0000861361-01-500027.txt : 20011010 0000861361-01-500027.hdr.sgml : 20011010 ACCESSION NUMBER: 0000861361-01-500027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010825 FILED AS OF DATE: 20011009 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: 1934 Act SEC FILE NUMBER: 000-18348 FILM NUMBER: 1754810 BUSINESS ADDRESS: STREET 1: 1400 CORPORATE CTR WY CITY: WELLINGTON STATE: FL ZIP: 33414 BUSINESS PHONE: 5617915000 MAIL ADDRESS: STREET 1: 1400 CORPORATE CENTER WAY STREET 2: 1400 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 aug10q2001.txt AUGUST 2001 10Q 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 August 25, 2001 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 (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, $0.01 par value, of which 35,122,250 shares were outstanding as of October 5, 2001. BE AEROSPACE, INC. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
August 25, February 24, 2001 2001 ---- ---- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 154,687 $60,271 Accounts receivable - trade, less allowance for doubtful accounts of $2,848 (August 25, 2001) and $2,619 (February 24, 2001) 108,341 99,673 Inventories, net 137,452 135,005 Other current assets 54,389 50,150 ------- ------- Total current assets 454,869 345,099 ------- ------- Property and equipment, net 154,946 157,517 Intangibles and other assets, net 468,168 433,379 ------- -------- $1,077,983 $935,995 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 59,253 $64,671 Accrued liabilities 88,543 99,685 Current portion of long-term debt 919 5,846 ------- ------- Total current liabilities 148,715 170,202 ------- ------- Long-term debt 701,286 603,812 Other liabilities 27,795 26,707 Stockholders' Equity: Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares outstanding Common stock, $0.01 par value; 100,000,000 shares authorized; 32,193,744 (August 25, 2001), 28,460,583 (February 24, 2001) shares issued and outstanding 322 285 Additional paid-in capital 369,693 311,506 Accumulated deficit (147,235) (154,602) Accumulated other comprehensive loss (22,593) (21,915) ------- ------- Total stockholders' equity 200,187 135,274 ------- ------- $1,077,983 $935,995 ========== ========
See accompanying notes to condensed consolidated financial statements. BE AEROSPACE, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Dollars in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED -------------------------------- ------------------------------- August 25, August 26, August 25, August 26, 2001 2000 2001 2000 ---------------- --------------- --------------- --------------- Net sales $179,093 $164,116 $355,926 $333,241 Cost of sales 110,113 103,358 221,040 210,930 ------- ------- ------- ------- Gross profit 68,980 60,758 134,886 122,311 Operating expenses: Selling, general and administrative 27,896 23,941 52,779 47,982 Research, development and engineering 10,973 12,228 23,053 25,209 Amortization 6,412 5,847 12,761 11,715 ----- ----- ------ ------ Total operating expenses 45,281 42,016 88,593 84,906 ------ ------ ------ ------ Operating earnings 23,699 18,742 46,293 37,405 Interest expense, net 13,790 13,488 27,764 27,219 ------ ------ ------ ------ Earnings before income taxes 9,909 5,254 18,529 10,186 Income taxes 991 525 1,853 1,019 ------ ------ ----- ----- Earnings before extraordinary item 8,918 4,729 16,676 9,167 Extraordinary item -- -- 9,309 -- ------ ------ ----- ------ Net earnings $8,918 $4,729 $7,367 $9,167 ====== ====== ====== ====== Basic earnings per common share: Earnings before extraordinary item $ 0.28 $ 0.19 $ 0.54 $ 0.36 Extraordinary item -- -- 0.30 -- ------ ------ ------ ------ Net earnings $ 0.28 $ 0.19 $ 0.24 $ 0.36 ====== ====== ====== ====== Diluted net earnings per common share: Earnings before extraordinary item $ 0.27 $ 0.19 $ 0.52 $ 0.36 Extraordinary item -- -- 0.29 -- ------ ------ ------ ------ Net earnings $ 0.27 $ 0.19 $ 0.23 $ 0.36 ====== ====== ====== ======
See accompanying notes to condensed consolidated financial statements. BE AEROSPACE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
SIX MONTHS ENDED ---------------------------------- ----------------- ---------------- August 25, August 26, 2001 2000 ----------------- ---------------- ----------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 7,367 $ 9,167 Adjustments to reconcile net earnings to net cash flows provided by operating activities: Extraordinary item 9,309 -- Depreciation and amortization 23,984 21,394 Non-cash employee benefit plan contributions 1,049 1,099 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (7,068) 1,978 Inventories 3,494 5,146 Other current assets (4,356) 6,290 Accounts payable (5,876) (4,471) Accrued liabilities 3,887 (23,574) --------- --------- Net cash flows provided by operating activities 31,790 17,029 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired (48,547) -- Capital expenditures (6,507) (10,548) Change in intangible and other assets (15,954) (2,634) ----------- --------- Net cash flows used in investing activities (71,008) (13,182) ------------ --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net payments under bank credit facilities (66,734) (1,450) Proceeds from issuances of stock, net of expenses 57,176 1,168 Principal payments on long-term debt (101,787) -- Proceeds from long-term debt 244,922 -- ---------- -------- Net cash flows provided by (used in) financing activities 133,577 (282) ---------- -------- Effect of exchange rate changes on cash flows 57 (729) ---------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 94,416 2,836 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 60,271 37,363 ---------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $154,687 $ 40,199 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during period for: Interest, net $23,142 $ 28,048 Income taxes, net $1,107 $ 494
See accompanying notes to condensed consolidated financial statements. BE AEROSPACE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT 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. Under such rules, certain information related to the Company's organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 prior year financial statements to conform to the August 25, 2001 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 24, 2001. Note 2. Comprehensive Earnings (Loss) ----------------------------- Comprehensive earnings (loss) is defined as all changes in a company's net assets except changes resulting from transactions with shareholders. It differs from net earnings in that certain items currently recorded to equity would be a part of comprehensive earnings (loss). The following table sets forth the computation of comprehensive earnings (loss) for the periods presented:
THREE MONTHS ENDED SIX MONTHS ENDED August 25, August 26, August 25, August 26, 2001 2000 2001 2000 -------------- -------------- -------------- --------- Net earnings $ 8,918 $ 4,729 $ 7,367 9,167 Other comprehensive earnings (loss): Foreign exchange translation adjustment 3,145 (2,455) (678) (10,741) -------- ------- ------- -------- Comprehensive earnings (loss) $ 12,063 $ 2,274 $ 6,689 $ (1,574) ======== ======= ======= ========
BE AEROSPACE, INC. Note 3. Segment Reporting (As Restated) ------------------------------- Subsequent to the issuance of the Company's condensed consolidated financial statements for the quarterly period ended August 26, 2000, management determined that the Company should disaggregate the disclosures for its Commercial Aircraft Products, Business Jet Products and Engineering Services operating segments. Previously, such disclosures had been aggregated and presented as a single reportable segment. As a result, the following information pertaining to the Company's operating segments has been restated to present such disaggregated segment disclosures. The Company is organized based on the products and services it offers. Under this organizational structure, the Company has three reportable segments: Commercial Aircraft Products, Business Jet Products and Engineering Services. The Company's Commercial Aircraft Products segment consists of 15 operating units while the Business Jet and Engineering Services segments consist of three and one operating units, respectively. Each segment reports its operating earnings and makes requests for capital expenditures and acquisition funding to the Company's chief operational decision-making group. This group is presently comprised of the Chairman, the President and Chief Executive Officer, and the Corporate Senior Vice President of Administration and Chief Financial Officer. Each operating segment has separate management teams and infrastructures dedicated to providing a full range of products and services to their commercial and general aviation customers. Corporate expenses are allocated to reportable segments based upon segment revenues to consolidated revenues. The Company does not allocate interest expense to its segments. The following table presents net sales and other financial information by business segment:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------ ------------------------------------- ------------------- ---------------- ---------------- -------------------- August 25, August 26, August 25, August 26, 2001 2000 2001 2000 ------------------- ---------------- ---------------- -------------------- ------------------- ---------------- ---------------- -------------------- Commercial Aircraft Products Net sales $ 141,528 $ 124,755 $ 281,356 $ 258,413 Operating earnings 16,776 11,741 33,747 25,121 Business Jet Products Net sales 21,731 21,172 43,789 41,980 Operating earnings 3,816 4,027 7,172 6,939 Engineering Services Net sales 15,834 18,189 30,781 32,848 Operating earnings 3,107 2,974 5,374 5,345 Consolidated Net sales 179,093 164,116 355,926 333,241 Operating earnings 23,699 18,742 46,293 37,405
BE AEROSPACE, INC. Note 4. Earnings Per Common Share Basic net earnings per common share is computed using the weighted average common shares outstanding during the period. Diluted net earnings 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 SIX MONTHS ENDED ------------------ ---------------- August 25, August 26, August 25, August 26, 2001 2000 2001 2000 ---- ---- ---- ---- Weighted average common shares outstanding 32,178 25,179 30,870 25,135 Dilutive effect of employee stock options 1,049 188 1,193 33 ------ ------ ------ ------ Diluted shares outstanding 33,227 25,367 32,063 25,168
Note 5. New Accounting Pronouncements In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. The Company does not believe that the adoption of SFAS 141 will have a significant impact on its financial statements. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." The Company is required to adopt SFAS 142 for its fiscal year beginning February 24, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is currently assessing but has not yet determined the impact of SFAS 142 on its financial position and results of operations. Note 6. Long-Term Debt On April 17, 2001 the Company sold $250,000 of 8 7/8% senior subordinated notes due 2011. The proceeds from this offering, net of debt issue costs, were approximately $242,800. Approximately $105,000 of proceeds were used to redeem the Company's 9 7/8% senior subordinated notes due 2006 and approximately $66,700 of proceeds were used to repay balances outstanding under the Company's bank credit facility, which was then terminated. On April 17, 2001 the Company called for redemption of all its 9 7/8% senior subordinated notes on May 17, 2001. The senior subordinated notes were redeemed at a redemption price equal to 104.97% of the principal amount, together with the accrued interest to the redemption date. The Company deposited with the trustee on April 17, 2001 funds in an amount sufficient to redeem the 9 7/8% senior subordinated notes on the redemption date. Upon deposit of these funds, the indenture governing the 9 7/8% senior subordinated notes was discharged. The Company incurred an extraordinary charge of $9,309 (net of tax) for unamortized debt issue costs, redemption premiums and fees and expenses related to the repurchase of the 9 7/8% senior subordinated notes. In August 2001, the Company established a new bank credit facility consisting of a $150,000 revolving credit facility which expires in August 2006. The bank credit facility is collateralized by the Company's accounts receivable, inventories and by substantially all of its other personal property. The bank credit facility contains customary affirmative covenants, negative covenants and conditions of borrowing. At August 25, 2001, indebtedness under the existing bank credit facility consisted of letters of credit aggregating approximately $4,900 (bearing interest at LIBOR plus 2.0%, as defined) and the Company was in compliance with all covenants. BE AEROSPACE, INC. Note 7. Equity Offering On May 16, 2001, the Company completed a 5,750,000 share offering of its common stock at $19.50 per share. Of the total number of shares, approximately 2,825,000 shares were sold by the Company and the remainder were sold by certain selling stockholders. The net proceeds from this offering were approximately $106,200. Approximately $53,100 was paid to the former owners of Alson Industries, Inc., T. L. Windust Machine, Inc., DMGI, Inc. and Maynard Precision, Inc. The Company received approximately $50,300, net of estimated offering costs, from the sale of 2,825,000 shares of stock it issued in connection with this offering. Note 8. Acquisitions Effective May 8, 2001, the Company acquired the outstanding common stock of Nelson Aero Space, Inc. for approximately $20,000. This transaction has been accounted for using purchase accounting. The assets purchased and liabilities assumed have been reflected in the accompanying balance sheet as of August 25, 2001. Effective July 18, 2001, the Company acquired the outstanding common stock of Denton Jet Interiors, Inc. for approximately $16,000. This transaction has been accounting for using purchase accounting. The assets purchased and liabilities assumed have been reflected in the accompanying balance sheet as of August 25, 2001. Had these acquisitions occurred on February 25, 2001, pro forma statement of operations data would not have been materially different from that currently being reported. Note 9. Subsequent Events On September 14, 2001, the Company acquired M & M Aerospace Hardware, Inc. ("M & M") for an initial purchase price of $177,000. M & M is the world's leading independent aftermarket distributor of aerospace fasteners. The M & M acquisition was completed by issuing to the former shareholders a total of approximately 1,460,280 shares of B/E stock, paying them $152,000 in cash and assuming current liabilities of approximately $5,800. The Company financed this acquisition through cash on hand and approximately $100,000 of borrowings under its bank credit facility. The aggregate purchase price includes approximately $23,000 of consideration represented by 1,343,458 shares of B/E common stock that was funded into an escrow account. The payment of this consideration is contingent upon M & M achieving certain operating results for calendar 2001. This transaction has been accounted for using purchase accounting. The Company has not yet completed the evaluation and allocation of the purchase price for M & M as the appraisals associated with the identification and valuation of certain intangible assets are not yet complete. The Company does not believe the appraisals will materially modify the preliminary purchase price allocation. The excess of the purchase prices over the fair value of the identifiable net tangible assets acquired aggregated approximately $87,100. The initial purchase price of M & M has been preliminarily allocated based on management's estimates as follows:
Accounts Receivable $ 13,400 Inventories 53,900 Other current assets 200 Property and equipment 28,200 Intangible assets and other 87,100 Current liabilities (5,800) --------- $177,000
BE AEROSPACE, INC. The September 11, 2001 terrorist attack has severely impacted conditions in the airline industry. For the first time in the history of commercial aviation, all domestic airlines were grounded for a period of three days. Since resuming service, most major US carriers have substantially reduced their flight schedules, parked or retired nearly 20% of their fleets and have announced workforce reductions aggregating over 100,000 employees. As a result of the substantial reduction in airline traffic arising from the September 11 terrorist attack and its aftermath, as well as other factors, such as the weakening economy, the airline industry is likely to incur the largest loss in history in calendar 2001, totaling in excess of $10 billion. Accordingly, the airlines are seeking to conserve cash in part by deferring or eliminating cabin interior refurbishment programs and canceling or deferring aircraft purchases. The Company expects that this will cause a substantial contraction in its business, the extent and duration of which cannot be determined at this time. The Company has not yet determined the impact of these significant changes in industry conditions on its operations, liquidity, financial condition or outlook. [Remainder of page intentionally left blank] BE AEROSPACE, INC. 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 August 25, 2001, as compared to the Company's results of operations for the three months ended August 26, 2000. The discussion and analysis then addresses the results of the Company's operations for the six months ended August 25, 2001, as compared to the Company's results of operations for the six months ended August 26, 2000. The discussion and analysis also addresses the liquidity and financial condition of the Company and other matters. See Note 3 for additional information regarding reportable segments. THREE MONTHS ENDED AUGUST 25, 2001, AS COMPARED TO THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 26, 2000 Net sales for the three-month period ended August 25, 2001 were $179,093, which is $14,977 or 9.1% greater than net sales of $164,116 for the comparable period in the prior year. The year over year increase in net sales is attributable to an increase in unit shipments at our commercial aircraft product segment. Gross profit was $68,980 or 38.5% of net sales for the three months ended August 25, 2001 as compared to $60,758 or 37.0% of net sales in the comparable period in the prior year, a year over year increase of 150 basis points. This gross margin improvement was due to manufacturing efficiencies realized in our commercial aircraft operations. Lean manufacturing and continuous improvement programs are enabling the commercial aircraft products businesses to reduce costs, improve quality and productivity and accelerate the order fulfillment cycle. Selling, general and administrative expenses were $27,896 or 15.6% of net sales for the three months ended August 25, 2001 as compared to $23,941 or 14.6% of net sales in the comparable period in the prior year. The year over year increase in selling, general and administrative expenses was primarily attributable to recent acquisitions, costs associated with the lean manufacturing initiatives now underway at each operating plant, along with implementation costs and increased depreciation expense associated with our new Enterprise Resource Planning system. Research, development and engineering expenses were $10,973 or 6.1% of net sales for the three months ended August 25, 2001, as compared with $12,228 or 7.5% of sales for the comparable period in the prior year. The year over year decrease in research, development and engineering expenses is primarily attributable to the timing of customer programs. Amortization expense for the quarter ended August 25, 2001 of $6,412 was $565 greater than the amount recorded in the second quarter of fiscal 2001 and is due to recent acquisitions. The Company generated operating earnings of $23,699 or 13.2% of net sales for the quarter ended August 25, 2001. This was $4,957 or 26.4% greater than operating earnings of $18,742 or 11.4% of net sales during the comparable period in the prior year. The increase in operating earnings in the current period is primarily the result of higher sales and a 150 basis point improvement in gross margin, offset by somewhat higher operating expenses. Interest expense, net was $13,790 for the three months ended August 25, 2001, or $302 greater than interest expense of $13,488 for the comparable period in the prior year. The increase in interest expense is due to the newly issued 8 7/8% senior subordinated notes, net of interest income from the proceeds from our recent debt and equity offerings. Earnings before income taxes in the current quarter were $9,909, which was $4,655 or 88.6% greater than pretax earnings in the prior year of $5,254. Income tax expense for the quarter ended August 25, 2001 was $991, as compared to $525 in the prior year's comparable period. Net earnings were $8,918 or $0.27 per share (diluted) for the three months ended August 25, 2001, as compared to $4,729 or $0.19 per share (diluted) for the comparable period in the prior year. BE AEROSPACE, INC. SIX MONTHS ENDED AUGUST 25, 2001, AS COMPARED TO THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 26, 2000 Net sales for the fiscal 2002 six-month period were $355,926, an increase of $22,685 or 6.8% over net sales of $333,241 for the comparable period in the prior year. The year over year increase in sales is primarily attributable to an increase in unit shipments at our commercial aircraft products segment. Gross profit was $134,886 or 37.9% of net sales for the six months ended August 25, 2001, as compared to a gross profit of $122,311 or 36.7% of net sales in the prior year, a year over year increase of 10.3% or 120 basis points. This gross margin improvement was due to manufacturing efficiencies realized in our commercial aircraft operations. Lean manufacturing and continuous improvement programs enabled the commercial aircraft products businesses to reduce costs, improve quality and productivity and accelerate the order fulfillment cycle. Selling, general and administrative expenses were $52,779 or 14.8% of net sales for the six months ended August 25, 2001, as compared to $47,982 or 14.4% of net sales in the prior year. The year over year increase in selling, general and administrative expenses was primarily attributable to recent acquisitions, costs associated with the lean manufacturing initiatives now underway at each operating plant, along with the implementation costs and increased depreciation expense associated with our Enterprise Resource Planning system. Research, development and engineering expenses for the current six-month period were $23,053 or 6.5% of net sales or $2,156 lower than the prior year of $25,209 or 7.6% of net sales. The year over year decrease in research, development and engineering expenses is primarily attributable to the timing of customer programs. Amortization expense for the six months ended August 25, 2001 was $12,761 as compared to $11,715 in the prior year. The year over year increase in amortization expense is due to recent acquisitions. The Company generated operating earnings of $46,293 or 13.0% of net sales for the six months ended August 25, 2001. This was $8,888 or 23.8% greater than operating earnings of $37,405, which represented 11.2% of net sales during the comparable period in the prior year. The increase in operating earnings is primarily the result of higher sales and a 120 basis point improvement in gross margin, offset by somewhat higher operating expenses. Interest expense, net was $27,764 for the six months ended August 25, 2001, or $545 greater than interest expense of $27,219 for the comparable period in the prior year. The increase in interest expense is due to the newly issued 8 7/8% senior subordinated notes, net of interest income from the proceeds from our recent debt and equity offerings. Earnings before income taxes and extraordinary item for the six months ended August 25, 2001 were $18,529, which was $8,343 or 82% greater than pretax earnings in the prior year of $10,186. Income tax expense for the six months ended August 25, 2001 was $1,853, as compared to $1,019 in the prior year's comparable period. Earnings before extraordinary item were $16,676 or $0.52 per share (diluted) for the six months ended August 25, 2001, as compared to $9,167 or $0.36 (diluted) per share for the comparable period in the prior year. The Company incurred an extraordinary charge of $9,309 (net of tax) during the quarter ended May 26, 2001 related to the early redemption of its 9 7/8% senior subordinated notes and repayment of its bank credit facility. As a result, the Company reported net earnings and net earnings per share of $7,367 and $0.23 (diluted) per share, respectively, for the six months ended August 25, 2001, as compared to net earnings and net earnings per share of $9,167 and $0.36 (diluted) per share, respectively, for the comparable period in the prior year. BE AEROSPACE, INC. LIQUIDITY AND CAPITAL RESOURCES Our liquidity requirements consist of working capital needs, ongoing capital expenditures and scheduled payments of interest and principal on indebtedness. Our working capital was $306,154 as of August 25, 2001, as compared to $174,897 as of February 24, 2001. At August 25, 2001, our cash and cash equivalents were $154,687, as compared to $60,271 at February 24, 2001. Cash provided by operating activities was $31,790 for the six months ended August 25, 2001. Our primary source of cash during the six months ended August 25, 2001 was cash provided from earnings (net earnings adjusted for non-cash items) of $41,709. Our primary requirement for working capital during the six-month period related to an increase in accounts receivable of $7,068, an increase in other current assets of $4,356 and a decrease in accounts payable of $5,876. We hold a promissory note, which was issued in connection with the sale of a subsidiary to Thomson - CSF Holding Corporation, a subsidiary of The Thales Group (a publicly traded French company with over $9,000,000 in annual sales). We are currently involved in a dispute with Thales over certain terms of the purchase and sales agreement in connection with this sale. Thomson - CSF Holding Corporation failed to make a $15,700 payment due to us under the terms of the purchase and sale agreement in October 2000. These obligations to us are guaranteed by Thomson - CSF Sextant, Inc. We have initiated arbitration against Thales and Thomson and expect that this matter will be resolved within the next twelve months. During the six months ended August 25, 2001, we used $48,547 of cash for business acquisitions, with the remainder of the acquisition costs being financed through the issuance of debt and equity securities described below. Our capital expenditures were $6,507 and $10,548 during the six months ended August 25, 2001 and August 26, 2000, respectively. The year over year decrease in capital expenditures is primarily attributable to the timing of planned expenditures. On April 17, 2001 we sold $250,000 of 8 7/8% senior subordinated notes due 2011. The net proceeds less estimated debt issue costs received by us from the sale of the notes were approximately $242,800. Approximately $105,000 of proceeds were used to redeem our 9 7/8% senior subordinated notes due 2006 and approximately $66,700 of proceeds were used to repay balances outstanding under our bank credit facility, which was then terminated. The remainder of the net proceeds will be used for general corporate purposes, including potential future acquisitions. We repaid and cancelled our bank credit facility on April 17, 2001 upon the settlement of the sale of $250,000 of 8 7/8% senior subordinated notes in our recent debt offering. On April 17, 2001 we called for redemption of all our 9 7/8% senior subordinated notes on May 17, 2001. We redeemed the notes at a redemption price equal to 104.97 percent of the principal amount, together with the accrued interest to the redemption date. We deposited with the trustee on April 17, 2001 funds in an amount sufficient to redeem the 9 7/8% senior subordinated notes on the redemption date. Upon deposit of these funds, the indenture governing the 9 7/8% senior subordinated notes was discharged. We incurred an extraordinary charge of $9,309 (net of tax) for unamortized debt issue costs, redemption premiums and fees and expenses related to the repurchase of the 9 7/8% Senior Subordinated Notes. On May 16, 2001, we completed a 5,750,000 share offering of our common stock at $19.50 per share. Of the total number of shares, approximately 2,825,000 shares were sold by us and the remainder were sold by certain selling stockholders. The net proceeds from this offering were approximately $106,200. Approximately $53,100 was paid to the former owners of Alson Industries, Inc., T. L. Windust Machine, Inc., DMGI, Inc. and Maynard Precision, Inc. The Company received approximately $50,300, net of estimated offering costs, from the sale of 2,825,000 shares of stock issued in connection with this offering. BE AEROSPACE, INC. In August 2001 we established a $150,000 revolving line of credit which matures in August 2006, replacing our prior facility. At August 25, 2001, borrowings under this revolving line of credit aggregated $4,900. Pro forma for the acquisition of M&M Aerospace, borrowings under this revolving line of credit aggregated approximately $107,900 at August 25, 2001. Pro forma for the acquisition of M & M Aerospace and the payment of accrued interest on our borrowings, our aggregate cash and availability under this revolving line of credit at August 25, 2001 was approximately $121,000 (see Note 9 of the Notes to Condensed Consolidated Financial Statements as of August 25, 2001). We believe that the cash flow from operations, the net proceeds of our recent debt and equity offerings and aggregate cash and availability under our bank credit facility will provide adequate funds for our working capital needs, planned capital expenditures and debt service requirements for the foreseeable future. Our ability to fund our operations, make planned capital expenditures, make scheduled payments and refinance our indebtedness, if necessary, depends on our 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 our control. The September 11, 2001 terrorist attack has severely impacted conditions in the airline industry. Accordingly, the airlines are seeking to conserve cash in part by deferring or eliminating cabin interior refurbishment programs and cancelling or deferring aircraft purchases. The Company expects that this will cause a substantial contraction in the Company's business, the extent and duration of which cannot be determined at this time. The Company has not yet determined the impact of these significant changes in industry conditions on its operations, liquidity, financial condition or outlook. See "Dependence on Conditions in the Airline Industry". DEFERRED TAX ASSETS We established a valuation allowance related to the utilization of our deferred tax assets because of uncertainties that preclude us from determining that it is more likely than not that it will be able to generate taxable income to realize such assets during the federal operating loss carryforward period, which begins to expire in 2012. Such uncertainties include recent cumulative losses, the highly cyclical nature of the industry in which we operate, our high degree of financial leverage, risks associated with new product introductions, recent increases in the cost of fuel and its impact on our airline customers, further remediation of our Seating Products operating problems and risks associated with the integration of its acquired businesses. We monitor these uncertainties, as well as other positive and negative factors that may arise in the future, as we assess the necessity for a valuation allowance for our deferred tax assets. NEW ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. We do not believe that the adoption of SFAS 141 will have a significant impact on our financial statements. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." We are required to adopt SFAS 142 for its fiscal year beginning February 24, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires us to complete a transitional goodwill impairment test six months from the date of adoption. We are currently assessing but have not yet determined the impact of SFAS 142 on its financial position and results of operations. BE AEROSPACE, INC. DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY Our principal customers are the world's commercial airlines. As a result, our business is directly dependent upon the conditions in the highly cyclical and competitive 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 major decline in our business and profitability. Although the world airline industry experienced a turnaround in operating results in the mid 1990's, since 2000, increases in fuel prices, the softening of the global economy and labor unrest have negatively impacted airline profitability. Moreover, as a result of the September 11, 2001 terrorist attacks on the World Trade Center in New York City and the Pentagon in Northern Virginia, the airline industry has once again been severely affected. For the first time in the history of commercial aviation, all domestic airlines were grounded for a period of three days following the terrorist attack. Since resuming service, most major US carriers have parked or retired nearly 20% of their fleets and have announced reductions in workforces aggregating over 100,000 employees, and Boeing has announced planned layoffs of approximately 30,000, or 30% of their commercial aircraft workforce. Congress has authorized financial assistance for the airline industry aggregating $15 billion; $5 billion in direct cash subsidies for U.S. carriers, and subject to certain conditions, up to $10 billion in federal loan guarantees. As a result of the substantial reduction in airline traffic arising from the September 11 terrorist attack and its aftermath, as well as other factors, such as the weakening economy, the airline industry is likely to incur the largest loss in history in calendar 2001, totaling in excess of $10 billion. Accordingly, the airlines are seeking to conserve cash by deferring or eliminating cabin interior refurbishment programs and canceling or deferring aircraft purchases. The Company expects that this will cause a substantial contraction in the Company's business, the extent and duration of which cannot be determined at this time. The Company has not yet determined the impact of these significant changes in industry conditions on its operations, liquidity, financial condition or outlook. However, given the magnitude of these events and the possible subsequent effects, the impact could be material. The airline industry is also 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. 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 were affected by the economic events in the Pacific Rim, certain carriers, including non-Asian carriers that have substantial Asian routes, did cancel or defer their existing orders. FORWARD LOOKING STATEMENTS This report contains forward-looking statements, including statements regarding the future benefits of corrective actions in the Company's seating business, implementation and expected benefits of lean manufacturing and continuous improvement programs, the Company's dealings with customers and partners, the consolidation of facilities, integration of acquired businesses, productivity improvements from recent information technology investments, the roll-out of the Company's e-commerce system, ongoing capital expenditures, the adequacy of funds to meet the Company's capital requirements, the ability to refinance our indebtedness, if necessary, the reduction of debt, the potential impact of new accounting pronouncements, the allocation of M & M's purchase price, the impact on our business of the BE AEROSPACE, INC. arbitration against Thales. These forward-looking statements include risks and uncertainties, and the Company's actual experience may differ materially from that anticipated in such statements. Factors that might cause such a difference include those discussed in the Company's filings with the Securities and Exchange Commission, including its most recent proxy statement and Form 10-K, 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, the impact of rising fuel prices on our airline customers, delays in, or unexpected costs associated with, the integration of our acquired businesses, conditions in the airline industry, problems meeting customer delivery requirements, the Company's success in winning new or expected refurbishment contracts from customers, capital expenditures, cash expenditures related to possible future acquisitions, further remediation of our Seating Products operating problems, labor disputes involving us, our significant customers or airframe manufacturers, the possibility of a write-down of intangible assets, 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 three months ended August 25, 2001, 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 24, 2001. [Remainder of page intentionally left blank] BE AEROSPACE, INC. 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 1. Annual meeting took place on August 14, 2001 2. Directors elected (Class I) - Jim C. Cowart and Brian H. Rowe 3. Directors whose term of office continued after meeting (Class II and III) - Robert J. Khoury, Jonathan M. Schofield, Richard G. Hamermesh and Amin J. Khoury 4. Adopted the 2001 Stock Option Plan 5. Adopted the 2001 Non-Employee Directors' Stock Option Plan 6. Amended the 1994 Employee Stock Purchase Plan 7. Increased the number of shares of common stock authorized for issuance
Abstain/ For Against Withheld Unvoted -------------------- -------------- ------------- ---------------- 1. Election of Class I Directors Jim C. Cowart 26,748,328 -- 3,823,193 Brian H. Rowe 29,648,121 -- 923,400 2. Proposal to adopt the 2001 Stock Option Plan 22,379,915 7,731,216 460,390 3. Proposal to adopt the 2001 Non-Employee Directors' Stock Option Plan 22,954,382 7,313,488 303,651 4. Proposal to amend the 1994 Employee Stock Purchase Plan 29,674,763 591,128 305,630 5. Proposal to increase the number of shares of common stock authorized for issuance 25,974,896 4,561,403 35,222 6. Proposal to adopt the MacBride Principles 8,041,966 17,504,332 950,462 4,084,761
Item 5. Other Information - None. BE AEROSPACE, INC. Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 1 Amended and Restated Employment Agreements dated as of September 14, 2001 between the Registrant and Amin J. Khoury Exhibit 2 Amended and Restated Employment Agreements dated as of September 14, 2001 between the Registrant and Robert J. Khoury Exhibit 3 Amended and Restated Employment Agreements dated as of September 14, 2001 between the Registrant and Thomas P. McCaffrey Exhibit 4 Credit Agreement dated as of August 21, 2001 b. Reports on Form 8-K Form 8-K, dated and filed August 13, 2001; includes press release to announce the Agreement to acquire M & M Aerospace Hardware, Inc. Form 8-K, dated and filed August 21, 2001; includes pro forma financial statements as of February 24, 2001 and the three months ended May 26, 2001 Form 8-K/A, dated and filed August 23, 2001; includes signed audit report from Form 8-K, originally dated and filed August 21, 2001. BE AEROSPACE, INC. 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: October 9, 2001 By: /s/ Robert J. Khoury ------------------------ Robert J. Khoury President and Chief Executive Officer Date: October 9, 2001 By: /s/ Thomas P. McCaffrey --------------------------- Thomas P. McCaffrey Corporate Senior Vice President of Administration and Chief Financial Officer EX-1 3 exhibiti.txt EMPLOYMENT AGREEMENT - AMIN J. KHOURY EXHIBIT 1 EMPLOYMENT AGREEMENT This Agreement ("Agreement") dated as of September 14, 2001, is between BE Aerospace, Inc., a Delaware corporation (the "Company") and Amin J. Khoury ("Executive"). WHEREAS, Executive and the Company entered into an employment agreement in 1992 which was revised and amended several times thereafter and whereas Executive and the Company entered into that certain Agreement dated as of May 29, 1998, and thereafter amended said Agreement by two amendments (said Agreement and amendments hereinafter collectively the "Employment Agreement"); and WHEREAS, Executive, having provided services to the Company since August 1, 1987, agrees to provide services for an additional period as provided herein, and the Company wishes to procure such services; and WHEREAS, Executive and the Company wish to further amend and restate the Employment Agreement in its entirety; NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows: 1. REFERENCE TO EMPLOYMENT AGREEMENT. The Employment Agreement is hereby restated, superseded and replaced in its entirety by this Agreement. 2. ARRANGEMENT. Executive shall provide to the Company, and the Company shall accept from Executive, the services set forth in Section 4.2 below, subject to the terms and conditions set forth in this Agreement. 3. TERM. Executive shall provide to the Company services hereunder during the term of this Agreement which, unless otherwise terminated pursuant to the provisions of Article 7 hereof, shall be the period ending three (3) years from any date as of which the term is being determined (the "Employment Term"). The date on which the Employment Term ends, including any extensions thereof, is sometimes hereinafter referred to as the "Expiration Date." 4. CAPACITY, SERVICES AND PERFORMANCE. 4.1. Capacity. Executive shall serve the Company as its Chairman of the Board of Directors (the "Board"), or in such other Board or executive capacity as the Board may designate from time to time, but only upon agreement with Executive. 4.2. Services. In the capacity set forth in Section 4.1 above, Executive shall be retained by the Company and shall perform such duties and responsibilities on behalf of the Company as Executive and the Board shall by mutual agreement from time to time determine. 4.3. Performance. During the Employment Term, Executive shall use his business judgment, skill and knowledge to the advancement of the Company's interests and to the discharge of his duties and responsibilities hereunder; provided that Executive shall be required only to devote so much time as Executive determines is reasonably necessary to discharge his duties as Chairman of the Board, and, subject to the provisions of Section 6 below, Executive may engage in other business activities during the Employment Term. 5. COMPENSATION AND BENEFITS. 5.1. Salary. Effective as of March 1, 2001 Executive shall receive an annual salary (the "Salary") of $765,000 during each year of the Employment Term. Such Salary shall be subject to adjustment from time to time by the Board; provided, however, that it shall at no time be adjusted below the Salary for the preceding year. Commencing on March 1, 2002, and on March 1 of each year thereafter during the Employment Term, the Salary then in effect shall be increased by an amount not less than the amount determined by applying to the Salary then in effect the percentage increase in the U.S. Bureau of Labor Statistics Consumer Price Index Revised - Urban Wage Earners and Clerical Workers - National - All Items (1982-84 = 100) (the "Index") for the consecutive twelve (12) month period (March through February) immediately preceding such March 1. If the Index is no longer issued, the Board and Executive shall agree upon a substitute index issued by such agency which most reasonably reflects the criteria utilized in the most recent issue of the Index. Except as otherwise provided in this Agreement, the Salary shall be payable biweekly or in accordance with the Company's current payroll practices, and shall be pro-rated for any period of service less than a full year. 5.2. Bonuses. Executive may receive bonuses from the Company when, as and if determined from time to time by the Board. Any such bonuses paid to Executive shall be in addition to the Salary then in effect. 5.3. Benefits. Executive shall be entitled to participate in all employee benefit plans, life insurance plans, disability income plans, incentive compensation plans and other benefit plans, other than retirement plans, as may be from time to time in effect for executives of the Company generally. In addition, Executive and his spouse, for as long as they each may live, shall be entitled to all medical, dental and health benefits available from time to time to the Company's executive officers and their spouses, respectively, and the Executive and his spouse, for as long as they each may live, shall be entitled to the benefits available under the Company's executive medical reimbursement plan in effect as of March 1, 2001 and this provision shall survive the termination or expiration of this Agreement for any reason. 5.4. Business Expenses. The Company shall pay or reimburse Executive during the Employment Term for all reasonable business expenses incurred or paid by him in the performance of his services, subject to reasonable substantiation and documentation. 5.5. Automobile. During the Employment Term, Executive shall be furnished either, as determined by the Company, an automobile owned or leased by the Company or an automobile allowance, which automobile or allowance shall be at least equivalent to that which the Company is providing to Executive as of March 1, 2001. 5.6 Stock Option Grants. Through the Employment Period the Executive shall be entitled to participate in any applicable option grant program of the Company. 6. PROPRIETARY RIGHTS AND NON-COMPETITION. Executive acknowledges that the Company is engaged in a continuous program of research, development and production in connection with its business, present and future, and hereby covenants as follows: 6.1. Confidentiality. Executive will maintain in confidence and will not disclose or use, either during or after the Employment Term, any proprietary or confidential information or know-how belonging to the Company ("Proprietary Information" hereinafter defined), whether or not in written form, except to the extent required to perform duties on behalf of the Company. For purposes of this Agreement, "Proprietary Information" shall mean any information, not generally known to the relevant trade or industry, which was obtained from the Company, or which was learned, discovered, developed, conceived, originated or prepared by Executive in connection with this Agreement. Such Proprietary Information includes, without limitation, software, technical and business information relating to the Company's inventions or products, research and development, production processes, manufacturing and engineering processes, machines and equipment, finances, customers, marketing and production and future business plans, information belonging to customers or suppliers of the Company disclosed incidental to Executive's performance under this Agreement, and any other information which is identified as confidential by the Company, but only so long as the same is not generally known in the relevant trade or industry. 6.2. Inventions. 6.2.1. Definition of Inventions. For purposes of this Agreement, "Inventions" shall mean any new or useful art, discovery, contribution, finding or improvement, whether or not patentable, and all related know-how. Inventions shall include, without limitation, all designs, discoveries, formulae, processes, manufacturing techniques, semiconductor designs, computer software, inventions, improvements and ideas. 6.2.2. Disclosure and Assignment of Inventions. Executive will promptly disclose and describe to the Company all Inventions which he may solely or jointly conceive, develop, or reduce to practice during the Employment Term (i) which relate at the time of conception, development, or reduction to practice of the Invention to the Company's business or actual or demonstrably anticipated research or development, (ii) which were developed, in whole or in part, on the Company's time or with the use of any of the Company's equipment, supplies, facilities or trade secret information, or (iii) which resulted from any work performed by Executive for the Company (the "Company's Inventions"). Executive hereby assigns all of his right, title and interest world-wide in the Company's Inventions and in all intellectual property rights based upon the Company's Inventions; provided, however, that Executive does not assign or agree to assign any Inventions, whether or not relating in any way to the Company's business or demonstrably anticipated research and development, which were made by him prior to the date of this Agreement, or which were developed by him independently during the term of this Agreement and not under the conditions stated in subparagraph (ii) above. 6.3. Documents and Materials. Upon termination of this Agreement or at any other time upon the Company's request, Executive will promptly deliver to the Company, without retaining any copies, all documents and other materials furnished to him by the Company, prepared by him for the Company or otherwise relating to the Company's business, including, without limitation, all written and tangible material in his possession incorporating any Proprietary Information. 6.4. Competitive Employment. During the Employment Term and for a period of two (2) years thereafter (collectively, the "Extended Term"), Executive will not engage in any employment, consulting, or other activity in any business competitive with the Company without the Company's written consent, which consent shall not be unreasonably withheld; provided, however, that nothing in this Section 6.4 shall preclude Executive from serving as a director of any other corporation. 6.5. Non-solicitation. During the Extended Term, Executive will not solicit or encourage, or cause others to solicit or encourage, any employees of the Company to terminate their employment with the Company. 6.6. Acts to Secure Proprietary Rights. 6.6.1. Further Acts. Executive agrees to perform, during and after the Employment Term, all acts deemed necessary or desirable by the Company to permit and assist it, at its expense, in perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company's Inventions. Such acts may include, without limitation, execution of documents and assistance or co-operation in the registration and enforcement of applicable patents and copyrights or other legal proceedings. 6.6.2. Appointment of Attorney-In-Fact. In the event that the Company is unable, for any reason whatsoever, to secure Executive's signature to any lawful and necessary document required to apply for or execute any patent, copyright or other applications with respect to any of the Company's Inventions (including improvements, renewals, extensions, continuations, divisions or continuations in part thereof), Executive hereby irrevocably appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights thereon with the same legal force and effect as if executed by him, intending hereby to create a so-called "durable power" which will survive any subsequent disability. 6.7. No Conflicting Obligations. Executive's performance of this Agreement does not breach and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by him. 6.8. Corporate Opportunities. Executive agrees that he will first present to the Board, for its acceptance or rejection on behalf of the Company, any opportunity to create or invest in any company which is or will be involved in equipping or furnishing airplane cabin interiors, which comes to his attention and in which he, or any affiliate, might desire to participate. If the Board rejects the same or fails to act thereon in a reasonable time, Executive shall be free to invest in, participate or present such opportunity to any other person or entity. 6.9. Specific Performance. Executive acknowledges that a breach of any of the promises or agreements contained herein could result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law, and the Company shall be entitled to seek injunctive relief and/or a decree for specific performance. 7. TERMINATION AND CHANGE OF CONTROL. 7.1 Termination Date/Voluntary Termination Prior to Change of Control. (i) The term "Termination Date" shall mean the date on which the Executive's employment with the Company terminates for any reason prior to the Expiration Date. (ii) If the Executive voluntarily resigns prior to the occurrence of a Change of Control, then the Executive shall receive payment of his unpaid Salary through the Termination Date, the Retirement Compensation determined as of the Termination Date and other Retirement Benefits shall become due pursuant to Sections 7.6 and 7.7 hereof, and the Severance Pay shall become due pursuant to Section 7.5 hereof. In addition, the Executive and his spouse shall be entitled to a continuation of their medical, dental and health benefits pursuant to the last sentence of Section 5.3 hereof. 7.2. Death. The Executive's employment hereunder shall terminate upon his death. In such event, the Company shall pay to such person as the Executive shall have designated in a notice filed with the Company, or if no such person shall have been designated, to his estate, a lump sum payment equal to the Salary that would have been due to the Executive had this Agreement been in effect from the date of his death until the Expiration Date and the Retirement Compensation as provided in Section 7.6 below, however, in no event will the aggregate amount payable to Executive pursuant to this Section 7.2 (including the amount payable pursuant to Section 7.6 below) be less than twenty (20) times the maximum annual Salary paid Executive during his employment by the Company. 7.3. Incapacity. If in the reasonable judgment of the Board, as a result of Executive's incapacity due to physical or mental illness or otherwise, Executive shall for at least six (6) consecutive months during the term of this Agreement have been unable to perform his duties under this Agreement on a full-time basis, the Company may terminate Executive's employment as provided in this Section 7.3. If the Company desires to so terminate Executive's employment, the Company shall: (i) give prompt notice to Executive of any such termination; and (ii) until the Expiration Date, (a) pay to Executive or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or if no such person shall have been designated, to Executive's estate, two (2) times the highest annual Salary paid to the Executive prior to the Termination Date, (b) continue to provide Executive with the disability insurance and life insurance coverage, in the same amounts and upon the same terms and conditions provided pursuant to Section 5.3 hereof immediately prior to the Termination Date, (c) reimburse the Executive for business expenses in the same manner and to the same extent required pursuant to Section 5.4 hereof prior to the Termination Date, including without limitation the reimbursement of travel expenses and other travel benefits as were afforded to Executive under the Company's Aircraft Travel Policy Authorization and Limitation on Officer Travel as in effect on May 31, 2001, and (d) continue to provide the Executive with the automobile allowance provided pursuant to Section 5.5 hereof immediately prior to the Termination Date. (iii) pay to Executive (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to his estate) the entire Retirement Compensation, or the remaining unpaid balance thereof if payments of such Retirement Compensation have commenced, as provided in Section 7.6 and below, however, in no event will the aggregate benefit payable to Executive pursuant to this Section 7.3 (iii) (including the amounts provided in Section 7.6 below) be less than twenty (20) times the maximum annual Salary paid Executive during his employment by the Company; and (iv) continue to provide medical benefits as provided in Section 5.3 above. Any dispute between the Board and Executive with respect to Executive's incapacity shall be settled by reference to a competent medical authority mutually agreed to by the Board and Executive or his personal representative, whose decision shall be binding on all parties. 7.4 Change of Control. (a) If a "Change of Control" of the Company occurs, the Company will be obligated as provided in Sections 7.4 and 7.5 of this Agreement. The Company's obligations under Sections 7.4 and 7.5 of this Agreement are the same whether the Executive's employment with the Company is terminated or continues following a Change of Control. For purposes of determining the Company's obligations under this Section 7.4 and 7.5, the date on which a Change of Control occurs hereinafter is referred to as the "Change of Control Date." If a "Change of Control" occurs during the Employment Term, the Company or its successors in interest shall: (i) within five (5) business days after the Change of Control Date, pay to the Executive, (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, the Executive's estate) a lump sum payment equal to the sum of: (a) the Salary, at the rate in effect on the Change of Control Date, that would have been payable to the Executive through the Expiration Date, (b) the unpaid amount of any bonuses declared to be payable to the Executive for any fiscal periods of the Company ending prior to the Change of Control Date, (c) an amount equal to two (2) times the Salary, determined at the highest rate annualized that was in effect at any time from the 180 day period preceding the Change of Control until the Change of Control Date (the "Highest Salary"), that would have been payable for the period from the Change of Control Date through the Expiration Date, and (d) an amount equal to two (2) times the Executive's Highest Salary, which lump sum shall not be prorated and shall be paid in addition to the Retirement Compensation payable under (ii) of this Section 7.4, the Salary and benefits payable under (iii) of this Section 7.4, and any Severance Pay payable pursuant to Section 7.5 hereof; (ii) within five (5) business days after the Change of Control Date, pay to Executive (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate), in a single lump sum payment, the aggregate amount of Retirement Compensation payable to Executive pursuant to Section 7.6 hereof determined as of the Change of Control Date; provided, however, that if the Change of Control Date is prior to May 28, 2003, the Retirement Compensation shall be determined as if the Executive had continued to be employed by the Company until, and the Change of Control Date occurred on, May 28, 2003; (iii) if the Executive's employment terminates after the Change of Control Date for any reason other than death pursuant to Section 7.2 or incapacity pursuant to Section 7.3, for the period from the Executive's actual Termination Date until the Expiration Date, (a) pay to Executive (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate) two (2) times Executive's Highest Salary, (b) provide Executive with continued life insurance and disability insurance coverage in the same amounts and upon the same terms and conditions as in effect on his Termination Date, or if greater, as those provided immediately prior to the Change of Control, (c) reimburse Executive for business expenses in the same manner and to the same extent required pursuant to Section 5.4 hereof prior to the Termination Date, or if greater, to the extent provided immediately prior to the Change of Control, and (d) continue to provide Executive with the automobile allowance provided pursuant to Section 5.5 hereof as of the Termination Date, or if greater, as provided immediately prior to the Change in Control; (iv) during the balance of the Employment Term and thereafter, continue to provide to Executive and his spouse, for their respective lifetimes, substantially the same medical, dental and health benefits, and on substantially similar terms, as the Executive and his spouse were receiving as of the Termination Date, or if greater, as they were receiving immediately prior to the Change of Control; (v) provide that any stock options granted Executive that would not vest on or prior to the effective date of the Change of Control shall be exercisable immediately upon the execution of any agreement that would constitute a Change in Control (regardless of whether such agreement is consummated), and such stock options shall continue to be exercisable until the later of their expiration date or the date on which shares of the Company are no longer traded as such; (vi) pay to Executive the amount of any Gross-Up Payment payable by the Company to the Executive under Section 7.8 hereof; and (vii) if the Executive's employment terminates after the Change of Control Date for any reason other than death pursuant to Section 7.2 or incapacity pursuant to Section 7.3, for the period from the Executive's actual Termination Date until the 5th anniversary after the date on which the Change of Control occurs, (a) reimburse Executive for the reasonable costs of leasing and operating an office at a location selected by Executive that is outside of the Company's office, including without limitation, the cost of a full-time assistant, and (b) provide Executive with up to 200 hours per year of corporate jet usage consistent with the Company's Aircraft Travel Policy, "Authorization and Limitation on Officer Travel", as in effect on May 31, 2001, or, in the event that the Company does not own or control an aircraft of the type specified in such policy or, at the Company's option, the Company may provide Executive with a quarter share of the same aircraft type specified in such policy under a five year, executive jet part share program. In the event the Company provides Executive with use of its corporate jet, the corporate jet shall be available for use by the Executive given seventy-two hours advance notice by Executive to the Company of his intent to use the aircraft. (b) For purposes of this Agreement, a "Change of Control" means: (i) The entering into of any agreement relating to a transaction or series of related transactions involving the ownership of the Company that requires a shareholder vote for the consummation of such transaction; (ii) Individuals who, as of March 1, 2001 (the "Effective Date") constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided that any person becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (iii) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of 25% or more of either the then outstanding shares of the Company's Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the ownership of a "Controlling Interest") excluding, for this purpose, any acquisitions by (1) the Company or its subsidiaries, (2) any person, entity or "group" that as of the Effective Date owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company or its subsidiaries; or (iv) The sale or other disposition by the Company of 25% or more of the value of its assets to any person or entity that is not controlled by the Company. 7.5 Severance Pay. If the Executive's employment with the Company is terminated for any reason, other than the Executive's death pursuant to Section 7.2 hereof, or the Executive's incapacity pursuant to Section 7.3 hereof, then within five (5) days after the Executive's Termination Date, the Company shall pay to the Executive (or in the event of the Executive's subsequent death, such person as the Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate) a lump sum amount equal to the Executive's annual Salary in effect as of the Termination Date, which lump sum shall not be pro-rated. The obligations of the Company pursuant to this Section 7.5 shall survive any termination of this Agreement or the Executive's employment as aforesaid, and shall be in addition to any amounts payable to the Executive pursuant to Section 7.4 hereof in the event of a Change of Control of the Company. 7.6 Retirement Compensation. (a) Amount of Retirement Compensation. In recognition that Executive founded the Company and will not be eligible for any retirement plan to be offered by the Company to its executives (as provided in Section 5.3 above), Executive shall be entitled to retirement compensation ("Retirement Compensation") equal to the product of (a) 150% times (b) the highest annual Salary paid to the Executive during his employment by the Company multiplied by (c) the number of years of service provided by Executive to the Company, such service having commenced as of August 1, 1987 ("Commencement Date"), with a ratable adjustment should Executive's final period of service be less than a full year. The Retirement Compensation as so determined shall be paid to Executive (or in the event of Executive's subsequent death, to such person as Executive shall have designated in a notice filed with the Company or, if no such person shall have been designated, to his estate) at the times specified in Sections 7.6(b)(ii) hereof within five (5) business days after the Termination Date. The amount of the Retirement Compensation so due and payable shall not be present-valued or otherwise reduced by use of any other discount or discounting method. (b) Payment of Retirement Compensation. (i) Within five business days after the date on which the BE Aerospace, Inc. Executive Compensation Trust II dated April 21, 1999, as amended, is terminated (the "Distribution Date"), the Company will distribute the amount of Retirement Compensation that would have been payable to the Executive under Section 7.6(a) as of the Distribution Date, based on his years of service through the Distribution Date and his then Highest Annual Salary. (ii) Within five (5) business days after the Executive's actual Termination Date, the Company shall pay to the Executive an amount equal to (x) the Retirement Compensation payable to the Executive as determined in Section 7.6(a)(i) hereof less (y) the sum of (1) the amount of Retirement Compensation previously distributed to the Executive pursuant to Section 7.6(b)(i) and 7.4(a)(ii) hereof, and (2) the amounts previously distributed pursuant to Section 7.6(c)(i) or 7.6(c)(ii). (c) Retirement Trust. (i) Within ninety days after the Distribution Date, the Company shall establish a trust for the duration of the Employment Term, and, commencing on such date and on a quarterly basis thereafter, each a "Contribution Date" the Company shall contribute to the trust (the "Retirement Trust") for the benefit of the Executive an amount equal to (a) Retirement Compensation that would be payable to the Executive under Section 7.6(b)(ii) if the Contribution Date was his Termination Date minus (b) the assets in the Retirement Trust as of the Contribution Date The Retirement Trust to which the Company shall make these contributions shall be irrevocable. The Retirement Trust shall provide that the Executive may withdraw from the Retirement Trust, within the 30 day period beginning on the date on which he receives notice from the Company that the Company has made a contribution pursuant to this Section 7.6(c)(i) an amount up to but not to exceed the amount of that contribution. If and to the extent that the Executive fails to exercise this withdrawal right within the 30 day period, such withdrawal right shall lapse. The Retirement Trust also shall contain such other provisions as the Company and the Executive reasonably agree are necessary in order for the Retirement Trust to qualify as a grantor trust under Section 671 of the Code with the Executive as the grantor. The trust agreement for the Retirement Trust shall provide that any assets remaining in the Retirement Trust, after payment of all the retirement compensation payable pursuant to this Section 7.6, shall be paid to the Executive, and that the Retirement Trust shall be exempt from the claims of the Company's creditors. (ii) As of the last day of each calendar quarter ending on or after the Distribution Date, during the Employment Term, the trustee of the Retirement Trust shall be required to distribute to the Executive 25% of the amount by which (x) the Assumed Taxes that the Company reasonably estimates will be assessed upon the Executive for the calendar year for which the distribution is being made as a result of his beneficial interest in the Retirement Trust, exceeds (y) the amount withdrawn by the Executive in such calendar year pursuant to Section 7.6(i). For this purpose, the term "Assumed Taxes" shall mean the Federal, State and local income taxes that would be payable by the Executive for the year in question, assuming that the amount taxable would be subject to the highest Federal and applicable State and local income taxes. 7.7 Other Retirement Benefits. In the event that the Executive's employment terminates for any reason other than death pursuant to Section 7.2 or incapacity pursuant to Section 7.3, then for the period from the Termination Date until the 5th anniversary after the Termination Date, the Company shall: (a) reimburse Executive for the reasonable costs of leasing and operating an office at a location selected by Executive that is outside of the Company's office, including without limitation, the cost of a full-time assistant, and (b) provide Executive with up to 200 hours per year of corporate jet usage consistent with the Company's Aircraft Travel Policy, "Authorization and Limitation on Officer Travel", as in effect on May 31, 2001, or, in the event that the Company does not own or control an aircraft of the type specified in such policy, or, at the Company's option, the Company may provide the Executive a quarter share of the same aircraft type specified in such policy under a five year, executive jet party share program. In the event the Company provides Executive with use of its corporate jet, the corporate jet shall be available for use by the Executive given seventy-two hours advance notice by Executive to the Company of his intent to use the aircraft. If and to the extent that the Company is required to withhold any amounts for taxes with regard to the foregoing, then the provision of the foregoing benefits shall be conditioned upon the Company and the Executive's making appropriate arrangements to ensure that those withholding requirements are satisfied. 7.8 Certain Additional Payments by the Company. (i) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other action by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (including without limitation any additional payments required under this Section 7.8) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Executive with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make a payment to the Executive (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, the Executive retains (or has had paid to the Internal Revenue Service on his behalf) an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-Up Payment is to be made, and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local. (ii) Subject to the provisions of paragraph (iii) of this Section 7.8, all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7.8, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 7.8 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (iii) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (A) give the Company any information reasonably requested by the Company relating to such claim, (B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (C) cooperate with the Company in good faith in order effectively to contest such claim, and (D) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.8(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (iv) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7.8(iii), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 7.8(iii)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7.8(iii), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 8. WITHHOLDING. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law. 9. INDEMNIFICATION. To the maximum extent permitted under Florida law as from time to time in effect, the Company hereby agrees to indemnify Executive and hold him harmless from, against and in respect of any and all damages, deficiencies, actions, suits, proceedings, demands, assessments, judgments, claims, losses, costs, expenses, obligations and liabilities arising from or related to the performance of this Agreement by Executive. 10. WAIVER. The waiver by any party hereto of a breach of any provision of this Agreement by the other party will not operate or be construed as a waiver of any other or subsequent breach by such other party. 11. SEVERABILITY. If any part of this Agreement is found to be invalid or unenforceable, that part will be deemed amended to achieve as nearly as possible the same economic effect as the original provision, and the remainder of this Agreement will remain in full force and effect. 12. NOTICES. Any notice or other communication in connection with this Agreement shall be deemed to be delivered if in writing, addressed as provided below (or to such other person or address as to which either party may notify the other in accordance with this Section 13) and actually delivered at said address: If to Executive, to him at: Amin J. Khoury 149 South Beach Road Hobe Sound, FL 33455 If to the Company, to it at: BE Aerospace, Inc. 1400 Corporate Center Drive Wellington, Florida 33414 Attention: General Counsel 13. SURVIVAL. The obligations of Executive pursuant to Section 6 hereof and the obligations of the Company pursuant to Section 7 hereof shall each survive any termination or expiration of this Agreement, or any resignation of employment by Executive under Section 7.4 above, as the case may be. 14. MISCELLANEOUS. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous understandings and agreements, whether oral or written, regarding such subject matter. This Agreement may be amended or modified only by a written instrument signed by Executive and by a duly authorized representative of the Company. This Agreement may be executed in any number of counterparts, which together shall constitute one and the same instrument. Except as otherwise provided in Section 10 above, this Agreement shall be governed by and construed in accordance with the laws (other than the conflicts of law rules) of the State of Florida. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, as of the date first above written. EXECUTIVE BE AEROSPACE, INC. ___________________________ By:___________________________ Title:__________________________ By:___________________________ Title:__________________________ EX-2 4 exhibitii.txt EMPLOYMENT AGREEMENT - ROBERT J. KHOURY EXHIBIT 2 EMPLOYMENT AGREEMENT This Agreement ("Agreement") dated as of September 14, 2001, is between BE Aerospace, Inc., a Delaware corporation (the "Company") and Robert J. Khoury ("Executive"). WHEREAS, Executive and the Company entered into an employment agreement in 1992 which was revised and amended several times thereafter and whereas Executive and the Company entered into that certain Agreement dated as of May 29, 1998, and thereafter amended said Agreement by two amendments (said Agreement and amendments hereinafter collectively the "Employment Agreement"); and WHEREAS, Executive, having provided services to the Company since August 1, 1987, agrees to provide services for an additional period as provided herein, and the Company wishes to procure such services; and WHEREAS, Executive and the Company wish to further amend and restate the Employment Agreement in its entirety; NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows: 1. REFERENCE TO EMPLOYMENT AGREEMENT. The Employment Agreement is hereby restated, superseded and replaced in its entirety by this Agreement. 2. ARRANGEMENT. Executive shall provide to the Company, and the Company shall accept from Executive, the services set forth in Section 4.2 below, subject to the terms and conditions set forth in this Agreement. 3. TERM. Executive shall provide to the Company services hereunder during the term of this Agreement which, unless otherwise terminated pursuant to the provisions of Article 7 hereof, shall be the period ending three (3) years from any date as of which the term is being determined (the "Employment Term"). The date on which the Employment Term ends, including any extensions thereof, is sometimes hereinafter referred to as the "Expiration Date." 4. CAPACITY, SERVICES AND PERFORMANCE. 4.1. Capacity. Executive shall serve the Company as its President and Chief Executive Officer or in such other executive capacity as the Board of Directors (the "Board") may designate from time to time, but only upon agreement with Executive. 4.2. Services. In the capacity set forth in Section 4.1 above, Executive shall be retained by the Company and shall perform such duties and responsibilities on behalf of the Company as Executive and the Board shall by mutual agreement from time to time determine. 4.3. Performance. During the Employment Term, Executive shall use his business judgment, skill and knowledge to the advancement of the Company's interests and to the discharge of his duties and responsibilities hereunder; provided that Executive shall be required only to devote so much time as Executive determines is reasonably necessary to discharge his duties as Chairman of the Board, and, subject to the provisions of Section 6 below, Executive may engage in other business activities during the Employment Term. 5. COMPENSATION AND BENEFITS. 5.1. Salary. Effective as of March 1, 2001 Executive shall receive an annual salary (the "Salary") of $710,000 during each year of the Employment Term. Such Salary shall be subject to adjustment from time to time by the Board; provided, however, that it shall at no time be adjusted below the Salary for the preceding year. Commencing on March 1, 2002, and on March 1 of each year thereafter during the Employment Term, the Salary then in effect shall be increased by an amount not less than the amount determined by applying to the Salary then in effect the percentage increase in the U.S. Bureau of Labor Statistics Consumer Price Index Revised - Urban Wage Earners and Clerical Workers - National - All Items (1982-84 = 100) (the "Index") for the consecutive twelve (12) month period (March through February) immediately preceding such March 1. If the Index is no longer issued, the Board and Executive shall agree upon a substitute index issued by such agency which most reasonably reflects the criteria utilized in the most recent issue of the Index. Except as otherwise provided in this Agreement, the Salary shall be payable biweekly or in accordance with the Company's current payroll practices, and shall be pro-rated for any period of service less than a full year. 5.2. Bonuses. Executive may receive bonuses from the Company when, as and if determined from time to time by the Board. Any such bonuses paid to Executive shall be in addition to the Salary then in effect. 5.3. Benefits. Executive shall be entitled to participate in all employee benefit plans, life insurance plans, disability income plans, incentive compensation plans and other benefit plans, other than retirement plans, as may be from time to time in effect for executives of the Company generally. In addition, Executive and his spouse, for as long as they each may live, shall be entitled to all medical, dental and health benefits available from time to time to the Company's executive officers and their spouses, respectively, and the Executive and his spouse, for as long as they each may live, shall be entitled to the benefits available under the Company's executive medical reimbursement plan in effect as of March 1, 2001 and this provision shall survive the termination or expiration of this Agreement for any reason. 5.4. Business Expenses. The Company shall pay or reimburse Executive during the Employment Term for all reasonable business expenses incurred or paid by him in the performance of his services, subject to reasonable substantiation and documentation. 5.5. Automobile. During the Employment Term, Executive shall be furnished either, as determined by the Company, an automobile owned or leased by the Company or an automobile allowance, which automobile or allowance shall be at least equivalent to that which the Company is providing to Executive as of March 1, 2001. 5.6 Stock Option Grants. Through the Employment Period the Executive shall be entitled to participate in any applicable option grant program of the Company. 6. PROPRIETARY RIGHTS AND NON-COMPETITION. Executive acknowledges that the Company is engaged in a continuous program of research, development and production in connection with its business, present and future, and hereby covenants as follows: 6.1. Confidentiality. Executive will maintain in confidence and will not disclose or use, either during or after the Employment Term, any proprietary or confidential information or know-how belonging to the Company ("Proprietary Information" hereinafter defined), whether or not in written form, except to the extent required to perform duties on behalf of the Company. For purposes of this Agreement, "Proprietary Information" shall mean any information, not generally known to the relevant trade or industry, which was obtained from the Company, or which was learned, discovered, developed, conceived, originated or prepared by Executive in connection with this Agreement. Such Proprietary Information includes, without limitation, software, technical and business information relating to the Company's inventions or products, research and development, production processes, manufacturing and engineering processes, machines and equipment, finances, customers, marketing and production and future business plans, information belonging to customers or suppliers of the Company disclosed incidental to Executive's performance under this Agreement, and any other information which is identified as confidential by the Company, but only so long as the same is not generally known in the relevant trade or industry. 6.2. Inventions. 6.2.1. Definition of Inventions. For purposes of this Agreement, "Inventions" shall mean any new or useful art, discovery, contribution, finding or improvement, whether or not patentable, and all related know-how. Inventions shall include, without limitation, all designs, discoveries, formulae, processes, manufacturing techniques, semiconductor designs, computer software, inventions, improvements and ideas. 6.2.2. Disclosure and Assignment of Inventions. Executive will promptly disclose and describe to the Company all Inventions which he may solely or jointly conceive, develop, or reduce to practice during the Employment Term (i) which relate at the time of conception, development, or reduction to practice of the Invention to the Company's business or actual or demonstrably anticipated research or development, (ii) which were developed, in whole or in part, on the Company's time or with the use of any of the Company's equipment, supplies, facilities or trade secret information, or (iii) which resulted from any work performed by Executive for the Company (the "Company's Inventions"). Executive hereby assigns all of his right, title and interest world-wide in the Company's Inventions and in all intellectual property rights based upon the Company's Inventions; provided, however, that Executive does not assign or agree to assign any Inventions, whether or not relating in any way to the Company's business or demonstrably anticipated research and development, which were made by him prior to the date of this Agreement, or which were developed by him independently during the term of this Agreement and not under the conditions stated in subparagraph (ii) above. 6.3. Documents and Materials. Upon termination of this Agreement or at any other time upon the Company's request, Executive will promptly deliver to the Company, without retaining any copies, all documents and other materials furnished to him by the Company, prepared by him for the Company or otherwise relating to the Company's business, including, without limitation, all written and tangible material in his possession incorporating any Proprietary Information. 6.4. Competitive Employment. During the Employment Term and for a period of two (2) years thereafter (collectively, the "Extended Term"), Executive will not engage in any employment, consulting, or other activity in any business competitive with the Company without the Company's written consent, which consent shall not be unreasonably withheld; provided, however, that nothing in this Section 6.4 shall preclude Executive from serving as a director of any other corporation. 6.5. Non-solicitation. During the Extended Term, Executive will not solicit or encourage, or cause others to solicit or encourage, any employees of the Company to terminate their employment with the Company. 6.6. Acts to Secure Proprietary Rights. 6.6.1. Further Acts. Executive agrees to perform, during and after the Employment Term, all acts deemed necessary or desirable by the Company to permit and assist it, at its expense, in perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company's Inventions. Such acts may include, without limitation, execution of documents and assistance or co-operation in the registration and enforcement of applicable patents and copyrights or other legal proceedings. 6.6.2. Appointment of Attorney-In-Fact. In the event that the Company is unable, for any reason whatsoever, to secure Executive's signature to any lawful and necessary document required to apply for or execute any patent, copyright or other applications with respect to any of the Company's Inventions (including improvements, renewals, extensions, continuations, divisions or continuations in part thereof), Executive hereby irrevocably appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights thereon with the same legal force and effect as if executed by him, intending hereby to create a so-called "durable power" which will survive any subsequent disability. 6.7. No Conflicting Obligations. Executive's performance of this Agreement does not breach and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by him. 6.8. Corporate Opportunities. Executive agrees that he will first present to the Board, for its acceptance or rejection on behalf of the Company, any opportunity to create or invest in any company which is or will be involved in equipping or furnishing airplane cabin interiors, which comes to his attention and in which he, or any affiliate, might desire to participate. If the Board rejects the same or fails to act thereon in a reasonable time, Executive shall be free to invest in, participate or present such opportunity to any other person or entity. 6.9. Specific Performance. Executive acknowledges that a breach of any of the promises or agreements contained herein could result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law, and the Company shall be entitled to seek injunctive relief and/or a decree for specific performance. 7. TERMINATION AND CHANGE OF CONTROL. 7.1 Termination Date/Voluntary Termination Prior to Change of Control. (i) The term "Termination Date" shall mean the date on which the Executive's employment with the Company terminates for any reason prior to the Expiration Date. (ii) If the Executive voluntarily resigns prior to the occurrence of a Change of Control, then the Executive shall receive payment of his unpaid Salary through the Termination Date, the Retirement Compensation shall become due pursuant to Sections 7.6 and 7.7 hereof, and the Severance Pay shall become due pursuant to Section 7.5 hereof. In addition, the Executive and his spouse shall be entitled to a continuation of their medical, dental and health benefits pursuant to the last sentence of Section 5.3 hereof. 7.2. Death. The Executive's employment hereunder shall terminate upon his death. In such event, the Company shall pay to such person as the Executive shall have designated in a notice filed with the Company, or if no such person shall have been designated, to his estate, a lump sum payment equal to the Salary that would have been due to the Executive had this Agreement been in effect from the date of his death until the Expiration Date and the Retirement Compensation as provided in Section 7.6 below, however, in no event will the aggregate amount payable to Executive pursuant to this Section 7.2 (including the amount payable pursuant to Section 7.6 below) be less than twenty (20) times the maximum annual Salary paid Executive during his employment by the Company. 7.3. Incapacity. If in the reasonable judgment of the Board, as a result of Executive's incapacity due to physical or mental illness or otherwise, Executive shall for at least six (6) consecutive months during the term of this Agreement have been unable to perform his duties under this Agreement on a full-time basis, the Company may terminate Executive's employment as provided in this Section 7.3. If the Company desires to so terminate Executive's employment, the Company shall: (i) give prompt notice to Executive of any such termination; and (ii) until the Expiration Date, (a) pay to Executive or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or if no such person shall have been designated, to Executive's estate, two (2) times the highest annual Salary paid to the Executive prior to the Termination Date, (b) continue to provide Executive with the disability insurance and life insurance coverage, in the same amounts and upon the same terms and conditions provided pursuant to Section 5.3 hereof immediately prior to the Termination Date, (c) reimburse the Executive for business expenses in the same manner and to the same extent required pursuant to Section 5.4 hereof prior to the Termination Date, including without limitation the reimbursement of travel expenses and other travel benefits as were afforded to Executive under the Company's Aircraft Travel Policy Authorization and Limitation on Officer Travel as in effect on May 31, 2001, and (d) continue to provide the Executive with the automobile allowance provided pursuant to Section 5.5 hereof immediately prior to the Termination Date. (iii) pay to Executive (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to his estate) the entire Retirement Compensation, or the remaining unpaid balance thereof if payments of such Retirement Compensation have commenced, as provided in Section 7.6 below, however, in no event will the aggregate benefit payable to Executive pursuant to this Section 7.3 (iii) (including the amounts provided in Section 7.6 below) be less than twenty (20) times the maximum annual Salary paid Executive during his employment by the Company; and (iv) continue to provide medical benefits as provided in Section 5.3 above. Any dispute between the Board and Executive with respect to Executive's incapacity shall be settled by reference to a competent medical authority mutually agreed to by the Board and Executive or his personal representative, whose decision shall be binding on all parties. 7.4 Change of Control. (a) If a "Change of Control" of the Company occurs, the Company will be obligated as provided in Sections 7.4 and 7.5 of this Agreement. The Company's obligations under Sections 7.4 and 7.5 of this Agreement are the same whether the Executive's employment with the Company is terminated or continues following a Change of Control. For purposes of determining the Company's obligations under this Section 7.4 and 7.5, the date on which a Change of Control occurs hereinafter is referred to as the "Change of Control Date." If a "Change of Control" occurs during the Employment Term, the Company or its successors in interest shall: (i) within five (5) business days after the Change of Control Date, pay to the Executive, (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, the Executive's estate) a lump sum payment equal to the sum of: (a) the Salary, at the rate in effect on the Change of Control Date, that would have been payable to the Executive through the Expiration Date, (b) the unpaid amount of any bonuses declared to be payable to the Executive for any fiscal periods of the Company ending prior to the Change of Control Date, (c) an amount equal to two (2) times the Salary, determined at the highest rate annualized that was in effect at any time from the 180 day period preceding the Change of Control until the Change of Control Date (the "Highest Salary"), that would have been payable for the period from the Change of Control Date through the Expiration Date, and (d) an amount equal to two (2) times the Executive's Highest Salary, which lump sum shall not be prorated and shall be paid in addition to the Retirement Compensation payable under (ii) of this Section 7.4, the Salary and benefits payable under (iii) of this Section 7.4, and any Severance Pay payable pursuant to Section 7.5 hereof; (ii) within five (5) business days after the Change of Control Date, pay to Executive (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate), in a single lump sum payment, the aggregate amount of Retirement Compensation payable to Executive pursuant to Section 7.6 hereof determined as of the Change of Control Date; provided, however, that if the Change of Control Date is prior to May 28, 2003, the Retirement Compensation shall be determined as if the Executive had continued to be employed by the Company until, and the Change of Control Date occurred on, May 28, 2003; (iii) until the Expiration Date, (a) pay to Executive (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate) two (2) times Executive's Highest Salary, (b) provide Executive with continued life insurance and disability insurance coverage in the same amounts and upon the same terms and conditions as in effect on his Termination Date, or if greater, as those provided immediately prior to the Change of Control, (c) reimburse Executive for business expenses in the same manner and to the same extent required pursuant to Section 5.4 hereof prior to the Termination Date, or if greater, to the extent provided immediately prior to the Change of Control, and (d) continue to provide Executive with the automobile allowance provided pursuant to Section 5.5 hereof as of the Termination Date, or if greater, as provided immediately prior to the Change in Control; (iv) during the balance of the Employment Term and thereafter, continue to provide to Executive and his spouse, for their respective lifetimes, substantially the same medical, dental and health benefits, and on substantially similar terms, as the Executive and his spouse were receiving as of the Termination Date, or if greater, as they were receiving immediately prior to the Change of Control; (v) provide that any stock options granted Executive that would not vest on or prior to the effective date of the Change of Control shall be exercisable immediately upon the execution of any agreement that would constitute a Change in Control (regardless of whether such agreement is consummated), and such stock options shall continue to be exercisable until the later of their expiration date or the date on which shares of the Company are no longer traded as such; (vi) pay to Executive the amount of any Gross-Up Payment payable by the Company to the Executive under Section 7.8 hereof; and (vii) if the Executive's employment terminates after the Change of Control Date for any reason other than death pursuant to Section 7.2 or incapacity pursuant to Section 7.3, for the period from the Executive's actual Termination Date until the 5th anniversary after the date on which the Change of Control occurs, (a) reimburse Executive for the reasonable costs of leasing and operating an office at a location selected by Executive that is outside of the Company's office, including without limitation, the cost of a full-time assistant, and (b) provide Executive with up to 200 hours per year of corporate jet usage consistent with the Company's Aircraft Travel Policy, "Authorization and Limitation on Officer Travel", as in effect on May 31, 2001, or, in the event that the Company does not own or control an aircraft of the type specified in such policy or, at the Company's option, the Company may provide Executive with a quarter share of the same aircraft type specified in such policy under a five year, executive jet part share program. In the event the Company provides Executive with use of its corporate jet, the corporate jet shall be available for use by the Executive given seventy-two hours advance notice by Executive to the Company of his intent to use the aircraft. (b) For purposes of this Agreement, a "Change of Control" means: (i) The entering into of any agreement relating to a transaction or series of related transactions involving the ownership of the Company that requires a shareholder vote for the consummation of such transaction; (ii) Individuals who, as of March 1, 2001 (the "Effective Date") constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided that any person becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (iii) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of 25% or more of either the then outstanding shares of the Company's Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the ownership of a "Controlling Interest") excluding, for this purpose, any acquisitions by (1) the Company or its subsidiaries, (2) any person, entity or "group" that as of the Effective Date owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company or its subsidiaries; or (iv) The sale or other disposition by the Company of 25% or more of the value of its assets to any person or entity that is not controlled by the Company. 7.5 Severance Pay. If the Executive's employment with the Company is terminated for any reason, other than the Executive's death pursuant to Section 7.2 hereof, or the Executive's incapacity pursuant to Section 7.3 hereof, then within five (5) days after the Executive's Termination Date, the Company shall pay to the Executive (or in the event of the Executive's subsequent death, such person as the Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate) a lump sum amount equal to the Executive's annual Salary in effect as of the Termination Date, which lump sum shall not be pro-rated. The obligations of the Company pursuant to this Section 7.5 shall survive any termination of this Agreement or the Executive's employment as aforesaid, and shall be in addition to any amounts payable to the Executive pursuant to Section 7.4 hereof in the event of a Change of Control of the Company. 7.6 Retirement Compensation. (a) Amount of Retirement Compensation. In recognition that Executive will not be eligible for any retirement plan to be offered by the Company to its executives (as provided in Section 5.3 above), Executive shall be entitled to retirement compensation ("Retirement Compensation") equal to the product of (a) 100% times (b) the highest annual Salary paid to the Executive during his employment by the Company multiplied by (c) the number of years of service provided by Executive to the Company, such service having commenced as of August 1, 1987 ("Commencement Date"), with a ratable adjustment should Executive's final period of service be less than a full year. The Retirement Compensation as so determined shall be paid to Executive (or in the event of Executive's subsequent death, to such person as Executive shall have designated in a notice filed with the Company or, if no such person shall have been designated, to his estate, at the times specified in Section 7.6(b)(ii) hereof within five (5) business days after the Termination Date. The amount of the Retirement Compensation so due and payable shall not be present-valued or otherwise reduced by use of any other discount or discounting method. (b) Payment of Retirement Compensation. (i) Within five business days after the date on with the BE Aerospace, Inc. Executive Compensation Trust II dated April 21, 1999, as amended, is terminated (the "Distribution Date", the Company will distribute the amount of Retirement Compensation that would have been payable to the Executive under Section 7.6(a) as of the Distribution Date, based on his years of service through the Distribution Date and his then Highest Annual Salary. (ii) Within five (5) business days after the Executive's actual Termination Date, the Company shall pay to the Executive an amount equal to (x) the Retirement Compensation payable to the Executive as determined in Section 7.6(a)(i) hereof less (y) the sum of (1) the amount of Retirement Compensation previously distributed to the Executive pursuant to Section 7.6(b)(i) and 7.4(a)(ii) hereof, and (2) the amounts previously distributed pursuant to Section 7.6(c)(i) or 7.6(c)(ii), (c) Retirement Trust. (i) Within ninety days after the Distribution Date, the Company shall establish a trust for the duration of the Employment Term, and, commencing on such date and on a quarterly basis thereafter, each a "Contribution Date" the Company shall contribute to the trust (the "Retirement Trust") for the benefit of the Executive an amount equal to (a) Retirement Compensation that would be payable to the Executive under Section 7.6(b)(ii) if the Contribution Date was his Termination Date minus (b) the assets in the Retirement Trust as of the Contribution Date The Retirement Trust to which the Company shall make these contributions shall be irrevocable. The Retirement Trust shall provide that the Executive may withdraw from the Retirement Trust, within the 30 day period beginning on the date on which he receives notice from the Company that the Company has made a contribution pursuant to this Section 7.6(c)(i) an amount up to but not to exceed the amount of that contribution. If and to the extent that the Executive fails to exercise this withdrawal right within the 30 day period, such withdrawal right shall lapse. The Retirement Trust also shall contain such other provisions as the Company and the Executive reasonably agree are necessary in order for the Retirement Trust to qualify as a grantor trust under Section 671 of the Code with the Executive as the grantor. The trust agreement for the Retirement Trust shall provide that any assets remaining in the Retirement Trust, after payment of all the retirement compensation payable pursuant to this Section 7.6, shall be paid to the Executive, and that the Retirement Trust shall be exempt from the claims of the Company's creditors. (ii) As of the last day of each calendar quarter ending on or after the Distribution Date, during the Employment Term, the trustee of the Retirement Trust shall be required to distribute to the Executive 25% of the amount by which (x) the Assumed Taxes that the Company reasonably estimates will be assessed upon the Executive for the calendar year for which the distribution is being made as a result of his beneficial interest in the Retirement Trust, exceeds (y) the amount withdrawn by the Executive in such calendar year pursuant to Section 7.6(i). For this purpose, the term "Assumed Taxes" shall mean the Federal, State and local income taxes that would be payable by the Executive for the year in question, assuming that the amount taxable would be subject to the highest Federal and applicable State and local income taxes. 7.7 Other Retirement Benefits. In the event that the Executive's employment terminates for any reason other than death pursuant to Section 7.2 or incapacity pursuant to Section 7.3, then for the period from the Termination Date until the 5th anniversary after the Termination Date, the Company shall: (a) reimburse Executive for the reasonable costs of leasing and operating an office at a location selected by Executive that is outside of the Company's office, including without limitation, the cost of a full-time assistant, and (b) provide Executive with up to 200 hours per year of corporate jet usage consistent with the Company's Aircraft Travel Policy, "Authorization and Limitation on Officer Travel", as in effect on May 31, 2001, or, in the event that the Company does not own or control an aircraft of the type specified in such policy, or, at the Company's option, the Company may provide the Executive a quarter share of the same aircraft type specified in such policy under a five year, executive jet party share program. In the event the Company provides Executive with use of its corporate jet, the corporate jet shall be available for use by the Executive given seventy-two hours advance notice by Executive to the Company of his intent to use the aircraft. If and to the extent that the Company is required to withhold any amounts for taxes with regard to the foregoing, then the provision of the foregoing benefits shall be conditioned upon the Company and the Executive's making appropriate arrangements to ensure that those withholding requirements are satisfied. 7.8 Certain Additional Payments by the Company. (i) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other action by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (including without limitation any additional payments required under this Section 7.8) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Executive with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make a payment to the Executive (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, the Executive retains (or has had paid to the Internal Revenue Service on his behalf) an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-Up Payment is to be made, and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local. (ii) Subject to the provisions of paragraph (iii) of this Section 7.8, all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7.8, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 7.8 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (iii) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (A) give the Company any information reasonably requested by the Company relating to such claim, (B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (C) cooperate with the Company in good faith in order effectively to contest such claim, and (D) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.8(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (iv) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7.8(iii), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 7.8(iii)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7.8(iii), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 8. WITHHOLDING. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law. 9. INDEMNIFICATION. To the maximum extent permitted under Florida law as from time to time in effect, the Company hereby agrees to indemnify Executive and hold him harmless from, against and in respect of any and all damages, deficiencies, actions, suits, proceedings, demands, assessments, judgments, claims, losses, costs, expenses, obligations and liabilities arising from or related to the performance of this Agreement by Executive. 10. WAIVER. The waiver by any party hereto of a breach of any provision of this Agreement by the other party will not operate or be construed as a waiver of any other or subsequent breach by such other party. 11. SEVERABILITY. If any part of this Agreement is found to be invalid or unenforceable, that part will be deemed amended to achieve as nearly as possible the same economic effect as the original provision, and the remainder of this Agreement will remain in full force and effect. 12. NOTICES. Any notice or other communication in connection with this Agreement shall be deemed to be delivered if in writing, addressed as provided below (or to such other person or address as to which either party may notify the other in accordance with this Section 13) and actually delivered at said address: If to Executive, to him at: Robert J. Khoury 889 Cutler Road Longwood, FL 32779 If to the Company, to it at: BE Aerospace, Inc. 1400 Corporate Center Drive Wellington, Florida 33414 Attention: General Counsel 13. SURVIVAL. The obligations of Executive pursuant to Section 6 hereof and the obligations of the Company pursuant to Section 7 hereof shall each survive any termination or expiration of this Agreement, or any resignation of employment by Executive under Section 7.4 above, as the case may be. 14. MISCELLANEOUS. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous understandings and agreements, whether oral or written, regarding such subject matter. This Agreement may be amended or modified only by a written instrument signed by Executive and by a duly authorized representative of the Company. This Agreement may be executed in any number of counterparts, which together shall constitute one and the same instrument. Except as otherwise provided in Section 10 above, this Agreement shall be governed by and construed in accordance with the laws (other than the conflicts of law rules) of the State of Florida. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, as of the date first above written. EXECUTIVE BE AEROSPACE, INC. ___________________________ By:___________________________ Title:__________________________ By:___________________________ Title:__________________________ EX-3 5 exhibitiii.txt EMPLOYMENT AGREEMENT - THOMAS P. MCCAFFREY EXHIBIT 3 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is made as of September 14, 2001 by and between BE Aerospace, Inc., a Delaware corporation (the "Company"), and Thomas P. McCaffrey (the "Executive"). RECITALS WHEREAS, Executive and the Company entered into that certain Employment Agreement dated as of May 29, 1998 and thereafter amended said Agreement by two amendments (said Employment Agreement and amendments hereinafter collectively the "Employment Agreement"); and WHEREAS, Executive having provided services to the Company since May 1, 1993 agrees to provide services for an additional period as provided herein and the Company wishes to procure such services; and WHEREAS, Executive and the Company wish to further amend and restate the Employment Agreement in its entirety; NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows: 1. Reference to Employment Agreement. The Employment Agreement is hereby restated, superseded and replaced in its entirety by this Agreement. 2. Term. Executive shall provide to the Company services hereunder during the term of this Agreement which, unless otherwise terminated pursuant to the provisions of Article 5 hereof, shall be the period ending three (3) years from any date as of which the term is being determined (the "Employment Term"). The date on which the Employment Term ends, including any extensions thereof, is sometimes hereinafter referred to as the "Expiration Date." 3. Position and Duties. The Executive shall serve the Company in the capacity of Corporate Senior Vice President of Administration and Chief Financial Officer, or in such other position as the Chief Executive Officer of the Company, his designee or the Board of Directors of the Company may designate from time to time, and shall be accountable to, and shall have such other powers, duties and responsibilities, consistent with this capacity, as the Chief Executive Officer of the Company, his designee or the Board of Directors of the Company shall determine. The Executive shall perform and discharge, faithfully, diligently and to the best of his ability, such duties and responsibilities. The Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. 4. Compensation. (a) Salary. Effective as of March 1, 2001, the Executive shall receive an annual salary (the "Salary") payable at the rate of $345,000 per annum. Such rate shall be subject to adjustment from time to time by the Board of Directors as hereinafter provided; provided, however, that it shall at no time be adjusted below the Salary for the preceding year. Commencing March 1, 2002, and of each year thereafter during the Employment Period, the Salary shall be increased by an amount not less than the amount determined by applying to the Salary then in effect the percentage increase in the U.S. Bureau of Labor Statistics Consumer Price Index Revised - Urban Wage Earners and Clerical Workers - National - All Items (1982-84=100) (the "Index") for the twelve month period (March through February) immediately preceding such March 1. If the Index is no longer issued, the Board of Directors and Executive shall agree upon a substitute adjustment index issued by such agency which most reasonable reflects the criteria utilized in the most recent issue of the Index. Except as otherwise provided in this Agreement, the Salary shall be payable biweekly or in accordance with the Company's current payroll practices, less all required deductions. (b) Incentive Bonus. During the Employment Period, the Executive may receive an incentive bonus (the "Bonus") for each fiscal year or portion thereof during which the Executive has been employed hereunder as determined by the Board of Directors of the Company at the end of the applicable fiscal year. (c) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by him on behalf of the Company in accordance with the Company policy. (d) Benefits. Executive shall be entitled to participate in all employee benefit plans, life insurance plans, disability income plans, incentive compensation plans and other benefit plans, other than retirement plans, as may be from time to time in effect for the executives of the Company generally. In accordance with the Company policy, the Executive shall also be entitled to paid vacation in any fiscal year during the Employment period as well as all paid holidays given by the Company to its employees. In addition, Executive and/or his spouse, should she survive him, for a period of up to five (5) years commencing on the Expiration Date, shall be entitled to participate in all medical, dental, and health benefit plans available to the Company's executive officers on similar terms and conditions as any actively employed executive. The preceding sentence shall survive the termination or expiration of this Agreement for any reason. (e) Automobile. During the Employment Period, the Executive shall be furnished with an automobile either owned or leased by the Company or an automobile allowance of $900 per month, at the discretion of the Company. (f) Stock Option Grants. Through the Employment Period the Executive shall be entitled to participate in any applicable option grant program of the Company. 5. Termination and Compensation Thereon. (a) Termination Date. The term "Termination Date" shall mean the date on which the Executive's employment with the Company is terminated for any reason. (b) Death. The Executive's employment hereunder shall terminate upon his death. In such event, the Company shall pay to such person as the Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to his estate, (i) the Retirement Compensation as provided in Section 5(g) below, and (ii)a lump sum payment amount equal to the Salary that would have been due to the Executive had this Agreement been in effect from the date of his death until the Expiration Date. (c) Incapacity. If in the reasonable judgment of the Board of Directors of the Company, as a result of the Executive's incapacity due to physical or mental illness or otherwise, the Executive shall for at least six (6) consecutive months during the term of this Agreement have been unable to perform his duties under this Agreement on a full-time basis, the Company may terminate the Executive's employment as provided in this Section 5(c). If the Company desires to so terminate the Executive, the Company shall: (i) give prompt notice to the Executive of any such termination; (ii) until the Expiration Date, (a) pay to Executive or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate, the highest annual Salary paid to the Executive prior to the Termination Date, (b) continue to provide Executive with the medical, dental, disability and life insurance coverage, in the same amounts and upon the same terms and conditions provided pursuant to Section 4(d) hereof immediately prior to the Termination Date, and (c) continue to provide the Executive with the automobile allowance provided pursuant to Section 4(e) hereof immediately prior to the Termination Date; and (iii) pay to Executive or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person has been designated, to the Executive's estate the Retirement Compensation as provided in Section 5(g) below. (d) Termination by the Company. The Company may terminate the Executive's employment hereunder for "cause". For purposes of this Agreement, "cause" shall mean (i) the Executive's material failure, refusal or neglect to perform and discharge his duties and responsibilities hereunder, other material breach of the terms hereof, or breach of any fiduciary duties he may have because of any position he holds with the Company or any subsidiary or affiliate thereof; or (ii) a felony conviction or a conviction for any crime involving the Executive's personal dishonesty or moral turpitude. If the Executive's employment is terminated pursuant to this Section 5(d), the Company shall have no further obligations to the Executive hereunder after the Termination Date, except for unpaid Salary and benefits accrued through the Termination Date. (e) Change of Control. (i) If a "Change of Control" of the Company occurs, the Company will be obligated as provided in Section 5 of this Agreement. The Company's obligations under Section 5 of this Agreement are the same whether the Executive's employment with the Company is terminated or continues following a Change of Control. For purposes of determining the Company's obligations under this Section 5, the date on which a Change in Control occurs hereafter is referred to as the "Change of Control Date." If a "Change of Control" occurs during the Employment Term, the Company or its successors in interest shall: (a) Within five (5) business days after the Change of Control Date, pay to the Executive, (or in the event of Executive's subsequent death, such person as Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, the Executive's estate) a lump sum payment equal to the sum of: (1) the Salary that would have been payable from the Change of Control Date through the Expiration Date, (2) the unpaid amount of any bonuses declared to be payable to the Executive for any fiscal periods of the Company ending prior to the Change of Control Date, (3) two (2) times the Salary, determined at the highest rate that was in effect at any time from the 180 day period preceding the Change of Control until the Termination Date (the "Highest Salary"), (4) an amount equal to the aggregate amount of Salary, determined based upon the Highest Salary, that would have been payable for the period from the Change of Control Date through the Expiration Date, and (5) by the amount equal to (x) one-half of the Executive's Highest Salary multiplied (y) by the number of months from May 1, 1993 to the Change of Control Date divided by twelve (12), which lump sum shall not be prorated and shall be paid in addition to the Severance Pay payable pursuant to Section 5(f), hereof. (b) during the balance of the Employment Term and thereafter until the Expiration Date, provide Executive with continued life insurance and disability and medical and dental insurance coverage in the same amounts and upon the same terms and conditions as in effect on his Termination Date, or if greater, as those provided immediately prior to the Change of Control, and (d) continue to provide Executive with the automobile allowance provided pursuant to Section 4(e) hereof as of the Termination Date, or if greater, as provided immediately prior to the Change in Control; (c) provide that any stock options granted Executive that would not vest on or prior to the effective date of the Change of Control shall be exercisable immediately upon the execution of any agreement that would constitute a Change in Control (regardless of whether such agreement is consummated), and such stock options shall continue to be exercisable until the later of their expiration date or the date on which shares of the Company are no longer traded as such; and (d) pay Executive the amount of any Gross-Up Payment payable by the Company to the Executive under Section 5(h) hereof. (ii) For purposes of this provision, "Change of Control" means: (a) the entering into of any agreement relating to a transaction or series of related transactions involving the ownership of the Company that requires a shareholder vote for the consummation of such transaction; (b) Individuals who, as of March 1, 2001 (the "Effective Date") constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided that any person becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (c) the acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of 25% or more of either the then outstanding shares of the Company's Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the ownership of a "Controlling Interest") excluding, for this purpose, any acquisitions by (1) the Company or its subsidiaries, (2) any person, entity or "group" that as of the Effective Date owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company or its subsidiaries; or (d) The sale or other disposition by the Company of 25% or more of the value of its assets to any person or entity that is not controlled by the Company. (iii) The obligations of the Company pursuant to this Section 5(e) shall survive any termination of this Agreement or the Executive's employment or any resignation of such employment by the Executive pursuant to this Section 5(e). (f) Severance Pay. If the Executive's employment hereunder is terminated for any reason, other than the Executive's death pursuant to Section 5(b) hereof, or the Executive's incapacity pursuant to Section 5(c) hereof, then within five (5) business days after the Executive's Termination Date, the Company shall pay to the Executive (or in the event of the Executive's subsequent death, such person as the Executive shall have designated in a notice filed with the Company, or, if no such person shall have been designated, to Executive's estate) a lump sum amount equal to the Executive's annual Salary in effect as of the Termination Date, which lump sum shall not be pro-rated. The obligations of the Company pursuant to this Section 5(f) shall survive any termination of this Agreement or the Executive's employment as aforesaid, and shall be in addition to any amounts payable to the Executive pursuant to Section 5(e) hereof in the event of a Change of Control of the Company. (g) Retirement. (i) If the employment of the Executive is terminated for any reason except cause as defined in Section 5(d) above, the Company shall pay to the Executive (or in the event of the Executive's death after such termination, to such person as the Executive has designated in a notice filed with the Company, or if no such person shall have been designated, to his estate), a lump sum amount equal to the amount by which (x) the product of (a) one-half multiplied by the Executive's average annual salary for the three year period preceding the Termination Date times (b) the number of years (including any partial year) since May 1, 1993 (the "Retirement Compensation") exceeds (y) the sum of (a) any amounts previously distributed to the Executive pursuant to Section 5(g)(ii), and (b) any amounts previously distributed pursuant to Sections 5(g)(iii) and 5(g)(iv). The lump sum amount to be paid shall not be present-valued or otherwise reduced by use of any other discount or discounting method. The payment will be made to the Executive within five business days of the Termination Date. (ii) Within five business days after the date on which the BE Aerospace, Inc. Executive Compensation Trust II dated April 21, 1999, as amended is terminated (the "Distribution Date"), the Company will distribute in a lump sum the amount of Retirement Compensation that would have been payable to the Executive under Section 5(g)(i) as of the Distribution Date. (iii) Within ninety days of the Distribution Date, the Company shall establish a trust for the duration of the Employment Term, and, commencing on the Distribution Date and on a quarterly basis, thereafter, each a "Contribution Date" the Company shall contribute to the trust (the "Retirement Trust") for the benefit of the Executive an amount equal to (a) the Retirement Compensation that would be payable to the Executive under Section 5(g)(ii) if the Contribution Date was his Termination Date minus (b) the assets in the Retirement Trust as of the Contribution Date. The Retirement Trust to which the Company shall make these contributions shall be irrevocable. The Retirement Trust shall provide that the Executive may withdraw from the Retirement Trust, within the 30 day period beginning on the date on which he receives notice from the Company that the Company has made a contribution pursuant to this Section 5(g)(iii) an amount up to but not to exceed the amount of that contribution. If and to the extent that the Executive fails to exercise this withdrawal right within the 30 day period, such withdrawal right shall lapse. The Retirement Trust also shall contain such other provisions as the Company and the Executive reasonable agree are necessary in order for the Retirement Trust to qualify as a grantor trust under Section 671 of the Code with the Executive as the grantor. The trust agreement for the Retirement Trust shall provide that any assets remaining in the Retirement Trust, after payment of all the retirement compensation payable pursuant to this Section 5g(iii), shall be payable to the Executive, and that prior to payment of such retirement compensation, the assets of the Retirement Trust shall be exempt from the claims of the Company's creditors. (iv) As of the last day of each calendar quarter ending on or after the Distribution Date, during the Employment Term, the trustee of the Retirement Trust shall be required to distribute to the Executive 25% of the amount of the Assumed Taxes that the Company reasonably estimates will be payable by the Executive for the calendar year for which the distribution is being made as a result of his beneficial interest in the Retirement Trust. For this purpose, the term "Assumed Taxes" shall mean the Federal, State and local income taxes that would be payable by the Executive for the year in question, assuming that the amount taxable would be subject to the highest Federal and applicable State and local income taxes. (v) The obligations of the Company pursuant to this Section 5(g) shall survive any termination of this Agreement or the Executive's employment as aforesaid. (h) Certain Additional Payments by the Company. (i) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other action by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (including without limitation any additional payments required under this Section 5(h)) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Executive with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make a payment to the Executive (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, the Executive retains (or has had paid to the Internal Revenue Service on his behalf) an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes at the at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local. (ii) Subject to the provisions of paragraph (iii) of this Section 5(h) all determinations required to be made under this Section 5(h), including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 5(h), shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 5(h) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (iii) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (A) give the Company any information reasonably requested by the Company relating to such claim, (B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (C) cooperate with the Company in good faith in order effectively to contest such claim, and (D) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5(h)(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (iv) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5(h)(iii), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 5(h)(iii)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5(h)(iii), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 6. Amendments. No amendment to this Agreement or any schedule hereto shall be effective unless it shall be in writing and signed by each party hereto. 7. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or sent by telecopy or three days after being mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Company, to it at: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, FL 33414 Attention: President with a copy to: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, FL 33414 Attention: General Counsel If to the Executive, to him at: 2126 Henley Place Wellington, FL 33414 8. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties. 9. Miscellaneous. (a) Enforceability. The invalidity and unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts which together shall constitute one instrument and shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of the State of Florida. (b) Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. This Agreement may be assigned by the Company. Executive may not assign or delegate Executive's duties under this Agreement without the Company's prior written approval. IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above. EXECUTIVE ____________________________________ Thomas P. McCaffrey BE AEROSPACE, INC. ____________________________________ Robert J. Khoury President and Chief Executive Officer EX-4 6 credit.txt CREDIT AGREEMENT EXHIBIT 4 CREDIT AGREEMENT dated as of August 21, 2001 between BE AEROSPACE, INC. The LENDERS Party Hereto J.P. MORGAN SECURITIES INC., as Lead Arranger and Bookrunner and THE CHASE MANHATTAN BANK, as Administrative Agent $150,000,000 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms...................................................1 SECTION 1.02. Classification of Loans and Borrowings.........................22 SECTION 1.03. Terms Generally................................................23 SECTION 1.04. Accounting Terms and Determinations............................23 ARTICLE II THE CREDITS SECTION 2.01. The Commitments................................................24 SECTION 2.02. Loans and Borrowings...........................................26 SECTION 2.03. Requests for Borrowings........................................26 SECTION 2.04. Letters of Credit..............................................28 SECTION 2.05. Funding of Borrowings..........................................32 SECTION 2.06. Interest Elections.............................................33 SECTION 2.07. Termination and Reduction of the Commitments...................35 SECTION 2.08. Repayment of Loans; Evidence of Debt...........................35 SECTION 2.09. Prepayment of Loans............................................37 SECTION 2.10. Fees. ........................................................39 SECTION 2.11. Interest.......................................................41 SECTION 2.12. Alternate Rate of Interest.....................................42 SECTION 2.13. Increased Costs................................................42 SECTION 2.14. Break Funding Payments.........................................43 SECTION 2.15. Taxes. 44 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs . .46 SECTION 2.17. Mitigation Obligations; Replacement of Lenders.................48 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers...........................................49 SECTION 3.02. Authorization; Enforceability..................................49 SECTION 3.03. Governmental Approvals; No Conflicts...........................50 SECTION 3.04. Financial Condition; No Material Adverse Change................50 SECTION 3.05. Properties.....................................................51 SECTION 3.06. Litigation and Environmental Matters...........................51 SECTION 3.07. Compliance with Laws...........................................53 SECTION 3.08. Investment and Holding Company Status..........................53 SECTION 3.09. Taxes ........................................................53 SECTION 3.10. ERISA ........................................................54 SECTION 3.11. Disclosure.....................................................54 SECTION 3.12. Use of Credit..................................................54 SECTION 3.13. Material Agreements and Liens..................................55 SECTION 3.14. Subsidiaries and Investments...................................55 SECTION 3.15. Capitalization.................................................56 ARTICLE IV CONDITIONS SECTION 4.01. Effective Date.................................................56 SECTION 4.02. Each Credit Event..............................................58 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements and Other Information.....................59 SECTION 5.02. Notices of Material Events.....................................61 SECTION 5.03. Existence; Conduct of Business; Etc............................62 SECTION 5.04. Insurance......................................................63 SECTION 5.05. Use of Proceeds and Letters of Credit..........................63 SECTION 5.06. Certain Obligations Respecting Subsidiaries....................63 SECTION 5.07. Environmental Matters..........................................65 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness...................................................66 SECTION 6.02. Liens ........................................................67 SECTION 6.03. Fundamental Changes............................................69 SECTION 6.04. Lines of Business..............................................69 SECTION 6.05. Investments....................................................70 SECTION 6.06. Restricted Payments............................................71 SECTION 6.07. Transactions with Affiliates...................................71 SECTION 6.08. Certain Financial Covenants....................................72 SECTION 6.09. Modifications of Certain Documents.............................74 SECTION 6.10. Redemption of Senior Subordinated Indebtedness.................74 ARTICLE VII EVENTS OF DEFAULT..............................................74 ARTICLE VIII THE ADMINISTRATIVE AGENT.......................................78 ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices........................................................80 SECTION 9.02. Waivers; Amendments............................................81 SECTION 9.03. Expenses; Indemnity; Damage Waiver.............................83 SECTION 9.04. Successors and Assigns.........................................85 SECTION 9.05. Survival.......................................................88 SECTION 9.06. Counterparts; Integration; Effectiveness.......................89 SECTION 9.07. Severability...................................................89 SECTION 9.08. Right of Setoff................................................89 SECTION 9.09. Governing Law; Jurisdiction; Etc...............................90 SECTION 9.10. WAIVER OF JURY TRIAL...........................................90 SECTION 9.11. Headings.......................................................91 SECTION 9.12. Treatment of Certain Information; Confidentiality..............91 SCHEDULE I - Commitments SCHEDULE II - Hazardous Materials SCHEDULE III - Material Agreements and Liens SCHEDULE IV - Subsidiaries and Investments SCHEDULE V - Approvals and Compliance SCHEDULE VI - Taxes SCHEDULE VII - Transactions with Affiliates EXHIBIT A - Form of Assignment and Acceptance EXHIBIT B - Form of Security Agreement EXHIBIT C - Form of Opinion of Counsel to the Borrower EXHIBIT D - Form of Opinion of In-House Counsel to the Borrower EXHIBIT E - Form of Opinion of Special New York Counsel to Chase CREDIT AGREEMENT dated as of August 21, 2001, between BE AEROSPACE, INC., the LENDERS party hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent. The Borrower (as hereinafter defined) has requested that the Lenders (as so defined) extend credit (by means of loans and letters of credit) to it in an aggregate principal or face amount not exceeding $150,000,000 (which amount may, in the circumstances hereinafter provided, be increased to $300,000,000) at any one time outstanding. The Lenders are prepared to extend such credit upon the terms and conditions hereof, and, accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" means any transaction, or any series of related transactions, by which the Borrower and/or any of its Subsidiaries (a) acquires any ongoing business or all or substantially all of the assets of any Person, whether through purchase of assets, merger or otherwise, (b) directly or indirectly acquires control of at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors or (c) directly or indirectly acquires control of a majority ownership interest in any partnership, joint venture or similar arrangement. The terms "Acquire" and "Acquired" used as a verb shall have a correlative meaning. "Adjusted LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period. "Adjusted Net Worth" means, as at any date, the sum (determined on a consolidated basis without duplication in accordance with GAAP) of (a) total stockholders' equity of the Borrower and its Subsidiaries plus (b) the aggregate amount of Restricted Payments made since May 26, 2001 in respect of the purchase, redemption, retirement or other acquisition of any shares of any class of stock of the Borrower permitted under Section 6.06 plus (c) the fair market value of any shares of capital stock of the Borrower (determined as of the date such shares are issued) issued after May 26, 2001 which are utilized in any business combination accounted for using pooling of interest accounting plus (d) the aggregate after-tax amount (calculated using the then effective corporate Federal tax rate, regardless of the after-tax amount determined in accordance with GAAP) of any non-recurring non-cash write-offs of intangible assets since May 26, 2001, of which the portion thereof not effected under Statement of Financial Accounting Standards No. 142 shall not exceed $50,000,000 plus (e) the amount of any purchased research and development and related acquisition costs of a target company to the extent such costs are or have been expensed after May 26, 2001 plus (f) the aggregate amount of any nonrecurring costs associated with any Acquisition and incurred at the time thereof plus (g) the aggregate amount of foreign currency translation losses (or minus the aggregate amount of foreign currency translation gains) carried on the balance sheet of the Borrower and its Subsidiaries at said date plus (h) any write-off of the note and receivable due from Thomson-CSF Sextant, Inc. related to the Borrower's sale of the In-Flight Entertainment line of business in an amount not to exceed $15,000,000. "Administrative Agent" means Chase, in its capacity as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means any Person that directly or indirectly controls, or is under common control with, or is controlled by, the Borrower and, if such Person is an individual, any member of the immediate family (including parents, spouse, children and siblings) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person that owns directly or indirectly securities having 5% or more of the voting power for the election of directors or other governing body of a corporation or 5% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by reason of his or her being a director, officer or employee of the Borrower or any of its Subsidiaries and (b) none of the Subsidiaries of the Borrower shall be Affiliates. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate for such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be. "Applicable Percentage" means, (a) with respect to any Revolving Credit Lender for purposes of Section 2.04 or in respect of any indemnity claim under Section 9.03(c) arising out of an action or omission of the Issuing Lender under this Agreement, the percentage of the total Revolving Credit Commitments represented by such Revolving Credit Lender's Revolving Credit Commitment and (b) with respect to any Lender for purposes of Section 2.04 or in respect of any indemnity claim under Section 9.03(c) arising out of an action or omission of the Administrative Agent under this Agreement, the percentage of the total Commitments or Loans of all Classes hereunder represented by aggregate amount of such Lender's Commitment or Loans of all Classes hereunder. If the Revolving Credit Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, for any Type of Revolving Credit Loans, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurodollar Spread or "Commitment Fee Rate", respectively, based upon the Leverage Ratio as of the most recent determination date:
===================================== ========================== ========================== ======================== Leverage Ratio: ABR Eurodollar Commitment --------------- Spread Spread Fee Rate ------------------------------------- -------------------------- -------------------------- ------------------------ Category 1 0.25% 1.25% 0.300% ---------- Less than 4.00 to 1 ------------------------------------- -------------------------- -------------------------- ------------------------ Category 2 0.50% 1.50% 0.375% ---------- Less than 4.50 to 1, but greater than or equal to 4.00 to 1 ------------------------------------- -------------------------- -------------------------- ------------------------ Category 3 1.00% 2.00% 0.500% ---------- Less than 5.00 to 1, but greater than or equal to 4.50 to 1 ------------------------------------- -------------------------- -------------------------- ------------------------ Category 4 1.50% 2.50% 0.500% ---------- Greater than or equal to 5.00 to 1 ===================================== ========================== ========================== ========================
For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Borrower's fiscal year based upon the Borrower's consolidated financial statements delivered pursuant to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date three Business Days after delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 4 (A) at any time that an Event of Default has occurred and is continuing and (B) if the Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a), (b) or (f), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered. Notwithstanding the foregoing, the "Applicable Rate" for any Series of Incremental Loans shall be the respective rates as shall be agreed upon at the time Incremental Loan Commitments of such Series are established; provided that, if the Applicable Rate for either Type of any Series of Incremental Loans shall be greater than .50% above the Applicable Rate for such Type of Revolving Credit Loans for any Category of Leverage Ratio set forth above, the Applicable Rate for such Type of Revolving Credit Loans shall be automatically adjusted upwards on the date upon which the Incremental Loan Commitments of such Series are established pursuant to Section 2.01(b) so that the Applicable Rate for such Type of such Series of Incremental Loans is .50% above such Applicable Rate for such Type of Revolving Credit Loans. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Bankruptcy Code" means the Federal Bankruptcy Code of 1978, as amended from time to time. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means BE Aerospace, Inc., a Delaware corporation. -------- "Borrowing" means (a) all ABR Loans made, converted or continued on the same date or (b) all Eurodollar Loans that have the same Interest Period. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.03. "Business Day" means any day (a) that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed and (b) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a continuation or conversion of or into, or the Interest Period for, a Eurodollar Borrowing, or to a notice by the Borrower with respect to any such borrowing, payment, prepayment, continuation, conversion, or Interest Period, that is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "Calculation Period" means, as at any date, the period of four consecutive complete fiscal quarters of the Borrower ending on or most recently ended prior to such date for which financial statements have been delivered pursuant to Sections 3.04(a), 5.01(a), 5.01(b) or 5.01(f). "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Casualty Event" means, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "CFC" means any entity that is a controlled foreign corporation under Section 957 of the Code (or any successor provision thereof). "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender's or the Issuing Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Chase" means The Chase Manhattan Bank. ----- "Class", when used in reference to any Loan, Borrowing or Commitment, refers to whether such Loan, the Loans comprising such Borrowing or the Loans that a Lender holding such Commitment is obligated to make, are Revolving Credit Loans or Incremental Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral Account" has the meaning assigned to such term in Section 4(a) of the Security Agreement. "Commitments" means the Revolving Credit Commitments and the Incremental Loan Commitments (if any), as applicable. "Commitment Termination Date" means August 21, 2006; provided that if such day is not a Business Day, the Commitment Termination Date shall be the immediately preceding Business Day. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disposition" means any sale, assignment, transfer or other disposition of any Property (whether now owned or hereafter acquired and including any real property sold as part of a sale-leaseback transaction) by the Borrower or any of its Subsidiaries to any Person excluding any sale, assignment, transfer or other disposition of inventory in the ordinary course of business and on ordinary business terms; provided that the term "Disposition" shall not include (i) any Equity Issuance (as such term is defined in this Section 1.01 without giving effect to the proviso therein), (ii) any sale, assignment, transfer or other disposition of Property by any Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the Borrower, in each case for consideration that is not in excess of the fair market value of such Property as determined in good faith by the chief financial officer of the Borrower, (iii) any sale, assignment, transfer or other disposition of Property by the Borrower or any Subsidiary of the Borrower to a Minority-Owned Entity, subject to the proviso in Section 6.05(h) or (iv) any sale, transfer or other disposition of any shares of stock of Advanced Thermal Sciences Corporation in connection with an initial public offering of such shares of stock. The creation of any Lien on any Property permitted under Section 6.02 shall not constitute a "Disposition" of such Property. The term "Dispose" shall have a correlative meaning. "Dollars" or "$" refers to lawful money of the United States of America. "Domestic Subsidiary" means any Subsidiary of the Borrower that is incorporated under the law of any State of the United States of America. "EBITDA" means, for any period, net operating earnings for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), calculated before depreciation and amortization expense, non-recurring non-cash write-offs of assets (to the extent deducted in computing net operating earnings), non-recurring costs associated with any Acquisition and incurred at the time thereof, Interest Expense, taxes, extraordinary and unusual items and all other non-cash charges for such period. For purposes of determining the Interest Coverage Ratio for any Calculation Period, or the Leverage Ratio as at any date, EBITDA shall be determined on a pro forma basis giving effect to any Acquisition or Disposition in the manner provided in the definition of the terms "Interest Coverage Ratio" and "Leverage Ratio" in this Section 1.01. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Claim" means, with respect to any Person, (a) any written notice, claim, demand or other communication (collectively, a "claim") by any other Person alleging or asserting such Person's liability for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" includes, without limitation, any written claim by any governmental authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any written claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" means any and all present and future Federal, state, local and foreign laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of human health, safety or the environment or to emissions, discharges, Releases or threatened Releases of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes into the indoor or outdoor environment, including, without limitation, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes. "Equity Issuance" means (a) any issuance or sale by the Borrower or any of its Subsidiaries after the date hereof of (i) any capital stock, (ii) any warrants or options exercisable in respect of capital stock (other than any warrants or options issued to directors, officers, employees, agents, consultants or advisors of the Borrower or any of its Subsidiaries and any capital stock of the Borrower issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in the issuing or selling Person or (b) the receipt by the Borrower or any of its Subsidiaries after May 26, 2001 of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided that Equity Issuance shall not include (w) any sale, transfer or other disposition of any shares of stock of Advanced Thermal Sciences Corporation in connection with an initial public offering of such shares of stock, (x) any such issuance or sale by any Subsidiary of the Borrower to the Borrower or any Wholly Owned Subsidiary of the Borrower, (y) any capital contribution by the Borrower or any Wholly Owned Subsidiary of the Borrower to any Subsidiary of the Borrower or (z) any such issuance or sale by the Borrower in connection with a permitted Acquisition under Section 6.03(c). "Equity Rights" means, with respect to any Person, any outstanding subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or outstanding securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article VII. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its overall gross or overall net income or overall receipts by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) any Taxes that would not have been imposed but for the activities of the recipient in the jurisdiction imposing such Tax other than the execution or delivery of the Loan Documents or otherwise as a result of participating in the transactions contemplated by the Loan Documents and (d) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any Tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability (other than as a result of a Change in Law) to comply with Section 2.15(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Tax pursuant to Section 2.15. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fiscal Date" means the last day of each fiscal quarterly period of the Borrower. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Funded Debt" means, for any Person: (a) all Indebtedness of such Person that should be reflected on a balance sheet of such Person in accordance with GAAP, (b) all Indebtedness of any other Person that should be reflected on a balance sheet of such other Person in accordance with GAAP and that is secured by a Lien on the Property of, is supported by a letter of credit issued for account of, or is Guaranteed by, such Person and (c) in respect of the Borrower, the amount of any Letters of Credit. "GAAP" means generally accepted accounting principles in the United States of America. "GE Lease Agreement" means the Master Lease Agreement dated as of October 20, 1997 between the Borrower and General Electric Capital Corporation, for itself and as Agent for Certain Participants, as amended. "Governmental Authority" means the government of the United States of America, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" means a guarantee, an endorsement, a contingent agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, other obligations, net worth, working capital or earnings of any Person, or a guarantee of the payment of dividends or other distributions upon the stock or equity interests of any Person, or an agreement to purchase, sell or lease (as lessee or lessor) Property, products, materials, supplies or services primarily for the purpose of enabling a debtor to make payment of such debtor's obligations or an agreement to assure a creditor against loss, and including, without limitation, causing a bank or other financial institution to issue a letter of credit or other similar instrument for the benefit of another Person, but excluding endorsements for collection or deposit in the ordinary course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a correlative meaning. "Hazardous Material" means, collectively, (a) any petroleum or petroleum products, flammable explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or substances which are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Incremental Loan" has the meaning assigned to such term in Section 2.01(b). "Incremental Loan Commitment" means, with respect to each Incremental Loan Lender, and for any Series thereof, the commitment of such Incremental Loan Lender to make Incremental Loans of such Series, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 or 2.09(b) and (b) reduced or increased from time to time pursuant to assignments by or to such Incremental Loan Lender pursuant to Section 9.04. The aggregate amount of the Incremental Loan Commitments of all Series shall not exceed $150,000,000. "Incremental Loan Lenders" means, in respect of any Series of Incremental Loans, (a) initially, the Lenders (or such other financial institutions) whose offers to make Incremental Loans of such Series shall have been accepted by the Borrower in accordance with the provisions of Section 2.01(b) and (b) thereafter, the Lenders (or such other financial institutions) from time to time holding Incremental Loans of such Series and/or Incremental Loan Commitments of such Series after giving effect to any assignments thereof permitted by Section 9.04. "Indebtedness" means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; and (f) Indebtedness of others Guaranteed by such Person. "Indemnified Taxes" means Taxes other than Excluded Taxes. ----------------- "Information Memorandum" means the Confidential Information Memorandum dated July, 2001 distributed to the Lenders in connection with the syndication of the Commitments hereunder. "Interest Coverage Ratio" means, as at any date the ratio of (i) EBITDA for the Calculation Period ending on or most recently ended prior to such date to (ii) Interest Expense for such Calculation Period; provided that, from and after the date of any Acquisition or Disposition until four full fiscal quarters of the Borrower have elapsed since the date of such Acquisition or Disposition, the Interest Coverage Ratio shall be calculated on a pro forma basis (reflecting, inter alia, in the case of any Acquisition, any amount attributable to any operating expense that will be eliminated or cost reduction that will be realized (in each case, net of any operating expense or other cost increase) in connection with such Acquisition, as determined in good faith by the chief financial officer of the Borrower in accordance with GAAP and the rules, regulations and guidelines of the Securities and Exchange Commission, as if such elimination of operating expense or the realization of such cost reductions were achieved at the beginning of such four-quarter period) as though such Acquisition or Disposition had occurred, and any Funded Debt incurred, assumed or repaid by the Borrower or any of its Subsidiaries in connection with, or in anticipation of, such Acquisition or Disposition had been incurred, assumed or repaid (as applicable), on the first day of such Calculation Period. "Interest Election Request" means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.06. "Interest Expense" means, for any period, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness (including the interest component of any payments in respect of Capital Lease Obligations) accrued or capitalized during such period (whether or not actually paid during such period) plus (b) the net amount payable (or minus the net amount receivable) under Interest Rate Protection Agreements relating to interest during such period (whether or not actually paid or received during such period) minus (c) interest income during such period. "Interest Payment Date" means (a) with respect to any ABR Loan, each Quarterly Date and (b) with respect to any Eurodollar Loan, the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period. "Interest Period" means, for any Eurodollar Loan or Borrowing, the period commencing on the date of such Loan or Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as specified in the applicable Borrowing Request or Interest Election Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan, and the date of a Borrowing comprising Loans that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Loans. Notwithstanding the foregoing, if any Interest Period for any Revolving Credit Borrowing would otherwise end after the Commitment Termination Date, such Interest Period shall end on the Commitment Termination Date. "Interest Rate Protection Agreement" means, for any Person, an interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more financial institutions providing for the transfer or mitigation of interest risks either generally or under specific contingencies. For purposes hereof, the "credit exposure" at any time of any Person under an Interest Rate Protection Agreement to which such Person is a party shall be determined at such time in accordance with the standard methods of calculating credit exposure under similar arrangements as prescribed from time to time by the Administrative Agent, taking into account potential interest rate movements and the respective termination provisions and notional principal amount and term of such Interest Rate Protection Agreement. "Investment" means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of, or capital contribution to, any other Person or any agreement to make any such acquisition or capital contribution (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding 90 days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the entering into of any Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Interest Rate Protection Agreement. "Issuing Lender" means The Chase Manhattan Bank, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.04(j). "LC Disbursement" means a payment made by the Issuing Lender pursuant to a Letter of Credit. "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Credit Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. "Lender Affiliate" means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Lenders" means, collectively, (a) the Persons listed on Schedule I, (b) the Incremental Loan Lenders (if any) and (c) any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "Letter of Credit" means any letter of credit issued pursuant to this Agreement. "Letter of Credit Documents" means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time. "Leverage Ratio" means, as at any date, the ratio of Total Adjusted Funded Debt at such date to EBITDA for the relevant Calculation Period; provided that, from and after the date of any Acquisition or Disposition until four full fiscal quarters of the Borrower shall have elapsed since the date of such Acquisition or Disposition, the Leverage Ratio shall be calculated on a pro forma basis (reflecting, inter alia, in the case of any Acquisition, any amount attributable to any operating expense that will be eliminated or cost reduction that will be realized (in each case, net of any operating expense or other cost increase) in connection with such Acquisition, as determined in good faith by the chief financial officer of the Borrower in accordance with GAAP and the rules, regulations and guidelines of the Securities and Exchange Commission, as if such elimination of operating expense or the realization of such cost reductions were achieved at the beginning of such four-quarter period) as though such Acquisition or Disposition had occurred, any Funded Debt incurred, assumed or repaid by the Borrower or any of its Subsidiaries in connection with, or in anticipation of, such Acquisition or Disposition had been incurred, assumed or repaid (as applicable), on the first day of such Calculation Period. "LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for the offering of Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the LIBO Rate for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any Property, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this Agreement and the other Loan Documents, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property. "Loan Documents" means, collectively, this Agreement, the Letter of Credit Documents and the Security Documents. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Margin Stock" means "margin stock" within the meaning of Regulations T, U and X of the Board. "Material Adverse Effect" means a material adverse effect on (a) the Property, business, operations, financial condition, prospects, liabilities or capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower to perform its obligations under any of the Loan Documents to which it is a party, (c) the validity or enforceability of any of the Loan Documents, (d) the rights and remedies of the Lenders and the Administrative Agent under any of the Loan Documents or (e) the timely payment of the principal of or interest on the Loans or the LC Exposure or other amounts payable in connection therewith. "Material Subsidiary" shall mean at any date any Subsidiary of the Borrower whose total assets equal or exceed 2% of the total assets of the Borrower and its Subsidiaries on a consolidated basis as at the most recent Fiscal Date; provided that, notwithstanding the above, each of B/E Aerospace Services, Inc. and Royal Inventum B.V. shall at all times constitute a Material Subsidiary of the Borrower so long as it is a Subsidiary of the Borrower. "Moody's" means Moody's Investors Service, Inc. ----- - "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Available Proceeds" means: ---------------------- (i) in the case of any Disposition, the amount of Net Cash Payments received in connection with such Disposition; and (ii) in the case of any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by the Borrower and its Subsidiaries in respect of such Casualty Event net of (A) reasonable expenses incurred by the Borrower and its Subsidiaries in connection therewith and (B) contractually required repayments of Indebtedness to the extent secured by a Lien on such Property and any income and transfer taxes payable by the Borrower or any of its Subsidiaries in respect of such Casualty Event. "Net Cash Payments" means, with respect to any Disposition, the aggregate amount of all cash payments, and the fair market value of any non-cash consideration, received by the Borrower and its Subsidiaries directly or indirectly in connection with such Disposition; provided that (a) Net Cash Payments shall be net of (i) the amount of any legal, accounting and other professional fees, title and recording tax expenses, commissions and other fees and expenses paid by the Borrower and its Subsidiaries in connection with such Disposition and (ii) any Federal, state and local income or other taxes estimated to be payable by the Borrower and its Subsidiaries as a result of such Disposition (but only to the extent that such estimated taxes are in fact paid to the relevant Federal, state or local governmental authority by the relevant due date for payment of such taxes (or the date such payments must be made in order to avoid interest or penalties with respect thereto) or the Borrower or any of its Subsidiaries uses any applicable tax benefit available to it as set forth on its balance sheet to reduce such estimated taxes payable by such date), (b) Net Cash Payments shall not include any cash payments of less than $100,000 from any one Disposition or a series of related Dispositions, and (c) Net Cash Payments shall be net of any repayments by the Borrower or any of its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured by a Lien on the Property that is the subject of such Disposition and (ii) the transferee of (or holder of a Lien on) such Property requires that such Indebtedness be repaid as a condition to the purchase of such Property. "Other Taxes" means any and all present or future stamp or documentary taxes or any excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Investments" means any Investment in (i) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America, or of any agency thereof; (ii) commercial paper rated at least A-1 by S&P or P-1 by Moody's; (iii) time deposits with, including certificates of deposit issued by, any office located in the United States of America of any bank or trust company which is organized under the laws of the United States of America or any state thereof and has capital, surplus and undivided profits aggregating at least $1,000,000,000; (iv) shares of any money market or mutual fund not less than 80% of the assets of which are invested solely in securities or obligations of the type described in clauses (i) through (iii) above and (v) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above, provided in each case that such Investment matures within one year from the date of acquisition thereof by the Borrower or a Subsidiary of the Borrower. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Property" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Proposed Sale/Leasebacks" means (i) the sale/leaseback with LaSalle National Leasing Corporation with respect to pallot poll machinery equipment in an amount of approximately $2,800,000 and (ii) the sale/leaseback with GE Capital with respect to a Challenger re-completion kit and aircraft capital improvements in an amount of approximately $3,900,000. "Quarterly Dates" means the last Business Day of March, June, September and December in each year, the first of which shall be the first such day after the date hereof. "Recapture Period" shall mean each period (a) commencing on the later of (i) the Effective Date and (ii) the day immediately following the last day of the immediately preceding Recapture Period, and (b) ending on the date on which the Borrower and/or its Subsidiaries receives Net Available Proceeds which, together with all Net Available Proceeds received since the first day of such Recapture Period, equal or exceeds in the aggregate $1,000,000. "Register" has the meaning set forth in Section 9.04. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata. The terms "Release" and "Released" used as a verb shall have a correlative meaning. "Required Lenders" means, at any time, Lenders having Loans, LC Exposure and unused Commitments representing at least a majority of the sum of the total Loans, LC Exposure and unused Commitments at such time. References herein to the "Required Revolving Credit Lenders", and "Required Incremental Loan Lenders" of any Series, shall refer to the Lenders of such Class holding at least a majority of the sum of the total Loans, LC Exposure (if applicable) and unused Commitments of such Class at such time. "Restricted Payment" means, with respect to any Person, (a) dividends (in cash, Property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any shares of any class of stock, including, without limitation, preferred stock, of such Person or of any warrants (other than of shares of common stock, warrants or options of such Person as payment for the exercise price of options or warrants to purchase common stock of such Person having a fair market value equal to such exercise price), options or other rights to acquire the same (or to make any payments to any other Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market or equity value of such Person or any of its Subsidiaries), but excluding dividends payable solely in shares of common stock or in options, warrants or other rights to purchase such common stock of such Person or (b) any payment (whether made by such Person or any of its Subsidiaries) on account of the purchase, redemption, prepayment, defeasance or other acquisition or retirement of value of any Indebtedness (such Indebtedness, "Retired Indebtedness") that is subordinated in right of payment to the prior payment of the Loans, except any such payment made from the proceeds of (x) the issuance of any equity securities or (y) any additional unsecured Indebtedness that does not rank senior in right of payment to, and does not mature or have any mandatory prepayment, which does not include required prepayments as a result of a change of control or asset sale, prior to the maturity of, such Retired Indebtedness. "Revolving Credit Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Commitment Termination Date and the date of termination of the Revolving Credit Commitments. "Revolving Credit Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Credit Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 or 2.09(b) and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Revolving Credit Commitment is set forth on Schedule I, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Credit Commitment, as applicable. The initial aggregate amount of the Lenders' Revolving Credit Commitments is $150,000,000. "Revolving Credit Exposure" means, with respect to any Revolving Credit Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Credit Loans and its LC Exposure at such time. "Revolving Credit Lender" means (a) initially, a Lender that has a Revolving Credit Commitment set forth opposite its name on Schedule I and (b) thereafter, the Lenders from time to time holding Revolving Credit Loans and Revolving Credit Commitments, after giving effect to any assignments thereof permitted by Section 9.04. "Revolving Credit Loan" means a Loan made pursuant to Section 2.01(a) that utilizes the Revolving Credit Commitment. "S&P" means Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc. "Security Agreement" means a Security Agreement substantially in the form of Exhibit B between the Borrower and the Administrative Agent, as the same shall be modified and supplemented and in effect from time to time. "Security Documents" means, collectively, the Security Agreement, any security document executed and delivered pursuant to Section 5.06(a), all Uniform Commercial Code financing statements required by the Security Agreement or any such security document and any other agreement or instrument executed by the Borrower that creates or purports to create a Lien in favor of the Administrative Agent for the benefit of the Lenders. "Senior Subordinated Indentures" means, collectively, the Senior Subordinated 1998 Indentures and the Senior Subordinated 2001 Indenture. "Senior Subordinated 1998 Indentures" means, collectively, (a) the Indenture dated as of February 13, 1998 between the Borrower and The Bank of New York as Trustee, and (b) the Indenture dated as of November 2, 1998 between the Borrower and The Bank of New York, as Trustee, as such Indentures shall be modified and supplemented and in effect from time to time. "Senior Subordinated 2001 Indenture" means the Indenture dated as of April 17, 2001 between the Borrower and The Bank of New York, as Trustee, as the same shall be modified and supplemented and in effect from time to time. "Series" has the meaning assigned to such term in Section 2.01(b). "Statutory Reserve Rate" means, for the Interest Period for any Eurodollar Borrowing, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the arithmetic mean, taken over each day in such Interest Period, of the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subsidiary" means, for any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. "Wholly Owned Subsidiary" means any such corporation, partnership or other entity of which all of the equity securities or other ownership interests (other than, in the case of a corporation, directors' qualifying shares) are so owned or controlled. "Synthetic Purchase Agreement" means any swap, derivative or other agreement or combination of agreements pursuant to which the Borrower or a Subsidiary is or may become obligated to make (i) any payment in connection with a purchase by any third party from a Person other than the Borrower or a Subsidiary of Indebtedness issued pursuant to the Senior Subordinated Indentures or (ii) any payment (other than on account of a permitted purchase by it of such Indebtedness) the amount of which is determined by reference to the price or value at any time of such Indebtedness; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Total Adjusted Funded Debt" means, as at any date, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of all Funded Debt minus the aggregate amount, if any, of cash and cash equivalents held by the Borrower and its Subsidiaries as at such date in excess of $35,000,000. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans constituting such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Credit Loan" or "Incremental Loan") or by Type (e.g., a "Base Rate Loan", or a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Credit Loan" or a "Base Rate Revolving Credit Loan"); each Series of Incremental Loans shall be deemed a separate Class of Loans hereunder. In similar fashion, (i) Borrowings may be classified and referred to by Class, by Type and by Class and Type, and (ii) Commitments may be classified and referred to by Class; each Series of Incremental Loan Borrowings and Incremental Loan Commitments shall be deemed a separate Borrowing and Commitment hereunder. SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms and Determinations. ----------------------------------- (a) Accounting Generally. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof in the manner described in subsection (b) below) be prepared, in accordance with generally accepted accounting principles applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Lenders hereunder (which, prior to the delivery of the first financial statements under Section 8.01, shall mean the audited financial statements as at February 24, 2001 referred to in Section 3.04). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of generally accepted accounting principles applied on a basis consistent with those used in the preparation of the latest annual or quarterly financial statements furnished to the Lenders pursuant to Section 5.01 (or, prior to the delivery of the first financial statements under Section 5.01, used in the preparation of the audited financial statements as at February 24, 2001, referred to in Section 3.04) unless (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01, shall mean the audited financial statements as at February 28, 2001 referred to in Section 3.04). (b) Statements of Accounting Variations. The Borrower shall deliver to the Lenders at the same time as the delivery of any annual or quarterly financial statement under Section 5.01 (i) a description in reasonable detail of any material variation between the application of accounting principles employed in the preparation of such statement and the application of accounting principles employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the last sentence of subsection (a) above and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. (c) Changes in Fiscal Periods. To enable the ready and consistent determination of compliance with the covenants set forth in Article VI, the fiscal year of the Borrower shall end on the last Saturday in February of each year, and the last days of the first three fiscal quarters shall fall on the last Saturday in each of May, August and November of each year, respectively, provided that the Borrower may change its fiscal year to end on December 31 in each year, and each of the first three fiscal quarters to end on the last day of March, June and September in each year, so long as the Borrower shall give the Lenders notice thereof at least 30 days prior to the date upon which such change is to become effective and shall deliver the pro forma financial statements referred to in Section 5.01(h) within 90 days after such change shall become effective. ARTICLE II THE CREDITS SECTION 2.01. The Commitments. --------------- (a) Revolving Credit Loans. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Credit Loans to the Borrower from time to time during the Revolving Credit Availability Period in an aggregate principal amount that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Credit Commitment or (b) the total Revolving Credit Exposures exceeding the total Revolving Credit Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Credit Loans. (b) Incremental Loans. In addition to Borrowings of Revolving Credit Loans pursuant to paragraph (a) above, at any time and from time to time prior to the Commitment Termination Date, the Borrower may request that one or more of the Persons (which may include the Lenders) offer to enter into commitments to make term loans (each such loan being herein called an "Incremental Loan") under this paragraph (b), it being understood that if such offer is to be made by any Person that is not already a Lender hereunder, the Administrative Agent shall have consented to such Person being a Lender hereunder to the extent such consent would be required pursuant to Section 9.04(b) in the event of an assignment to such Person. In the event that one or more of such Persons offer, in their sole discretion, to enter into such commitments, and such Persons and the Borrower agree as to the amount of such commitments that shall be allocated to the respective Persons making such offers and the fees (if any) to be payable by the Borrower in connection therewith and the amortization and maturity date to be applicable thereto, the Borrower, such Persons and the Administrative Agent shall execute and deliver an appropriate agreement with respect thereto, and such Persons shall become obligated to make Incremental Loans under this Agreement in an amount equal to the amount of their respective Incremental Loan Commitments as specified in such agreement. The Incremental Loans to be made pursuant to any such agreement between the Borrower and one or more Lenders in response to any such request by the Borrower shall be deemed to be a separate "Series" of Incremental Loans for all purposes of this Agreement. Anything herein to the contrary notwithstanding, (i) the minimum aggregate principal amount of Incremental Loan Commitments entered into pursuant to any such request (and, accordingly, the minimum aggregate principal amount of any Series of Incremental Loans) shall be $25,000,000, (ii) the aggregate principal amount of all Incremental Loan Commitments and Incremental Loans shall not exceed $150,000,000 and (iii) the final maturity for the Incremental Loans of any Series shall not be earlier than the Commitment Termination Date or later than the earliest regularly scheduled maturity or mandatory prepayment for any Indebtedness incurred pursuant to Section 6.01(g). Following the acceptance by the Borrower of the offers made by any one or more Incremental Loan Lenders to make any Series of Incremental Loans pursuant to the foregoing provisions of this paragraph (b), and the execution and delivery of an agreement with respect thereto as described in such foregoing provisions, each Incremental Loan Lender in respect of such Series of Incremental Loans severally agrees, on the terms and conditions of this Agreement, to make such Incremental Loans to the Borrower in Dollars during the period from and including the availability period for such Loans as agreed to between the Borrower and such Incremental Loan Lenders in an aggregate principal amount up to but not exceeding the amount of the Incremental Loan Commitment of such Incremental Loan Lender in respect of such Series as in effect from time to time. Thereafter, subject to the terms and conditions of this Agreement, the Borrower may convert Incremental Loans of such Series of one Type into Incremental Loans of such Series of another Type (as provided in Section 2.06) or continue Incremental Loans of such Series of one Type as Incremental Loans of such Series of the same Type (as provided in Section 2.06). Incremental Loans of any Series that are prepaid or repaid may not be reborrowed as Incremental Loans of the same Series. SECTION 2.02. Loans and Borrowings. -------------------- (a) Obligations of Lenders. Each Loan shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Type of Loans. Subject to Section 2.12, each Borrowing shall be constituted entirely of ABR Loans or of Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar Borrowing shall be in an aggregate amount of $1,000,000 or a larger multiple of $1,000,000. Each ABR Borrowing shall be in an aggregate amount equal to $1,000,000 or a larger multiple of $1,000,000; provided that (i) a Revolving Credit ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Credit Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(f) and (ii) an ABR Incremental Loan Borrowing of any Series may be in an aggregate amount equal to the entire unused balance of the Incremental Loan Commitments of such Series. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurodollar Borrowings outstanding. (d) Limitations on Interest Periods. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request (or to elect to convert to or continue as a Eurodollar Borrowing) any Borrowing if the Interest Period requested therefor would end after the Commitment Termination Date. SECTION 2.03. Requests for Borrowings. ----------------------- (a) Notice by the Borrower. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an Revolving Credit ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(f) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. (b) Content of Borrowing Requests. Each telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Credit Borrowing or an Incremental Loan Borrowing (including, if applicable, the respective Series of Incremental Loans to which such Borrowing relates); (ii) the aggregate amount of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (v) in the case of a Eurodollar Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.02(d); and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. (c) Notice by the Administrative Agent to the Lenders. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. (d) Failure to Elect. If no election as to the Type of a Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the requested Borrowing shall be made instead as a Eurodollar Borrowing with a one month Interest Period. SECTION 2.04. Letters of Credit. ----------------- (a) General. Subject to the terms and conditions set forth herein, in addition to the Revolving Credit Loans provided for in Section 2.01(a), the Borrower may request the Issuing Lender to issue, at any time and from time to time during the Revolving Credit Availability Period, Letters of Credit for its own account in such form as is acceptable to the Issuing Lender in its reasonable determination. Letters of Credit issued hereunder shall constitute utilization of the Revolving Credit Commitments. (b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Lender, the Borrower also shall submit a letter of credit application on the Issuing Lender's standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (c) Limitations on Amounts. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the aggregate LC Exposure of the Issuing Lender (determined for these purposes without giving effect to the participations therein of the Lenders pursuant to paragraph (e) of this Section) shall not exceed $20,000,000 and (ii) the total Revolving Credit Exposures shall not exceed the total Revolving Credit Commitments. (d) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date twelve months after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, twelve months after the then-current expiration date of such Letter of Credit, so long as such renewal or extension occurs within three months of such then-current expiration date) and (ii) the date that is five Business Days prior to the Commitment Termination Date. (e) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) by the Issuing Lender, and without any further action on the part of the Issuing Lender or the Revolving Credit Lenders, the Issuing Lender hereby grants to each Revolving Credit Lender, and each Revolving Credit Lender hereby acquires from the Issuing Lender, a participation in such Letter of Credit equal to such Revolving Credit Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for account of the Issuing Lender, such Revolving Credit Lender's Applicable Percentage of each LC Disbursement made by the Issuing Lender promptly upon the request of the Issuing Lender at any time from the time of such LC Disbursement until such LC Disbursement is reimbursed by the Borrower or at any time after any reimbursement payment is required to be refunded to the Borrower for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each such payment shall be made in the same manner as provided in Section 2.05 with respect to Loans made by such Revolving Credit Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Lender the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to the next following paragraph, the Administrative Agent shall distribute such payment to the Issuing Lender or, to the extent that the Revolving Credit Lenders have made payments pursuant to this paragraph to reimburse the Issuing Lender, then to such Revolving Credit Lenders and the Issuing Lender as their interests may appear. Any payment made by a Revolving Credit Lender pursuant to this paragraph to reimburse the Issuing Lender for any LC Disbursement shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Reimbursement. If the Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse the Issuing Lender in respect of such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time, provided that, if such LC Disbursement is not less than $500,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with a Revolving Credit ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting Revolving Credit ABR Borrowing. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Credit Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Revolving Credit Lender's Applicable Percentage thereof. (g) Obligations Absolute. The Borrower's obligation to reimburse LC Disbursements as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Lender, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit by the Issuing Lender or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Lender; provided that the foregoing shall not be construed to excuse the Issuing Lender from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Lender's gross negligence or willful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that: (i) the Issuing Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; (ii) the Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and (iii) this sentence shall establish the standard of care to be exercised by the Issuing Lender when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing). (h) Disbursement Procedures. The Issuing Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Lender shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Lender and the Revolving Credit Lenders with respect to any such LC Disbursement. (i) Interim Interest. If the Issuing Lender shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to Revolving Credit ABR Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (f) of this Section, then Section 2.11(c) shall apply. Interest accrued pursuant to this paragraph shall be for account of the Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (f) of this Section to reimburse the Issuing Lender shall be for account of such Revolving Credit Lender to the extent of such payment. (j) Replacement of the Issuing Lender. The Issuing Lender may be replaced at any time by written agreement between the Borrower, the Administrative Agent, the replaced Issuing Lender and the successor Issuing Lender. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for account of the replaced Issuing Lender pursuant to Section 2.10(b). From and after the effective date of any such replacement, (i) the successor Issuing Lender shall have all the rights and obligations of the replaced Issuing Lender under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Lender" shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. (k) Cash Collateralization. If either (i) an Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Required Revolving Credit Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing more than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, or (ii) the Borrower shall be required to provide cover for LC Exposure pursuant to Section 2.09(b), the Borrower shall immediately deposit into the Collateral Account an amount in cash equal to, in the case of an Event of Default, the LC Exposure as of such date plus any accrued and unpaid interest thereon and, in the case of cover pursuant to Section 2.09(b), the amount required under Section 2.09(b); provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (f) or (g) of Article VII. Such deposit shall be held by the Administrative Agent in the Collateral Account as collateral in the first instance for the LC Exposure under this Agreement and thereafter for the payment of the "Secured Obligations" under and as defined in the Security Agreement, and for these purposes the Borrower hereby grants a security interest to the Administrative Agent for the benefit of the Lenders in the Collateral Account and in any financial assets (as defined in the Uniform Commercial Code) or other property held therein. SECTION 2.05. Funding of Borrowings. --------------------- (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request; provided that Revolving Credit ABR Borrowings made to finance the reimbursement of an LC Disbursement as provided in Section 2.04(f) shall be remitted by the Administrative Agent to the Issuing Lender. (b) Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. ------------------ (a) Elections by the Borrower. The Loans constituting each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have the Interest Period specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type and, in the case of a Eurodollar Borrowing, may elect the Interest Period therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans constituting such Borrowing, and the Loans constituting each such portion shall be considered a separate Borrowing. (b) Notice of Elections. To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies (including, if applicable, the respective Series of Incremental Loans to which such Interest Election Request relates) and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period therefor after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.02(d). (d) Notice by the Administrative Agent to the Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) Failure to Elect; Events of Default. If the Borrower fails to deliver a timely and complete Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to a Eurodollar Borrowing with a one month Interest Period. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period therefor. SECTION 2.07. Termination and Reduction of the Commitments. -------------------------------------------- (a) Scheduled Termination. Unless previously terminated, the Commitments shall terminate on the Commitment Termination Date. (b) Voluntary Termination or Reduction. The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class (including any Incremental Loan Commitments of any Class); provided that (i) each reduction of the Commitments of such Class pursuant to this Section shall be in an amount that is $10,000,000 or a larger multiple of $5,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Credit Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the total Revolving Credit Exposures would exceed the total Revolving Credit Commitments. (c) Notice of Voluntary Termination or Reduction. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of Commitments shall be permanent (d) Effect of Termination or Reduction. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.08. Repayment of Loans; Evidence of Debt. ------------------------------------ (a) Revolving Credit Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent for account of the Revolving Credit Lenders the outstanding principal amount of the Revolving Credit Loans on the Commitment Termination Date. (b) Incremental Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the Incremental Loan Lenders of any Series the principal of the Incremental Loans of such Series in installments on such dates and in such amounts as shall be agreed upon between the Borrower and such Incremental Loan Lenders at the time the Incremental Loan Commitments of such Series are established; provided that in no event shall the final maturity of any Incremental Loan of any Series be earlier than the Commitment Termination Date. (c) Manner of Payment. Prior to any repayment or prepayment of any Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment; provided that each repayment of Borrowings shall be applied to repay any outstanding ABR Borrowings before any other Borrowings. If the Borrower fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Borrowings and, second, to other Borrowings in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be repaid first). Each payment of a Borrowing shall be applied ratably to the Loans included in such Borrowing. (d) Maintenance of Records by Lenders. Each Lender shall maintain in accordance with its usual practice records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (e) Maintenance of Records by the Administrative Agent. The Administrative Agent shall maintain records in which it shall record (i) the amount of each Loan made hereunder, the Type thereof (and, in the case of Incremental Loans, the respective Series thereof) and each Interest Period therefor, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for account of the Lenders and each Lender's share thereof. (f) Effect of Entries. The entries made in the records maintained pursuant to paragraph (d) or (e) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein, absent manifest error; provided that the failure of any Lender or the Administrative Agent to maintain such records or any finding that an entry is incorrect shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (g) Promissory Notes. Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.09. Prepayment of Loans. ------------------- (a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section. Each prepayment of Incremental Loans shall be applied to all Series of the Incremental Loans ratably in accordance with the respective outstanding principal amounts of such Series and to the installments thereof ratably in accordance with the respective amounts thereof. (b) Mandatory Prepayments. The Borrower will prepay the Loans (and/or provide cover for LC Exposure as specified in Section 2.04(k)), and/or the Commitments shall be subject to automatic reduction, as follows: (i) Casualty Events. Upon the date 60 days following the receipt by the Borrower of the proceeds of insurance, condemnation award or other compensation in respect of any Casualty Event affecting any property of the Borrower or any of its Subsidiaries (or upon such earlier date as the Borrower or such Subsidiary, as the case may be, shall have determined not to repair or replace the property affected by such Casualty Event), the Borrower shall prepay the Loans (and/or provide cover for LC Exposure as specified in Section 2.04(k)), and/or the Commitments shall be subject to automatic reduction, in an aggregate amount, if any, equal to 75% of the Net Available Proceeds of such Casualty Event not theretofore applied to the repair or replacement of such property, such prepayment and/or reduction to be effected in each case in the manner and to the extent specified in clause (iii) of this paragraph, provided that the Borrower shall not be required to make any prepayment pursuant to this clause (i) until such time as the aggregate Net Available Proceeds of all Casualty Events not so applied to the repair or replacement of property shall exceed $1,000,000. Notwithstanding the foregoing, the Borrower shall not be required to make any prepayment pursuant to this clause (i) to the extent that (A) the Borrower advises the Administrative Agent within 60 days following the receipt by the Borrower of such Net Available Proceeds that it intends to reinvest such Net Available Proceeds into the business of the Borrower and its Subsidiaries, (B) such Net Available Proceeds are held by the Borrower in a segregated investment or other account until so reinvested, and (C) such Net Available Proceeds are in fact so reinvested within 270 days after receipt thereof by the Borrower (it being understood that, in the event that Net Available Proceeds related to more than one Casualty Event are held by the Borrower, such Net Available Proceeds shall be deemed to be utilized in the same order in which the Borrower received such Net Available Proceeds and, accordingly, any such Net Available Proceeds so held for more than 270 days shall be forthwith applied to the prepayment of Loans as provided above). Nothing in this paragraph shall be deemed to limit any obligation of the Borrower or any of its Subsidiaries pursuant to any of the Security Documents to remit to a collateral or similar account maintained by the Administrative Agent pursuant to any of the Security Documents the proceeds of insurance, condemnation award or other compensation received in respect of any Casualty Event. (ii) Sale of Assets. Without limiting the obligation of the Borrower to obtain the consent of the Required Lenders pursuant to Section 6.03 to any Disposition not otherwise permitted hereunder, in the event that the Net Available Proceeds of any Disposition (herein, the "Current Disposition"), and of all prior Dispositions as to which a prepayment has not yet been made under this paragraph, shall exceed $1,000,000 then, no later than five Business Days prior to the occurrence of the Current Disposition, the Borrower will deliver to the Lenders a statement, certified by the chief financial officer of the Borrower, in form and detail satisfactory to the Administrative Agent, of the amount of the Net Available Proceeds of the Current Disposition and of all such prior Dispositions and will prepay the Loans (and/or provide cover for LC Exposure as specified in Section 2.04(k)), and/or the Commitments shall be subject to automatic reduction, in an aggregate amount equal to 75% of the Net Available Proceeds of the Current Disposition and such prior Dispositions, such prepayment and/or reduction to be effected in each case in the manner and to the extent specified in clause (iii) of this paragraph, provided that, notwithstanding the foregoing, the Borrower shall not be required to make a prepayment under this clause (ii) to the extent that (A) the Borrower advises the Administrative Agent at the time of the relevant Disposition that it intends to use such Net Available Proceeds to finance one or more Acquisitions pursuant to Section 6.03, or otherwise to reinvest the proceeds thereof into the business of the Borrower and its Subsidiaries, (B) such Net Available Proceeds are held by the Borrower in a segregated investment or other account until so used to finance one or more Acquisitions or to make such reinvestment as contemplated above, and (C) such Net Available Proceeds are in fact so applied to such Acquisition(s) or reinvestment within 270 days of such Disposition (it being understood that, in the event Net Available Proceeds from more than one Disposition are held by the Borrower, such Net Available Proceeds shall be deemed to be utilized in the same order in which such Dispositions occurred and, accordingly, any such Net Available Proceeds so held for more than 270 days shall be forthwith applied to the prepayment of Loans as provided above). (iii) Application. Prepayments and/or reductions of Commitments pursuant to this paragraph shall be apportioned between the Revolving Credit Commitments (and Revolving Credit Exposure), and Incremental Loan Commitments (and Incremental Loans) of each Series, ratably in accordance with the respective then-outstanding aggregate principal amounts of the Commitments (or Exposure or Loans), whichever is greater, with the amounts so apportioned to be applied to the prepayment of the respective Loans of each such Class (and to provide cover for LC Exposure), provided that to the extent any such required reduction of the Commitments of any Class shall exceed the then-outstanding aggregate principal amount of the Revolving Credit Exposure or outstanding Loans of such Class, such excess shall be applied ratably to the prepayment of Loans (and to provide cover for LC Exposure) of each other Class. Each prepayment of the Incremental Loans of any Series shall be aplied to the installments thereof ratably in accordance with the respective amounts thereof. (c) Notices, Etc. The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and shall be made in the manner specified in Section 2.08(c). SECTION 2.10. Fees. ---- (a) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of the Commitment of such Lender during the period from and including the date hereof to but excluding the earlier of the date such Commitment terminates and the Commitment Termination Date. Accrued commitment fees shall be payable on each Quarterly Date and on the earlier of the date the Commitments terminate and the Commitment Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees, the Commitment of a Lender shall be deemed to be used to the extent of the outstanding Loans and LC Exposure of such Lender. (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent for account of each Revolving Credit Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to the Applicable Rate applicable to interest on Revolving Credit Eurodollar Loans on the average daily amount of such Revolving Credit Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Revolving Credit Lender's Commitment terminates and the date on which such Revolving Credit Lender ceases to have any LC Exposure, and (ii) to the Administrative Agent for account of the Issuing Lender all commissions, charges, costs and expenses in the amounts customarily charged by the Issuing Lender from time to time in like circumstances with respect to the issuance of each Letter of Credit and drawings and other transactions relating thereto, as well as the Issuing Lender's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees specified above accrued through and including each Quarterly Date shall be payable on the third Business Day following such Quarterly Date, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Credit Commitments terminate and any such fees accruing after the date on which the Revolving Credit Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lender pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees specified above shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (d) Payment of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Lender, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. -------- (a) ABR Loans. The Loans constituting each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Rate. (b) Eurodollar Loans. The Loans constituting each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period for such Borrowing plus the Applicable Rate. (c) Default Interest. Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration, by mandatory prepayment or otherwise, such overdue amount shall, to the maximum extent permitted under applicable law, bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (d) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the Commitment Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion. (e) Computation. All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of the Interest Period for any Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) if such Borrowing is of a particular Class of Loans (including of a particular Series of Incremental Loans), the Administrative Agent is advised by the Required Revolving Credit Lenders or the Required Incremental Loan Lenders of such Series, as the case may be, that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their respective Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing (unless prepaid) shall be continued as, or converted to, an ABR Borrowing and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.13. Increased Costs. --------------- (a) Increased Costs Generally. If any Change in Law shall: ------------------------- (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Lender; or (ii) impose on any Lender or the Issuing Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lenders of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Lender of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Lender hereunder, whether of principal, interest or otherwise (in any such case, other than Indemnified Taxes or Other Taxes, which shall be governed exclusively by Section 2.15), then the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender or the Issuing Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Lender's capital or on the capital of such Lender's or the Issuing Lender's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Lender's policies and the policies of such Lender's or the Issuing Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding company for any such reduction suffered. (c) Certificates from Lenders. A certificate of a Lender or the Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Lender pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender or the Issuing Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period therefor (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.09(c) and is revoked in accordance herewith), or (d) the assignment as a result of a request by the Borrower pursuant to Section 2.17(b) of any Eurodollar Loan other than on the last day of an Interest Period therefor, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.15. Taxes. ----- (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto. (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time such Foreign Lender becomes a party to this Agreement or time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (f) Application of Credits. If the Borrower is required to pay amounts pursuant to the provisions of this Section 2.15, and if thereafter the Administrative Agent, Lender or Issuing Lender (as the case may be) shall receive or be granted a credit against or remission or other relief for Indemnified Taxes or Other Taxes payable by the Administrative Agent, Lender or Issuing Lender (as the case may be) and solely in respect of the amounts so paid by the Borrower, the Administrative Agent, Lender or Issuing Lender (as the case may be) shall to the extent that it can do so without prejudice to the retention of the amount of such credit, remission or other relief, pay to the Borrower 30 days after the date on which the Administrative Agent, Lender or Issuing Lender (as the case may be) actually realizes the benefit of such credit, remission or other relief an amount which it reasonably determines to be attributable to amounts paid by Borrower pursuant to this Section 2.15 less any sum which it is required by law to deduct therefrom; provided that the Administrative Agent, Lender or Issuing Lender (as the case may be) may, in its sole discretion, determine the order of utilization of all charges, deductions, credits and expenses. Nothing in this Section 2.15(f) shall be construed as requiring the Administrative Agent, Lender or Issuing Lender (as the case may be) to conduct its business or to arrange or alter in any respect its tax or financial affairs so that it is entitled to receive such credit, remission or other relief, other than performing any ministerial acts necessary to be entitled to receive such credit, remission or other relief. (g) Assessments; Contests; Etc. In the event that the Administrative Agent, Lender or Issuing Lender (as the case may be) receives written communication from any tax authority with respect to an assessment or proposed assessment of any Indemnified Taxes or Other Taxes, the Administrative Agent, Lender or Issuing Lender (as the case may be) shall promptly notify the Borrower in writing and provide a copy of such communication to the Borrower. If Administrative Agent, Lender or Issuing Lender (as the case may be) becomes subject to any Indemnified Taxes or Other Taxes for which the Borrower has an indemnity obligation pursuant to this Section 2.15, such Person shall cooperate with the Borrower and assist the Borrower to reduce or recover amounts with respect to such Indemnified Taxes or Other Taxes including (in such person's sole discretion) contesting such amounts in good faith and notifying the Borrower of any administrative or judicial proceeding with respect to such Taxes; provided that (i) nothing contained in this Section 2.15(g) shall require any of the Administrative Agent, Lender or Issuing Lender (as the case may be) to reveal any tax returns or any other information deemed to be confidential by the Administrative Agent, Lender or Issuing Lender (as the case may be) and (ii) all expenses relating to any such contest shall be borne by the Borrower. SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. ----------------------------------------------------------- (a) Payments by the Borrower. The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or under Section 2.13, 2.14 or 2.15, or otherwise) or under any other Loan Document (except to the extent otherwise provided therein) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, except as otherwise expressly provided in the relevant Loan Document and except payments to be made directly to the Issuing Lender as expressly provided herein and payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03, which shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder or under any other Loan Document (except to the extent otherwise provided therein) shall be made in Dollars. (b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Borrowing of Loans of a particular Class (including of a particular Series of Incremental Loans) shall be made from the relevant Lenders, each payment of commitment fee under Section 2.10 in respect of Commitments of a particular Class (including of a particular Series of Incremental Loans) shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments of a particular Class (including of a particular Series of Incremental Loans) under Section 2.07 shall be applied to the respective Commitments of such Class of the relevant Lenders, pro rata according to the amounts of their respective Commitments of such Class; (ii) each Borrowing of Loans of a particular Class shall be allocated pro rata among the relevant Lenders according to the amounts of their respective Commitments of such Class (in the case of the making of Loans) or their respective Loans of such Class that are to be included in such Borrowing (in the case of conversions and continuations of Loans); (iii) each payment or prepayment of principal of Loans of a particular Class (including of a particular Series of Incremental Loans) by the Borrower shall be made for account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans of such Class held by them; and (iv) each payment of interest on Loans of a particular Class (including of a particular Series of Incremental Loans) by the Borrower shall be made for account of the relevant Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders. (d) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon then due than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (e) Presumptions of Payment. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. (f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(e), 2.05(b) or 2.16(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. ---------------------------------------------- (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, the Issuing Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries: (a) is a corporation, partnership or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify could have a Material Adverse Effect. SECTION 3.02. Authorization; Enforceability. The Borrower has all necessary corporate power, authority and legal right to execute, deliver and perform its obligations under each of the Loan Documents; the execution, delivery and performance by the Borrower of each of the Loan Documents have been duly authorized by all necessary corporate action on its part (including, without limitation, any required shareholder approvals); and this Agreement has been duly and validly executed and delivered by the Borrower and constitutes, and the other Loan Documents to which it is a party when executed and delivered will constitute, its legal, valid and binding obligation, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 3.03. Governmental Approvals; No Conflicts. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange, are necessary for the execution, delivery or performance by the Borrower of the Loan Documents to which it is a party or for the legality, validity or enforceability hereof or thereof, except for filings and recordings in respect of the Liens created pursuant to the Security Documents. None of the execution and delivery of this Agreement and the other Loan Documents, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof will conflict with or result in a breach of, or require any consent under, the charter or by-laws of the Borrower, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Borrower or any of its Subsidiaries is a party (including, without limitation, the Senior Subordinated Indentures) or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or (except for Liens created pursuant to the Security Documents) result in the creation or imposition of any Lien upon any Property of the Borrower or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. SECTION 3.04. Financial Condition; No Material Adverse Change. ----------------------------------------------- (a) Financial Statements. The Borrower has heretofore furnished to each of the Lenders (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at February 24, 2001 and the related consolidated statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Deloitte & Touche, and (ii) the consolidated balance sheet of the Borrower and its Subsidiaries as at May 26, 2001 and the related consolidated statements of earnings, stockholders' equity and cash flows of the Borrower and its Subsidiaries for the fiscal quarter ended on such date. All such financial statements present fairly, in all material respects, the financial position of the Borrower and its Subsidiaries as at, and the results of operations for the fiscal year and fiscal quarter, ended on said date, all in accordance with generally accepted accounting principles and practices applied on a consistent basis (subject, in the case of such financial statements as at May 26, 2001, to normal year-end audit adjustments). Neither the Borrower nor any of its Subsidiaries has on the date hereof any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates or in Part A of Schedule III. (b) No Material Adverse Change. Since February 24, 2001, there has been no material adverse change in the financial condition, operations, business or prospects of the Borrower and its Subsidiaries from that set forth in said financial statements as at said date. SECTION 3.05. Properties. The Borrower and each of its Subsidiaries owns and has good and marketable title (subject only to Liens permitted by Section 6.02) to the Properties shown to be owned in the most recent financial statements referred to in Section 3.04(a) (other than Properties disposed of in the ordinary course of business or otherwise permitted to be disposed of pursuant to Section 6.03). The Borrower and each of its Subsidiaries owns and has good and marketable title to, and enjoys peaceful and undisturbed possession of, all Properties (subject only to Liens permitted by Section 6.02) that are necessary for the operation and conduct of its businesses. SECTION 3.06. Litigation and Environmental Matters. ------------------------------------ (a) Actions, Suits and Proceedings. Except as disclosed to the Lenders in writing prior to the date hereof, there are no legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or (to the knowledge of the Borrower) threatened against the Borrower or any of its Subsidiaries which, if adversely determined, could have a Material Adverse Effect. (b) Environmental Matters. Except as set forth in Schedule II, each of the Borrower and its Subsidiaries has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization would not have a Material Adverse Effect. All of the permits, licenses and authorizations that have been obtained are in full force and effect and each of the Borrower and its Subsidiaries is in compliance with the terms and conditions thereof, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply therewith would not have a Material Adverse Effect. In addition, except as set forth in Schedule II, and except as would not result in aggregate liability or costs to the Borrower and its Subsidiaries of more than $2,000,000 in the case of any single event or condition, or of more than $10,000,000 in the case of all events or conditions: (i) To the Borrower's knowledge after due inquiry, no written notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened by any governmental or other entity with respect to any alleged failure by the Borrower or any of its Subsidiaries to have any environmental, health or safety permit, license or other authorization required under any Environmental Law in connection with the conduct of the business of the Borrower or any of its Subsidiaries or with respect to any generation, treatment, storage, recycling, transportation, discharge or disposal, or any Release of any Hazardous Materials generated by the Borrower or any of its Subsidiaries. (ii) Neither the Borrower nor any of its Subsidiaries owns, operates or leases a treatment, storage or disposal facility requiring a permit under the Resource Conservation and Recovery Act of 1976, as amended, or under any comparable state or local statute; and (A) to the Borrower's knowledge after due inquiry, no PCB Transformers (as defined in the Toxic Substances Control Act, 15 U.S.C. ss.1601, et seq., as amended, and the regulations relating thereto) are present at any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries; (B) to the Borrower's knowledge after due inquiry, no asbestos or asbestos-containing materials is present at any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries; (C) to the Borrower's knowledge after due inquiry, there are no underground storage tanks or surface impoundments for Hazardous Materials, active or abandoned, at any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries; and (D) to the Borrower's knowledge after due inquiry, no Hazardous Materials have been Released by the Borrower or any of its Subsidiaries at, on or under any site or facility now owned, operated or leased by the Borrower or any of its Subsidiaries in a reportable quantity established by any Environmental Law. (iii) To the Borrower's knowledge after due inquiry, neither the Borrower nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location that is listed on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by the Environmental Protection Agency, or listed in the Comprehensive Environmental Response and Liability Information System, as provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"), or on any similar state or local list or that is the subject of Federal, state or local enforcement actions or other investigations that may lead to Environmental Claims against the Borrower or any of its Subsidiaries. (iv) No Liens are presently recorded with the appropriate land records under or pursuant to any Environmental Laws on any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries, and to the Borrower's knowledge no government action has been taken or is in process that could subject any such site or facility to such Liens. Neither the Borrower nor any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any site or facility owned by it in any deed to the real property on which such site or facility is located. (v) There have been no environmental investigations, written studies, audits, tests, reviews or other analyses conducted by or that are in the possession of the Borrower or any of its Subsidiaries in relation to any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries which have not been made available to the Lenders. SECTION 3.07. Compliance with Laws. Except as set forth in Schedule V, each of the Borrower and its Subsidiaries is in compliance with all applicable laws, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities or bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its Property (including Environmental Laws), except such noncompliance as would not, in the aggregate, have a Material Adverse Effect on the business, properties, assets, operations, condition (financial or otherwise), or prospects of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Neither the Borrower nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 3.09. Taxes. The Borrower and its Domestic Subsidiaries are members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which the Borrower is the "common parent" (within the meaning of Section 1504 of the Code) of such group. The Borrower and its Domestic Subsidiaries have filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes shown to be due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Domestic Subsidiaries. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate. Except as set forth in Schedule VI, the Borrower has not given or been requested to give a waiver of the statute of limitations relating to the payment of Federal, state, local and foreign taxes or other impositions. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. As of the date hereof, the present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not exceed by more than $1,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not exceed by more than $1,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Borrower to the Administrative Agent or any Lender prior to the Effective Date in connection with the negotiation, preparation or delivery of this Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole (together with the Information Memorandum which the Lenders acknowledge contains projections based on certain assumptions therein stated) do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished on or after the Effective Date by the Borrower and its Subsidiaries to the Administrative Agent and the Lenders in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to the Borrower that could have a Material Adverse Effect that has not been disclosed herein, in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lenders for use in connection with the transactions contemplated hereby or thereby. SECTION 3.12. Use of Credit. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock. SECTION 3.13. Material Agreements and Liens. ----------------------------- (a) Indebtedness. Part A of Schedule III is a complete and correct list, as of the date hereof, of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Borrower or any of its Subsidiaries the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $1,000,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule III. (b) Liens. Part B of Schedule III is a complete and correct list, as of the date hereof, of each Lien securing Indebtedness the aggregate principal or face amount of which equals or exceeds $1,000,000 of any Person and covering any Property of the Borrower or any of its Subsidiaries, and the aggregate amount of such Indebtedness secured (or which may be secured) by each such Lien and the Property covered by each such Lien is correctly described in Part B of said Schedule III. SECTION 3.14. Subsidiaries and Investments. ---------------------------- (a) Subsidiaries. Set forth in Part A of Schedule IV is a complete and correct list, as of the date hereof, of all of the Subsidiaries of the Borrower, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary, (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests and (iv) the total book value of the assets of each such Subsidiary as of May 26, 2001 (or, in the case of Subsidiaries acquired after May 26, 2001, such other date as specified in Part A of Schedule IV). Except as disclosed in Part A of Schedule IV, (x) each of the Borrower and its Subsidiaries owns, free and clear of Liens (other than Liens created pursuant to the Security Documents), and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Part A of Schedule IV, (y) all of the issued and outstanding capital stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) there are no outstanding Equity Rights with respect to such Person. (b) Investments. Set forth in Part B of Schedule IV is a complete and correct list, as of the date hereof, of all Investments (other than Investments disclosed in Part A of said Schedule IV) of $1,000,000 or more held by the Borrower or any of its Subsidiaries in any Person and, for each such Investment, (x) the identity of the Person or Persons in which such Investment has been made, (y) the nature of such Investment and (z) the amount of such Investment. Except as disclosed in Part B of Schedule IV, each of the Borrower and its Subsidiaries owns, free and clear of all Liens (other than Liens created pursuant to the Security Documents), all such Investments. (c) No Restrictive Covenants. Except as set forth in Part A of Schedule III, none of the Subsidiaries of the Borrower is subject to any indenture, agreement, instrument or other arrangement of the type described in Section 5.06(c). SECTION 3.15. Capitalization. The authorized capital stock, as of the date hereof, of the Borrower consists of an aggregate of 51,000,000 shares consisting of (i) 50,000,000 shares of common stock, par value $0.01 per share, of which 32,118,788 shares were, as at May 26, 2001 duly and validly issued and outstanding, each of which shares is fully paid and nonassessable and (ii) 1,000,000 shares of preferred stock, par value $0.01 per share, of which no shares were outstanding as at May 26, 2001. The Borrower is registered with the Securities and Exchange Commission under the Securities Exchange Act, and its shares of common stock are publicly owned and traded on the NASDAQ National Market System. As of the date hereof, (x) except for options to purchase 5,770,735 shares of the common stock of the Borrower, there are no outstanding Equity Rights with respect to the Borrower and (y) there are no outstanding obligations of the Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of the Borrower nor are there any outstanding obligations of the Borrower or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Borrower or any of its Subsidiaries. ARTICLE IV CONDITIONS SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Lender to issue Letters of Credit hereunder shall not become effective until the date on which the Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent (and to the extent specified below, to each Lender) in form and substance (or such condition shall have been waived in accordance with Section 9.02): (a) Executed Counterparts. From each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement. (b) Opinions of Counsel to the Borrower. A favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of (i) Shearman & Sterling, counsel for the Borrower, substantially in the form of Exhibit C, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Required Lenders shall reasonably request and (ii) of Jeff E. Moriarty, General Counsel to the Borrower, substantially in the form of Exhibit D (and the Borrower hereby instructs such counsel to deliver such opinions to the Lenders and the Administrative Agent). (c) Opinion of Special New York Counsel to Chase. An opinion, dated the Effective Date, of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to Chase, substantially in the form of Exhibit E (and Chase hereby instructs such counsel to deliver such opinion to the Lenders). (d) Corporate Documents. Such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (e) Officer's Certificate. A certificate, dated the Effective Date and signed by the President, a Vice President or a senior financial officer of the Borrower, confirming compliance with the conditions set forth in the lettered clauses of the first sentence of Section 4.02. (f) Security Agreement. The Security Agreement, duly executed and delivered by the Borrower and the Administrative Agent and the certificates identified in Annex 3 thereto, in each case accompanied by undated stock powers executed in blank. In addition, the Borrower shall have taken such other action (including delivering to the Administrative Agent, for filing, appropriately completed and duly executed copies of Uniform Commercial Code financing statements) as the Administrative Agent shall have requested in order to perfect the security interests created pursuant to the Security Agreement. (g) Other Documents. Such other documents as the Administra- tive Agent or any Lender or special New York counsel to Chase may reasonably request. The obligation of each Lender to make its initial extension of credit hereunder is also subject to the payment by the Borrower of such fees as the Borrower shall have agreed to pay to any Lender or the Administrative Agent in connection herewith, including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to Chase, in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents and the extensions of credit hereunder (to the extent that statements for such fees and expenses have been delivered to the Borrower). The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Lender to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) on or prior to 3:00 p.m., New York City time, on August 21, 2001 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.02. Each Credit Event. The obligation of each Lender to make any Loan, and of the Issuing Lender to issue, amend, renew or extend any Letter of Credit, is additionally subject to the satisfaction of the following conditions: (a) the representations and warranties of the Borrower set forth in this Agreement and in the other Loan Documents shall be true and correct on and as of the date of such Loan or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable; (b) at the time of and immediately after giving effect to such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing; and (c) the incurrence of such additional Indebtedness shall be permitted under the Subordinated Indentures (and, upon request from the Administrative Agent, a senior financial officer of the Borrower shall deliver to the Administrative Agent a certificate setting forth calculations in sufficient detail to demonstrate compliance with this clause (c)). Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in the preceding sentence. ARTICLE V AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) as soon as available and in any event within 60 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Borrower, consolidated statements of earnings, stockholders' equity and cash flows of the Borrower and its Subsidiaries, for such period and for the period from the beginning of the respective fiscal year to the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, and the related consolidated balance sheet of the Borrower and its Subsidiaries, as at the end of such period, setting forth in comparative form the corresponding consolidated figures for the last day of the preceding fiscal year, accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said consolidated financial statements present fairly, in all material respects, the consolidated financial condition and results of operations of the Borrower and its Subsidiaries, in accordance with generally accepted accounting principles, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); (b) as soon as available and in any event within 105 days after the end of each fiscal year of the Borrower, consolidated statements of operations and stockholders' equity of the Borrower and its Subsidiaries, and consolidated statements of cash flows of the Borrower and its Subsidiaries, for such fiscal year and the related consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements present fairly, in all material respects, the consolidated financial condition and results of operations of the Borrower and its Subsidiaries as at the end of, and for, such fiscal year in accordance with generally accepted accounting principles, and a report of such accountants stating that, in making the examination necessary for their opinion, nothing came to their attention, except as specifically stated, that caused them to believe that the Borrower had failed to comply with Sections 6.06 and 6.08, or any other provisions hereof, insofar as they relate to accounting matters; (c) as soon as available and in any event within 105 days after the end of each fiscal year of the Borrower, statements of information concerning net sales, operating earnings, depreciation and amortization of each division of the Borrower and its Subsidiaries (including, without limitation, the Seating Products Group, the Interior Systems Group, the Business Jet Group and the Flight Structures Group) for such period setting forth in each case in comparative form the corresponding figures for the preceding fiscal year; (d) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, which the Borrower shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange; (e) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (f) Within 20 Business Days after the date of any material Acquisition or Disposition and at the time of delivery of the financial statements for the first four Fiscal Dates thereafter, pro forma consolidated statements of earnings of the Borrower and its Subsidiaries for the relevant Calculation Period and related pro forma consolidated balance sheet items necessary for the pro forma calculation of compliance with the covenants in this Agreement of the Borrower and its Subsidiaries as of the last day of each fiscal quarter of the Borrower occurring during such Calculation Period, prepared as though such material Acquisition or Disposition had occurred, and any Funded Debt incurred, assumed or repaid by the Borrower or any of its Subsidiaries in connection with such Acquisition or Disposition had been incurred, assumed or repaid, on the first day of such Calculation Period; provided, that, solely for purposes of this Section 5.01(f), the term "material" shall, in the case of any Acquisition, refer to a transaction that can reasonably be expected to result in an increase by 10% or more of the aggregate consolidated revenues of the Borrower and its Subsidiaries and, in the case of any Disposition, refer to a transaction that can reasonably be expected to result in a decrease by 10% or more of the aggregate consolidated revenues of the Borrower and its Subsidiaries; (g) with the delivery of the financial statements pursuant to Sections 5.01(a) and 5.01(b), a statement of a senior financial officer of the Borrower (A) listing each Disposition by the Borrower and its Subsidiaries that occurred during the quarterly fiscal period ending on the date of such financial statements if the Net Available Proceeds thereof exceeded $1,000,000 and (B) setting forth in reasonable detail the Net Available Proceeds of each such Disposition and the aggregate Net Available Proceeds since the first day of the then current Recapture Period; (h) promptly but in any event within 90 days following the change in the fiscal year of the Borrower contemplated by Section 1.04(c), pro forma consolidated statements of operations and stockholders' equity of the Borrower and its Subsidiaries, and pro forma consolidated statements of cash flows of the Borrower and its Subsidiaries, for such each fiscal quarter ending on the changed quarter-end dates necessary in order to determine compliance with the requirements of Section 6.08; and (i) from time to time such other information regarding the financial condition, operations, business or prospects of the Borrower or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Administrative Agent may reasonably request. The Borrower will furnish to each Lender, at the time it furnishes each set of financial statements pursuant to paragraph (a), (b) or (f) above, a certificate of a senior financial officer of the Borrower (i) to the effect that no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail and describing the action that the Borrower has taken or proposes to take with respect thereto) and (ii) setting forth in reasonable detail (x) the computations necessary to determine whether the Borrower is in compliance with Sections 6.01(e), 6.01(h), 6.05(f), 6.05(h), 6.06 and 6.08, and (y) the Interest Coverage Ratio and the Leverage Ratio as of the end of the respective quarterly fiscal period, fiscal year or Calculation Period. SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any of its Affiliates or Subsidiaries that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $5,000,000; (d) the assertion of any Environmental Claim by any Person against, or with respect to the activities of, the Borrower or any of its Subsidiaries and any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations, other than any Environmental Claim or alleged violation that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect; and (e) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a senior financial officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business; Etc. The Borrower will, and will cause each of its Subsidiaries to: (a) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section shall prohibit any transaction expressly permitted under Section 6.03); (b) comply with the requirements of all applicable laws, rules, regulations and orders of governmental or regulatory authorities if failure to comply with such requirements could have a Material Adverse Effect; (c) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; (d) maintain all of its Properties used or useful in its business in good working order and condition, ordinary wear and tear excepted; (e) keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied; and (f) permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be). SECTION 5.04. Insurance. The Borrower will, and will cause each of its Subsidiaries to, keep insured by financially sound and reputable insurers all Property of a character usually insured by corporations engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations and carry such other insurance as is usually carried by such corporations. SECTION 5.05. Use of Proceeds and Letters of Credit. The Borrower will use the proceeds of the Loans hereunder solely (i) to finance ongoing working capital and other capital requirements of the Borrower and (ii) to finance Acquisitions; provided that neither the Administrative Agent nor any Lender shall have any responsibility as to the use of any of such proceeds; and provided further that no more than $100,000,000 of the Revolving Credit Commitments may be used for the purposes set forth in clause (ii) above. SECTION 5.06. Certain Obligations Respecting Subsidiaries. ------------------------------------------- (a) Ownership of Subsidiaries. The Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that the Borrower and each of its Subsidiaries at all times owns (subject only to the Lien of the Security Documents) at least the same percentage of the issued and outstanding shares of each class of stock or partnership or other ownership interest of each of its Subsidiaries as is owned on the date hereof (or, with respect to any Subsidiary acquired or organized after the date hereof, as of the date of such acquisition or organization); provided that nothing contained in this Section 5.06(a) shall prevent the Borrower from selling shares of Advanced Thermal Sciences Corporation pursuant to an initial public offering of such shares. Without limiting the generality of the foregoing, none of the Borrower nor any of its Subsidiaries shall sell, transfer, pledge or otherwise dispose of any shares of stock or partnership or other ownership interest in any Subsidiary owned by them, nor permit any Subsidiary to issue any shares of stock of any class or partnership or other ownership interest whatsoever to any Person (other than to the Borrower or the immediate parent of such Subsidiary which is a Wholly Owned Subsidiary of the Borrower). In the event that (a) any such additional shares of stock or partnership or other ownership interest shall be issued by any such Subsidiary or (b) the Borrower shall directly or indirectly create any new Material Subsidiary or Acquire any additional Material Subsidiary and shall thereby become the direct owner of the shares of capital stock or partnership or other ownership interest of such new or additional Material Subsidiary, the Borrower agrees forthwith to deliver to the Administrative Agent pursuant to security documents satisfactory to the Lenders, any shares, certificates of ownership, membership interests or other evidence of ownership, or other securities received as a result therefrom (together with undated stock or other powers executed in blank) and shall give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be necessary or desirable (in the judgment of the Administrative Agent) to create, preserve or validate the security interest created therein, including, without limitation, causing any or all of the Collateral (as defined in the Security Agreement) to be transferred of record into the name of the Administrative Agent; provided that if any such direct Material Subsidiary of the Borrower is a CFC, the Borrower need not pledge to the Administrative Agent more than 65% of the capital stock, partnership or other ownership interest in such Material Subsidiary. (b) Guarantees by Subsidiaries. In the event that any one or more of the Subsidiaries of the Borrower shall Guarantee Indebtedness of the Borrower in an aggregate principal amount (as to all such Guarantees) in excess of $25,000,000, then the Borrower will cause such Subsidiary to Guarantee the "Secured Obligations" under and as defined in the Security Agreement pursuant to an agreement in form and substance satisfactory to the Administrative Agent and to deliver to the Administrative Agent such proof of corporate and other action, and opinions of counsel, in connection therewith as the Administrative Agent shall reasonably request. (c) No Restrictive Agreements. The Borrower will not permit any of its Subsidiaries to enter into, after the date hereof, any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends, the making of loans, advances or Investments or the sale, assignment, transfer or other disposition of Property. (d) Transfer of Assets from Subsidiaries. ------------------------------------ (i) The Borrower will cause each of B/E Oxygen Systems Company, a California corporation, SMR Technologies, Inc., an Ohio corporation and Alson Industries, Inc., a California corporation to: (A) not later than 60 days after the Effective Date, transfer (whether through merger or otherwise) all of the tangible Property owned by such Subsidiary to the Borrower pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent; and (B) not later than 120 days after the Effective Date, transfer (whether through merger or otherwise) all of the intangible Property owed by such Subsidiary to the Borrower pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent; (ii) In connection with the foregoing clause (i), the Borrower will and will cause each such Subsidiary to, (A) take such action (including delivering shares of stock, executing and delivering such Uniform Commercial Code financing statements) as shall be necessary or desirable (in the judgment of the Administrative Agent) to create and perfect valid and enforceable Liens (subject only to Liens permitted by Section 6.02) on all of such transferred assets in favor of the Administrative Agent for the benefit of the Secured Parties as provided in the Security Agreement; and (B) deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by the Borrower pursuant to Section 4.01 on the Effective Date or as the Administrative Agent shall have requested. (iii) Upon the completion of the transfer of all of the tangible and intangible Property from any such Subsidiary to the Borrower and the execution and delivery of such documents as required by paragraph (ii) above, the Administrative Agent and each Lender agrees that the Administrative Agent shall release any Lien covering ownership interests of such Subsidiary pledged by the Borrower to the Administrative Agent for the benefit of the Secured Parties pursuant to the Security Agreement. SECTION 5.07. Environmental Matters. --------------------- (a) Compliance Generally. The Borrower will, and will cause each of its Subsidiaries to, comply with all Environmental Laws applicable to the Borrower and each of its Subsidiaries, except to the extent that failure to comply with such laws would not have a Material Adverse Effect, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and maintain such authorizations in full force and effect. (b) Clean-up of Hazardous Materials. If the Borrower discovers evidence of the presence of any Hazardous Materials in any amount that is required to be reported under Environmental Law, the Borrower will promptly clean-up such Hazardous Materials or take such other remedial action as is (a) required by law or (b) deemed necessary by the Borrower in its reasonable determination, such determination to be based in part on the advice of independent environmental consultants acceptable to the Borrower and the Administrative Agent. (c) Notices of Environmental Claims. The Borrower shall promptly furnish to the Administrative Agent all written notices of any Environmental Claims received by the Borrower or any of its Subsidiaries with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations issued thereunder in connection with the ownership, operation or use of any site or facility or the operation of their businesses or the presence or Release of Hazardous Substances, which Environmental Claim if determined adversely to the Borrower would have a Material Adverse Effect. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Indebtedness. The Borrower will not, nor will it permit any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness except: (a) Indebtedness to the Lenders hereunder; (b) Indebtedness outstanding or committed on the date hereof and, if equal to or in excess of $1,000,000, listed in Part A of Schedule III and any extension, renewal or replacement thereof; (c) Indebtedness of Subsidiaries of the Borrower to the Borrower; (d) Indebtedness of the Borrower to its Subsidiaries and Indebtedness of Subsidiaries of the Borrower to other Subsidiaries of the Borrower; (e) Indebtedness of the Borrower and its Subsidiaries secured by Liens permitted under Sections 6.02(i), 6.02(j) and 6.02(k); (f) Guarantees by any Subsidiary of the Borrower of Indebtedness of the Borrower or any Subsidiary of the Borrower; (g) unsecured Indebtedness of the Borrower that has no regularly scheduled maturity or mandatory prepayments on or before the Commitment Termination Date (or, if any Incremental Loans are not include required prepayments (including, without limitation, as a result of a change of control or asset sale) on terms less favorable to the Lenders than the Senior Subordinated Indentures, and that is subordinated in right of payment to the Loans at least to the extent provided in the Senior Subordinated Indentures; (h) additional unsecured Indebtedness of the Borrower and its Subsidiaries up to but not exceeding in the aggregate $50,000,000 at any one time outstanding; provided that any (i) such Indebtedness of any such individual Subsidiary (other than any Domestic Subsidiary) may not exceed $10,000,000 in the aggregate at any one time outstanding and (ii) such Indebtedness of any such individual Domestic Subsidiary may not exceed $2,000,000 in the aggregate at any one time outstanding; and (i) additional indebtedness of B/E Aerospace Holdings (UK) Limited in an amount not to exceed (pound)5,000,000 under the Loan Agreement dated as of February 24, 1993 with Barclays Bank PLC, as amended or refinanced. SECTION 6.02. Liens. The Borrower will not, nor will it permit any of its Domestic Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except: (a) Liens created pursuant to the Security Documents; (b) Liens outstanding on the date hereof and listed in Part B of Schedule III; (c) Liens imposed by any governmental authority for taxes, assessments or charges not yet due or which are being contested in good faith and by appropriate proceedings if, unless the amount thereof is not material with respect to it or its financial condition, adequate reserves with respect thereto are maintained on the books of the Borrower or the affected Domestic Subsidiaries, as the case may be, in accordance with GAAP; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings and Liens securing judgments but only to the extent, for an amount and for a period not resulting in an Event of Default under clause (h) of Article VII; (e) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Domestic Subsidiaries; (h) Liens on Property of any corporation which becomes a Domestic Subsidiary of the Borrower after the date hereof; provided that such Liens are in existence at the time such corporation becomes a Domestic Subsidiary of the Borrower and were not created in anticipation thereof; (i) subject to the restrictions contained in the Security Documents, Liens upon real and/or tangible personal Property and/or software and license rights with respect to software (including, without limitation, software and license rights with respect to software under the GE Lease Agreement) acquired after the date hereof (by purchase, construction or otherwise) by the Borrower or any of its Domestic Subsidiaries other than in connection with any Acquisition by the Borrower or any of its Domestic Subsidiaries, each of which Liens either (A) existed on such Property before the time of its acquisition and was not created in anticipation thereof, or (B) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such Property; provided that no such Lien shall extend to or cover any Property of the Borrower or such Domestic Subsidiary other than the Property so acquired and improvements thereon; and provided, further, that the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the fair market value (as determined in good faith by a senior financial officer of the Borrower) of such Property at the time it was acquired (by purchase, construction or otherwise); (j) any Liens arising as a result of (i) the sale of real property owned by the Borrower or any Subsidiary of the Borrower which property is, immediately following such sale, leased back to the respective seller thereof and (ii) the consummation of the Proposed Sale/Leasebacks; (k) additional Liens upon real and/or tangible personal Property of the Borrower or any of its Domestic Subsidiaries created after the date hereof; provided that the aggregate Indebtedness secured thereby and incurred on and after the date hereof shall not exceed $30,000,000 in the aggregate at any one time outstanding; and (l) any extension, renewal or replacement of the foregoing; provided, however, that the Liens permitted hereunder shall not be spread to cover any additional Indebtedness or Property (other than a substitution of like Property). SECTION 6.03. Fundamental Changes. The Borrower will not, nor will it permit any of its Subsidiaries to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or Dispose of all or substantially all of its Property. The Borrower will not, nor will it permit any of its Subsidiaries to, to make any Acquisition except for Investments permitted under Section 6.05. Notwithstanding the foregoing provisions of this Section: (a) any Subsidiary of the Borrower may be merged or consolidated with or into: (i) the Borrower if the Borrower shall be the continuing or surviving corporation or (ii) any other such Subsidiary; provided that if any such transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving corporation; (b) any Subsidiary of the Borrower may Dispose of assets to the Borrower or any other Subsidiary of the Borrower; (c) subject to Section 6.04, the Borrower or any Subsidiary of the Borrower may make any Acquisition; provided that immediately prior to and after giving effect to any such Acquisition, (i) no Default shall have occurred and be continuing and (ii) not more than $100,000,000 of the proceeds of the Revolving Credit Loans then outstanding shall have been applied, directly by the Borrower or indirectly through a Subsidiary, for the purposes specified in clause (ii) of Section 5.05; and (d) the Borrower or any Subsidiary of the Borrower may make any Acquisition from any Subsidiary of the Borrower in each case for consideration that is not in excess of the fair market value of the Property acquired in such Acquisition as determined in good faith by the chief financial officer of the Borrower. SECTION 6.04. Lines of Business. Neither the Borrower nor any of its Subsidiaries shall engage to any substantial extent in any line or lines of business activity other than the business of designing, manufacturing, distributing, selling, leasing and servicing products used in commercial aircraft, business jets, buses and trains and servicing and acting as a broker in the sales and leases of such products together with any other business reasonably related to the foregoing. SECTION 6.05. Investments. The Borrower will not, nor will it permit any of its Subsidiaries to, make or permit to remain outstanding any Investments except: (a) Investments outstanding on the date hereof and identified in Schedule IV Part B; (b) operating deposit accounts with banks; (c) Permitted Investments; (d) Investments by the Borrower in Subsidiaries of the Borrower in the ordinary course of business; provided that 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 Borrower or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Borrower) sold, assigned, transferred or otherwise disposed of on or after May 26, 2001 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 Borrower to any one or more Subsidiaries since May 26, 2001 shall not exceed in the aggregate at any one time outstanding the greater of (x) $50,000,000 and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for which financial statements have been provided hereunder; (e) Investments by Subsidiaries of the Borrower in other Subsidiaries of the Borrower and in the Borrower; (f) Interest Rate Protection Agreements entered into in the ordinary course of the Borrower's financial planning and not for speculative purposes; (g) Investments permitted by clause (c) of the last sentence of Section 6.03; and (h) Investments of the Borrower 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 Borrower ("Minority-Owned Entities") or (ii) representing obligations of customers owing to the Borrower 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 Borrower and its Subsidiaries as provided for in Section 6.04 hereof and on such terms as the management of the Borrower 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 Borrower or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Borrower) sold, assigned, transferred or otherwise disposed of on or after May 26, 2001 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 Borrower to any one or more Subsidiaries since May 26, 2001 shall not exceed in the aggregate at any one time outstanding the greater of (x) $50,000,000 and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for which financial statements have been provided hereunder. SECTION 6.06. Restricted Payments. The Borrower will not, nor will it permit any of its Subsidiaries to, declare or make any Restricted Payment at any time; provided that (i) so long as no Default shall have occurred and be continuing or result therefrom, the Borrower may make Restricted Payments in an amount up to but not exceeding (A) $25,000,000 in the aggregate plus (B) the aggregate proceeds of the sale, assignment, transfer or other disposition of any shares of stock of Advanced Thermal Sciences Corporation in connection with an initial public offering of such shares of stock plus (C) in any fiscal year of the Borrower, an aggregate amount up to but not exceeding 25% of the net earnings of the Borrower for the immediately preceding fiscal year ("Available Net Earnings"), provided that any portion of Available Net Earnings not used for Restricted Payments in any fiscal year (the "Carry-Over Amount") may be used for Restricted Payments in the immediately succeeding fiscal year only, for which purpose Restricted Payments in any fiscal year shall be deemed to have been made first from Available Net Earnings, and only thereafter from any Carry-Over Amount, such Restricted Payments set forth in clauses (i)(A) and (B) hereof not to exceed $75,000,000 in the aggregate, and (ii) any Subsidiary of the Borrower may make Restricted Payments to the Borrower or any other Subsidiary of the Borrower from time to time. SECTION 6.07. Transactions with Affiliates. Except as set forth in Schedule VII or as expressly permitted by this Agreement, the Borrower will not, nor will it permit any of its Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate with or purchase or acquire Property from an Affiliate; or (d) enter into any other transaction directly or indirectly with or for the benefit of an Affiliate (including, without limitation, guarantees and assumptions of obligations of an Affiliate); provided that (x) any Affiliate who is an individual may serve as a director, officer or employee of the Borrower or any of its Subsidiaries and receive reasonable compensation for his or her services in such capacity and (y) the Borrower and its Subsidiaries may enter into transactions (other than extensions of credit by the Borrower or any of its Subsidiaries to an Affiliate) providing for the leasing of Property, the rendering or receipt of services or the purchase or sale of inventory and other Property in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to the Borrower and its Subsidiaries as the monetary or business consideration which would obtain in a comparable transaction with a Person not an Affiliate. SECTION 6.08. Certain Financial Covenants. --------------------------- (a) Leverage Ratio. The Borrower will not permit the Leverage Ratio to exceed the following respective ratios at any time during the following respective periods:
(A) (B) Pre Change in Fiscal Post Change in Fiscal Ratio Year Period Year Period From (but not including) the From (but not including) the 5.25 to 1 Effective Date through the Effective Date through the Fiscal Fiscal Date in February 2003 Date in December 2002 From (but not including) the From (but not including) the 4.90 to 1 Fiscal Date in February 2003 Fiscal Date in December 2002 through the Fiscal Date in through the Fiscal Date in February 2004 December 2003 From (but not including) the From (but not including) the 4.25 to 1 Fiscal Date in February 2004 Fiscal Date in December 2003 through the Fiscal Date in through the Fiscal Date in February 2005 December 2004 Thereafter Thereafter 4.00 to 1
For purposes hereof, the periods set forth in column (A) above shall be applicable until such time as the Borrower shall have delivered the pro forma financial statements referred to in Section 5.01(h) following a change in the Borrower's fiscal year as contemplated in Section 1.04(c), in which event the periods set forth in column (B) above shall be applicable. (b) Interest Coverage Ratio. The Borrower will not permit the Interest Coverage Ratio to be less than the following respective ratios at any time during the following respective periods:
(A) (B) Pre Change in Fiscal Post Change in Fiscal Ratio Year Period Year Period From (but not including) the From (but not including) the 2.00 to 1 Effective Date through the Effective Date through the Fiscal Fiscal Date in February 2003 Date in December 2002 From (but not including) the From (but not including) the 2.25 to 1 Fiscal Date in February 2003 Fiscal Date in December 2002 through the Fiscal Date in through the Fiscal Date in February 2004 December 2003 From (but not including) the From (but not including) the 2.50 to 1 Fiscal Date in February 2004 Fiscal Date in December 2003 through the Fiscal Date in through the Fiscal Date in February 2005 December 2004 From (but not including) the From (but not including) the 2.75 to 1 Fiscal Date in February 2005 Fiscal Date in December 2004 through the Fiscal Date in through the Fiscal Date in February 2006 December 2005 Thereafter Thereafter 3.00 to 1
For purposes hereof, the periods set forth in column (A) above shall be applicable until such time as the Borrower shall have delivered the pro forma financial statements referred to in Section 5.01(h) following a change in the Borrower's fiscal year as contemplated in Section 1.04(c), in which event the periods set forth in column (B) above shall be applicable. (c) Adjusted Net Worth. The Borrower will not at any date permit Adjusted Net Worth to be less than the sum of (a) $150,000,000 plus (b) 50% of the aggregate amount of Net Available Proceeds of Equity Issuances since May 26, 2001 plus (c) 50% of the sum of consolidated net earnings of the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) for each fiscal quarter of the Borrower ending after May 26, 2001; provided that consolidated net earnings for any fiscal quarter in which there is a consolidated net loss shall be deemed to be zero. SECTION 6.09. Modifications of Certain Documents. The Borrower will not consent to (i) any modification, supplement or waiver of any of the provisions of the Senior Subordinated Indentures or (ii) to the creation of any class of preferred stock that has a mandatory redemption date prior to the Commitment Termination Date; provided that any Senior Subordinated Indenture may be amended in connection with, and to facilitate, the purchase, redemption, prepayment, defeasance or other retirement in full of the Indebtedness issued pursuant thereto, which purchase, redemption, prepayment, defeasance or other retirement is permitted hereunder. SECTION 6.10. Redemption of Senior Subordinated Indebtedness. ---------------------------------------------- (a) Redemptions Generally. Except as permitted by Section 6.06, the Borrower will not prepay, redeem, effect a defeasance or covenant defeasance or otherwise retire any of the Indebtedness issued pursuant to the Senior Subordinated Indentures. (b) Synthetic Redemptions. The Borrower will not, and will not permit any Subsidiary to, enter into or be party to, or make any payment under, any Synthetic Purchase Agreement unless (i) in the case of any Synthetic Purchase Agreement related to any Indebtedness issued pursuant to the Senior Subordinated Indentures, the payments required to be made by the Borrower or its Subsidiaries thereunder are limited to the amount permitted under Section 6.06 and (ii) in the case of any Synthetic Purchase Agreement, the obligations of the Borrower and the Subsidiaries thereunder are subordinated to the obligations under the Loan Documents on terms satisfactory to the Administrative Agent. ARTICLE VII EVENTS OF DEFAULT If any of the following events ("Events of Default") shall occur: (a) The Borrower shall (i) default in the payment of any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when due (whether at stated maturity or upon mandatory or optional prepayment) or (ii) default in the payment of any interest on any Loan, any fee or any other amount payable by it hereunder or under any other Loan Document when due (whether at stated maturity or upon mandatory or optional prepayment or otherwise) and such default shall have continued unremedied for three or more Business Days; or (b) The Borrower or any of its Subsidiaries shall default in the payment when due of any principal of or interest on any of its other Indebtedness aggregating $5,000,000 or more, or in the payment when due of any amount aggregating $5,000,000 or more under any Interest Rate Protection Agreement; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness or any event specified in any Interest Rate Protection Agreement shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity or to have the interest rate thereon reset to a level so that securities evidencing such Indebtedness trade at a level specified in relation to the par value thereof or, in the case of an Interest Rate Protection Agreement, to permit the payments owing under such Interest Rate Protection Agreement to be liquidated in an amount aggregating $5,000,000 or more; or (c) Any representation, warranty or certification made or deemed made herein or in any other Loan Document (or in any modification or supplement hereto or thereto) by the Borrower, or any certificate furnished to any Lender or the Administrative Agent pursuant to the provisions hereof or thereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or (d) The Borrower shall default in the performance of any of its obligations under any of Sections 5.02(a), 5.06(d), 6.02, 6.03, 6.05, 6.06 or 6.08 or the Borrower shall default in the performance of any of its obligations under Section 5.03 of the Security Agreement; or the Borrower shall default in the performance of any of its other obligations in this Agreement or any other Loan Document and such default shall continue unremedied for a period of thirty days after notice thereof to the Borrower by the Administrative Agent or any Lender (through the Administrative Agent); or (e) The Borrower or any of its Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (f) The Borrower or any of its Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its Property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (g) A proceeding or case shall be commenced, without the application or consent of the Borrower or any of its Subsidiaries, in any court of competent jurisdiction, seeking (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Borrower or such Subsidiary or of all or any substantial part of its Property, or (iii) similar relief in respect of the Borrower or such Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief against the Borrower or such Subsidiary shall be entered in an involuntary case under the Bankruptcy Code; or (h) A final judgment or judgments for the payment of money in excess of $5,000,000 in the aggregate (exclusive of judgment amounts fully covered by insurance where the insurer has admitted liability in respect of such judgment) or in excess of $20,000,000 in the aggregate (regardless of insurance coverage) shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against the Borrower or any of its Subsidiaries and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Borrower or the relevant Subsidiary shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) An event or condition specified in Section 5.02(c) shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, the Borrower or any ERISA Affiliate shall incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) or in the opinion of the Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) which would constitute, in the determination of the Required Lenders, a Material Adverse Effect; or (j) A reasonable basis shall exist for the assertion against the Borrower or any of its Subsidiaries of (or there shall have been asserted against the Borrower or any of its Subsidiaries) claims or liabilities, whether accrued, absolute or contingent, based on or arising from the generation, storage, transport, handling or disposal of Hazardous Materials by the Borrower or any of its Subsidiaries or Affiliates, or any predecessor in interest of the Borrower or any of its Subsidiaries or Affiliates, or relating to any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries or Affiliates, which claims or liabilities (insofar as they are payable by the Borrower or any of its Subsidiaries but after deducting any portion thereof which is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor), in the judgment of the Required Lenders are reasonably likely to be determined adversely to the Borrower or any of its Subsidiaries, and the amount thereof is, singly or in the aggregate, reasonably likely to have a Material Adverse Effect; or (k) Any "person" or "group" (as such terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act (other than Amin or Robert Khoury, their lineal descendants or trusts established by such Persons for their respective lineal descendants)) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the aggregate voting rights of the outstanding capital stock of the Borrower (on a fully diluted basis); or during any consecutive 25-month period, individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any new directors whose election by the stockholders of the Borrower was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Borrower then in office; or (l) Except for expiration in accordance with its terms, any of the Security Documents shall be terminated or shall cease to be in full force and effect or the Borrower shall so assert, for whatever reason; then, and in every such event (other than an event with respect to the Borrower described in clause (f) or (g) of this Article VII), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (f) or (g) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII THE ADMINISTRATIVE AGENT Each of the Lenders and the Issuing Lender hereby irrevocably appoints the Administrative Agent as its agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein and in the other Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Revolving Credit Lenders or the Required Incremental Loan Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent may resign at any time by notifying the Lenders, the Issuing Lender and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent's resignation shall nonetheless become effective and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and (2) the Required Lenders shall perform the duties of the Administrative Agent (and all payments and communications provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly) until such time as the Required Lenders appoint a successor agent as provided for above in this paragraph. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at 1400 Corporate Center Way, Wellington, FL 33414, Attention of Jeffrey P. Holtzman (Telecopy No. (561) 791-3966; Telephone No. (561) 791-5000); (b) if to the Administrative Agent, to The Chase Manhattan Bank, 1 Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Frank Giacalone, Loan and Agency Services Group (Telecopy No. (212) 552-5650; Telephone No.(212) 552-5949), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Vilma Francis (Telecopy No. (212) 270-4016; Telephone No. (212) 270-5484); (c) if to the Issuing Lender, to it at 4 Metrotech Center, 8th Floor, Brooklyn, New York 11245, Attention of Rebecca McNally (Telecopy No.(718) 552-6537; Telephone No.(718)242-3468); and (d) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any such change by a Lender, by notice to the Borrower and the Administrative Agent). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. ------------------- (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent, the Issuing Lender or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Lender and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Lender may have had notice or knowledge of such Default at the time. (b) Amendments. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(d) without the consent of each Lender affected thereby, or (v) change any of the provisions of this Section or the percentage in the definition of the term "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Lender hereunder without the prior written consent of the Administrative Agent or the Issuing Lender, as the case may be. Anything in this Agreement to the contrary notwithstanding, no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling the Borrower to satisfy a condition precedent to the making of Revolving Credit Loans shall be effective against the Lenders of any Class unless the Required Lenders of such Class shall have concurred with such waiver or modification, and no waiver or modification of any provision of this Agreement or any other Loan Document that could reasonably be expected to adversely affect the Lenders of any Class shall be effective against the Lenders of such Class unless the Required Lenders of such Class shall have concurred with such waiver or modification. (c) Amendments to Security Documents. No Security Document nor any provision thereof may be waived, amended or modified, nor may the Liens thereof be spread to secure any additional obligations (including any increase in Loans hereunder) except pursuant to an agreement or agreements in writing entered into by the Borrower, and by the Administrative Agent with the consent of the Required Lenders; provided that, (i) without the written consent of each Lender, no such agreement shall release the Borrower from its obligations under the Security Documents and (ii) without the written consent of each Lender, no such agreement shall release all or substantially all of the collateral security or otherwise terminate all or substantially all of the Liens under the Security Documents, alter the relative priorities of the obligations entitled to the Liens created under the Security Documents with respect to all or substantially all of the collateral security provided thereby, except that (A) no such consent shall be required, and the Administrative Agent is hereby authorized (and so agrees with the Borrower), (i) to release any Lien covering property that is the subject of either a disposition of property permitted hereunder or a disposition to which the Required Lenders have consented, and (ii) to terminate the Security Agreement if (w) at the time of such release, no Incremental Loans are outstanding, (x) the long term senior, unsecured debt of the Borrower is rated at least Baa2 by Moody's and is rated at least BBB by S&P, (y) no Default has occurred and is continuing and (z) the Borrower shall have delivered to the Administrative Agent a certificate signed by a senior financial officer of the Borrower stating that the conditions set forth in clauses (w), (x) and (y) above have been satisfied, (B) no such consent shall be required with respect to, and the Administrative Agent is hereby authorized to enter into, any amendment that would implement collateral security for the Incremental Loans hereunder; (C) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent without the prior written consent of the Administrative Agent; and (D) no such consent shall be required in order to allow the Administrative Agent to release the Lien covering the ownership interests which are subject to the requirements of Section 5.06(d). SECTION 9.03. Expenses; Indemnity; Damage Waiver. ---------------------------------- (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Lender or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Lender or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including in connection with any workout, restructuring or negotiations in respect thereof and (iv) and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Security Document or any other document referred to therein. (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, the Issuing Lender and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any Environmental Law as a result of the past, present or future operations of the Borrower or any of its Subsidiaries (or any predecessor in interest to the Borrower or any of its Subsidiaries), or the past, present or future condition of any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries (or any such predecessor in interest), or any Release or threatened Release of any Hazardous Materials from any such site or facility, including any such Release or threatened Release which shall occur during any period when the Administrative Agent or any Lender shall be in possession of any such site or facility following the exercise by the Administrative Agent or any Lender of any of its rights and remedies hereunder or under any of the Security Documents but only to the extent that such Release or threatened Release is directly or indirectly attributable to facts, circumstances or Releases of Hazardous Materials existing prior to the date of such possession or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Reimbursement by Lenders. To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Issuing Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Issuing Lender, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Issuing Lender in its capacity as such. (d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. (e) Payments. All amounts due under this Section shall be payable promptly after written demand therefor. -------- SECTION 9.04. Successors and Assigns. ---------------------- (a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Lender and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or a Lender Affiliate, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure, the Issuing Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or a Lender Affiliate or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or, in the case of an assignment of by an Incremental Loan Lender of a portion of its Incremental Loan Commitment, $1,000,000) unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement in respect of Revolving Credit Commitments and Revolving Credit Loans and/or Incremental Loan Commitments and Incremental Loans, as the case may be, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (a), (b), (f) or (g) of Article VII has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. Notwithstanding anything to the contrary contained herein (but for the avoidance of doubt an "SPV", as defined below, shall, for purposes of Section 2.15 be considered an assignee of such Lender), any Lender (a "Granting Lender") may grant to a special purpose vehicle (an "SPV") of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to Section 2.01; provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan, (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) the Borrower may bring any proceeding against either the Granting Lender or the SPV in order to enforce any rights of the Borrower under any of the Loan Documents. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Lender makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof arising out of any claim against such SPV under this Agreement. In addition, notwithstanding anything to the contrary contained in this Section, any SPV may with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support (if any) with respect to commercial paper issued by such SPV to fund such Loans and such SPV may disclose, on a confidential basis, confidential information with respect to the Borrower and its Subsidiaries to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit liquidity enhancement to such SPV. This paragraph may not be amended without the consent of any SPV at the time holding Loans under this Agreement. (c) Maintenance of Register by the Administrative Agent. The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York City a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notification to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Lender and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Effectiveness of Assignments. Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Participations. Any Lender may, without the consent of the Borrower, the Administrative Agent or the Issuing Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. (f) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. (h) No Assignments to the Borrower or Affiliates. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan or LC Exposure held by it hereunder to the Borrower or any of its Affiliates or Subsidiaries without the prior consent of each Lender. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Lender or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements entered into by the Borrower with respect to fees payable to the Administrative Agent constitute the entire contract between and among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page to this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Etc. -------------------------------- (a) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Submission to Jurisdiction. The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Lender or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) Waiver of Venue. The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Service of Process. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12.Treatment of Certain Information; Confidentiality ------------------------------------------------- (a) Treatment of Certain Information. The Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate, it being understood that any such subsidiary or affiliate receiving such information shall be bound by the provisions of paragraph (b) of this Section as if it were a Lender hereunder. Such authorization shall survive the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. (b) Confidentiality. Each of the Administrative Agent, the Issuing Lender and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement at the time of such disclosure, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this paragraph, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this paragraph or (B) becomes available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this paragraph, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BE AEROSPACE, INC. By_________________________ Name: Title: LENDERS THE CHASE MANHATTAN BANK, individually and as Administrative Agent By_________________________ Name: Title: BANK OF AMERICA, N.A. By_________________________ Name: Title: CREDIT SUISSE FIRST BOSTON By_________________________ Name: Title: By_________________________ Name: Title: FIRST UNION NATIONAL BANK By_________________________ Name: Title: MERRILL LYNCH CAPITAL CORPORATION By_________________________ Name: Title: THE BANK OF NEW YORK By_________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By_________________________ Name: Title: