax benefit actually realized on or prior to the date of an indemnification payment under this Section 7.03, and (ii) net of any insurance proceeds and any indemnity, contribution or other similar payment actually recovered by any Purchaser Indemnified Party from any third party with respect thereto (on an after Tax basis). (c) Payments by the Seller or BE Aerospace pursuant to Section 7.03(a) hereof shall be limited to the amount of any Losses that remains after deducting therefrom (i) any Tax benefit actually realized on or prior to the date of an indemnification payment under this Section 7.03, by such Purchaser Indemnified Party and (ii) any insurance proceeds and any indemnity, contribution or other similar payment actually recovered by any Purchaser Indemnified Party from any third party with respect thereto (on an after Tax basis). If a payment is made by the Seller or BE Aerospace in accordance with this Section 7.03, and if a Tax benefit subsequently is actually realized by such Purchaser Indemnified Party or any Affiliate of any Purchaser Indemnified Party (that was not previously taken into account to reduce an amount otherwise payable by the Seller and BE Aerospace to such Purchaser Indemnified Party under this Section 7.03), the Purchaser shall promptly pay to the Seller or BE Aerospace, as the case may be, at the time of such realization, the amount of such Tax benefit to the extent that such amount would have resulted in a reduction in an obligation of the Seller and BE Aerospace under this Section 7.03 if the Tax benefit had been obtained at the time that such obligation was satisfied. SECTION 7.04. INDEMNIFICATION PROCEDURES. (a) A Seller Indemnified Party or a Purchaser Indemnified Party, as the case may be (for purposes of this Section 7.04, an "Indemnified Party"), shall give the indemnifying party under Section 7.02 or 7.03 hereof, as applicable (for purposes of this Section 7.04, an "Indemnifying Party"), prompt written notice of any claim, assertion, event or proceeding by or in respect of a third party as to which it may request indemnification hereunder or as to which the Seller's Threshold Amount or the Purchaser's Threshold Amount, as applicable, may be applied as soon as is practicable and in any event within 45 days of the time that such Indemnified Party learns of such claim, assertion, event or proceeding; provided, that the failure to so notify the Indemnifying Party shall not affect rights to indemnification hereunder except to the extent that the Indemnifying Party is actually prejudiced by such failure. The Indemnifying Party shall have the right to direct, through counsel of its own choosing, the defense or settlement of any such claim or proceeding at its own expense; provided, however, that the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld), enter into any settlement or otherwise compromise any such claim or proceeding that relates to Taxes if such settlement or compromise may adversely affect the Tax liability of the Indemnified Party or the Company, or any Affiliate of either of the foregoing, for any taxable period. With respect to such claims or proceedings relating to Taxes, the Indemnifying Party shall allow the Indemnified Party to reasonably request updates regarding developments that may be relevant to the Taxes of the Company or the Indemnified Party, and shall allow the Indemnified Party to provide comments regarding the direction of such claim or proceeding (which comments, subject to the foregoing consent requirements with respect to settlements or compromises, the Indemnifying Party will be free to accept or reject in its sole discretion). If the Indemnifying Party elects to assume the defense of any such claim or proceeding, the Indemnified Party may participate in such defense, but in such case the expenses of such Indemnified Party shall be paid by such Indemnified Party. Such Indemnified Party shall provide the Indemnifying Party with access to its records and personnel relating to any such claim, assertion, event or proceeding during normal business hours and shall otherwise cooperate with the Indemnifying Party in the defense or settlement thereof, and the Indemnifying Party shall reimburse such Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith. If the Indemnifying Party elects to direct the defense of any such claim or proceeding, such Indemnified Party shall not pay, or permit to be paid, any part of any claim or demand arising from such asserted liability, unless the Indemnifying Party consents in writing to such payment or unless the Indemnifying Party, subject to the last sentence of this Section 7.04(a), withdraws from the defense of such asserted liability, or unless a final judgment from which no appeal may be taken by or on behalf of the Indemnifying Party is entered against such Indemnified Party for such liability. If the Indemnifying Party shall fail to defend against such claim or proceeding, or if, after commencing or undertaking any such defense, the Indemnifying Party fails to prosecute or withdraws from such defense, such Indemnified Party shall have the right to undertake the defense or settlement thereof, at the Indemnifying Party's expense. If such Indemnified Party assumes the defense of any such claim or proceeding pursuant to this Section 7.04(a) and proposes to settle such claim or proceeding prior to a final judgment thereon or to forego appeal with respect thereto, then such Indemnified Party shall give the Indemnifying Party prompt written notice thereof and the Indemnifying Party shall have the right to participate in the settlement or assume or reassume the defense of such claim or proceeding. (b) Each party hereto hereby acknowledges and agrees that from and after the Closing, its sole and exclusive remedy with respect to any and all claims relating to the representations and warranties contained in Article III and Article IV and the covenants contained in this Agreement to be performed prior to the Closing shall be pursuant to the indemnification provisions set forth in this Article VII. In furtherance of the foregoing, each party hereto hereby waives, to the fullest extent permitted under applicable law, any and all other rights, claims and causes of action it may have, from and after the Closing, against the other parties hereto or its officers, directors, employees, agents, representatives and Affiliates relating thereto. (c) Except as set forth in this Agreement, the parties hereto are not making any representation, warranty, covenant or agreement with respect to the matters contained herein. Notwithstanding anything to the contrary contained in this Agreement, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right on the part of any party hereto, after the consummation of the purchase and sale of the Purchased Interest contemplated by this Agreement, to rescind this Agreement or any of the transactions contemplated hereby. (d) Notwithstanding anything to the contrary contained in this Agreement, no party hereto shall have any liability under any provision of this Agreement for, and in no event shall the Purchaser's Threshold Amount or the Seller's Threshold Amount, as the case may be, be applied to, any consequential damages. Each party hereto shall take all reasonable steps to mitigate its Losses upon and after becoming aware of any event which could reasonably be expected to give rise to any Losses. (e) For purposes of Sections 7.02 and 7.03 hereof, a Tax benefit shall be considered realized in the taxable year in which the Taxes of an Indemnified Party are reduced as a result of any deduction, loss, credit, allowance or similar item that relates to a claim or action for which an indemnification payment was made by an Indemnifying Party under this Agreement (it being understood that no Indemnifying Party shall forgo any Tax Benefit to which it is properly entitled). Prior to the time that any indemnification payment is made under this Article VII, and thereafter on a quarterly basis (on January 15, April 15, July 15 and October 15 of each calendar year), the Indemnified Party shall provide the Indemnifying Party with a certificate of an internationally-recognized independent accounting firm, signed by a duly authorized member of such firm and providing such firm's determination of the amount that may be taken into account under Sections 7.02 or 7.03 hereof, as the case may be, as the Tax benefits of the Indemnified Party that are actually realized; it being understood that if the foregoing certificate is to be provided by the Purchaser, such certificate shall be provided by Mazars & Guerard or such other internationally-recognized independent accounting firm chosen by the Purchaser, and if such certificate is to be provided by the Seller or BE Aerospace, such certificate shall be provided by Deloitte & Touche, LLP or such other internationally-recognized independent accounting firm chosen by BE Aerospace; provided, however, that if the Indemnifying Party objects to the determination set forth in the certificate, the matter shall be submitted to an internationally-recognized independent accounting firm mutually acceptable to the parties, whose determination of the Tax benefits actually realized by an Indemnified Party shall be final and binding (and whose fees shall be paid by the Indemnifying Party); it being further understood that the Indemnified Party shall not be obligated to disclose and no accounting firm providing the above-described certificate shall disclose to the Indemnifying Party any information relating to the income or operations of the Indemnified Party or its Affiliates or any other information relating to any Returns of such Indemnified Party. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. TERMINATION. This Agreement may be terminated at any time prior to the Closing: (a) by the mutual written consent of BE Aerospace and the Purchaser; (b) by BE Aerospace or the Purchaser, if any Governmental Authority with jurisdiction over such matters shall have issued a Governmental Order restraining, enjoining or otherwise prohibiting the sale of the Purchased Interest hereunder and such order, decree, ruling or other action shall have become final and unappealable; provided, that the provisions of this Section 8.01(b) shall not be available to any party unless such party shall have complied with its obligations under Section 5.01 or otherwise used its best efforts to oppose any such Governmental Order or to have such Governmental Order vacated or made inapplicable to the transactions contemplated by this Agreement; or (c) by BE Aerospace or the Purchaser, if the Closing shall not have occurred on or prior to December 31, 1999; provided, however, that the right to terminate this Agreement under this Section 8.01(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur prior to such date. SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of this Agreement as provided in Section 8.01, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except that nothing herein shall relieve any party from liability for any willful breach hereof. SECTION 8.03. WAIVER. At any time prior to the Closing, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of another party hereto, (b) waive any inaccuracies in the representations and warranties made to such party herein or in any document delivered pursuant hereto or (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. EXPENSES. Except as otherwise provided in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred. SECTION 9.02. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by cable, by telecopy, by telegram, by telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02): (a) if to the Seller and the Former Interest Holders: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, FL 33414 Attention: Thomas P. McCaffrey Corporate Senior Vice President of Administration and Chief Financial Officer Edmund J. Moriarty Corporate Vice President and General Counsel Telecopier: (561) 791-3966 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Attention: Alfred J. Ross, Esq. Telecopier: (212) 848-7179 (b) if to the Purchaser: Thomson-CSF Sextant, Inc. 1924 NW 84th Avenue Miami, Florida 33126 Attention: Franck Hebert President Telecopier: (305) 597-6366 with a copy to: Thomson-CSF Sextant Zone Aeronautique Louis Breguet-BP 200 78141 Velizy-Villacoublay Cedex France Attention: Alain Villevieille Telecopier: (011) 33.1.46.29.88.88 and White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attention: Alison M. Dreizen, Esq. Telecopier: (212) 354-8113 SECTION 9.03. PUBLIC ANNOUNCEMENTS. Unless otherwise required by applicable Law, no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without prior notification to the other parties, and the parties hereto shall cooperate as to the timing and contents of any such announcement. SECTION 9.04. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.05. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible. SECTION 9.06. ENTIRE AGREEMENT. This Agreement (including the Disclosure Schedule and the Exhibits hereto) together with the Initial Purchase Agreement (including the Disclosure Schedule of the Initial Purchase Agreement and the Exhibits thereto) and the Assignment and Assumption Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the Seller, the Former Interest Holders and the Purchaser with respect to the subject matter hereof and except as otherwise expressly provided herein. SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by any party hereto, provided that the Purchaser may, by written notice delivered to BE Aerospace not less than three (3) days prior to the Closing Date, designate an Affiliate to assume all or a portion of the obligations and rights of the Purchaser under this Agreement, provided further, however, that no such assignment shall release the Guarantor of its obligations under the Guaranty. SECTION 9.08. NO THIRD-PARTY BENEFICIARIES. Except as specifically provided in Article VII, this Agreement is for the sole benefit of the parties hereto and their permitted successors, assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. SECTION 9.09. Waivers and Amendments. This Agreement may be amended or modified, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties hereto or, in the case of a waiver, by each party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any other right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at Law or in equity. SECTION 9.10. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement required to be performed prior to the Closing was not performed in accordance with the terms hereof and that, prior to the Closing, the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at Law or in equity. SECTION 9.11. GOVERNING LAW; DISPUTE RESOLUTION. (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. (b) In the event of any Dispute, the parties hereto shall attempt in good faith to negotiate and resolve any such Dispute. If after good faith negotiations the Dispute shall have not been resolved, either party may deliver an Arbitration Notice to the other party. If the matter is not resolved within ten (10) Business Days after the delivery of the Arbitration Notice, or such later date as may be mutually agreed upon, then all Disputes shall be finally settled by arbitration. (c) The seat of the arbitration shall be in New York, and the arbitration shall be conducted in English, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such rules. The arbitrators are precluded from considering or awarding consequential, special, punitive or exemplary damages to any party in any arbitration conducted pursuant hereto. The parties shall have the right to present documentary evidence and witnesses. The parties shall also have the right to cross-examine witnesses. The decision of the arbitrators shall be final and binding upon the parties, and no party shall seek recourse to a law court or other authorities to appeal for revisions of such decision. Nothing herein shall limit the ability of a party to seek temporary or preliminary injunctive relief pending arbitration. SECTION 9.12. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto each by its respective officers thereunto duly authorized have caused this Agreement to be executed as of the date first written. IFE SALES, LLC By:____________________ Name: Title: BE AEROSPACE, INC. By:____________________ Name: Title: BE INTELLECTUAL PROPERTY INC. By:____________________ Name: Title: PURITAN-BENNETT AEROSYSTEMS CO. By:____________________ Name: Title: THOMSON-CSF SEXTANT, INC. By:______________________ Name: Franck Hebert Title: President EX-10.8C 4 PROMISSORY NOTE PROMISSORY NOTE U.S.$22,000,000 Dated: October 5, 1999 FOR VALUE RECEIVED, the undersigned, THOMSON-CSF HOLDING CORPORATION, a Delaware corporation (the "Payor"), HEREBY PROMISES TO PAY to the order of IFE SALES, LLC, a Delaware limited liability company (the "Payee") (i) the principal amount of $11,000,000 on the first anniversary of the making of this Note, plus interest on such amount at an interest rate per annum equal at all times to 5% and (ii) the principal amount of $11,000,000 on the second anniversary of the making of this Note (the "Maturity Date"), plus interest on such amount at an interest rate per annum equal at all times to 5%; provided, however, that any overdue amount (after giving effect to any applicable grace period) of principal, interest or other amounts payable hereunder shall, to the fullest extent permitted by law, bear interest, payable on demand, at 8% per annum. SECTION 1. REPAYMENT. The Payor shall repay to the Payee on the Maturity Date the aggregate principal amount hereof then outstanding. SECTION 2. PREPAYMENTS. The Payor may, upon at least one Business Day's (as defined below) notice to the Payee stating the proposed date and principal amount of the prepayment, and if such notice is given the Payor shall, prepay the outstanding principal amount hereof in whole or in part, with accrued interest to the date of such prepayment on the amount prepaid, provided that each optional partial prepayment shall be in a principal amount not less than $250,000. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City or Washington, D.C. SECTION 3. PAYMENTS AND COMPUTATIONS. (a) The Payor shall make each payment hereunder not later than 1:00 P.M. (New York City time) on the day when due in U.S. dollars to the Payee at its address referred to in Section 6 or at an account maintained by the Payee with a commercial bank organized under the laws of the United States, or any State thereof, and designated by the Payee for such purposes at least two Business Days in advance, in same day funds. (b) All computations of interest shall be made on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. (c) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. (d) In this Note in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 4. EVENTS OF DEFAULT. If any of the following events ("Events of Default") shall occur and be continuing: (a) (i) The Payor shall fail to perform its obligations pursuant to Section 1; or (ii) the Payor shall fail to pay any interest on the outstanding principal amount hereof within 15 Business Days after the same becomes due and payable; or 2 (b) The Payor shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Payor seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; then, and in any such event, the Payee may, by written notice to the Payor, declare this Note, all interest thereon and all other amounts payable under this Note to be forthwith due and payable, whereupon this Note, all such interest and all such amounts shall become and be forthwith due and payable. SECTION 5. RIGHT OF SET-OFF. Payor shall have the right to set off against amounts due under this Note any amount then due and unpaid by the Payee or the other parties to each of (i) the Purchase Agreement dated as of January 25, 1999 between Thomson-CSF Sextant, Inc. and BE Aerospace, Inc. and (ii) the Purchase Agreement dated as of September 1, 1999 among Thomson-CSF Sextant, Inc., the Payee, BE Aerospace, Inc., BE Intellectual Property, Inc. and Puritan-Bennett Aero Systems, Inc. owing to the Payor or any Affiliate thereof. SECTION 6. NOTICES, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier) and mailed, telecopied or delivered, if to the Payor, at its address at 100 West Commons Boulevard, One Corporate Commons, Suite 302, New Castle, Delaware 19720, fax no. (302) 326-0837, Attention: Dan O'Brien, with a copy to Thomson-CSF North America, Inc., 99 Canal Center Plaza, Suite 480, Alexandria, Virginia 22314, fax no. (703) 836-2967, Attention: Martita Cooper, Esq., and if to the Payee, at its address at 1400 Corporate Center Way, Wellington, Florida 33414, fax no. (561) 791-3966, Attention: Thomas P. McCaffrey, or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed, be effective when deposited in the mails, or when telecopied, be effective upon confirmation of the sending thereof, or when delivered, be effective upon delivery thereof. SECTION 7. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of the Payor and the Payee and their respective successors and assigns, except that neither the Payor nor the Payee shall have the right to assign or transfer its rights hereunder or any interest herein without the prior written consent of the other party. SECTION 8. GOVERNING LAW, JURISDICTION, WAIVER OF JURY TRIAL, ETC. (a) This Note shall be governed by, and construed in accordance with, the laws of the State of New York. 3 (b) In the event of any Dispute, the parties hereto shall attempt in good faith to negotiate and resolve any such Dispute. If after good faith negotiations the Dispute shall have not been resolved, either party may deliver written notice of its intent to submit the matter to arbitration (the "Arbitration Notice") to the other party. If the matter is not resolved within ten (10) Business Days after the delivery of the Arbitration Notice, or such later date as may be mutually agreed upon, then all Disputes shall be finally settled by arbitration. (c) The seat of the arbitration shall be in New York, and the arbitration shall be conducted in English, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such rules. The arbitrators are precluded from considering or awarding consequential, special, punitive or exemplary damages to any party in any arbitration conducted pursuant hereto. The parties shall have the right to present documentary evidence and witnesses. The parties shall also have the right to cross-examine witnesses. The decision of the arbitrators shall be final and binding upon the parties, and no party shall seek recourse to a law court or other authorities to appeal for revisions of such decision. Nothing herein shall limit the ability of a party to seek temporary or preliminary injunctive relief pending arbitration. (d) Each of the Payor and the Payee hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Note. IN WITNESS WHEREOF, each of the Payor and the Payee has caused this Note to be executed by its officer thereunto duly authorized, as of the date first above written. THOMSON-CSF HOLDING CORPORATION By_____________________________ Name: Title: Acknowledged and Agreed to: IFE SALES, LLC By ______________________________________ Name: Thomas P. McCaffrey Title: Vice President EX-10.8C 5 GUARANTY AGREEMENT WITH THOMSON-CSF SEXTANT GUARANTY Dated October 5, 1999 From THOMSON-CSF SEXTANT as Guarantor in favor of IFE SALES, LLC, BE AEROSPACE, INC., BE INTELLECTUAL PROPERTY, INC. and PURITAN-BENNETT AERO SYSTEMS CO. T A B L E OF C O N T E N T S
Section Page 1. Guaranty............................................................1 2. Guaranty Absolute...................................................1 3. Waivers and Acknowledgments.........................................2 4. Representations and Warranties......................................3 5. Amendments, Etc.....................................................4 6. Notices, Etc........................................................4 7. No Waiver; Remedies.................................................4 8. Indemnification.....................................................4 9. Continuing Guaranty.................................................5 10. Governing Law; Arbitration.........................................5
GUARANTY GUARANTY dated October 5, 1999 made by Thomson-CSF Sextant, a societe anonyme organized under the laws of France (the "Guarantor"), in favor of IFE Sales, LLC, a Delaware limited liability company (the "Seller"), BE Aerospace, Inc., a Delaware corporation ("BE Aerospace"), BE Intellectual Property, Inc., a Delaware corporation ("BE IP"), Puritan-Bennett Aero Systems Co., a Delaware corporation ("Puritan-Bennett" and together with BE Aerospace and BE IP, the "Former Interest Holders"). PRELIMINARY STATEMENT. The Seller and the Former Interest Holders are parties to a Purchase Agreement dated as of September 1, 1999 (together with the attached Disclosure Schedule and exhibits, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Purchase Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with Thomson-CSF Sextant Inc., a Florida corporation ("Sextant"), pursuant to which Sextant agreed to purchase from the Seller 100% of the Class Two Interests in Sextant In-Flight Systems, LLC (formerly known as In-Flight Entertainment LLC), a Delaware limited liability company ("SIFS"). Pursuant to an Assignment and Assumption Agreement dated as of September 30, 1999, Sextant assigned its rights and obligations under the Purchase Agreement to Thomson-CSF Holding Corporation, a Delaware corporation (the "Purchaser"). The Guarantor is an Affiliate of the Purchaser. NOW, THEREFORE, in consideration of the premises and in order to induce the Seller and the Former Interest Holders to enter into the Purchase Agreement, the Guarantor hereby agrees as follows: Section 1. GUARANTY. The Guarantor hereby unconditionally and irrevocably guarantees the punctual performance and payment when due of all obligations, amounts and other liabilities of the Purchaser now or hereafter existing under the Purchase Agreement, and the obligations of SIFS to BE Aerospace referred to in Section 2.06 of the Purchase Agreement (such obligations, amounts and other liabilities being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Seller and the Former Interest Holders in successfully enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts and obligations that constitute part of the Guaranteed Obligations and would be owed by the Purchaser to the Seller and the Former Interest Holders under the Purchase Agreement but for the fact that they are unenforceable or not allowable in either case due to the existence of a bankruptcy, reorganization or similar proceeding involving the Purchaser. Section 2. GUARANTY ABSOLUTE. The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Purchase Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Seller and the Former Interest Holders with respect thereto. The obligations of the Guarantor under this Guaranty are independent of the Guaranteed Obligations or any other obligations of the Purchaser under the Purchase Agreement, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Purchaser or whether the Purchaser is 1 joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of the Purchase Agreement or any agreement or instrument relating thereto arising from the failure of the Purchaser to properly authorize, execute and deliver the Purchase Agreement; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of the Purchaser under the Purchase Agreement or any agreement or instrument relating thereto, or any other amendment or waiver of or any consent to departure from the Purchase Agreement; (c) any change, restructuring or termination of the corporate structure or existence of the Purchaser, SIFS or any of their respective subsidiaries; or (d) any failure of the Seller or the Former Interest Holders to disclose to the Guarantor any information relating to the financial condition, operations, properties or prospects of SIFS or any of its subsidiaries now or in the future known to the Seller and the Former Interest Holders (the Guarantor waiving any duty on the part of the Seller and the Former Interest Holders to disclose such information). This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Seller, any Former Interest Holder or any other Person upon the insolvency, bankruptcy or reorganization of the Purchaser or SIFS or otherwise, all as though such payment had not been made. Section 3. WAIVERS AND ACKNOWLEDGMENTS. (a) The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Seller and the Former Interest Holders exhaust any right, pursue any remedy or take any action against the Purchaser or any other Person. 2 (b) The Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. Section 4. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents and warrants as follows: (a) The Guarantor is a societe anonyme duly incorporated, validly existing and in good standing under the laws of France and has all necessary corporate power and authority to enter into this Guaranty, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. (b) The Guarantor has taken all requisite corporate action to duly authorize the execution and delivery of this Guaranty by the Guarantor, the performance by the Guarantor of its obligations hereunder and the consummation by the Guarantor of the transactions contemplated hereby. (c) This Guaranty has been duly executed and delivered by the Guarantor, and constitutes a legal, valid and binding obligation of the Guarantor enforceable against it in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) Except as may result from any facts or circumstances relating solely to the Seller and the Former Interest Holders, the execution, delivery and performance of this Guaranty by the Guarantor does not and will not: (i) conflict with or violate the Certificate of Incorporation or By-laws (or other similar applicable documents) of the Guarantor; (ii) conflict with or violate any Law or Governmental Order applicable to the Guarantor, except as would not, individually or in the aggregate, have a material adverse effect on the ability of the Guarantor to consummate, or delay the consummation of, the transactions contemplated by this Guaranty; or (iii) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Encumbrance on any of the assets or properties of the Guarantor pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument relating to such assets or properties to which the Guarantor or any of its subsidiaries is a party or by which any of such assets or properties is bound or affected, except as would not, individually or in the aggregate, have a material adverse effect on the ability of the Guarantor to consummate, or delay the consummation of, the transactions contemplated by this Guaranty. 3 (e) The execution and delivery of this Guaranty by the Guarantor do not, and the performance of this Guaranty by the Guarantor will not, require any consent, approval, authorization or other action by, or filing with or notification to, any governmental or regulatory authority. (f) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived. Section 5. AMENDMENTS, ETC. No amendment or waiver of any provision of this Guaranty and no consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Guarantor, the Seller and the Former Interest Holders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 6. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered to it, if to the Guarantor, addressed to it at Thomson-CSF Sextant, Zone Aeronautique, Louis Breguet - BP 200, 78141 Velizy - Villacoublay Cedex, France, Attention: Alain Villevieille, if to the Seller and the Former Interest Holders, to BE Aerospace, at its address specified in the Purchase Agreement. All such notices and other communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively. Section 7. NO WAIVER; REMEDIES. No failure on the part of the Seller or any Former Interest Holders to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 8. INDEMNIFICATION. Without limitation on any other obligations of the Guarantor or remedies of the Seller and the Former Interest Holders under this Guaranty, the Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless the Seller and the Former Interest Holders from and against, and shall pay on demand, any and all losses, liabilities, damages, expenses and charges (including the fees and disbursements of legal counsel to the Seller and the Former Interest Holders) suffered or incurred by the Seller and the Former Interest Holders as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their terms arising from the failure of the Purchaser to properly authorize, execute and deliver the Purchase Agreement. 4 Section 9. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and the performance by the Purchaser of all its obligations under the Purchase Agreement and (b) not be assignable by the Guarantor, the Seller or the Former Interest Holders. Section 10. GOVERNING LAW; ARBITRATION. (a) This Guaranty shall be goverened by, and construed in accordance with, the laws of the State of New York. (b) In the event of any dispute in connection with or arising out of the existence, validity, construction or performance of this Guaranty (or any terms hereof) (collectively, a "Dispute"), the Guarantor shall attempt in good faith to negotiate and resolve any such Dispute with the Seller and the Former Interest Holders. If after good faith negotiations the Dispute shall have not been resolved, any party may deliver to any other party written notice of its intention to submit the matter to arbitration (the "Arbitration Notice"). If the matter is not resolved within 10 Business Days after the delivery of the Arbitration Notice, or such later date as may be mutually agreed upon, then all Disputes shall be finally settled by arbitration. The seat of the arbitration shall be in New York, and the arbitration shall be conducted in English, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such rules. The arbitrators are precluded from considering or awarding consequential, special, punitive or exemplary damages to any party in any arbitration conducted pursuant hereto. The parties shall have the right to present documentary evidence and witnesses. The parties shall also have the right to cross-examine witnesses. The decision of the arbitrators shall be final and binding upon all the parties, and no party shall seek recourse to a law court or other authorities to appeal for revisions of such decision. Nothing herein shall limit the ability of any party to seek temporary or preliminary injunctive relief pending arbitration. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. THOMSON-CSF SEXTANT By ________________________ Title: EX-10.8A 6 AMEND. 1 TO CHASE MANHANTTAN BANK CREDIT FACILITY AMENDMENT, RELEASE AND WAIVER NO. 1 AMENDMENT, RELEASE AND WAIVER NO. 1 dated as of December 4, 1998 by and among BE Aerospace, Inc., a Delaware corporation (the "Company"), In-Flight Entertainment, LLC, a Delaware limited liability company ("In-Flight"), the lenders party hereto (the "Lenders") and The Chase Manhattan Bank, as administrative agent (the "Administrative Agent"). WHEREAS the Company, the Lenders and the Administrative Agent are party to a Fifth Amended and Restated Credit Agreement dated as of October 29, 1993, amended and restated as of August 7, 1998 (as amended, supplemented and otherwise modified and in effect to but excluding the date hereof, the "Credit Agreement"). WHEREAS In-Flight and the Administrative Agent are parties to an Amended and Restated Guarantee and Security Agreement (the "In-Flight Guarantee and Security Agreement") providing, inter alia, for the guarantee by In-Flight of the obligations of the Company under the Credit Agreement. WHEREAS the Company and the Administrative Agent are parties to an Amended and Restated Security Agreement (the "Security Agreement") providing, inter alia, for the pledge by the Company, as collateral security for the payment of the obligations of the Company under the Credit Agreement, of all of the membership interests of In-Flight owned by the Company. WHEREAS the Company has advised the Lenders and the Administrative Agent that the Company wishes to (i) sell, at any time or from time to time, all or any part of the membership interests it holds in In-Flight (collectively, the "In-Flight Disposition"), (ii) transfer certain assets of Puritan-Bennett Aero Systems Corp. ("Puritan-Bennett") associated with the business of In-Flight in an amount not to exceed $2,000,000 to a special purpose subsidiary of the Company ("Puritan-Bennett Subsidiary") after which the Company shall then transfer all of the issued and outstanding stock of Puritan-Bennett Subsidiary to In-Flight (the "Puritan-Bennett Transfer") and (iii) terminate the In-Flight Guarantee and Security Agreement and release the remaining membership interests of In-Flight owned by the Company from the Collateral under the Security Agreement. Therefore, the Company has requested that the Lenders agree, and the Lenders party hereto are willing, on the basis set forth herein, to waive and amend various provisions contained in Sections 8.05, 8.08 and 8.17 of the Credit Agreement and to consent to the termination of the In-Flight Guarantee and Security Agreement and the release of the remaining membership interests of In-Flight from the Collateral, all on the terms and conditions of this Amendment, Release and Waiver No. 1. Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement. NOW THEREFORE in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. WAIVER, TERMINATION AND RELEASE. (a) Subject to the satisfaction of the conditions to effectiveness specified in Section 5 hereof, but with effect on the date hereof, each of the Lenders hereby agrees with the Company that: (i) any violation of Section 8.05 of the Credit Agreement shall be waived to the extent necessary to permit the In-Flight Disposition; (ii) any violation by the Company or Puritan-Bennett of Section 8.08(d) of the Credit Agreement shall be waived to the extent necessary to permit the Puritan-Bennett Transfer and any investment by the Company or Puritan-Bennett in connection therewith shall not constitute an Investment for the purpose of Section 8.08(d); and (iii) Section 8.17 of the Credit Agreement, which requires that the Company maintain its ownership interest in each of its Subsidiaries and prohibits the sale, transfer, pledge or disposal of such ownership interests, shall be waived to the extent necessary to permit the In-Flight Disposition. (b) Subject to the satisfaction of the conditions to effectiveness specified in Section 5 hereof, but with effect on the date of the initial In-Flight Disposition, each of the Lenders hereby further agrees with the Company that In-Flight shall be released from its obligations under the In-Flight Guarantee and Security Agreement. (c) Subject to the satisfaction of the conditions to effectiveness specified in Section 5 hereof, but with effect on the date of the initial In-Flight Disposition, each of the Lenders hereby further agrees with the Company that, all membership interests of In-Flight owned by the Company shall be released from the Collateral under the Security Agreement. Section 2. AMENDMENTS. Subject to the satisfaction of the conditions precedent specified in Section 5 hereof, but with effect on the date hereof, the Credit Agreement shall be amended as follows: (a) Section 8.08(d) shall be amended to read in its entirety: "(d) Investments by the Company in Subsidiaries of the Company in the ordinary course of business; provided that (i) the aggregate amount of the Investments by the Company or any of its Subsidiaries in the Specified Subsidiaries shall not exceed $5,000,000 at any one time outstanding and (ii) the aggregate amount of Customer Obligations (as defined in paragraph (h) below) that are not fully secured (whether by a perfected Lien on, or an indefeasible title retention to, the products so sold or leased, or otherwise) plus the aggregate fair market value of all Property (whether now owned or hereafter acquired) of the Company or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Company) sold, assigned, transferred or otherwise disposed of on or after December 2, 1998 to any Minority-Owned Entities (as defined in paragraph (h) below) plus the aggregate book value (at the time of its transfer) of all Property (not including cash and not including any Property that is subject to a Lien in favor of the Administrative Agent for the benefit of the Lenders) transferred by the Company to any one or more Subsidiaries since December 2, 1998 minus any cash dividends or other distributions received by the Company from any Minority-Owned Entity (as defined in paragraph (h) below) since December 2, 1998 shall not exceed in the aggregate at any one time outstanding the greater of (x) $25,000,000 and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for which financial statements have been provided hereunder; provided further, that any increase in the net worth of any Minority-Owned Entity (determined in accordance with GAAP) shall not be considered in determining the amounts under (x) and (y) above;" (b) Section 8.08(h) shall be amended to read in its entirety: "(h) Investments of the Company and its Subsidiaries (i) in corporations, companies, limited liability companies, partnerships and other entities in each case that are not, or do not thereby become, Subsidiaries of the Company ("Minority-Owned Entities") or (ii) representing obligations of customers owing to the Company and its Subsidiaries in respect of the deferred purchase price of products or services sold or the leasing of products to customers ("Customer Obligations"), in each case in the ordinary course of business of the Company and its Subsidiaries as provided for in Section 8.14 hereof and on such terms as the management of the Company may determine in its reasonable business judgment, provided that the aggregate amount of such Customer Obligations that are not fully secured (whether by a perfected Lien on, or an indefeasible title retention to, the products so sold or leased, or otherwise) plus the aggregate fair market value of all Property (whether now owned or hereafter acquired) of the Company or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Company) sold, assigned, transferred or otherwise disposed of on or after December 2, 1998 to any such Minority-Owned Entities plus the aggregate book value (at the time of its transfer) of all Property (not including cash and not including Property that is subject to a Lien in favor of the Administrative Agent for the benefit of the Lenders) transferred by the Company to any one or more Subsidiaries since December 2, 1998 minus any cash dividends or other distributions received by the Company from any Minority-Owned Entity since December 2, 1998 shall not exceed in the aggregate at any one time outstanding the greater of (x) $25,000,000 and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for which financial statements have been provided hereunder; provided further, that any increase in the net worth of any Minority-Owned Entity (determined in accordance with GAAP) shall not be considered in determining the amounts under (x) and (y) above." Section 3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Lenders and the Administrative Agent that this Amendment, Release and Waiver No. 1 has been duly and validly executed and delivered by the Company and constitutes the Company's legal and valid obligation, enforceable in accordance with its terms. The Company further represents and warrants to the Lenders and the Administrative Agent that both before and after giving effect to this Amendment, Release and Waiver No. 1 (i) no Default has occurred and is continuing and (ii) the representations and warranties made by the Company in Section 7 of the Credit Agreement are true and complete on and as of the date hereof with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). It shall be an Event of Default for all purposes of the Credit Agreement (as amended hereby) if any representation, warranty or certification made by the Company in this Amendment, Release and Waiver No. 1, or in any certificate or other writing furnished to any Lender or the Administrative Agent pursuant to this Amendment, Release and Waiver No. 1, shall prove to have been incorrect as of the time made or furnished in any material respect. Section 4. DOCUMENTS OTHERWISE UNCHANGED. The parties hereto agree that, except as expressly provided herein, the Credit Agreement and the Security Agreement shall remain unchanged and in full force and effect. Section 5. CONDITIONS TO EFFECTIVENESS. The waivers set forth in Section 1 hereof and the amendments to the Credit Agreement set forth in Section 2 hereof shall be subject to the satisfaction of each of the following conditions to effectiveness: (a) the Administrative Agent shall have received one or more counterparts of this Amendment, Release and Waiver No. 1 duly executed by the Company, In-Flight, the Majority Lenders and the Administrative Agent; and (b) the Administrative Agent shall have received satisfactory evidence from the chief financial officer of the Company as to the Net Available Proceeds that the Company shall receive in connection with the sale of the membership interests of In-Flight and the chief financial officer shall have given the Administrative Agent irrevocable notice that such Net Available Proceeds shall be applied to the prepayment of the Series B Loans. Section 6. COUNTERPARTS. This Amendment, Release and Waiver No. 1 may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment, Release and Waiver No. 1 by signing any such counterpart. Section 7. EXPENSES. Without limiting its obligations under Section 11.03 of the Credit Agreement, the Company agrees to pay, on demand, all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special counsel to the Administrative Agent) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment, Release and Waiver No. 1. Section 8. BINDING EFFECT. This Amendment, Release and Waiver No. 1 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 9. GOVERNING LAW. This Amendment, Release and Waiver No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment, Release and Waiver No. 1 to be duly executed as of the date first above written. BE AEROSPACE, INC. By_______________________ Name: Title: Address for Notices: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, Florida 33414 Attention: Jeffrey P. Holtzman, Vice President and Treasurer Telecopier No.: (561) 791-3966 Telephone No.: (561) 791-5000 with a copy to: Ropes & Gray One International Place Boston, MA 02110 Attention: Winthrop G. Minot, Esq. Telecopier No.: (617) 951-7050 Telephone No.: (617) 951-7000 IN-FLIGHT ENTERTAINMENT, LLC By BE Aerospace, Inc., Member By_______________________ Name: Title: Address for Notices: In-Flight Entertainment, LLC 17481 Red Hill Avenue Irvine, California 92614 Attention: Thomas P. McCaffrey Telephone No.: Telecopier No.: LENDERS THE CHASE MANHATTAN BANK By_______________________ Name: Title: NATIONSBANK, N.A. By_______________________ Name: Title: CREDIT LYONNAIS ATLANTA AGENCY By_______________________ Name: Title: LASALLE BUSINESS CREDIT, INC. By_______________________ Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By_______________________ Name: Title: THE FUJI BANK AND TRUST COMPANY By_______________________ Name: Title: WACHOVIA BANK, N.A. By_______________________ Name: Title: AMSOUTH BANK By_______________________ Name: Title: THE BANK OF NEW YORK By_______________________ Name: Title: DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH By_______________________ Name: Title: By_______________________ Name: Title: FIRST UNION NATIONAL BANK By_______________________ Name: Title: SUNTRUST BANK, SOUTH FLORIDA, N.A. By_______________________ Name: Title: ABN AMRO BANK N.V. By_______________________ Name: Title: By_______________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By_______________________ Name: Title: Address for Notices to Chase as Administrative Agent: The Chase Manhattan Bank Loan and Agency Services Group 1 Chase Manhattan Plaza New York, New York 10081 EX-10.8B 7 AMEND. 2 TO CHASE MANHATTAN BANK CREDIT FACILITY AMENDMENT NO. 2 AMENDMENT NO. 2 dated as of December 21, 1999, between BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"); each of the lenders that is a signatory hereto (individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The Company, the Lenders and the Administrative Agent are parties to a Fifth Amended and Restated Credit Agreement dated as of August 7, 1998, as amended by Amendment, Release and Waiver No. 1 dated as of December 4, 1998 (as amended, modified and supplemented and in effect on the date hereof, the "Credit Agreement"). The Company has requested that the Credit Agreement be amended and accordingly, the parties hereto hereby agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment No. 2, terms defined in the Credit Agreement (as amended hereby) are used herein as defined therein. Section 2. AMENDMENTS. Subject to the satisfaction of the condition precedent specified in Section 4 below, but effective as of the date hereof (the "Amendment Effective Date"), the Credit Agreement shall be amended as follows: 2.01. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby. 2.02. The definition of "Adjusted Net Worth" in Section 1.01 of the Credit Agreement shall be amended by adding following words at the end thereof: " plus (f) an amount not to exceed $28,000,000 in the aggregate of the after-tax amount (calculated using the then effective corporate Federal tax rate, regardless of the after-tax amount determined in accordance with GAAP) of the non-cash portion of the non-recurring charges and operating inefficiencies discussed by the Company in its November 22, 1999 press release." 2.03. The definition of "Applicable Margin" in Section 1.01 of the Credit Agreement shall be amended to read in its entirety as follows: "'APPLICABLE MARGIN' shall mean with respect to Base Rate Loans and Eurodollar Loans, the rate for such Type of Loan for each level period set forth in the schedule below:
Applicable Margin Level Period Base Rate Loans Eurodollar Loans - --------------------------------------- ----------------------------- ------------------- Level I Period 0.00% 0.750% Level II Period 0.00% 0.875% Level III Period 0.00% 1.000% Level IV Period 0.50% 1.500% Level V Period 0.75% 1.750% Level VI Period 1.00% 2.000% Level VII Period 1.50% 2.500%
PROVIDED that notwithstanding anything herein to the contrary, the Applicable Margin shall not be less than the rate for a Level V Period from the Amendment Effective Date until the third Business Day following of the receipt of the financial statements under Section 8.01(b) as at and for the fiscal quarter ending on the Fiscal Date in November, 1999." 2.04. The definition of "Commitment Fee Rate" in Section 1.01 of the Credit Agreement shall be amended to read in its entirety as follows: "'COMMITMENT FEE RATE' shall mean (a) 0.2000% for any Level I Period, (b) 0.2500% for any Level II Period, (c) 0.2500% for any Level III Period, (d) 0.3750% for any Level IV Period, (e) 0.3750% for any Level V Period, (f) 0.5000% for any Level VI Period and (e) 0.5000% for any Level VII Period, provided that notwithstanding anything herein to the contrary, the Commitment Fee Rate shall not be less than the rate for a Level V Period from the Amendment Effective Date until the third Business Day following of the receipt of the financial statements under Section 8.01(b) as at and for the fiscal quarter ending on the Fiscal Date in November, 1999." 2.05. The definition of "EBITDA" in Section 1.01 of the Credit Agreement shall be amended by adding following words at the end thereof: "; PROVIDED, HOWEVER, that for the purpose of calculating EBITDA for the five fiscal quarters of the Company beginning with November 1999 and ending with November 2000, EBITDA shall be adjusted to add back the non-recurring charges and operating inefficiencies discussed by the Company in its November 22, 1999 press release in an amount not to exceed, without duplication, (i) $72,300,000 for the quarter ending November 1999, (ii) $83,900,000 for each of the three quarters ending February 2000, May 2000 and August 2000 and (iii) $11,600,000 for the quarter ending November 2000." 2.06. The definition of "Indebtedness" in Section 1.01 of the Credit Agreement shall be amended by inserting at the end thereof the words "excluding, however, any guaranty or indemnity given by the Company in connection with the sale of the Sextant In-Flight Entertainment Note". 2.07. Section 8.10 of the Credit Agreement shall be amended to read in its entirety as follows: "8.10 Leverage Ratio. The Company will not permit the Leverage Ratio to exceed the following respective ratios at any time during the following respective periods:
Period Ratio From the Fiscal Date in November 1999 through the Fiscal Date in February 2001 5.25 to 1 From (but not including) the Fiscal Date in February 2001 through the Fiscal Date in February 2002 4.75 to 1 From (but not including) the Fiscal Date in February 2002 through the Fiscal Date in February 2003 4.25 to 1 Thereafter 4.00 to 1"
2.08. Section 8.11 of the Credit Agreement shall be amended to read in its entirety as follows: "ADJUSTED NET WORTH. The Company will not at any date permit Adjusted Net Worth to be less than the sum of (a) $170,000,000 plus (b) 75% of the aggregate amount of Net Available Proceeds of Equity Issuances received after November 27, 1999 plus (c) 75% of the sum of consolidated net earnings of the Company and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) for each fiscal quarter of the Company ending after November 27, 1999; provided that consolidated net earnings for any fiscal quarter in which there is a consolidated net loss shall be deemed to be zero." 2.09. Section 8.12 of the Credit Agreement shall be amended to read in its entirety as follows: "INTEREST COVERAGE RATIO. The Company will not permit the Interest Coverage Ratio to be less than the following respective ratios during the following respective periods:
Period Ratio From the Fiscal Date in November 1999 through the Fiscal Date in February 2001 2.00 to 1 From (but not including) the Fiscal Date in February 2001 through the Fiscal Date in February 2002 2.25 to 1 From (but not including) the Fiscal Date in February 2002 through the Fiscal Date in February 2003 2.50 to 1 Thereafter 2.75 to 1"
Section 3. Representations and Warranties. The Company represents and warrants to the Lenders that the representations and warranties set forth in Section 7 of the Credit Agreement (as amended hereby) are true and complete on the date hereof as if made on and as of the date hereof (or, if such representation or warranty is expressly stated to be made as of a specific date, as of such specific date) and as if each reference in said Section 7 to "this Agreement" included reference to this Amendment No. 2. Section 4. CONDITION PRECEDENT. As provided in Section 2 above, the amendments to the Credit Agreement set forth in said Section 2 shall become effective, as of the date hereof, upon receipt by the Administrative Agent of the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance: 4.01. AMENDMENT NO. 2. Duly executed counterparts of this Amendment No. 2 by the Company, the Administrative Agent and the Majority Lenders. 4.02. OPINION OF COUNSEL TO THE COMPANY. An opinion, dated the Amendment Effective Date, of Shearman & Sterling, counsel to the Company, (i) as to the due authorization, execution and delivery of this Amendment No. 2 and (ii) that this Amendment No. 2 is legal, valid, binding and enforceable in accordance with its terms (subject to customary exceptions) and the Company hereby instructs such counsel to deliver such opinions to the Lenders and the Administrative Agent. 4.03. OTHER DOCUMENTS. Such other documents that the Administrative agent or special New York counsel to Chase may reasonably request. Section 5. MISCELLANEOUS. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 by signing any such counterpart. This Amendment No. 2 shall be governed by, and construed in accordance with, the law of the State of New York. [Remainder of this page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By_______________________ Name: Title: Address for Notices: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, Florida 33414 Attention: Jeffrey P. Holtzman, Vice President - Finance and Treasurer Telecopier No.: (561) 791-3966 Telephone No.: (561) 791-5000 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Attention: Maura O'Sullivan, Esq. Telecopier No.: (212) 848-7179 Telephone No.: (212) 848-7897 LENDERS THE CHASE MANHATTAN BANK By_______________________ Name: Title: BANK OF AMERICA, N.A. (f/k/a NationsBank, N.A.) By_______________________ Name: Title: CREDIT LYONNAIS ATLANTA AGENCY By_______________________ Name: Title: LASALLE BUSINESS CREDIT, INC. By_______________________ Name: Title: GENERAL ELECTRIC CAPITAL CORPORATION By_______________________ Name: Title: THE FUJI BANK AND TRUST COMPANY By_______________________ Name: Title: WACHOVIA BANK, N.A. By_______________________ Name: Title: AMSOUTH BANK By_______________________ Name: Title: THE BANK OF NEW YORK By_______________________ Name: Title: FIRST UNION NATIONAL BANK By_______________________ Name: Title: DG BANK, DEUTSCHE GENOSSENSCHAFTSBANK AG, CAYMAN ISLANDS BRANCH By_______________________ Name: Title: By_______________________ Name: Title: SUNTRUST BANK, SOUTH FLORIDA, N.A. By_______________________ Name: Title: ABN AMRO BANK N.V. By_______________________ Name: Title: By_______________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By_______________________ Name: Title: Address for Notices to Chase as Administrative Agent: The Chase Manhattan Bank Loan and Agency Services Group 1 Chase Manhattan Plaza New York, New York 10081 -----END PRIVACY-ENHANCED MESSAGE-----