-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BWfPBCudt2BVo5tkJmvMb1ywhiQRP8+o6JKTWRQtCbtogRvnO6sagJyWHGaYVmL7 UcAYyVZZlaentqyEatLcPw== 0000947871-98-000301.txt : 19980914 0000947871-98-000301.hdr.sgml : 19980914 ACCESSION NUMBER: 0000947871-98-000301 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19980911 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BE AEROSPACE INC CENTRAL INDEX KEY: 0000861361 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC BUILDING AND RELATED FURNITURE [2531] IRS NUMBER: 061209796 STATE OF INCORPORATION: DE FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-60209 FILM NUMBER: 98708332 BUSINESS ADDRESS: STREET 1: 1400 CORPORATE CTR WY CITY: WELLINGTON STATE: FL ZIP: 33414 BUSINESS PHONE: 5617915000 MAIL ADDRESS: STREET 1: 1300 CORPORATE CENTER WAY STREET 2: 1300 CORPORATE CENTER WAY CITY: WELLINGTON STATE: FL ZIP: 33414 FORMER COMPANY: FORMER CONFORMED NAME: BE AVIONICS INC DATE OF NAME CHANGE: 19920608 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 As filed with the Securities and Exchange Commission on September 11, 1998. Registration No. 333-60209 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------- Amendment No. 1 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- BE AEROSPACE, INC. (Exact name of registrant as specified in its charter) Delaware 06-1209796 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1400 Corporate Center Way, Wellington, Florida 33414 (561) 791-5000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Edmund J. Moriarty, Esq. General Counsel 1400 Corporate Center Way Wellington, FL 33414 (561) 791-5000 / (561) 791-3966 (fax) (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- Copies of all communications to: Rohan S. Weerasinghe, Esq. Winthrop G. Minot, Esq. Shearman & Sterling Ropes & Gray 599 Lexington Avenue One International Place New York, New York 10022 Boston, Massachusetts 02110 (212) 848-4000 / (212) 848-7179 (fax) (617) 951-7000/(617) 951-7050 (fax) --------------------- Approximate date of commencement of proposed sale to the public: From time to time or at one time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act") other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. |X| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| --------------------- The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED September 11, 1998 5,166,675 Shares [Logo] BE AEROSPACE, INC. Common Stock ---------------- All of the shares (the "Shares") of Common Stock of BE Aerospace, Inc., a Delaware corporation ("B/E" or the "Company"), par value $.01 per share (the "Common Stock"), offered hereby are being offered by certain stockholders listed herein (collectively, the "Selling Stockholders"), who may from time to time offer for sale shares of the Common Stock. The Selling Stockholders received such shares in connection with the acquisitions of either ASI, ALC or SMR (each as defined herein). Except as provided by the SMR Acquisition Agreement (as defined herein), the Company will not receive any proceeds from the sale by the Selling Stockholders of the Shares. See "Selling Stockholders." The Selling Stockholders have advised the Company that the Shares of Common Stock offered hereby may be offered or sold by or for the account of such Selling Stockholders, from time to time, to purchasers directly, or through brokers in brokerage transactions on the Nasdaq National Market, or to underwriters or dealers in negotiated transactions or in a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. From time to time the Selling Stockholders may engage in short sales, puts and calls and other transactions in securities of the Company, or derivatives thereof, and may sell and deliver the Shares in connection therewith. Brokers, dealers and underwriters that participate in the distribution of the Common Stock offered hereby may be deemed to be underwriters under the Securities Act of 1933 as amended, and together with the rules and regulations thereunder (the "Securities Act"), and any discounts or commissions received by them from the Selling Stockholders and any profit on the resale of the Common Stock offered hereby by them may be deemed to be underwriting discounts and commissions under the Securities Act. The Selling Stockholders may be deemed to be underwriters under the Securities Act. The Company will bear all expenses in connection with the offering made hereunder, other than, in the case of the Selling Stockholders who received their shares in connection with the acquisitions of ASI or ALC, all applicable stock transfer taxes, brokerage commissions, underwriting discounts or commissions and fees of such Selling Stockholders' counsel which will be paid by such Selling Stockholders, pursuant to the relevant Merger Agreements (as defined herein). The Company has agreed to indemnify the Selling Stockholders against certain liabilities, including certain liabilities under the Securities Act, in connection with the registration and the offering and sale of the Common Stock offered hereby. See "Plan of Distribution." The Common Stock is listed on the Nasdaq National Market ("Nasdaq") under the symbol "BEAV." On September 10, 1998, the last reported sale price of the Common Stock was $22.75 per share. If necessary, certain information relating to the Selling Stockholders, the terms of each sale of Common Stock offered hereby, including the public offering price, the names of any underwriters or agents, the compensation, if any, of such underwriters or agents and the other terms in connection with the sale of the Common Stock, in respect of which this Prospectus is delivered will be set forth in an accompanying Prospectus Supplement (the "Prospectus Supplement"). FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 5. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- The date of this Prospectus is , 1998. No person has been authorized to give any information or to make any representations other than those contained in this Prospectus or any Prospectus Supplement and, if given or made, such information or representations must not be relied upon as having been authorized. This Prospectus and any Prospectus Supplement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus or any Prospectus Supplement nor any sale made hereunder or thereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or thereof or that the information contained herein or therein is correct as of any time subsequent to the date of such information. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements, and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. The Company has filed with the Commission a registration statement on Form S-3 (the "Registration Statement") under the Securities Act with respect to the Common Stock to which this Prospectus relates. This Prospectus does not contain all the information set forth in the Registration Statement, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the Common Stock, reference is made to the Registration Statement, including the exhibits thereto. The Registration Statement may be inspected by anyone without charge at the principal office of the Commission in Washington, D.C., and copies of all or part of it may be obtained from the Commission upon payment of the prescribed fees. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed with the Commission (Commission File No. 000-18348) by the Company are incorporated in this Prospectus by reference and made a part hereof: (1) B/E's Annual Report on Form 10-K for the year ended February 28, 1998 (the "1998 10-K"), filed with the Commission on May 29, 1998, as amended by the amendment to the 1998 10-K filed with the Commission on June 29, 1998. (2) The Company's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998, filed with the Commission on July 14, 1998. (3) The description of the Company's Common Stock contained in the Company's Registration Statement on Form 8-A filed with the Commission on March 7, 1990 under Section 12 of the Exchange Act, including any report or amendment updating such description. (4) The Company's Current Reports on Form 8-K filed on April 13, 1998, April 27, 1998, May 8, 1998 and August 24, 1998, respectively. All documents subsequently filed by B/E with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the termination of the offering of the Common Stock shall be deemed to be incorporated by reference into this Prospectus and to be a part of this Prospectus from the date of filing of such document. Any statement contained herein, or in a document all or a portion of which is incorporated or deemed to be -2- incorporated by reference herein, shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein or in any other subsequently filed document that is also deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. B/E will provide without charge to any person to whom this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the foregoing documents incorporated by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Written requests should be directed to: Chief Financial Officer, BE Aerospace, Inc., 1400 Corporate Center Way, Wellington, FL 33414. Telephone requests may be directed to B/E at (561) 791-5000. In connection with any underwritten offering of the Shares, the underwriters and certain persons participating in such offering may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock, including over-allotment, stabilizing transactions, syndicate short covering transactions and penalty bids. Such transactions may be effected on the Nasdaq, in the over-the-counter market or otherwise. Such transactions, if commenced, may be discontinued at any time. THE COMPANY General B/E is the world's largest manufacturer of commercial and general aviation aircraft cabin interior products, serving virtually all major airlines and a wide variety of general aviation customers and airframe manufacturers. Management believes that the Company has achieved leading global market positions in each of its major product categories, which include aircraft seats, food and beverage preparation and storage equipment, galley and other interior structures, oxygen delivery systems, lighting systems and in-flight entertainment systems. In addition, B/E provides design, integration, installation and certification services, offering its customers in-house capabilities to design, project manage, integrate, test and certify reconfigurations and modifications to commercial aircraft passenger cabin interiors and to manufacture related products, including engineering kits and interface components. B/E also provides upgrade, maintenance and repair services for its airline customers around the world. B/E's executive offices are located at 1400 Corporate Center Way, Wellington, Florida 33414, and its telephone number is (561) 791-5000. Recent Acquisitions On March 27, 1998, the Company acquired Aerospace Interiors, Inc. ("ASI") for a total of 201,895 shares of Common Stock, representing a purchase price of approximately $5.6 million. ASI services, cleans and repairs aircraft interior parts and products, and is a leading provider of seat repair and maintenance services performed by non-airline entities. See "Selling Stockholders." On April, 14, 1998, the Company acquired Puritan-Bennett Aero Systems Co. ("PBASCO"), a wholly owned subsidiary of Nellcor Puritan Bennett Inc., for a cash purchase price of $69.7 million. PBASCO is a leading manufacturer of commercial aircraft oxygen delivery systems and passenger service unit components and systems ("PSU") and is a major supplier of air valves, overhead lights and switches for both commercial and general aviation aircraft. On April 21, 1998, the Company acquired Aircraft Modular Products ("AMP") for a cash purchase price of $117.3 million. AMP is a leading manufacturer of cabin interior products for general aviation (business jet) and commercial-type VIP aircraft, providing a broad line of products including seating, sidewalls, bulkheads, credenza, closets, galley structures, lavatories, tables and sofas, as well as related spare parts. -3- On July 30, 1998, the Company acquired Aerospace Lighting Corporation ("ALC") for a total of 964,780 shares of Common Stock, representing a purchase price of approximately $28.1 million. ALC is a market leader in producing interior fluorescent lighting systems for business and corporate jet aircraft. See "Selling Stockholders." On August 7, 1998, the Company acquired the common stock of SMR Aerospace, Inc., the membership interests of SMR Developers LLC, and the partnership interests of SMR Associates (together, the "SMR Companies" or "SMR") for a total aggregate purchase price of approximately $120.0 million, subject to adjustment (the "SMR Purchase Price"). Pursuant to the SMR Acquisition Agreement, the Company issued 4,000,000 shares of Common Stock to the SMR Sellers (as defined herein) and paid the SMR Sellers $2.0 million in cash. The Company also paid $22.0 million in cash to the employee stock ownership plan (the "ESOP") of Flight Structures, Inc. ("FSI"), a subsidiary of SMR Aerospace, Inc., pursuant to a separate Stock Purchase Agreement between the ESOP and B/E, to purchase the minority equity interest in FSI held by the ESOP, bringing the total aggregate purchase price paid by B/E for SMR to approximately $142.0 million. To the extent the Net Proceeds (as defined in the SMR Acquisition Agreement), which include the $2 million in cash already received by the SMR Sellers, from the sale of the 4,000,000 shares of Common Stock is less than the SMR Purchase Price, the Company will pay such difference to the SMR Sellers with funds drawn under the Bank Credit Facility (as defined herein). B/E's obligations to the SMR Sellers under the SMR Acquisition Agreement are secured by an irrevocable stand-by letter of credit from The Chase Manhattan Bank in favor of the SMR Sellers. If such Net Proceeds exceed the SMR Purchase Price, the SMR Sellers will remit such excess to the Company. SMR is a leader in providing design, integration, installation and certification services for commercial aircraft passenger cabin interiors. SMR provides a broad range of interior reconfiguration services which allow airlines to change the size of certain classes of service, modify and upgrade the seating, install telecommunications or entertainment options, relocate galleys, lavatories, and overhead bins, and install crew rest compartments. SMR is also a supplier of structural design and integration services, including airframe modifications for passenger-to-freighter conversions. In addition, SMR provides a variety of niche products and components that are used to facilitate reconfigurations and conversions. SMR's services are performed primarily on an aftermarket basis, and its customers include major airlines, such as United Airlines, Japan Airlines, British Airways, Air France, Cathay Pacific and Qantas, as well as Boeing, Airborne Express and Federal Express. See "Selling Stockholders." On September 3, 1998, the Company acquired substantially all of the galley equipment assets and assumed related liabilities of CF Taylor Interiors Limited and acquired the common stock of CF Taylor (Wales) Limited (collectively "CF Taylor"), both wholly owned subsidiaries of EIS Group PLC, for a total cash purchase price of approximately (pound)14.9 million, (approximately $25.1 million, based upon the exchange rate in effect on September 3, 1998). CF Taylor is a manufacturer of galley equipment for both narrow- and wide-body aircraft, including galley structures, crew rests and related spare parts. -4- RISK FACTORS Prior to making an investment decision with respect to the Shares of Common Stock offered hereby, prospective investors should carefully consider the specific factors set forth below, together with all of the other information appearing herein, in light of their particular investment objectives and financial circumstances. Dependence upon Conditions in the Airline Industry The Company's principal customers are the world's commercial airlines. As a result, the Company's business is directly dependent upon the conditions in the highly cyclical and competitive commercial airline industry. In the late 1980s and early 1990s, the airline industry suffered a severe downturn, which resulted in record losses and several air carriers seeking protection under bankruptcy laws. As a consequence, during such period, airlines sought to conserve cash by reducing or deferring scheduled cabin interior refurbishment and upgrade programs and by delaying purchases of new aircraft. This led to a significant contraction in the commercial aircraft cabin interior products industry and a decline in the Company's business and profitability. The airline industry has now experienced five consecutive years of profitability including record profitability in each of the last three calendar years. This financial turnaround has, in part, been driven by record load factors, rising fare prices and declining fuel costs. The airlines have substantially restored their balance sheets through cash generated from operations and debt and equity placements. As a result, the levels of airline spending on refurbishment and new aircraft purchases have expanded. However, due to the volatility of the airline industry there can be no assurance that the current profitability of the airline industry will continue or that the airlines will maintain or increase expenditures on cabin interior products for refurbishments or new aircraft. In addition, the airline industry is undergoing a process of consolidation and significantly increased competition. Such consolidation could result in a reduction of future aircraft orders as overlapping routes are eliminated and airlines seek greater economies through higher aircraft utilization. Increased airline competition may also result in airlines seeking to reduce costs by promoting greater price competition from airline cabin interior products manufacturers, thereby adversely affecting the Company's revenues and margins. Recently, turbulence in the financial and currency markets of many Asian countries has led to uncertainty with respect to the economic outlook for these countries. Of the Company's $590 million of backlog at May 30, 1998, the Company had $45 million with Asian carriers deliverable in fiscal 1999 and a further $76 million deliverable in subsequent fiscal years. Of such Asian carrier backlog, approximately $36 million was with Japan Airlines, Singapore Airlines and Cathay Pacific. Although not all carriers have been affected by the current economic events in the Pacific Rim, certain carriers could cancel or defer their existing orders and future orders from airlines in these countries may be adversely affected. New Product Introductions and Technological Change Airlines currently are taking delivery of a new generation of aircraft and demanding increasingly sophisticated cabin interior products. As a result, the cabin interior configurations of commercial aircraft are becoming more complex and will require more technologically advanced and integrated products. For example, airlines increasingly are seeking sophisticated in-flight entertainment systems, such as the MDDS interactive individual passenger in-flight entertainment system developed by B/E. The Company expects that in-flight entertainment systems, including live broadcast television on narrow-body aircraft, will provide a significant percentage of its future revenues. Development of the MDDS and related in-flight entertainment systems required substantial investment by the Company and third parties in research, development and engineering. The future success of the Company may depend to some extent on its ability to manufacture successfully and deliver, on a timely basis, in-flight entertainment products and to have these products perform at the level expected by B/E's customers and their passengers, as well as the Company's ability to continue to develop, profitably manufacture and deliver, on a timely basis, other technologically advanced, reliable high-quality products, which can be readily integrated into complex cabin interior configurations. -5- Competition The Company competes with a number of established companies that have significantly greater financial, technological and marketing resources than the Company. Although the Company has achieved a significant share of the market for a number of its commercial airline cabin interior products, there can be no assurance that the Company will be able to maintain this market share. The ability of the Company to maintain its market share will depend not only on its ability to remain the supplier of retrofit and refurbishment products and spare parts on the commercial fleets on which its products are currently in service, but also on its success in causing its products to be selected for installation in new aircraft, including next-generation aircraft, expected to be purchased by the airlines over the next decade, and in avoiding product obsolescence. The Company's primary competitors in the market for new passenger entertainment products, including individual seat video and in-flight entertainment and cabin management systems, are Matsushita Electronics and Rockwell Collins, each of which has significantly greater technological capabilities and financial and marketing resources than the Company. Adverse Consequences of Financial Leverage The Company has substantial indebtedness and, as a result, significant debt service obligations. As of May 30, 1998, the Company had approximately $436.2 million aggregate amount of indebtedness outstanding, representing approximately 80% of total capitalization. As a result of B/E's acquisition of the minority equity interest in FSI held by the ESOP, B/E will incur an additional $22.0 million of indebtedness. The degree of the Company's leverage could have important consequences to purchasers or holders of its shares of Common Stock, including: (i) limiting the Company's ability to obtain additional financing to fund future working capital requirements, capital expenditures, acquisitions or other general corporate requirements; (ii) requiring a substantial portion of the Company's cash flow from operations to be dedicated to debt service requirements, thereby reducing the funds available for operations and further business opportunities; and (iii) increasing the Company's vulnerability to adverse economic and industry conditions. In addition, since any borrowings under the Company's bank credit facilities will be at variable rates of interest, the Company will be vulnerable to increases in interest rates. The Company may incur additional indebtedness in the future, although its ability to do so will be restricted by the indentures governing the Company's 97/8% Senior Subordinated Notes due 2006 (the "97/8% Notes") and 8% Senior Subordinated Notes due 2008 (the "8% Notes") and by the terms of its existing credit facilities with The Chase Manhattan Bank (the "Bank Credit Facility"). The ability of the Company to make scheduled payments under its present and future indebtedness will depend on, among other things, the future operating performance of the Company and the Company's ability to refinance its indebtedness when necessary. Each of these factors is to a large extent subject to economic, financial, competitive and other factors beyond the Company's control. The Company's bank credit facilities and the indentures governing the 97/8% Notes and 8% Notes contain numerous financial and operating covenants that will limit the discretion of the Company's management with respect to certain business matters. These covenants will place significant restrictions on, among other things, the ability of the Company to incur additional indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments and to sell or otherwise dispose of assets and merge or consolidate with other entities. The Company's bank credit facilities also require the Company to meet certain financial ratios and tests. A failure to comply with the obligations contained in the Company's bank credit facilities, or the indentures governing the 97/8% Notes and 8% Notes, could result in an event of default under the Company's Bank Credit Facility, or the aforementioned indentures, which could permit acceleration of the related debt and acceleration of debt under other instruments that may contain cross- acceleration or cross-default provisions. Customer Delivery Requirements The commercial aircraft cabin interior products industry is currently experiencing a period of rapid growth. From February 22, 1997 to May 30, 1998, the Company has experienced an approximately 42% increase in its backlog. The ability of the Company to receive new contract awards and to deliver its existing backlog is dependent upon its (and its suppliers') ability to increase deliveries to meet the recent surge in demand. Although the Company believes it has -6- sufficient manufacturing capacity to meet customer demand, there can be no assurance that the Company, or its suppliers, will be able to meet the increased product delivery requirements. General Aviation Acquisitions; Ability to Integrate Acquired Businesses; Additional Capital Requirements Between 1989 and January 1996, the Company acquired nine companies. During fiscal 1999, the Company acquired six additional companies, including ALC, SMR and CF Taylor. Through several recent acquisitions, the Company has expanded its activities from the commercial to the general aviation market. There can be no assurance that the Company will be successful in entering the general aviation market. The Company intends to consider future strategic acquisitions in the commercial airline and general aviation cabin interior industries, some of which could be material to the Company. B/E is in discussions from time to time with one or more third parties regarding possible acquisitions. As of the date of this Prospectus, except as disclosed herein, the Company has no agreements or understanding with a prospective acquisition candidate in respect of a specific transaction. The ability of the Company to continue to achieve its goals will depend upon its ability to integrate effectively the recent and any future acquisitions and to achieve cost efficiencies. Although B/E has been successful in the past in doing so, there can be no assurance that the Company will continue to be successful. See "The Company -- Recent Acquisitions." Depending upon, among other things, the acquisition opportunities available, the Company may need to raise additional funds. The Company may seek such additional funds through public offerings or private placements of debt or equity securities or bank loans. Issuance of additional equity securities by the Company could result in substantial dilution to stockholders. In the absence of such financing, the Company's ability to make future acquisitions in accordance with its business strategy, to absorb adverse operating results, to fund capital expenditures or to respond to changing business and economic conditions may be adversely affected, all of which may have a material adverse effect on the Company's business, results of operations and financial condition. Regulation The Federal Aviation Administration (the "FAA") prescribes standards and licensing requirements for aircraft components, including virtually all commercial airline and general aviation cabin interior products, and licenses component repair stations within the United States. Comparable agencies regulate these matters in other countries. If the Company fails to obtain a required license for one of its products or services or loses a license previously granted, the sale of the subject product or service would be prohibited by law until such license is obtained or renewed. In addition, designing new products to meet existing FAA requirements and retrofitting installed products to comply with new FAA requirements can be both expensive and time-consuming. Risks Associated with the Year 2000 Issue The "Year 2000" issue is the result of computer programs using two digits rather than four to define the applicable year. Because of this programming convention, software, hardware or firmware may recognize a date using "00" as the year 1900 rather than the year 2000. Use of non-Year 2000 compliant programs could result in system failures, miscalculations or errors causing disruptions of operations or other business problems, including, among others, a temporary inability to process transactions and invoices or engage in similar normal business activities. B/E Technology Initiatives Program. The Company has experienced substantial growth as a result of having completed 15 acquisitions since 1989. Essentially all of the acquired businesses were operating on separate information systems, using different hardware and software platforms. In fiscal 1997, the Company undertook to examine its systems, both pre-existing and acquired, for Year 2000 compliance with a view to replacing non-compliant systems and creating an integrated Year 2000 compliant system. In addition, the Company has undertaken a comprehensive program to address the Year 2000 issue with respect to the following non-system areas: (i) network switching, (ii) the Company's non- information technology systems (such as buildings, plant, equipment and other infrastructure systems that may contain embedded microcontroller technology), and (iii) the status of major vendors, third party network service providers and other -7- material service providers (insofar as they relate to the Company's business). As explained below, the Company's efforts to assess its systems as well as non-system areas related to Year 2000 compliance involve (i) a wide-ranging assessment of the Year 2000 problems that may affect the Company, (ii) the development of remedies to address the problems discovered in the assessment phase and (iii) testing of the remedies. Assessment Phase. The Company has identified substantially all of its major hardware and software platforms in use as well as the relevant non-system areas described above. The Company has determined its systems requirements on a company-wide basis and has begun the implementation of an enterprise resource planning (ERP) system, which is intended to be a single system data base onto which all the Company's individual systems will be migrated. In relation thereto, the Company has signed contracts with substantially all of its significant hardware, software and other equipment vendors and third party network service providers related to Year 2000 compliance. Remediation and Testing Phase. In implementing the ERP system, the Company undertook, and has completed, a remediation and testing phase of all internal systems, LAN's, WAN's and PBX's. These phases were intended to address potential Year 2000 problems of the ERP system in relation to both information technology and non-information technology systems and then to demonstrate that the ERP software was Year 2000 compliant. ERP system software was selected and applications implemented by a team of internal users, outside system integrator specialists and ERP application experts. The ERP system was tested between June 1997 to 1998 by this team of experts. To date, one location has been fully implemented on the ERP system. This company-wide solution is being deployed to all other B/E sites in a manner that is designed to meet full implementation for all non-Year 2000 compliant sites by December 31, 1999. Contingency Plans. The Company has begun to analyze contingency plans to handle worst case Year 2000 scenarios that the Company believes reasonably could occur and, if necessary, intends to develop a timetable for completing such contingency plans. Costs Related to the Year 2000 Issue. To date, the Company has incurred approximately $15 million in costs related to the implementation of the ERP system. The Company currently estimates the total ERP implementation will cost approximately $30 million. Implementation costs have and will be capitalized to the extent permitted under generally accepted accounting principles. The Company expects that it will incur approximately $8 million related to this program during calendar 1998 and an additional $7 million during calendar 1999. Risks Related to the Year 2000 Issue. Although the Company's efforts to be Year 2000 compliant are intended to minimize the adverse effects of the Year 2000 issue on the Company's business and operations, the actual effects of the issue will not be known until 2000. Difficulties in implementing the ERP system or failure by the Company to fully implement the ERP system or the failure of its major vendors, third party network service providers, and other material service providers and customers to adequately address their respective Year 2000 issues in a timely manner could have a material adverse effect on the Company's business, results of operations, and financial condition. The Company's capital requirements may differ materially from the foregoing estimate as a result of regulatory, technological and competitive developments (including market developments and new opportunities) in the Company's industry. Risks Inherent in International Operations; Risks Associated with the Conversion by Certain EU Member States to the "Euro" Foreign operations of B/E accounted for 29% and 26% of total sales for the three months ended May 30, 1998 and fiscal 1998, respectively, as compared to 23% and 25% for the three months ended May 31, 1997 and fiscal 1997, respectively. In addition, the Company has direct investments in a number of subsidiaries in foreign countries (primarily in Europe). Fluctuations in the value of foreign currencies affect the dollar value of B/E's net investment in foreign subsidiaries, with these fluctuations being included in a separate component of stockholders' equity. Operating results of foreign subsidiaries are translated into U.S. dollars at average monthly exchange rates. For the three months ended May 30, 1998 and fiscal 1998, the impact of such transactions on operating results was not significant; however, B/E reported a cumulative foreign currency translation amount of $(3.5) million in stockholders' equity at May 30, 1998 as a result of -8- foreign currency adjustments, and there can be no assurance that the Company will not incur additional adjustments in future periods. In addition, the U.S. dollar value of transactions based in foreign currency (collections on foreign sales or payments for foreign purchases) also fluctuates with exchange rates. Historically, foreign currency risk has not been material because a substantial majority of the Company's sales have been denominated in the currency of the country of product origin and no repatriation of earnings has occurred (or is anticipated). However, there can be no assurance that a substantial majority of sales will continue to be denominated in the currency of the country of product origin or as to the impact of changes in the value the United States dollar or other currencies. The largest foreign currency exposure results from activity in Dutch guilders, British pounds and Japanese yen. B/E has not hedged net foreign investments in the past, although it may engage in hedging transactions in the future to manage or reduce its foreign exchange risk. There can be no assurance that B/E's attempts to manage its foreign currency exchange risk will be successful. The Company's foreign operations could also be subject to unexpected changes in regulatory requirements, tariffs and other market barriers and political and economic instability in the countries where it operates. There can be no assurance as to the impact of any such events that may occur in the future. See "Risk Factors -- Dependence upon Conditions in the Airline Industry." In addition, the Company may be exposed to certain risks as a result of the conversion by certain European Union ("EU") member states of their respective currencies to the "euro" as legal currency on January 1, 1999. The conversion rates between such EU member states' currencies and the euro will be fixed by the Council of the EU. Risks related to the conversion to the euro could include, among other things, effects on pricing due to increased cross-border price transparency, costs of modifying information systems, including both software and hardware, costs of relying on third parties whose systems also require modification, changes in the conduct of business and in the principal markets for the Company's products and services, effects on, and continuity of, contracts and currency exchange rate risk. The Company has analyzed whether the conversion to the euro will materially affect its business operations. While the Company is uncertain as to the impact of the conversion, the Company does not expect anticipated costs in connection with the euro conversion to be material. However, the actual effects of the conversion cannot be known until the conversion to the euro has taken place and there can be no assurance that the actual effects of the conversion could not have a material adverse effect on the Company's business, results of operations, and financial condition. Environmental Matters The Company is subject to regulation by federal, state and local authorities establishing health and environmental quality standards, and may be subject to liability or penalties for violations of those standards. The Company is also subject to laws, ordinances and regulations governing remediation of contamination at facilities it owns or operates or to which it sends hazardous substances or wastes for treatment, recycling or disposal. The Company believes that it is in compliance, in all material respects, with all laws affecting its business. However, there can be no assurance that the Company will continue to comply with all such laws, or with amended, new or more stringent laws and regulations which may be adopted in the future. Any such violation of law may result in penalties and/or liability in private actions filed by injured parties. In addition, future discovery of any environmental contamination or liability at any of the Company's facilities may cause the Company to incur significant expenses as a result thereof. Dividend Policy; Restrictions on Payment of Dividends The Company has never paid a cash dividend and does not plan to pay cash dividends on its Common Stock in the foreseeable future. The Company's Bank Credit Facility and the Indentures governing the 97/8% Notes and the 8% Notes restrict and limit the payment of dividends on the Common Stock. Future indebtedness may also contain restrictions and limitations on the payment of dividends on the Common Stock. Certain Anti-Takeover Provisions -9- The Company's Restated Certificate of Incorporation and By-laws contain provisions that may have the effect of discouraging a third party from making an acquisition of the Company by means of a tender offer, proxy contest or otherwise. The Restated Certificate of Incorporation and By-laws of the Company, among other things, (i) classify the Board of Directors into three classes, with directors of each class serving for a staggered three-year period, (ii) provide that directors may be removed only for cause and only upon the approval of the holders of at least two-thirds of the voting power of the Company's shares entitled to vote generally in the election of such directors, (iii) require at least two-thirds of the voting power of the Company's shares entitled to vote generally in the election of directors to alter, amend or repeal the provisions relating to the classified board and removal of directors described above and (iv) permit the Board of Directors to fill vacancies and newly created directorships on the Board. Such provisions would make the removal of incumbent directors more difficult and time-consuming and may have the effect of discouraging a tender offer or other takeover attempt not previously approved by the Board of Directors. Under the Company's Restated Certificate of Incorporation, the Board of Directors of the Company also has the authority to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the powers, preferences and rights of any such series without stockholder approval. The Board of Directors could, therefore, issue, without stockholder approval, preferred stock with voting and other rights that could adversely affect the voting power of the holders of Common Stock and could make it more difficult for a third party to gain control of the Company. In addition, under certain circumstances, Section 203 of the Delaware General Corporation Law makes it more difficult for an "interested stockholder" (generally a 15% stockholder) to effect various business combinations with a corporation for a three-year period. See "Description of Capital Stock". CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in "Risk Factors" and elsewhere, and incorporated by reference herein, including statements regarding the business strategy of the Company, potential strategic acquisitions, the products which the Company expects to offer, implementation of the Company's Year 2000 readiness program, anticipated development and marketing expenditures and regulatory reform, effects of the conversion by certain EU member states to the "euro," the intent, belief or current expectations of the Company, its directors or its officers, primarily with respect to the future operating performance of the Company, and other statements contained herein, and incorporated by reference herein, regarding matters that are not historical facts, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). In addition, when used in this Prospectus and elsewhere, the words "believe," "anticipate," "expect," intend" and similar expressions are intended to identify forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward- looking statements include, but are not limited to, the factors set forth in "Risk Factors." -10- USE OF PROCEEDS Except as provided by the SMR Acquisition Agreement, the Company will not receive any of the proceeds from the sale of the Shares of Common Stock by the Selling Stockholders. See "Selling Stockholders." Any net proceeds received by the Company will be used for general corporate purposes, including working capital requirements to support increased sales, and possible investments in strategic acquisitions. SELLING STOCKHOLDERS General B/E has recently made several acquisitions and, pursuant to the provisions of the agreements governing such acquisitions, B/E agreed to register shares of Common Stock issued as consideration in such acquisitions. Each of the Selling Stockholders received the Shares of Common Stock offered hereby in connection with either the acquisition of ASI, ALC or SMR. The following are brief summaries of certain provisions of the agreements governing the Company's recent acquisitions of ASI, ALC, and SMR. Such summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, such agreements which will be filed as exhibits to the Registration Statement. Capitalized terms are defined in the respective agreements unless otherwise defined herein. Whenever any term therein is referred to, such definition is incorporated herein by reference. The ASI Acquisition On March 27, 1998, pursuant to the terms of an Agreement and Plan of Reorganization and Merger dated as of March 27, 1998, by and among B/E, BE Acquisition Corp., ASI, the Gregory and Deborah Fodell Partnership, Ltd. (the "Fodell Partnership I"), the Gregory and Deborah Fodell Partnership II, Ltd. (the "Fodell Partnership II" and collectively with the Fodell Partnership I, the "ASI Sellers") and Gregory N. Fodell (the "ASI Merger Agreement"), B/E acquired from the ASI Sellers all of the outstanding stock of ASI (the "ASI Acquisition"), a company based in Houston, Texas that services, cleans and repairs aircraft interior parts and products. In exchange, the ASI Sellers received a total of 201,895 shares of Common Stock, representing a purchase price of approximately $5.6 million. B/E accounted for the acquisition of ASI as a pooling of interests. Pursuant to the terms of the ASI Merger Agreement, B/E agreed to register the shares of Common Stock received by the ASI Sellers. The shares of Common Stock offered by the ASI Sellers by this Prospectus were initially issued to the ASI Sellers pursuant to the ASI Merger Agreement. Gregory N. Fodell is a general partner and limited partner of each of the ASI Sellers and is currently a Vice President - Major Accounts of B/E Aerospace Services, Inc., a wholly-owned subsidiary of the Company. Immediately following the closing under the ASI Merger Agreement, the Fodell Partnership I beneficially owned 18,354 shares of Common Stock and the Fodell Partnership II beneficially owned 183,541 shares of Common Stock. The B/E Common Stock beneficially owned by the ASI Sellers represented approximately 0.7% of the shares of the Company's Common Stock outstanding on September 9, 1998. The ALC Acquisition On July 30, 1998, pursuant to the terms of an Agreement and Plan of Reorganization and Merger dated as of July 30, 1998, by and among B/E, BE Aerospace Acquisition Corp, Aerospace Lighting Corp., and Louis J. Francisco, Elsie M. Francisco, Michael J. Tenzyk, Judith D. Tenzyk, Trustee U/A Gertrude Brown dated 1/7/92 and Trustee U/A William Brown dated 1/7/92 (together, the "ALC Sellers") (the "ALC Merger Agreement"), B/E acquired from the ALC Sellers all of the outstanding stock of Aerospace Lighting Corporation ("ALC"), a company based in Holbrook, New York, that produces interior fluorescent lighting systems for business and corporate jet aircraft. In exchange, the ALC Sellers received a total of 964,780 shares of Common Stock, representing a purchase price of approximately $28.1 million. B/E accounted -11- for the acquisition of ALC as a pooling of interests. Pursuant to the terms of the ALC Merger Agreement, B/E agreed to register the shares of Common Stock received by the ALC Sellers. The Shares of Common Stock offered by the ALC Sellers by this Prospectus were originally issued to the ALC Sellers pursuant to the ALC Merger Agreement. Immediately following the closing under the ALC Merger Agreement, Louis J. Francisco owned 260,198 shares of Common Stock, Elsie M. Francisco owned 61,395 shares of Common Stock, Michael J. Tenzyk owned 160,797 shares of Common Stock, Judith D. Tenzyk owned 160,797 shares of Common Stock, Trustee U/A Gertrude Brown dated 1/7/92 owned 78,936 shares of Common Stock and Trustees U/A William Brown Dated 1/7/92 owned 242,657 shares of Common Stock. The Common Stock received by the ALC Sellers pursuant to the ALC Merger Agreement constitute all of the shares of the Company's Common Stock held by them. The B/E Common Stock owned by the ALC Sellers represented approximately 3.3% of the shares of the Company's Common Stock outstanding on September 9, 1998. The SMR Acquisition On August 7, 1998, pursuant to the terms of an Acquisition Agreement dated as of July 21, 1998, by and among B/E, Oscar J. Mifsud, Patrick L. Ryan, David B. Smith, the Oscar J. Mifsud Trust - 1998, the Patrick L. Ryan Trust - 1998 and the David B. Smith Trust - 1998 (the several Trusts together, the "SMR Sellers" and, collectively with the ASI Sellers and the ALC Sellers, the "Selling Stockholders") (the "SMR Acquisition Agreement" and, together with the ASI Merger Agreement and the ALC Merger Agreement, the "Merger Agreements"), B/E acquired from the SMR Sellers all of the outstanding stock of SMR Aerospace, Inc., all of the outstanding membership interests of SMR Developers LLC, and all of the outstanding partnership interests of SMR Associates for a total aggregate purchase price of approximately $120.0 million, subject to adjustment (the "SMR Purchase Price). Pursuant to the SMR Acquisition Agreement, the Company issued 4,000,000 shares of Common Stock to the SMR Sellers and paid the SMR Sellers $2.0 million in cash. The Company also paid $22.0 million in cash to the ESOP of FSI, a subsidiary of SMR Aerospace, Inc., pursuant to a separate Stock Purchase Agreement between the ESOP and B/E, to purchase the minority equity interest in FSI held by the ESOP, bringing the total aggregate purchase price paid by B/E for SMR to approximately $142.0 million. To the extent the Net Proceeds (as defined in the SMR Acquisition Agreement), which includes the $2.0 million in cash already received by the SMR Sellers, from the sale of the 4,000,000 shares of Common Stock is less than the SMR Purchase Price, the Company will pay such difference to the SMR Sellers with funds drawn under the Bank Credit Facility. B/E's obligations to the SMR Sellers under the SMR Acquisition Agreement are secured by an irrevocable stand-by letter of credit from The Chase Manhattan Bank in favor of the SMR Sellers. If such Net Proceeds exceed the SMR Purchase Price, the SMR Sellers will remit such excess to the Company. B/E intends to account for the acquisition of SMR as a purchase. Pursuant to the terms of the SMR Acquisition Agreement, B/E agreed to register the shares of Common Stock received by the SMR Sellers. SMR is a leader in providing design, integration, installation and certification services for commercial aircraft passenger cabin interiors. SMR provides a broad range of interior reconfiguration services which allow airlines to change the size of certain classes of service, modify and upgrade the seating, install telecommunications or entertainment options, relocate galleys, lavatories, and overhead bins, and install crew rest compartments. SMR is also a supplier of structural design and integration services, including airframe modifications for passenger-to-freighter conversions. In addition, SMR provides a variety of niche products and components that are used to facilitate reconfigurations and conversions. SMR's services are performed primarily on an aftermarket basis, and its customers include major airlines, such as United Airlines, Japan Airlines, British Airways, Air France, Cathay Pacific and Qantas, as well as Boeing, Airborne Express and Federal Express. The shares of Common Stock offered by the SMR Sellers by this Prospectus were originally issued to the SMR Sellers pursuant to the SMR Acquisition Agreement. The Common Stock issued to the SMR Sellers constitute all of the shares of Common Stock that are beneficially owned by the SMR Sellers and represent approximately 13.7% of the shares of the Company's Common Stock outstanding on September 9, 1998. -12- Set forth below are the names of each Selling Stockholder, the number of shares of Common Stock beneficially owned as of September 9, 1998 by each Selling Stockholder, the number of Shares that may be offered and sold by or on behalf of each Selling Stockholder hereunder and the amount of Common Stock to be owned by each Selling Stockholder upon the completion of the Offering if all Shares offered by such Selling Stockholder are sold. Except as set forth below, as of September 9, 1998, none of the Selling Stockholders beneficially owns more than 1% of the outstanding Common Stock and, to the knowledge of the Company, except for Gregory Fodell, who is an employee of the Company, none of the Selling Stockholders has had any material relationships with the Company subsequent to the closings of the respective acquisitions of ASI, ALC and SMR. Any and all of the Shares listed below under the heading "Shares Offered" may be offered for sale by or on behalf of the Selling Stockholders. Except as provided by the Share Disposition Agreement (as defined herein) and the Merger Agreements, the Selling Stockholders may sell the Shares of Common Stock offered hereby from time to time and, as a result, no estimate can be given as of the date hereof as to the amount of Shares of Common Stock that will actually be offered for sale by the Selling Stockholders or as to the amount of Common Stock that will be held by the Selling Stockholders upon termination of such offering. See "Plan of Distribution." Additional information as to the number and percentage of Shares beneficially owned before the offering by the Selling Stockholders, the number of Shares to be sold and the number of Shares beneficially owned after the offering will be set forth in an accompanying Prospectus Supplement, to the extent necessary.
Shares Beneficially Owned Shares Beneficially Prior to Offering Shares Owned After Offering Selling Stockholders Number Percent Offered Number Percent -------------------- ------ ------- ------- ------ ------- ASI Sellers: Gregory and Deborah Fodell Partnership, Ltd. 18,354 * 18,354 -- -- Gregory and Deborah Fodell Partnership II, Ltd. 183,541 * 183,541 -- -- ALC Sellers: Elise M. Francisco 61,395 * 61,395 -- -- Louis J. Francisco 260,198 * 260,198 -- -- Judith D. Tenzyk 160,797 * 160,797 -- -- Michael J. Tenzyk 160,797 * 160,797 -- -- Trustees U/A Gertrude Brown dated 1/7/92 78,937 * 78,937 -- -- Trustees U/A William Brown dated 1/7/92 242,657 * 242,657 -- -- SMR Sellers: Oscar J. Mifsud Trust - 1998 1,333,334 4.56 1,333,334 -- -- Patrick L. Ryan Trust - 1998 1,333,333 4.56 1,333,333 -- -- David B. Smith Trust - 1998 1,333,333 4.56 1,333,333 -- --
- --------------- * The percentage of shares of Common Stock beneficially owned does not exceed one percent of the outstanding shares of Common Stock as of September 9, 1998. -13- PLAN OF DISTRIBUTION The Selling Stockholders may sell all or a portion of the Shares of Common Stock offered hereby in private transactions or in the over-the-counter market at prices related to the prevailing prices of the shares on the Nasdaq National Market. The Selling Stockholders may be deemed to be underwriters within the meaning of the Securities Act. Any Selling Stockholder may effect such transactions by selling to or through one or more broker-dealers, and such broker-dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Stockholders. The Selling Stockholders and any broker-dealers that participate in the distribution may under certain circumstances be deemed to be underwriters within the meaning of the Securities Act, and any commissions received by such broker-dealers and any profits realized on the resale of shares by them may be deemed to be underwriting discounts and commissions under the Securities Act. The Merger Agreements provide that the Company indemnify the Selling Stockholders against certain liabilities, including liabilities under the Securities Act. The Merger Agreements also provide for the indemnification of the Company by the Selling Stockholders for certain liabilities, including liabilities under the Securities Act. The SMR Sellers may sell the shares of Common Stock offered hereby from time to time subject to the terms of the SMR Acquisition Agreement and the Share Disposition Agreement (the "Share Disposition Agreement") by and between B/E and the SMR Sellers dated July 21, 1998, pursuant to which the SMR Sellers agreed to sell the SMR Shares only on such terms and conditions, and at such times as directed and approved by B/E. The ASI Sellers and the ALC Sellers may sell shares of Common Stock offered hereby from time to time subject to the terms of the ASI Merger Agreement and the ALC Merger Agreement, respectively. To the extent required under the Securities Act, a supplemental prospectus will be filed, disclosing (a) the name of any Selling Stockholder; (b) the name of any broker-dealers effecting the transaction on behalf of the Selling Stockholder; (c) the number of shares involved; (d) the price at which such shares are to be sold; (e) the commissions paid or discounts or concessions allowed to such broker-dealer, where applicable; (f) that such broker-dealer did not conduct any investigation to verify the information set out or incorporated by reference in this Prospectus, as supplemented, and (g) other facts material to the transaction. Pursuant to the Merger Agreements, the Company has agreed to pay substantially all fees and expenses incident to the preparation, filing, amending and supplementing of the Registration Statement of which this Prospectus is a part and any registration, filing, qualification and other fees and expenses of complying with state Blue Sky or securities law. In addition, in connection with the acquisition of SMR, the Company has agreed to pay all applicable stock transfer taxes, brokerage commissions, underwriting discounts or commissions and any fees of the SMR Sellers' counsel. In connection with the acquisitions of ASI and ALC, the ASI Sellers and the ALC Sellers will pay all applicable stock transfer taxes, brokerage commissions, underwriting discounts or commissions and any fees of such Selling Stockholders' counsel. Pursuant to the Merger Agreements, and subject to certain conditions, the Company has agreed to keep the Registration Statement relating to the offering and sale by the Selling Stockholders of the shares of Common Stock continuously effective until a fixed date following the effectiveness of the Registration Statement or such earlier date as of which all shares of Common Stock registered hereunder have been disposed of. -14- DESCRIPTION OF CAPITAL STOCK Common Stock The Company is authorized to issue 50,000,000 shares of Common Stock, $0.01 par value, of which 23,256,268 shares were outstanding as of July 27, 1998, and held by approximately 516 stockholders of record. Holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders and to receive such dividends as may be declared by the Board of Directors out of funds legally available therefor. The indentures relating to the Company's 97/8% Notes and 8% Notes and the Bank Credit Agreement, however, currently restrict dividend payments by the Company to its stockholders. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock have the right to a ratable portion of the assets remaining after payment of liabilities. Holders of Common Stock do not have cumulative voting, preemptive, redemption or conversion rights. All outstanding shares of Common Stock are, and the shares to be sold in this offering will be, fully paid and non-assessable. Preferred Stock The Company's Restated Certificate of Incorporation (the "Certificate") provides, among other things, for the authorization of 1,000,000 shares of Preferred Stock, $0.01 par value (the "Preferred Stock"). The shares of Preferred Stock may be issued from time to time at the discretion of the Board of Directors without stockholder approval. The Board of Directors is authorized to issue these shares in different classes and series and, with respect to each class or series, to determine the dividend rate, the redemption provisions, conversion provisions, liquidation preference and other rights and privileges not in conflict with the Certificate. No shares of Preferred Stock are outstanding, and the Company has no immediate plans to issue any Preferred Stock. While issuance of Preferred Stock could provide needed flexibility in connection with possible acquisitions and other corporate purposes, such issuance could also make it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company or discourage an attempt to gain control of the Company. In addition, the Board of Directors, without stockholder approval, can issue shares of Preferred Stock with voting and conversion rights which could adversely affect the voting power and other rights of the holders of Common Stock. Directors' Exculpation and Indemnification The Certificate provides that no director of the Company shall be liable to the Company or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent otherwise required by the Delaware General Corporation Law (the "DGCL"). The effect of this provision of the Certificate is to eliminate the rights of the Company and its stockholders (through stockholders' derivative suits on behalf of the Company) to recover monetary damages against a director for breach of a fiduciary duty of care as a director. This provision does not limit or eliminate the rights of the Company or any stockholder to seek non-monetary relief, such as an injunction or rescission in the event of a breach of a director's duty of care. In addition, the Certificate provides that, if the DGCL is amended to authorize the further elimination or limitation of the liability of a director, then the liability of the directors shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. These provisions will not alter the liability of directors under federal or state securities laws. The Certificate also includes provisions for the indemnification of the Company's directors and officers to the fullest extent permitted by Section 145 of the DGCL. Election and Removal of Directors The Certificate classifies the board of directors into three classes, as nearly equal in number as possible, so that each director will serve for three years, with one class of directors being elected each year. The Certificate also provides that directors may be removed for cause only with the approval of the holders of at least two-thirds of the voting power of the Company's shares entitled to vote generally in the election of directors at an annual meeting or special meeting called for such purpose. In addition, the Certificate requires at least two-thirds of the voting power of the Company's shares -15- entitled to vote generally in the election of directors at an annual meeting or special meeting called for such purpose to alter, amend or repeal the provisions relating to the classified board and removal of directors described above. Management believes that the Certificate provisions described in the preceding paragraph (the "Provisions"), taken together, reduce the possibility that a third party could effect a change in the composition of the Company's board of directors without the support of the incumbent board. The Provisions, however, may have significant effects on the ability of stockholders of the Company to change the composition of the incumbent board, to benefit from transactions which are opposed by the incumbent board, to assume control of the Company or effect a fundamental corporate transaction such as a merger. Nevertheless, although the Company has not experienced any problems in the past with the continuity or stability of the board, management believes that the Provisions help assure the continuity and stability of the Company's policies in the future, since the majority of the directors at any time will have prior experience as directors of the Company. Section 203 of the Delaware General Corporation Law The Company is subject to the provisions of Section 203 of the DGCL. That section provides, with certain exceptions, that a Delaware corporation may not engage in any of a broad range of business combinations with a person or affiliate, or associate of such person, who is an "interested stockholder" for a period of three years from the date that such person became an interested stockholder unless: (i) the transaction resulting in a person becoming an interested stockholder, or the business combination, is approved by the board of directors of the corporation before the person becomes an interested stockholder, (ii) the interested stockholder acquires 85% or more of the outstanding voting stock of the corporation in the same transaction that makes it an interested stockholder (excluding shares owned by persons who are both officers and directors of the corporation, and shares held by certain employee stock ownership plans); or (iii) on or after the date the person becomes an interested stockholder, the business combination is approved by the corporation's board of directors and by the holders of at least 662/3% of the corporation's outstanding voting stock at an annual or special meeting, excluding shares owned by the interested stockholder. An "interested stockholder" is defined as any person that is (i) the owner of 15% or more of the outstanding voting stock of the corporation or (ii) an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder. Transfer Agent and Registrar The transfer agent and registrar for the Company's Common Stock is Boston EquiServe L.P., Canton, Massachusetts 02021. LEGAL MATTERS Certain legal matters with respect to the validity of the Shares of Common Stock offered hereby will be passed upon for the Company by Shearman & Sterling, New York, New York. EXPERTS The consolidated financial statements and schedule of the Company appearing in its annual report on Form 10-K for the fiscal year ended February 28, 1998, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports included therein and incorporated herein by reference. Such consolidated financial statements and schedule are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of SMR as of December 31, 1997 and 1996 and for the years ended December 31, 1997 and 1996, have been audited by Zalick, Torok, Kirgesner, Cook & Co., independent auditors, as stated -16- in their reports incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. -17- ================================================================================ No person has been authorized to give any information or to make any representations other than those contained in this Prospectus or any Prospectus Supplement and, if given or made, such information or representations must not be relied upon as having been authorized. This Prospectus and any Prospectus Supplement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus or any Prospectus Supplement nor any sale made hereunder or thereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or thereof or that the information contained herein or therein is correct as of any time subsequent to the date of such information. ------------- TABLE OF CONTENTS Page ---- Prospectus Available Information.........................................................2 Incorporation of Certain Documents by Reference..............................................................2 The Company...................................................................3 Risk Factors..................................................................5 Cautionary Statement Regarding Forward-Looking Statements...............................................10 Use of Proceeds..............................................................11 Selling Stockholders.........................................................11 Plan of Distribution.........................................................14 Description of Capital Stock.................................................15 Legal Matters................................................................16 Experts......................................................................16 ================================================================================ ================================================================================ BE Aerospace, Inc. [Logo] 5,166,675 Shares of Common Stock ---------- PROSPECTUS ---------- , 1998 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution Securities and Exchange Commission registration fee............. $ 49,955 Printing........................................................ ** Legal fees and expenses......................................... ** Nasdaq National Market Additional Listing Fee................... 39,038 Accounting fees and expenses.................................... ** Miscellaneous................................................... ** --------- Total.................................................. $ ** ========= - -------------- * Estimated ** To be provided by amendment Item 15. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law, as amended ("DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amount paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against expenses actually and reasonably incurred in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 102(b)(7) of the DGCL permits a corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (relating to unlawful payment of dividends and unlawful stock purchase and redemption) or (iv) for any transaction from which the director derived an improper personal benefit. The Registrant's Restated Certificate of Incorporation (the "Certificate") provides that the Company's Directors shall be liable to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that exculpation from liabilities is not permitted under the DGCL as in effect at the time such liability is determined. The Registrant's Certificate further provides that the Registrant shall indemnify its directors and officers to the fullest extent permitted by the DGCL. II-1 The directors and officers of the Company are covered under directors' and officer's liability insurance policies maintained by the Company. Item 16. Exhibits and Financial Statement Schedules Exhibit Number Description - ------ ----------- Exhibit 3 Articles of Incorporation and By-Laws 3.1 Amended and Restated Certificate of Incorporation* 3.2 Certificate or Amendment of the Restated Certificate of Incorporation* 3.3 Amended and Restated By-Laws* Exhibit 4 Instruments defining the rights of security holders, including debentures 4.1 Specimen Common Stock Certificate* 4.2 Form of Note for the Registrant's Series B 9-7/8% Senior Subordinated Notes* 4.3 Indenture dated January 24, 1996 between Fleet National Bank, as trustee, and the Registrant relating to the Registrant's 9-7/8% Senior Subordinated Notes and Series B 9-7/8% Senior Subordinated Notes* 4.4 Indenture dated February 13, 1998 for the Registrant's issue of 8% Senior Subordinated Notes* 4.5 Form of Note for the Registrant's 8% Senior Subordinated Notes* 4.6 Form of Stockholders' Agreement by and among the Registrant, Summit Ventures II, L.P., Summit Investors II, L.P. and Wedbush Capital Partners* Exhibit 5 5.1 Opinion of Shearman & Sterling Exhibit 10(i) Material Contracts 10.1 Supply Agreement dated as of April 17, 1990 between the Registrant and Applied Extrusion Technologies, Inc.* 10.2 Amended and Restated Credit Agreement (the "Chase Credit Agreement"), dated as of May 18, 1994 among the Registrant, the banks named therein and The Chase Manhattan Bank, N.A. as Agent* 10.3 Amendment No. 1 dated May 18, 1994 to the Chase Credit Agreement* 10.4 Second Amended and Restated Chase Credit Agreement dated January 19, 1996* 10.5 Third Amended and Restated Chase Credit Agreement dated May 29, 1997* 10.6 Fourth Amended and Restated Chase Credit Agreement dated April 3, 1998* 10.6(a) Fifth Amended and Restated Credit Agreement dated August 7,1998 10.7 Receivables Sales Agreement dated January 24, 1996 among the Registrant, First Trust of Illinois, N.A. and Centrally Held Eagle Receivables Program, Inc.* 10.8 Escrow Agreement dated January 24, 1996 among the Registrant, Eagle Industrial Product Corporation and First Trust of Illinois, N.A. as Escrow Agent* 10.9 Acquisition Agreement dated as of December 14, 1995 by and among the Registrant, Eagle Industrial Products Corporation, Eagle Industries, Inc. and Great American Management and Investment, Inc.* 10.10 Asset Purchase Agreement dated as of April 16, 1998 by and between Stanford Aerospace Group, Inc. and the Registrant* 10.11 Stock Purchase Agreement dated as of March 31, 1998 by and between the Registrant and Puritan Bennet Corporation* 10.12 Acquisition Agreement dated July 21, 1998 among the Registrant and Sellers named therein* Exhibit 10(ii) Leases 10.13 Lease dated May 15, 1992 between McDonnell Douglas Company, as lessor, and the Registrant, as lessee, relating to the Irvine, California property* 10.14 Lease dated September 1, 1992 relating to the Wellington, Florida property* II-2 10.15 Chesham, England Lease dated October 1, 1973 between Drawheath Limited and the Peninsular and Oriental Steam Navigation Company (assigned in February 1985)* 10.16 Utrecht, The Netherlands Lease dated December 15, 1988 between the Pension Fund Foundation for Food Supply Commodity Boards and Inventum* 10.17 Utrecht, The Netherlands Lease dated January 31, 1992 between G.W. van de Grift Onroerend Goed B.V. and Inventum* 10.18 Lease dated October 25, 1993 relating to the property in Longwood, Florida* Exhibit 10(iii) Executive Compensation Plans and Arrangements 10.19 Amended and Restated 1989 Stock Option Plan 10.20 Directors' 1991 Stock Option Plan* 10.21 1990 Stock Option Agreement with Richard G. Hamermesh* 10.22 1990 Stock Option Agreement with B. Martha Cassidy 10.23 1990 Stock Option Agreement with Jim C. Cowart* 10.24 1990 Stock Option Agreement with Petros A. Palandjian* 10.25 1990 Stock Option Agreement with Hansjorg Wyss* 10.26 1991 Stock Option Agreement with Amin J. Khoury* 10.27 1991 Stock Option Agreement with Jim C. Cowart* 10.28 1992 Stock Option Agreement with Amin J. Khoury* 10.29 1992 Stock Option Agreement with Jim C. Cowart* 10.30 1992 Stock Option Agreement with Paul W. Marshall* 10.31 1992 Stock Option Agreement with David Lahar* 10.32 United Kingdom 1992 Employee Share Option Scheme* 10.33 1994 Employee Stock Purchase Plan* 10.34 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Amin J. Khoury* 10.35 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Robert J. Khoury* 10.36 Employment Agreement dated as of March 1, 1992 between the Registrant and Marco Lanza (the "Lanza Agreement")* 10.37 Amendment No. 1 dated as of January 1, 1996 to the Lanza Agreement* 10.38 Employment Agreement dated as of April 1, 1992 between the Registrant and G. Bernard Jewell* 10.39 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Thomas P. McCaffrey* 10.40 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Paul E. Fulchino* 10.41 BE Aerospace, Inc. Savings and Profit Sharing Plan and Trust -- Financial Statements for the Ten Months Ended December 31, 1995 and the Year Ended February 28, 1995, Supplemental Schedules and Independent Auditors' Report* 10.42 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan Financial Statements as of February 29, 1996 and February 26, 1995; and for the Year Ended February 29, 1996 and the period from May 15, 1994 (inception) to February 28, 1995 and Independent Auditors' Report* Exhibit 23 Consent of Experts and Counsel 23.1 Consent of Independent Accountants -- Deloitte & Touche LLP 23.2 Consent of Shearman & Sterling (Included in Exhibit 5.1) 23.3 Consent of Independent Accountants -- Zalick, Torok, Kirgesner, Cook & Co. II-3 Exhibit 24 Power of Attorney 24.1 Power of Attorney (Included on page II-6) Exhibit 99 99.1 Agreement and Plan of Reorganization and Merger dated March 27, 1998 by and among the Registrant, BE Acquisition Corp., Aerospace Interiors, Inc., Gregory and Deborah Fodell Partnership, Ltd., Gregory and Deborah Fodell Partnership II, Ltd. And Gregory N. Fodell 99.2 Agreement and Plan of Reorganization and Merger dated as of July 30, 1998 by and among the Registrant, BE Aerospace Acquisition Corp., Aerospace Lighting Corp., and Louis J. Francisco, Elsie M. Francisco, Michael J. Tenzyk, Judith D. Tenzyk, Trustees U/A Gertrude Brown dated 1/7/92 and Trustee U/A William Brown dated 1/7/92. - ------------------- * Previously filed and incorporated by reference herein. See Exhibit Index. Item 17. Undertakings The undersigned Company hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act, unless the information required to be included in such post-effective amendment is contained in a periodic report filed by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act and incorporated herein by reference; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement, unless the information required to be included in such post-effective amendment is contained in a periodic report filed by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act and incorporated herein by reference. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any securities being registered which remain unsold at the termination of the offering. (4) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the II-4 securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial information is required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such financial information. (6) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 15, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the Company has duly caused this Amendment to the Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wellington and the State of Florida, on the 11th day of September, 1998. BE AEROSPACE, INC. By: * ------------------------------------ Title: Chairman of the Board of Directors Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed by the following persons in the capacities indicated below on the 11th day of September, 1998. Signature Title * Chairman of the Board of Directors - -------------------------- Amin J. Khoury * Vice Chairman of the Board of Directors and - -------------------------- Chief Executive Officer (principal executive Robert J. Khoury officer) * President, Chief Operating Officer and Director - -------------------------- Paul E. Fulchino * Corporate Senior Vice President of - -------------------------- Administration, Chief Financial Officer and Thomas P. McCaffrey Assistant Secretary (principal financial and accounting officer) * Director - -------------------------- Jim C. Cowart * Director - -------------------------- Richard G. Hamermesh * Director - -------------------------- Brian H. Rowe * Director - -------------------------- Hansjorg Wyss *By: /s/ Thomas P. McCaffrey ------------------------ Thomas P. McCaffrey Attorney-in-fact II-6 Exhibit Index Exhibit Number Description - ------ ----------- Exhibit 3 Articles of Incorporation and By-Laws 3.1 Amended and Restated Certificate of Incorporation(1) 3.2 Certificate or Amendment of the Restated Certificate of Incorporation(2) 3.3 Amended and Restated By-Laws(14) Exhibit 4 Instruments defining the rights of security holders, including debentures 4.1 Specimen Common Stock Certificate(1) 4.2 Form of Note for the Registrant's Series B 9-7/8% Senior Subordinated Notes(3) 4.3 Indenture dated January 24, 1996 between Fleet National Bank, as trustee, and the Registrant relating to the Registrant's 9-7/8% Senior Subordinated Notes and Series B 9-7/8% Senior Subordinated Notes(3) 4.4 Indenture dated February 13, 1998 for the Registrant's issue of 8% Senior Subordinated Notes(4) 4.5 Form of Note for the Registrant's 8% Senior Subordinated Notes(4) 4.6 Form of Stockholders' Agreement by and among the Registrant, Summit Ventures II, L.P., Summit Investors II, L.P. and Wedbush Capital Partners(5) Exhibit 5 5.1 Opinion of Shearman & Sterling* Exhibit 10(i) Material Contracts 10.1 Supply Agreement dated as of April 17, 1990 between the Registrant and Applied Extrusion Technologies, Inc.(1) 10.2 Amended and Restated Credit Agreement (the "Chase Credit Agreement"), dated as of May 18, 1994 among the Registrant, the banks named therein and The Chase Manhattan Bank, N.A. as Agent(6) 10.3 Amendment No. 1 dated May 18, 1994 to the Chase Credit Agreement(7) 10.4 Second Amended and Restated Chase Credit Agreement dated January 19, 1996(3) 10.5 Third Amended and Restated Chase Credit Agreement dated May 29, 1997(4) 10.6 Fourth Amended and Restated Chase Credit Agreement dated April 3, 1998(4) 10.6(a) Fifth Amended and Restated Credit Agreement dated August 7,1998* 10.7 Receivables Sales Agreement dated January 24, 1996 among the Registrant, First Trust of Illinois, N.A. and Centrally Held Eagle Receivables Program, Inc.(3) 10.8 Escrow Agreement dated January 24, 1996 among the Registrant, Eagle Industrial Product Corporation and First Trust of Illinois, N.A. as Escrow Agent(3) 10.9 Acquisition Agreement dated as of December 14, 1995 by and among the Registrant, Eagle Industrial Products Corporation, Eagle Industries, Inc. and Great American Management and Investment, Inc.(8) i 10.10 Asset Purchase Agreement dated as of April 16, 1998 by and between Stanford Aerospace Group, Inc. and the Registrant(9) 10.11 Stock Purchase Agreement dated as of March 31, 1998 by and between the Registrant and Puritan Bennet Corporation(10) 10.12 Acquisition Agreement dated July 21, 1998 among the Registrant and Sellers named therein(16) Exhibit 10(ii) Leases 10.13 Lease dated May 15, 1992 between McDonnell Douglas Company, as lessor, and the Registrant, as lessee, relating to the Irvine, California property(2) 10.14 Lease dated September 1, 1992 relating to the Wellington, Florida property(2) 10.15 Chesham, England Lease dated October 1, 1973 between Drawheath Limited and the Peninsular and Oriental Steam Navigation Company (assigned in February 1985)(14) 10.16 Utrecht, The Netherlands Lease dated December 15, 1988 between the Pension Fund Foundation for Food Supply Commodity Boards and Inventum(14) 10.17 Utrecht, The Netherlands Lease dated January 31, 1992 between G.W. van de Grift Onroerend Goed B.V. and Inventum(14) 10.18 Lease dated October 25, 1993 relating to the property in Longwood, Florida(6) Exhibit 10(iii) Executive Compensation Plans and Arrangements 10.19 Amended and Restated 1989 Stock Option Plan(11) 10.20 Directors' 1991 Stock Option Plan(11) 10.21 1990 Stock Option Agreement with Richard G. Hamermesh(11) 10.22 1990 Stock Option Agreement with B. Martha Cassidy(11) 10.23 1990 Stock Option Agreement with Jim C. Cowart(11) 10.24 1990 Stock Option Agreement with Petros A. Palandjian(11) 10.25 1990 Stock Option Agreement with Hansjorg Wyss(11) 10.26 1991 Stock Option Agreement with Amin J. Khoury(11) 10.27 1991 Stock Option Agreement with Jim C. Cowart(11) 10.28 1992 Stock Option Agreement with Amin J. Khoury(11) 10.29 1992 Stock Option Agreement with Jim C. Cowart(11) 10.30 1992 Stock Option Agreement with Paul W. Marshall(11) 10.31 1992 Stock Option Agreement with David Lahar(11) 10.32 United Kingdom 1992 Employee Share Option Scheme(2) 10.33 1994 Employee Stock Purchase Plan(12) 10.34 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Amin J. Khoury(15) 10.35 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Robert J. Khoury(15) 10.36 Employment Agreement dated as of March 1, 1992 between the Registrant and Marco Lanza (the "Lanza Agreement")(14) 10.37 Amendment No. 1 dated as of January 1, 1996 to the Lanza Agreemen(13) 10.38 Employment Agreement dated as of April 1, 1992 between the Registrant and G. Bernard Jewell(14) ii 10.39 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Thomas P. McCaffrey(15) 10.40 Amended and Restated Employment Agreement dated as of May 29, 1998 between the Registrant and Paul E. Fulchino(15) 10.41 BE Aerospace, Inc. Savings and Profit Sharing Plan and Trust -- Financial Statements for the Ten Months Ended December 31, 1995 and the Year Ended February 28, 1995, Supplemental Schedules and Independent Auditors' Report(14) 10.42 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan Financial Statements as of February 29, 1996 and February 26, 1995; and for the Year Ended February 29, 1996 and the period from May 15, 1994 (inception) to February 28, 1995 and Independent Auditors' Report(14) Exhibit 23 Consent of Experts and Counsel 23.1 Consent of Independent Accountants -- Deloitte & Touche LLP* 23.2 Consent of Shearman & Sterling (Included in Exhibit 5.1) 23.3 Consent of Independent Accountants -- Zalik, Torok, Kirgesner, Cook & Co.* Exhibit 24 Power of Attorney 24.1 Power of Attorney (Included on page II-6) Exhibit 99 99.1 Agreement and Plan of Reorganization and Merger dated March 27, 1998 by and among the Registrant, BE Acquisition Corp., Aerospace Interiors, Inc., Gregory and Deborah Fodell Partnership, Ltd., Gregory and Deborah Fodell Partnership II, Ltd. And Gregory N. Fodell* 99.2 Agreement and Plan of Reorganization and Merger dated as of July 30, 1998 by and among the Registrant, BE Aerospace Acquisition Corp., Aerospace Lighting Corp., and Louis J. Francisco, Elsie M. Francisco, Michael J. Tenzyk, Judith D. Tenzyk, Trustees U/A Gertrude Brown dated 1/7/92 and Trustee U/A William Brown dated 1/7/92.* - ------------------- * Filed herein. (1) Incorporated by reference to the Company's Registration Statement on Form S-1, as amended (No. 33-33689), filed with the Commission on March 7, 1990. (2) Incorporated by reference to the Company's Registration Statement on Form S-1, as amended (No. 33-54146), filed with the Commission on November 3, 1992. (3) Incorporated by reference to the Company's Registration Statement on Form S-4 (No. 333- 00433), filed with the Commission on January 26, 1996. (4) Incorporated by reference to the Company's Registration Statement on Form S-4 (No. 333- 47649), filed with the Commission on March 10, 1998. (5) Incorporated by reference to the Company's Registration Statement on Form S-2 (No. 33- 66490), filed with the Commission on July 23, 1993. (6) Incorporated by reference to the Company's Annual Report on Form 10-K as amended for the Fiscal year ended February 26, 1994, filed with the Commission on May 25, 1994. iii (7) Incorporated by reference to the Company's Annual Report on Form 10-K as amended for the Fiscal year ended February 25, 1995, filed with the Commission on May 26, 1995. (8) Incorporated by reference to the Company's Current Report on Form 8-K dated December 14, 1995, filed with the Commission on December 28, 1995. (9) Incorporated by reference to the Company's Current Report on Form 8-K dated May 8, 1998, filed with the Commission on May 8, 1998. (10) Incorporated by reference to the Company's Current Report on Form 8-K dated March 31, 1998, filed with the Commission on April 27, 1998. (11) Incorporated by reference to the Company's Registration Statement on Form S-8 (No. 33- 48119), filed with the Commission on May 26, 1992. (12) Incorporated by reference to the Company's Registration Statement on Form S-8 (No. 33- 82894), filed with the Commission on August 16, 1994. (13) Incorporated by reference to the Company's Current Report on Form 8-K dated March 26, 1996, filed with the Commission on April 5, 1996. (14) Incorporated by reference to the Company's Annual Report on Form 10-K as amended for the Fiscal year ended February 28, 1998, filed with the Commission on May 29, 1998. (15) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998, filed with the Commission on July 14, 1998. (16) Incorporated by reference to the Company's Current Report on Form 8-K dated August 24, 1998, filed with the Commission on August 24, 1998. EX-5.1 2 OPINION OF COUNSEL Conformed Copy Exhibit 5.1 Shearman & Sterling 599 Lexington Avenue New York, NY 10022-6069 September 1, 1998 BE Aerospace, Inc. 1400 Corporate Center Way Wellington, Florida 33414 Ladies and Gentlemen: We have acted as counsel to BE Aerospace, Inc., a Delaware corporation (the "Company"), in connection with the preparation of the Registration Statement on Form S-3 of the Company, filed with the Securities and Exchange Commission on July 30, 1998 (the "Registration Statement"), relating to the registration under the Securities Act of 1933, as amended, of 5,166,675 shares of the Company's Common Stock, par value $.01 per share (the "Shares"), to be offered from time to time by certain selling stockholders in the manner described in the prospectus contained in the Registration Statement (the "Prospectus"). We have examined the Registration Statement and originals, or copies certified or otherwise identified to our satisfaction, of such other documents and corporate records as we have deemed necessary as a basis for the opinion set forth herein. We have relied as to factual matters on certificates or other documents furnished by the Company or its officers and by governmental authorities and upon such other documents and data that we have deemed appropriate. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the legal capacity of all persons executing such documents, the conformity to original documents of all documents submitted to us as copies and the truth and correctness of any representations and warranties contained therein. The opinion expressed below is limited to the General Corporation Law of Delaware. We express no opinion herein concerning any other law. 2 Based on such examination and review and subject to the foregoing, we are of the opinion that the Shares have been duly authorized and are validly issued, fully paid and non-assessable. We consent to the use of this opinion as an Exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus. Very truly yours, /s/ Shearman & Sterling EX-10.6(A) 3 FIFTH AMENDED AND RESTATED CREDIT AGREEMENT Execution Counterpart ************************************************************ BE AEROSPACE, INC. ----------------------------- FIFTH AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 29, 1993 Amended and Restated as of August 7, 1998 ------------------------------ THE CHASE MANHATTAN BANK, as Administrative Agent NATIONSBANK, N.A., as Documentation Agent ************************************************************ TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page Section 1. Definitions and Accounting Matters...........................................1 1.01 Certain Defined Terms........................................................1 1.02 Accounting Terms and Determinations.........................................21 1.03 Classes and Types of Loans..................................................21 Section 2. Commitments, Loans, Notes and Prepayments...................................22 2.01 Loans.......................................................................22 2.02 Borrowings..................................................................23 2.03 Letters of Credit...........................................................23 2.04 Changes of Commitments......................................................30 2.05 Commitment Fee..............................................................31 2.06 Lending Offices.............................................................32 2.07 Several Obligations; Remedies Independent...................................32 2.08 Evidence of Debt............................................................32 2.09 Optional Prepayments and Conversions or Continuations of Loans..............32 2.10 Mandatory Prepayments and Reductions of Commitments.........................33 Section 3. Payments of Principal and Interest..........................................35 3.01 Repayment of Loans..........................................................35 3.02 Interest....................................................................35 Section 4. Payments; Pro Rata Treatment; Computations; Etc.............................36 4.01 Payments....................................................................36 4.02 Pro Rata Treatment..........................................................37 4.03 Computations................................................................38 4.04 Minimum Amounts.............................................................38 4.05 Certain Notices.............................................................38 4.06 Non-Receipt of Funds by the Administrative Agent............................39 4.07 Sharing of Payments, Etc....................................................40 Section 5. Yield Protection, Etc.......................................................41 5.01 Additional Costs............................................................41 5.02 Limitation on Types of Loans................................................43 5.03 Illegality..................................................................44 5.04 Treatment of Affected Loans.................................................44 5.05 Compensation................................................................45 5.06 Additional Costs in Respect of Letters of Credit............................45 5.07 U.S. Taxes..................................................................46
Page Section 6. Conditions Precedent........................................................47 6.01 Conditions to Effectiveness.................................................47 6.02 Initial and Subsequent Extensions of Credit.................................49 Section 7. Representations and Warranties..............................................50 7.01 Corporate Existence.........................................................50 7.02 Financial Condition.........................................................50 7.03 Litigation..................................................................50 7.04 No Breach...................................................................51 7.05 Action......................................................................51 7.06 Approvals...................................................................51 7.07 Use of Credit...............................................................51 7.08 ERISA.......................................................................52 7.09 Taxes.......................................................................52 7.10 Investment Company Act......................................................52 7.11 Public Utility Holding Company Act..........................................52 7.12 Material Agreements and Liens...............................................52 7.13 Environmental Matters.......................................................53 7.14 Capitalization..............................................................54 7.15 Subsidiaries, Etc...........................................................55 7.16 Title to Assets.............................................................55 7.17 Compliance with Law.........................................................56 7.18 True and Complete Disclosure................................................56 7.19 Year 2000...................................................................56 Section 8. Covenants of the Company....................................................57 8.01 Financial Statements, Etc...................................................57 8.02 Litigation..................................................................60 8.03 Existence, Etc..............................................................60 8.04 Insurance...................................................................61 8.05 Prohibition of Fundamental Changes..........................................61 8.06 Limitation on Liens.........................................................61 8.07 Indebtedness................................................................63 8.08 Investments.................................................................64 8.09 Restricted Payments.........................................................65 8.10 Leverage Ratio..............................................................65 8.11 Adjusted Net Worth..........................................................66 8.12 Interest Coverage Ratio.....................................................66 8.13 [Intentionally Omitted.]....................................................67 8.14 Lines of Business...........................................................67 8.15 Transactions with Affiliates................................................67 8.16 Use of Proceeds.............................................................68 8.17 Certain Obligations Respecting Subsidiaries.................................68 8.18 Modifications of Certain Documents..........................................69 8.19 Environmental Matters.......................................................69
Page 8.20 Security for Loans..........................................................70 8.21 Redemption of Senior Subordinated Indebtedness..............................70 Section 9. Events of Default...........................................................70 Section 10. The Administrative Agent....................................................73 10.01 Appointment, Powers and Immunities..........................................73 10.02 Reliance by Administrative Agent............................................74 10.03 Defaults....................................................................74 10.04 Rights as a Lender..........................................................75 10.05 Indemnification.............................................................75 10.06 Non-Reliance on Administrative Agent and Other Lenders......................76 10.07 Failure to Act..............................................................76 10.08 Resignation or Removal of Administrative Agent..............................76 10.09 Consents under Basic Documents..............................................77 10.10 Collateral Sub-Agents.......................................................77 10.11 Documentation Agent.........................................................77 Section 11. Miscellaneous...............................................................77 11.01 Waiver......................................................................77 11.02 Notices.....................................................................78 11.03 Expenses, Etc...............................................................78 11.04 Amendments, Etc.............................................................79 11.05 Successors and Assigns......................................................80 11.06 Assignments and Participations..............................................80 11.07 Survival....................................................................82 11.08 Captions....................................................................82 11.09 Counterparts................................................................83 11.10 Governing Law; Submission to Jurisdiction...................................83 11.11 Waiver of Jury Trial........................................................83 11.12 Treatment of Certain Information; Confidentiality...........................83 11.13 Amended and Restated Security Agreement.....................................84
Annex 1 - Commitments Annex 2 Pledged Stock Annex 3 Pledged Membership Interests SCHEDULE I - Material Agreements and Liens SCHEDULE II - Hazardous Materials SCHEDULE III - Subsidiaries and Investments SCHEDULE IV - Approvals and Compliance SCHEDULE V - Existing Letters of Credit SCHEDULE VI - Taxes SCHEDULE VII - Transactions with Affiliates EXHIBIT A-1 - Form of Security Agreement EXHIBIT A-2 - Form of In-Flight Guarantee and Security Agreement EXHIBIT B - Form of Confidentiality Agreement EXHIBIT C - Form of Series C Letter of Credit (iv) FIFTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 29, 1993, amended and restated as of August 7, 1998, among: BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"); each of the lenders that is a signatory hereto identified under the caption "LENDERS" on the signature pages hereto or which, pursuant to Section 11.06(b) hereof, shall become a "Lender" hereunder (individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The Company, certain Lenders and the Administrative Agent are party to a Fourth Amended and Restated Credit Agreement dated as of October 29, 1993, amended and restated as of April 3, 1998 (as modified and supplemented and in effect immediately prior to the Amendment Effective Date referred to below, the "Existing Credit Agreement"). The Company has requested that the Lenders and the Administrative Agent agree to amend and restate the Existing Credit Agreement, and the Lenders and the Administrative Agent are willing to amend and restate the Existing Credit Agreement, all on the terms and conditions herein set forth. Accordingly, the parties hereto agree to amend and restate the Existing Credit Agreement so that, as amended and restated, it reads in its entirety as provided herein. Section 1. Definitions and Accounting Matters. 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "Acquisition" shall mean any transaction, or any series of related transactions, by which the Company and/or any of its Subsidiaries (a) acquires any ongoing business or all or substantially all of the assets of any Person, whether through purchase of assets, merger or otherwise, (b) directly or indirectly acquires control of at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors or (c) directly or indirectly acquires control of a majority ownership interest in any partnership, joint venture or similar arrangement. The terms "Acquire" and "Acquired" used as a verb shall have a correlative meaning. "Adjusted Net Worth" shall mean, as at any date, the sum of (a) total stockholders' equity of the Company and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) plus (b) the aggregate amount of Restricted Payments made since November 29, 1997 in respect of the purchase, redemption, retirement or other acquisition of any shares of any class of stock of the Company permitted under Section 8.09 hereof plus (c) the fair market value of any shares of capital stock of the Company (determined as of the date such shares are issued) issued after November 29, 1997 which are utilized in any - 2 - business combination accounted for using pooling of interest accounting plus (d) an amount not to exceed $35,000,000 in the aggregate of the after-tax amount (calculated using the then effective corporate Federal tax rate, regardless of the after-tax amount determined in accordance with GAAP) of any nonrecurring noncash write-offs of intangible assets since November 29, 1997 plus (e) the amount of any purchased research and development and related acquisition costs of a target company to the extent such costs are or have been expensed after November 29, 1997. "Administrative Questionnaire" shall mean an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" shall mean any Person that directly or indirectly controls, or is under common control with, or is controlled by, the Company and, if such Person is an individual, any member of the immediate family (including parents, spouse, children and siblings) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person that owns directly or indirectly securities having 5% or more of the voting power for the election of directors or other governing body of a corporation or 5% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by reason of his or her being a director, officer or employee of the Company or any of its Subsidiaries and (b) none of the Subsidiaries of the Company shall be Affiliates. "Amendment Effective Date" shall mean the date on which all of the conditions set forth in Section 6.01 hereof shall have been satisfied or waived by the Lenders and the Administrative Agent. "Applicable Lending Office" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Company as the office by which its Loans of such Type are to be made and maintained. - 3 - "Applicable Margin" shall mean with respect to Base Rate Loans and Eurodollar Loans, the rate for such Type of Loan for each level period set forth in the schedule below: Applicable Margin Level Period Base Rate Loans Eurodollar Loans - ----------------------------- ---------------------- ---------------------- Level I Period 0.00% 0.500% Level II Period 0.00% 0.750% Level III Period 0.00% 0.875% Level IV Period 0.00% 1.000% Level V Period 0.00% 1.250% Level VI Period 0.25% 1.500% Level VII Period 0.75% 2.000% provided that notwithstanding anything herein to the contrary, the Applicable Margin shall not be less than the rate for a Level VI Period from the Amendment Effective Date until the earlier of (i) the third Business Day following of the receipt of the financial statements under Section 8.01(b) as at and for the fiscal quarter ending on the Fiscal Date in November, 1998 and (ii) the termination of the Series C Commitments and the repayment in full of the Series C Loans. "B/E Services" shall mean B/E Aerospace Services, Inc., a Delaware corporation and Wholly Owned Subsidiary of the Company. "Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended from time to time. "Base Rate" shall mean, for any day, a rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate for such day. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "Base Rate Loans" shall mean Loans that bear interest at rates based upon the Base Rate. "Basic Documents" shall mean, collectively, this Agreement, the Notes, the Letter of Credit Documents and the Security Documents. "Business Day" shall mean any day (a) on which commercial banks are not authorized or required to close in New York City and (b) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice by the Company with respect to any such borrowing, payment, prepayment, Conversion or Interest Period, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. - 4 - "Calculation Period" shall mean, as at any date, the period of four consecutive complete fiscal quarters of the Company ending on or most recently ended prior to such date for which financial statements have been delivered pursuant to Sections 7.02(a), 8.01(a), 8.01(b) or 8.01(h) hereof. "Capital Lease Obligations" shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board), and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13). "Casualty Event" shall mean, with respect to any Property of any Person, any loss of or damage to, or any condemnation or other taking of, such Property for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "Chase" shall mean The Chase Manhattan Bank. "Class" shall have the meaning assigned to such term in Section 1.03 hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral Account" shall have the meaning assigned to such term in Section 4.01 of the Security Agreement. "Commitment Fee Rate" shall mean (a) 0.2000% for any Level I Period, (b) 0.2250% for any Level II Period, (c) 0.2500% for any Level III Period, (d) 0.2750% for any Level IV Period, (e) 0.3250% for any Level V Period, (f) 0.3750% for any Level VI Period and (e) 0.5000% for any Level VII Period, provided that notwithstanding anything herein to the contrary, the Commitment Fee Rate shall not be less than the rate for a Level VI Period from the Amendment Effective Date until the earlier of (i) the third Business Day following of the receipt of the financial statements under Section 8.01(b) as at and for the fiscal quarter ending on the Fiscal Date in November, 1998 and (ii) the termination of the Series C Commitments and the repayment in full of the Series C Loans. "Commitments" shall mean the Series A Commitments, the Series B Commitments and the Series C Commitments. "Continue", "Continuation" and "Continued" shall refer to the continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to the next Interest Period. - 5 - "Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans, which may be accompanied by the transfer by a Lender (at its sole discretion) of a Loan from one Applicable Lending Office to another. "Default" shall mean an Event of Default or an event that with notice or lapse of time or both would become an Event of Default. "Disposition" shall mean any sale, assignment, transfer or other disposition of any Property (whether now owned or hereafter acquired) by the Company or any of its Subsidiaries to any Person excluding any sale, assignment, transfer or other disposition of inventory in the ordinary course of business and on ordinary business terms; provided that the term "Disposition" shall not include (i) any Equity Issuance (as such term is defined in this Section 1.01 without giving effect to the proviso therein), (ii) any sale, assignment, transfer or other disposition of Property by any Subsidiary of the Company to the Company or to any other Subsidiary of the Company, in each case for consideration that is not in excess of the fair market value of such Property as determined in good faith by the chief financial officer of the Company or (iii) any sale, assignment, transfer or other disposition of Property by the Company or any Subsidiary of the Company to a joint venture, subject to the proviso in Section 8.08(h) hereof. The creation of any Lien on any Property permitted under Section 8.06 hereof shall not constitute a "Disposition" of such Property. The term "Dispose" shall have a correlative meaning. "Dollars" and "$" shall mean lawful money of the United States of America. "Domestic Subsidiary" shall mean any Subsidiary of the Company that is incorporated under the law of any State of the United States of America. "EBITDA" shall mean, for any period of four consecutive fiscal quarters of the Company, for the Company and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), net operating earnings (calculated before depreciation and amortization expense, non-recurring non-cash write-offs of assets (to the extent deducted in computing net operating earnings), Interest Expense, taxes and extraordinary and unusual items) for such period. "Environmental Claim" shall mean, with respect to any Person, (a) any written notice, claim, demand or other communication (collectively, a "claim") by any other Person alleging or asserting such Person's liability for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any written claim by any governmental authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any written claim by any third party seeking damages, contribution, indemnification, cost recovery, - 6 - compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" shall mean any and all present and future Federal, state, local and foreign laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of human health, safety or the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes into the indoor or outdoor environment, including, without limitation, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes. "Equity Issuance" shall mean (a) any issuance or sale by the Company or any of its Subsidiaries after the Restatement Date of (i) any capital stock, (ii) any warrants or options exercisable in respect of capital stock (other than any warrants or options issued to directors, officers, employees, agents, consultants or advisors of the Company or any of its Subsidiaries and any capital stock of the Company issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in the issuing or selling Person or (b) the receipt by the Company or any of its Subsidiaries after November 29, 1997 of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided that Equity Issuance shall not include (x) any such issuance or sale by any Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the Company, (y) any capital contribution by the Company or any Wholly Owned Subsidiary of the Company to any Subsidiary of the Company or (z) any such issuance or sale by the Company in connection with a permitted Acquisition under Section 8.05(b). "Equity Rights" shall mean, with respect to any Person, any outstanding subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or outstanding securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which the Company is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which the Company is a member. "Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/100 - 7 - of 1%) of the respective rates per annum quoted by each Reference Lender at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date two Business Days prior to the first day of such Interest Period for the offering by such Reference Lender to leading banks in the London interbank market of Dollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of the Eurodollar Loan to be made by such Reference Lender for such Interest Period. If any Reference Lender is not participating in any Eurodollar Loan during any Interest Period therefor, the Eurodollar Base Rate for such Loan for such Interest Period shall be determined by reference to the amount of the Eurodollar Loan to be made by Chase for such Interest Period. "Eurodollar Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.01. "Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base Rate for such Loan for such Interest Period divided by 1 minus the Reserve Requirement for such Loan for such Interest Period. "Event of Default" shall have the meaning assigned to such term in Section 9 hereof. "Existing Credit Agreement" shall have the meaning assigned to such term in the recitals hereto. "Existing Lenders" shall mean the lenders party to the Existing Credit Agreement. "Existing Letters of Credit" shall have the meaning assigned to such term in Section 2.03(A)(l) hereof. "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average rate charged to Chase on such Business Day on such transactions as determined by the Administrative Agent. "Fiscal Date" shall mean the last day of each fiscal quarterly period of the Company. "Foreign Subsidiary" shall mean each Subsidiary of the Company other than any Domestic Subsidiary. - 8 - "Funded Debt" shall mean, for any Person: (a) all Indebtedness of such Person that should be reflected on a balance sheet of such Person in accordance with GAAP, (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 Company, the amount of the Series C Letter of Credit. "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with those which, in accordance with the last sentence of Section 1.02(a) hereof, are to be used in making the calculations for purposes of determining compliance with this Agreement. "GE Lease Agreement" shall mean the Master Lease Agreement dated as of October 20, 1997 between the Company and General Electric Capital Corporation, for itself and as Agent for Certain Participants. "Guarantee" shall mean a guarantee, an endorsement, a contingent agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, other obligations, net worth, working capital or earnings of any Person, or a guarantee of the payment of dividends or other distributions upon the stock or equity interests of any Person, or an agreement to purchase, sell or lease (as lessee or lessor) Property, products, materials, supplies or services primarily for the purpose of enabling a debtor to make payment of such debtor's obligations or an agreement to assure a creditor against loss, and including, without limitation, causing a bank or other financial institution to issue a letter of credit or other similar instrument for the benefit of another Person, but excluding endorsements for collection or deposit in the ordinary course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a correlative meaning. "Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum products, flammable explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or substances which are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of - 9 - the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; and (f) Indebtedness of others Guaranteed by such Person. "In-Flight" shall mean In-Flight Entertainment, LLC, a Delaware limited liability company and Wholly Owned Subsidiary of the Company. "In-Flight Guarantee and Security Agreement" shall mean the Amended and Restated Guarantee and Security Agreement dated as of November 19, 1997, amended and restated as of April 3, 1998, between In-Flight and the Administrative Agent, substantially in the form of Exhibit A-2 hereto, as the same shall be modified, supplemented and in effect from time to time. "Information Memorandum" shall mean the Confidential Information Memorandum dated July, 1998 distributed to the Lenders. "Interest Coverage Ratio" shall mean, as at any date the ratio of (i) EBITDA for the relevant Calculation Period to (ii) Interest Expense for such Calculation Period; provided that, from and after the date of any Acquisition occurring after February 28, 1998 until four full fiscal quarters of the Company have elapsed since the date of such Acquisition, the Interest Coverage Ratio shall be calculated on a pro forma basis (reflecting, inter alia, any amount attributable to any operating expense that will be eliminated or cost reduction that will be realized (in each case, net of any operating expense or other cost increase) in connection with such Acquisition, as determined in good faith by the chief financial officer of the Company in accordance with GAAP and the rules, regulations and guidelines of the Securities and Exchange Commission, as if such elimination of operating expense or the realization of such cost reductions were achieved at the beginning of such four-quarter period) as though such Acquisition had occurred, and any Funded Debt incurred or assumed by the Company or any of its Subsidiaries in connection with, or in anticipation of, such Acquisition had been incurred or assumed, on the first day of such Calculation Period. "Interest Expense" shall mean, for any period, the sum, for the Company and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness accrued or capitalized during such period (whether or not actually paid during such period) plus (b) the net amounts payable (or minus the net amounts receivable) under Interest Rate Protection Agreements accrued during such period (whether or not actually paid or received during such period) minus (c) interest income during such period. "Interest Period" shall mean, with respect to any Eurodollar Loan, each period commencing on the date such Eurodollar Loan is made or Converted from a Base Rate Loan or the last day of the next preceding Interest Period for such Loan and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as the Company may select as provided in Section 4.05 hereof, except that each Interest Period that commences - 10 - on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) no Interest Period for any Series A Loan may end after the Series A Commitment Termination Date; (ii) no Interest Period for any Series B Loan may commence before and end after any Series B Principal Payment Date unless, after giving effect thereto, the aggregate principal amount of the Series B Loans having Interest Periods that end after such Series B Principal Payment Date shall be equal to or less than the aggregate principal amount of the Series B Loans scheduled to be outstanding after giving effect to the payments of principal required to be made on such Series B Principal Payment Date; (iii) no Interest Period for any Series C Loan may end after the Series C Commitment Termination Date; (iv) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (v) notwithstanding clauses (i), (ii) and (iii) above, no Interest Period shall have a duration of less than one month and, if the Interest Period for any Eurodollar Loan would otherwise be a shorter period, such Eurodollar Loan shall not be available hereunder for such period. "Interest Rate Protection Agreement" shall mean, for any Person, an interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more financial institutions providing for the transfer or mitigation of interest risks either generally or under specific contingencies. For purposes hereof, the "credit exposure" at any time of any Person under an Interest Rate Protection Agreement to which such Person is a party shall be determined at such time in accordance with the standard methods of calculating credit exposure under similar arrangements as prescribed from time to time by the Administrative Agent, taking into account potential interest rate movements and the respective termination provisions and notional principal amount and term of such Interest Rate Protection Agreement. "Investment" shall mean, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of, or capital contribution to, any other Person or any agreement to make any such acquisition or capital contribution (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding 90 days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the entering into of any Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Interest Rate Protection Agreement. "Issuing Lender" shall mean Chase, as the issuer of Letters of Credit under Section 2.03 hereof, together with its successors and assigns in such capacity. - 11 - "Letter of Credit" shall mean a Series A Letter of Credit or the Series C Letter of Credit. "Letter of Credit Interest" shall mean the Series A Letter of Credit Interest or the Series C Letter of Credit Interest. "Letter of Credit Liabilities" shall mean the Series A Letter of Credit Liabilities or the Series C Letter of Credit Liabilities. "Level I Period" shall mean any period during which (a) no Event of Default shall have occurred and be continuing, and (b) the Leverage Ratio is less than 2.25 to 1; "Level II Period" shall mean any period, other than a Level I Period, during which (a) no Event of Default shall have occurred and be continuing and (b) the Leverage Ratio is greater than or equal to 2.25 to 1 but less than 2.75 to 1; "Level III Period" shall mean any period, other than a Level I Period or a Level II Period, during which (a) no Event of Default shall have occurred and be continuing and (b) the Leverage Ratio is greater than or equal to 2.75 to 1 but less than 3.25 to 1; "Level IV Period" shall mean any period, other than a Level I Period, a Level II Period or a Level III Period during which (a) no Event of Default shall have occurred and be continuing and (b) the Leverage Ratio is greater than or equal to 3.25 to 1 but less than 3.75 to 1; "Level V Period" shall mean any period, other than a Level I Period, a Level II Period, a Level III Period or Level IV Period during which (a) no Event of Default shall have occurred and be continuing and (b) the Leverage Ratio is greater than or equal to 3.75 to 1 but less than 4.25 to 1; "Level VI Period" shall mean any period that is not a Level I Period, a Level II Period, a Level III Period, a Level IV Period or a Level V Period during which (a) no Event of Default shall have occurred and be continuing and (b) the Leverage Ratio is greater than or equal to 4.25 to 1 but less than 4.75; and "Level VII Period" shall mean any period that is not a Level I Period, a Level II Period, a Level III Period, a Level IV Period, a Level V Period or a Level VI Period. Any change in the Applicable Margin for any Type of Loan or any change in the Commitment Fee by reason of a change in the Leverage Ratio shall become effective on the third Business Day following receipt by the Administrative Agent of the financial statements of the Company and its Subsidiaries delivered as required by Sections 8.01(a), (b) or (h) hereof; provided that failure to deliver such financial statements as required by Sections 8.01(a), (b) or (h) hereof shall result in the Applicable Margin and Commitment Fee Rate being at the rates set forth opposite Level VII Period. "Leverage Ratio" shall mean, as at any date, the ratio of Total Funded Debt at such date to EBITDA for the relevant Calculation Period; provided that, from and after the date of any Acquisition occurring after February 28, 1998 until four full fiscal quarters of the Company shall have elapsed since the date of such Acquisition, the Leverage Ratio shall be calculated on a pro forma basis (reflecting, inter alia, any amount attributable to any operating expense that will be eliminated or cost reduction that will be realized (in each case, net of any operating expense or other cost increase) in connection with such Acquisition, as determined in good faith by the chief financial officer of the Company in accordance with GAAP and the rules, regulations and guidelines of the Securities and Exchange Commission, as if such elimination of operating expense or the realization of such cost reductions were achieved at the beginning of such four-quarter period") as though such Acquisition had occurred, any Funded Debt incurred - 12 - or assumed by the Company or any of its Subsidiaries in connection with, or in anticipation of, such Acquisition had been incurred or assumed, on the first day of such Calculation Period. "Lien" shall mean, with respect to any Property, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this Agreement and the other Basic Documents, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property. "Loans" shall mean the Series A Loans, the Series B Loans and the Series C Loans. "Majority Lenders" shall mean Majority Series A Lenders, Majority Series B Lenders and Majority Series C Lenders. "Majority Series A Lenders" shall mean Series A Lenders having more than 50% of the aggregate amount of the Series A Commitments or, if the Series A Commitments shall have terminated, Lenders holding more than 50% of the sum of (a) the aggregate unpaid principal amount of the Series A Loans plus (b) the aggregate amount of all Letter of Credit Liabilities. "Majority Series B Lenders" shall mean Series B Lenders having more than 50% of the aggregate amount of the Series B Commitments or, if the Series B Commitments shall have terminated, Lenders holding more than 50% of the aggregate unpaid principal amount of the Series B Loans. "Majority Series C Lenders" shall mean Series C Lenders having more than 50% of the aggregate amount of the Series C Commitments or, if the Series C Commitments shall have terminated, Lenders holding more than 50% of the aggregate unpaid principal amount of the Series C Loans. "Margin Stock" shall mean "margin stock" within the meaning of Regulations U and X. "Material Adverse Effect" shall mean a material adverse effect on (a) the Property, business, operations, financial condition, prospects, liabilities or capitalization of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company to perform its obligations under any of the Basic Documents to which it is a party, (c) the validity or enforceability of any of the Basic Documents, (d) the rights and remedies of the Lenders and the Administrative Agent under any of the Basic Documents or (e) the timely payment of the principal of or interest on the Loans or the Reimbursement Obligations or other amounts payable in connection therewith. "Material Subsidiary" shall mean at any date any Subsidiary of the Company whose total assets equal or exceed 2% of the total assets of the Company and its Subsidiaries on - 13 - a consolidated basis as at the most recent Fiscal Date; provided that, notwithstanding the above, each of B/E Services and Royal Inventum B.V. shall at all times constitute a Material Subsidiary of the Company so long as it is a Subsidiary of the Company. "Multiemployer Plan" shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by the Company or any ERISA Affiliate and which is covered by Title IV of ERISA. "Net Available Proceeds" shall mean: (i) in the case of any Disposition, the amount of Net Cash Payments received in connection with such Disposition; (ii) in the case of any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by the Company and its Subsidiaries in respect of such Casualty Event net of (A) reasonable expenses incurred by the Company and its Subsidiaries in connection therewith and (B) contractually required repayments of Indebtedness to the extent secured by a Lien on such Property and any income and transfer taxes payable by the Company or any of its Subsidiaries in respect of such Casualty Event; (iii) in the case of any Equity Issuance, the aggregate amount of all cash received by the Company and its Subsidiaries in respect of such Equity Issuance net of reasonable expenses incurred by the Company and its Subsidiaries in connection therewith; and (iv) in the case of any Reversion, the aggregate amount of all cash received by the Company or any of its Subsidiaries in respect of such Reversion net of (A) reasonable expenses incurred by the Company and its Subsidiaries in connection therewith and (B) any income and excise taxes payable by the Company or any of its Subsidiaries in respect of such Reversion. "Net Cash Payments" shall mean, with respect to any Disposition, the aggregate amount of all cash payments, and the fair market value of any non-cash consideration, received by the Company and its Subsidiaries directly or indirectly in connection with such Disposition; provided that (a) Net Cash Payments shall be net of (i) the amount of any legal, accounting and other professional fees, title and recording tax expenses, commissions and other fees and expenses paid by the Company and its Subsidiaries in connection with such Disposition and (ii) any Federal, state and local income or other taxes estimated to be payable by the Company and its Subsidiaries as a result of such Disposition (but only to the extent that such estimated taxes are in fact paid to the relevant Federal, state or local governmental authority within three months of date of such Disposition or the Company or any of its Subsidiaries uses any applicable tax benefit available to it as set forth on its balance sheet to reduce such estimated taxes payable within such three month period), (b) Net Cash Payments shall not include any cash payments of less than $100,000 from any one Disposition or a series of related Dispositions, and (c) Net Cash Payments shall be net of any repayments by the Company or any of its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured by a Lien on the Property that is - 14 - the subject of such Disposition and (ii) the transferee of (or holder of a Lien on) such Property requires that such Indebtedness be repaid as a condition to the purchase of such Property. "Notes" shall mean the promissory notes (if any) executed and delivered by the Company pursuant to Section 2.08(d) hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Investments" shall mean any Investment in (i) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America, or of any agency thereof; (ii) commercial paper rated at least A-1 by S&P or P-1 by Moody's; (iii) time deposits with, including certificates of deposit issued by, any office located in the United States of America of any bank or trust company which is organized under the laws of the United States of America or any state thereof and has capital, surplus and undivided profits aggregating at least $1,000,000,000; (iv) shares of any money market or mutual fund not less than 80% of the assets of which are invested solely in securities or obligations of the type described in clauses (i) through (iii) above and (v) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above, provided in each case that such Investment matures within one year from the date of acquisition thereof by the Company or a Subsidiary of the Company. "Person" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). "Plan" shall mean an employee benefit plan established or maintained by the Company or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "Post-Default Rate" shall mean, in respect of any principal of any Loan, any Reimbursement Obligation or any other amount under this Agreement, any Note or any other Basic Document that is not paid when due (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% plus the Base Rate as in effect from time to time plus the Applicable Margin for Base Rate Loans (provided that, if the amount so in default is principal of a Eurodollar Loan and the due date thereof is a day other than the last day of the Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period for and including such due date to but excluding the last day of the Interest Period, 2% plus the interest rate for such Loan as provided in Section 3.02 hereof and, thereafter, the rate provided for above in this definition). "Prime Rate" shall mean the rate of interest from time to time announced by Chase at the Principal Office as its prime commercial lending rate. - 15 - "Principal Office" shall mean the principal office of Chase, located on the date hereof at 270 Park Avenue, New York, New York 10017. "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Quarterly Dates" shall mean the quarterly anniversaries of the Restatement Date; provided that, if any such date is not a Business Day, the Quarterly Date shall be the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, the next preceding Business Day). "Recapture Date" shall mean the last day of the Recapture Period. "Recapture Period" shall mean each period (a) commencing on the later of (i) the Restatement Date and (ii) the day immediately following the last day of the immediately preceding Recapture Period, and (b) ending on the date on which the Company and/or its Subsidiaries receives Net Available Proceeds which, together with all Net Available Proceeds received since the first day of such Recapture Period, equal or exceeds in the aggregate $1,000,000. "Reference Lenders" shall mean Chase and NationsBank, N.A. "Regulations A, D, U and X" shall mean, respectively, Regulations A, D, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. "Regulatory Change" shall mean, with respect to any Lender, any change after the date of this Agreement in Federal, state or foreign law or regulations (including, without limitation, Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of banks including such Lender of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Reimbursement Obligations" shall mean the Series A Reimbursement Obligations and the Series C Reimbursement Obligations. "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata. The terms "Release" and "Released" used as a verb shall have a correlative meaning. "Reserve Requirement" shall mean, for any Interest Period for any Eurodollar Loan, the average maximum rate at which reserves (including, without limitation, any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period - 16 - under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall include any other reserves required to be maintained by such member banks by reason of any Regulatory Change with respect to (i) any category of liabilities that includes deposits by reference to which the Eurodollar Base Rate is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions of credit or other assets that includes Eurodollar Loans. "Restatement Date" shall mean August 7, 1998. "Restricted Payment" shall mean, with respect to any Person, (a) dividends (in cash, Property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any shares of any class of stock of such Person or of any warrants (other than of shares of common stock, warrants or options of such Person as payment for the exercise price of options or warrants to purchase common stock of such Person having a fair market value equal to such exercise price), options or other rights to acquire the same (or to make any payments to any other Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market or equity value of such Person or any of its Subsidiaries), but excluding dividends payable solely in shares of common stock or in options, warrants or other rights to purchase such common stock of such Person or (b) any payment (whether made by such Person or any of its Subsidiaries) on account of the purchase, redemption, prepayment, defeasance or other acquisition or retirement of value of any Indebtedness (such Indebtedness, "Retired Indebtedness") that is subordinated in right of payment to the prior payment of the Loans, except any such payment made from the proceeds of (x) the issuance of any equity securities or (y) any additional unsecured Indebtedness that does not rank senior in right of payment to, and does not mature or have any mandatory prepayment, which does not include required prepayments as a result of a change of control or asset sale, prior to the maturity of, such Retired Indebtedness. "Reversion" shall mean the termination by the Company or any of its Subsidiaries of a Plan which results in a payment to the Company or any of its Subsidiaries of any part of the over-funded portion of such Plan. "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Security Agreement" shall mean the Amended and Restated Security Agreement dated as of October 29, 1998, amended and restated as of April 3, 1998, between the Company and the Administrative Agent, substantially in the form of Exhibit A-1 hereto, as the same shall be modified, supplemented and in effect from time to time. "Security Documents" shall mean, collectively, the Security Agreement and the In-Flight Guarantee and Security Agreement. - 17 - "Senior Subordinated Indentures" shall mean the Senior Subordinated 1996 Indenture and the Senior Subordinated 1998 Indenture. "Senior Subordinated 1996 Indenture" shall mean the Indenture dated as of February 1, 1996 between the Company and Fleet National Bank Connecticut, N.A., as Trustee, as the same shall be modified and supplemented and in effect from time to time. "Senior Subordinated 1998 Indenture" shall mean the Indenture dated as of February 13, 1998 between the Company and United States Trust Company of New York as Trustee, as the same shall be modified and supplemented and in effect from time to time. "Series A Commitment" shall mean, for each Series A Lender, the obligation of such Lender to make Series A Loans, and to participate in Series A Letters of Credit, in an aggregate amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on Annex 1 hereto under the caption "Series A Commitment" (as the same may be reduced from time to time pursuant to Section 2.04 hereof or increased or reduced from time to time pursuant to Section 11.06 hereof). The original aggregate principal amount of the Series A Commitments is $100,000,000. "Series A Commitment Percentage" shall mean, with respect to any Series A Lender, the ratio of (a) the amount of the Series A Commitment of such Lender to (b) the aggregate amount of the Series A Commitments of all of the Lenders. "Series A Commitment Termination Date" shall mean April 3, 2004; provided that if such day is not a Business Day, the Series A Commitment Termination Date shall be the immediately preceding Business Day. "Series A Lenders" shall mean (a) on the Amendment Effective Date, the Lenders having Series A Commitments as indicated on Annex 1 hereto and (b) thereafter, the Lenders from time to time holding Series A Loans and Series A Commitments after giving effect to any assignments thereof permitted by Section 11.06 hereof. "Series A Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.03(A) hereof. "Series A Letter of Credit Documents" shall mean, with respect to any Series A 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 Series A Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Series A 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. "Series A Letter of Credit Interest" shall mean, for each Series A Lender, such Lender's participation interest (or, in the case of the Issuing Lender, the Issuing Lender's retained interest) in the Issuing Lender's liability under Series A Letters of Credit and such Lender's rights - 18 - and interests in Series A Reimbursement Obligations and fees, interest and other amounts payable in connection with Series A Letters of Credit and Series A Reimbursement Obligations. "Series A Letter of Credit Liability" shall mean, without duplication, at any time and in respect of any Series A Letter of Credit, the sum of (a) the undrawn amount of such Series A Letter of Credit plus (b) the aggregate unpaid principal amount of all Series A Reimbursement Obligations of the Company at such time due and payable in respect of all drawings made under such Series A Letter of Credit. For purposes of this Agreement, a Series A Lender (other than the Issuing Lender) shall be deemed to hold a Series A Letter of Credit Liability in an amount equal to its participation interest in the related Series A Letter of Credit under Section 2.03(A) hereof, and the Issuing Lender shall be deemed to hold a Series A Letter of Credit Liability in an amount equal to its retained interest in the related Series A Letter of Credit after giving effect to the acquisition by the Series A Lenders other than the Issuing Lender of their participation interests under said Section 2.03(A). "Series A Loans" shall mean the loans provided for by Section 2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans. "Series A Notes" shall mean the promissory notes (if any) provided for by Section 2.08(d) hereof and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. "Series A Reimbursement Obligations" shall mean, at any time, the obligations of the Company then outstanding, or which may thereafter arise in respect of all Series A Letters of Credit then outstanding, to reimburse amounts paid by the Issuing Lender in respect of any drawings under a Series A Letter of Credit. "Series B Commitment" shall mean, for each Series B Lender, the obligation of such Lender to make Series B Loans in an aggregate amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on Annex 1 hereto under the caption "Series B Commitment" (as the same may be reduced from time to time pursuant to Section 2.04 hereof or increased or reduced from time to time pursuant to Section 11.06 hereof). The original aggregate principal amount of the Series B Commitments is $100,000,000. "Series B Commitment Termination Date" shall mean April 2, 1999; provided that if such day is not a Business Day, the Series B Commitment Termination Date shall be the immediately preceding Business Day. "Series B Lenders" shall mean (a) on the Amendment Effective Date, the Lenders having Series B Commitments as indicated on Annex 1 hereto and (b) thereafter, the Lenders from time to time holding Series B Loans and Series B Commitments after giving effect to any assignments thereof permitted by Section 11.06 hereof. "Series B Loans" shall mean the loans provided for by Section 2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans. - 19 - "Series B Notes" shall mean the promissory notes (if any) provided for by Section 2.08(d) hereof and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. "Series B Principal Payment Date" shall mean any Quarterly Date on which payments of principal of Series B Loans are scheduled to be made pursuant to Section 3.01(b) hereof. "Series C Commitment" shall mean, for each Series C Lender, the obligation of such Lender to make Series C Loans, and to participate in the Series C Letter of Credit, in an aggregate amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on Annex 1 hereto under the caption "Series C Commitment" (as the same may be reduced from time to time pursuant to Section 2.04 hereof or increased or reduced from time to time pursuant to Section 11.06 hereof). The original aggregate principal amount of the Series C Commitments is $120,000,000. "Series C Commitment Percentage" shall mean, with respect to any Series C Lender, the ratio of (a) the amount of the Series C Commitment of such Lender to (b) the aggregate amount of the Series C Commitments of all of the Lenders. "Series C Commitment Termination Date" shall mean April 2, 1999; provided that if such day is not a Business Day, the Series C Commitment Termination Date shall be the immediately preceding Business Day. "Series C Lenders" shall mean (a) on the Amendment Effective Date, the Lenders having Series C Commitments as indicated on Annex 1 hereto and (b) thereafter, the Lenders from time to time holding Series C Loans and Series C Commitments after giving effect to any assignments thereof permitted by Section 11.06 hereof. "Series C Letter of Credit" shall mean the letter of credit issued pursuant to Section 2.03(B) hereof. "Series C Letter of Credit Documents" shall mean, with respect to the Series C Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to the Series C Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to the Series C 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. "Series C Letter of Credit Interest" shall mean, for each Series C Lender, such Lender's participation interest (or, in the case of the Issuing Lender, the Issuing Lender's retained interest) in the Issuing Lender's liability under the Series C Letter of Credit and such Lender's rights and interests in Series C Reimbursement Obligations and fees, interest and other amounts payable in connection with the Series C Letter of Credit and Series C Reimbursement Obligations. - 20 - "Series C Letter of Credit Liability" shall mean, without duplication, at any time and in respect of the Series C Letter of Credit, the sum of (a) the undrawn amount of the Series C Letter of Credit plus (b) the aggregate unpaid principal amount of all Series C Reimbursement Obligations of the Company at such time due and payable in respect of all drawings made under the Series C Letter of Credit. For purposes of this Agreement, a Series C Lender (other than the Issuing Lender) shall be deemed to hold a Series C Letter of Credit Liability in an amount equal to its participation interest in the Series C Letter of Credit under Section 2.03(B) hereof, and the Issuing Lender shall be deemed to hold a Series C Letter of Credit Liability in an amount equal to its retained interest in the related Series C Letter of Credit after giving effect to the acquisition by the Series C Lenders other than the Issuing Lender of their participation interests under said Section 2.03(B). "Series C Loans" shall mean the loans provided for by Section 2.01(c) hereof, which may be Base Rate Loans and/or Eurodollar Loans. "Series C Notes" shall mean the promissory notes (if any) provided for by Section 2.08(d) hereof and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. "Series C Reimbursement Obligations" shall mean, at any time, the obligations of the Company then outstanding, or which may thereafter arise in respect of the Series C Letter of Credit then outstanding, to reimburse amounts paid by the Issuing Lender in respect of any drawings under the Series C Letter of Credit. "SMR" shall mean SMR Aerospace, Inc., an Ohio corporation. "Specified Subsidiary" shall mean each Subsidiary of the Company identified as a "Specified Subsidiary" on Schedule III hereto, but only until all (or, in the case of a Subsidiary that is not a Domestic Subsidiary, 65%) of its shares that are owned by the Company become subject to the Lien of the Security Agreement or are otherwise pledged to the Administrative Agent for the benefit of the Lenders pursuant to documentation in form and substance reasonably satisfactory to the Majority Lenders. "Subsidiary" shall mean, for any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. "Wholly Owned Subsidiary" shall mean any such corporation, partnership or other entity of which all of the equity securities or other ownership interests (other than, in the case of a corporation, directors' qualifying shares) are so owned or controlled. - 21 - "Total Funded Debt" shall mean, as at any date, the sum, for the Company and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of all Funded Debt. "Type" shall have the meaning assigned to such term in Section 1.03 hereof. 1.02 Accounting Terms and Determinations. ----------------------------------- (a) Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof in the manner described in subsection (b) below) be prepared, in accordance with generally accepted accounting principles applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Lenders hereunder (which, prior to the delivery of the first financial statements under Section 8.01 hereof, shall mean the audited financial statements as at February 28, 1998 referred to in Section 7.02 hereof). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of generally accepted accounting principles applied on a basis consistent with those used in the preparation of the latest annual or quarterly financial statements furnished to the Lenders pursuant to Section 8.01 hereof (or, prior to the delivery of the first financial statements under Section 8.01 hereof, used in the preparation of the audited financial statements as at February 28, 1998, referred to in Section 7.02 hereof) unless (i) the Company shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) the Majority Lenders shall so object in writing within 30 days after delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 8.01 hereof, shall mean the audited financial statements as at February 28, 1998 referred to in Section 7.02 hereof). (b) The Company shall deliver to the Lenders at the same time as the delivery of any annual or quarterly financial statement under Section 8.01 hereof (i) a description in reasonable detail of any material variation between the application of accounting principles employed in the preparation of such statement and the application of accounting principles employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the last sentence of subsection (a) above and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. (c) To enable the ready and consistent determination of compliance with the covenants set forth in Section 8 hereof, the fiscal year of the Company shall end on the last Saturday in February of each year, and the last days of the first three fiscal quarters shall fall on the last Saturday in each of May, August and November of each year, respectively. 1.03 Classes and Types of Loans. Loans, Letters of Credit, Letter of Credit Liabilities and Reimbursement Obligations hereunder are distinguished by "Class" and by - 22 - "Type". The "Class" of a Loan (or of a Commitment to make a Loan) refers to whether such Loan is a Series A Loan, a Series B Loan or a Series C Loan, each of which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may be identified by both Class and Type. A Class of Letter of Credit, Letter of Credit Liabilities or Reimbursement Obligations refers to whether such Letter of Credit, Letter of Credit Liability or Reimbursement Obligation is under the Series A Commitments or the Series C Commitments. Section 2. Commitments, Loans, Notes and Prepayments. ----------------------------------------- 2.01 Loans. ----- (a) Series A Loans. Each Series A Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Company in Dollars to but not including the Series A Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of the Series A Commitment of such Lender as in effect from time to time (such Loans, together with the "Series A Loans" made under the Existing Credit Agreement, being herein called "Series A Loans"), provided that in no event shall the aggregate principal amount of all Series A Loans, together with the aggregate amount of all Series A Letter of Credit Liabilities, exceed the aggregate amount of the Series A Commitments. Subject to the terms and conditions of this Agreement, the Company may borrow, repay and reborrow the amount of the Series A Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert Series A Loans of one Type into Series A Loans of another Type (as provided in Section 2.09 hereof). Series A Loans outstanding under the Existing Credit Agreement will continue as Series A Loans under this Agreement. (b) Series B Loans. Each Series B Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Company in Dollars to but not including the Series B Commitment Termination Date in an aggregate principal amount up to but not exceeding the amount of the Series B Commitment of such Lender as in effect from time to time (such Loans being herein called "Series B Loans"). Subject to the terms and conditions of this Agreement, the Company may borrow the amount of the Series B Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert Series B Loans of one Type into Series B Loans of another Type (as provided in Section 2.09 hereof) or Continue Series B Loans of one Type as Series B Loans of the same Type (as provided in Section 2.09 hereof). Series B Loans may be prepaid, but they may not be reborrowed once prepaid. Series B Loans outstanding under the Existing Credit Agreement will continue as Series B Loans under this Agreement. (c) Series C Loans. Each Series C Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Company in Dollars from the date of issuance of the Series C Letter of Credit to but not including the Series C Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of the Series C Commitment of such Lender as in effect from time to time (the "Series C Loans"), provided that in no event shall the aggregate principal amount of all Series C Loans, together with the aggregate amount of all Series C Letter of Credit Liabilities, exceed the - 23 - aggregate amount of the Series C Commitments. Subject to the terms and conditions of this Agreement, the Company may borrow, repay and reborrow the amount of the Series C Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert Series C Loans of one Type into Series C Loans of another Type (as provided in Section 2.09 hereof). (d) Limit on Eurodollar Loans. No more than ten separate Interest Periods in respect of Eurodollar Loans of either Class from each Lender may be outstanding at any one time. 2.02 Borrowings. The Company shall give the Administrative Agent (which shall promptly notify the Lenders) notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on the date specified for each borrowing hereunder, each Lender shall make available the amount of the Loan or Loans to be made by it on such date to the Administrative Agent, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders, in immediately available funds, for account of the Company. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by depositing the same, in immediately available funds, in an account of the Company maintained with Chase at the Principal Office designated by the Company. 2.03 Letters of Credit. ----------------- (A) Series A Letters of Credit. Subject to the terms and conditions of this Agreement, the Series A Commitments may be utilized, upon the request of the Company, in addition to the Series A Loans provided for by Section 2.01(a) hereof, by the issuance by the Issuing Lender of letters of credit (collectively, "Series A Letters of Credit") for account of the Company or any of its Subsidiaries (as specified by the Company), provided that in no event shall (i) the aggregate amount of all Series A Letter of Credit Liabilities, together with the aggregate principal amount of the Series A Loans, exceed the aggregate amount of the Series A Commitments as in effect from time to time, (ii) the outstanding aggregate amount of all Series A Letter of Credit Liabilities exceed $15,000,000 and (iii) the expiration date of any Series A Letter of Credit extend beyond the earlier of the Series A Commitment Termination Date and the date twelve months following the issuance of such Series A Letter of Credit. The following additional provisions shall apply to Series A Letters of Credit: (a) The Company shall give the Administrative Agent at least three Business Days' irrevocable prior notice (effective upon receipt) specifying the Business Day (which shall be no later than thirty days preceding the Series A Commitment Termination Date) each Series A Letter of Credit is to be issued and the account party or parties therefor and describing in reasonable detail the proposed terms of such Series A Letter of Credit (including the beneficiary thereof) and the nature of the transactions or obligations proposed to be supported thereby (including whether such Series A Letter of Credit is to be a commercial letter of credit or a standby letter of credit). Upon receipt of any such notice, the Administrative Agent shall advise the Issuing Lender of the contents thereof. (b) On each day during the period commencing with the issuance by the Issuing Lender of any Series A Letter of Credit and until such Series A Letter of Credit shall have - 24 - expired or been terminated, the Series A Commitment of each Series A Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Series A Commitment Percentage of the then undrawn face amount of such Series A Letter of Credit. Each Series A Lender (other than the Issuing Lender) agrees that, upon the issuance of any Series A Letter of Credit hereunder, it shall automatically acquire a participation in the Issuing Lender's liability under such Series A Letter of Credit in an amount equal to such Lender's Series A Commitment Percentage of such liability, and each Series A Lender (other than the Issuing Lender) thereby shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and shall be unconditionally obligated to the Issuing Lender to pay and discharge when due, its Series A Commitment Percentage of the Issuing Lender's liability under such Series A Letter of Credit. (c) Upon receipt from the beneficiary of any Series A Letter of Credit of any demand for payment under such Series A Letter of Credit, the Issuing Lender shall promptly notify the Company (through the Administrative Agent) of the amount to be paid by the Issuing Lender as a result of such demand and the date on which payment is to be made by the Issuing Lender to such beneficiary in respect of such demand. Notwithstanding the identity of the account party of any Series A Letter of Credit, the Company hereby unconditionally agrees to pay and reimburse the Administrative Agent for account of the Issuing Lender for the amount of each demand for payment under such Series A Letter of Credit at or prior to the date on which payment is to be made by the Issuing Lender to the beneficiary thereunder, without presentment, demand, protest or other formalities of any kind. (d) Forthwith upon its receipt of a notice referred to in clause (c) of this Section 2.03(A), the Company shall advise the Administrative Agent whether or not the Company intends to borrow hereunder to finance its obligation to reimburse the Issuing Lender for the amount of the related demand for payment and, if it does, submit a notice of such borrowing as provided in Section 4.05 hereof. In the event that the Company fails to so advise the Administrative Agent, or if the Company fails to reimburse the Issuing Lender for a demand for payment under a Series A Letter of Credit by the date of such payment, the Administrative Agent shall give each Series A Lender prompt notice of the amount of the demand for payment, specifying such Lender's Series A Commitment Percentage of the amount of the related demand for payment. (e) Each Series A Lender (other than the Issuing Lender) shall pay to the Administrative Agent for account of the Issuing Lender at the Principal Office in Dollars and in immediately available funds, the amount of such Lender's Series A Commitment Percentage of any payment under a Series A Letter of Credit upon notice by the Issuing Lender (through the Administrative Agent) to such Series A Lender requesting such payment and specifying such amount; provided that such Series A Lender shall not be obligated to reimburse the Issuing Bank if such payment is the result of the willful misconduct or gross negligence of the Issuing Bank in determining that the request or demand for such payment complied with the terms of such Series A Letter of Credit. Each such Series A Lender's obligation to make such payments to the Administrative Agent for account of the Issuing Lender under this clause (e), and the Issuing Lender's right to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, (i) the failure of any other Series - 25 - A Lender to make its payment under this clause (e), the financial condition of the Company (or any other account party), the existence of any Default or (ii) the termination of the Commitments. Each such payment to the Issuing Lender shall be made without any offset, abatement, withholding or reduction whatsoever. If any Series A Lender shall default in its obligation to make any such payment to the Administrative Agent for account of the Issuing Lender, for so long as such default shall continue the Administrative Agent shall at the request of the Issuing Bank withhold from any payments received by the Administrative Agent under this Agreement or any Note for account of such Series A Lender the amount so in default and the Administrative Agent shall pay the same to the Issuing Lender in satisfaction of such defaulted obligation. (f) Upon the making of each payment by a Series A Lender to the Issuing Lender pursuant to clause (e) above in respect of any Series A Letter of Credit, such Lender shall, automatically and without any further action on the part of the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a participation in an amount equal to such payment in the Series A Reimbursement Obligation owing to the Issuing Lender by the Company hereunder and under the Series A Letter of Credit Documents relating to such Series A Letter of Credit and (ii) a participation in a percentage equal to such Lender's Series A Commitment Percentage in any interest or other amounts payable by the Company hereunder and under such Series A Letter of Credit Documents in respect of such Series A Reimbursement Obligation (other than the commissions, charges, costs and expenses payable to the Issuing Lender pursuant to clause (g) of this Section 2.03(A)). Upon receipt by the Issuing Lender from or for account of the Company of any payment in respect of any Series A Reimbursement Obligation or any such interest or other amount (including by way of setoff or application of proceeds of any collateral security) the Issuing Lender shall promptly pay to the Administrative Agent for account of each Series A Lender entitled thereto, such Series A Lender's Series A Commitment Percentage of such payment, each such payment by the Issuing Lender to be made in the same money and funds in which received by the Issuing Lender. In the event any payment received by the Issuing Lender and so paid to the Series A Lenders hereunder is rescinded or must otherwise be returned by the Issuing Lender, each Series A Lender shall, upon the request of the Issuing Lender (through the Administrative Agent), repay to the Issuing Lender (through the Administrative Agent) the amount of such payment paid to such Lender, with interest as specified in clause (j) of this Section 2.03(A). (g) The Company shall pay to the Administrative Agent for account of the Series A Lenders in respect of each Series A Letter of Credit a letter of credit fee in an amount equal to the product of the Applicable Margin for Eurodollar Loans times the daily average undrawn amount of such Series A Letter of Credit for the period from and including the date of issuance of such Series A Letter of Credit to and including the date such Series A Letter of Credit is drawn in full, expires or is terminated (such fee to be non-refundable, to be paid in arrears on each Quarterly Date and on the Series A Commitment Termination Date and to be calculated, for any day, after giving effect to any payments made under such Series A Letter of Credit on such day). In addition, the Company shall pay to the Administrative Agent for account of the Issuing Lender all commissions, charges, costs and expenses in the amounts customarily charged by the Issuing Lender from time to time in like circumstances with respect to the issuance of each Series A Letter of Credit and drawings and other transactions relating thereto. - 26 - (h) Promptly following the end of each calendar month, the Issuing Lender shall deliver (through the Administrative Agent) to each Series A Lender and the Company a notice describing the aggregate amount of all Series A Letters of Credit outstanding at the end of such month. Upon the request of any Series A Lender from time to time, the Issuing Lender shall deliver any other information reasonably requested by such Lender with respect to each Series A Letter of Credit then outstanding. (i) The issuance by the Issuing Lender of each Series A Letter of Credit shall, in addition to the conditions precedent set forth in Section 6 hereof, be subject to the conditions precedent that (i) such Series A Letter of Credit shall be in such form, contain such terms and support such transactions as shall be satisfactory to the Issuing Lender consistent with its then current practices and procedures with respect to letters of credit of the same type and (ii) the Company shall have executed and delivered such applications, agreements and other instruments relating to such Series A Letter of Credit as the Issuing Lender shall have reasonably requested consistent with its then current practices and procedures with respect to letters of credit of the same type, provided that in the event of any conflict between any such application, agreement or other instrument and the provisions of this Agreement or any Security Document, the provisions of this Agreement and the Security Documents shall control. (j) To the extent that any Series A Lender fails to pay any amount required to be paid pursuant to clause (e) or (f) of this Section 2.03(A) on the due date therefor, such Lender shall pay interest to the Issuing Lender (through the Administrative Agent) on such amount from and including such due date to but excluding the date such payment is made (i) during the period from and including such due date to but excluding the date three Business Days thereafter, at a rate per annum equal to the Federal Funds Rate (as in effect from time to time) and (ii) thereafter, at a rate per annum equal to the Base Rate (as in effect from time to time) plus 2%. (k) The issuance by the Issuing Lender of any modification or supplement to any Series A Letter of Credit hereunder shall be subject to the same conditions applicable under this Section 2.03(A) to the issuance of new Series A Letters of Credit, and no such modification or supplement shall be issued hereunder unless either (x) the respective Series A Letter of Credit affected thereby would have complied with such conditions had it originally been issued hereunder in such modified or supplemented form or (y) each Series A Lender shall have consented thereto. (l) Pursuant to Section 2.03 of the Existing Credit Agreement, Chase has issued the letters of credit identified on Schedule V hereto (the "Existing Letters of Credit"). Each Series A Lender hereby agrees that each Existing Letter of Credit shall constitute, on and after the Amendment Effective Date, a Series A Letter of Credit for all purposes of this Agreement. The Company hereby indemnifies and holds harmless each Series A Lender and the Administrative Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender or the Administrative Agent may incur (or which may be claimed against such Lender or the Administrative Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or refusal to pay by - 27 - the Issuing Lender under any Series A Letter of Credit; provided that the Company shall not be required to indemnify any Lender or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the Issuing Lender in determining whether a request presented under any Series A Letter of Credit complied with the terms of such Series A Letter of Credit or (y) in the case of the Issuing Lender, such Lender's failure to pay under any Series A Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of such Series A Letter of Credit. Nothing in this Section 2.03(A) is intended to limit the other obligations of the Company, any Lender or the Administrative Agent under this Agreement. (B) Series C Letter of Credit. Subject to the terms and conditions of this Agreement, the Series C Commitments may be utilized, upon the request of the Company, in addition to the Series C Loans provided for by Section 2.01(c) hereof, by the issuance by the Issuing Lender of a letter of credit (the "Series C Letter of Credit") for account of the Company in connection with, and at the closing of, the Acquisition of the stock of SMR in substantially the form of Exhibit C hereto, provided that in no event shall the aggregate amount of all Series C Letter of Credit Liabilities, together with the aggregate principal amount of the Series C Loans, exceed the aggregate amount of the Series C Commitments as in effect from time to time. The following additional provisions shall apply to Series C Letters of Credit: (a) The Company shall give the Administrative Agent at least one Business Day's irrevocable prior notice (effective upon receipt) specifying the Business Day the Series C Letter of Credit is to be issued. Upon receipt of any such notice, the Administrative Agent shall advise the Issuing Lender of the contents thereof. (b) On each day during the period commencing with the issuance by the Issuing Lender of the Series C Letter of Credit and until the Series C Letter of Credit shall have expired or been terminated, the Series C Commitment of each Series C Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Series C Commitment Percentage of the then undrawn amount of the Series C Letter of Credit. Each Series C Lender (other than the Issuing Lender) agrees that, upon the issuance of the Series C Letter of Credit hereunder, it shall automatically acquire a participation in the Issuing Lender's liability under the Series C Letter of Credit in an amount equal to such Lender's Series C Commitment Percentage of such liability, and each Series C Lender (other than the Issuing Lender) thereby shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and shall be unconditionally obligated to the Issuing Lender to pay and discharge when due, its Series C Commitment Percentage of the Issuing Lender's liability under the Series C Letter of Credit. (c) Upon receipt from the beneficiary of the Series C Letter of Credit of any demand for payment under the Series C Letter of Credit, the Issuing Lender shall promptly notify the Company (through the Administrative Agent) of the amount to be paid by the Issuing Lender as a result of such demand and the date on which payment is to be made by the Issuing Lender to such beneficiary in respect of such demand. The Company hereby unconditionally agrees to pay and reimburse the Administrative Agent for account of the Issuing Lender for the amount of such demand for payment under the Series C Letter of Credit on the date on which payment is made - 28 - by the Issuing Lender to the beneficiary thereunder, without presentment, demand, protest or other formalities of any kind. (d) Forthwith upon its receipt of a notice referred to in clause (c) of this Section 2.03(B), the Company shall advise the Administrative Agent whether or not the Company intends to borrow hereunder to finance its obligation to reimburse the Issuing Lender for the amount of the demand for payment and, if it does, submit a notice of such borrowing as provided in Section 4.05 hereof (for which purpose a default in the payment of Indebtedness supported by the Series C Letter of Credit will be deemed not to be a Default hereunder). In the event that the Company fails to so advise the Administrative Agent, or if the Company fails to reimburse the Issuing Lender for such demand for payment under the Series C Letter of Credit by the date of such payment, the Administrative Agent shall give each Series C Lender prompt notice of the amount of the demand for payment, specifying such Lender's Series C Commitment Percentage of the amount of the related demand for payment. (e) Each Series C Lender (other than the Issuing Lender) shall pay to the Administrative Agent for account of the Issuing Lender at the Principal Office in Dollars and in immediately available funds, the amount of such Lender's Series C Commitment Percentage of any payment under the Series C Letter of Credit upon notice by the Issuing Lender (through the Administrative Agent) to such Series C Lender requesting such payment and specifying such amount; provided that such Series C Lender shall not be obligated to reimburse the Issuing Bank if such payment is the result of the willful misconduct or gross negligence of the Issuing Bank in determining that the request or demand for such payment complied with the terms of the Series C Letter of Credit. Each such Series C Lender's obligation to make such payments to the Administrative Agent for account of the Issuing Lender under this clause (e), and the Issuing Lender's right to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, (i) the failure of any other Series C Lender to make its payment under this clause (e), the financial condition of the Company, the existence of any Default or (ii) the termination of the Series C Commitments. Such payment to the Issuing Lender shall be made without any offset, abatement, withholding or reduction whatsoever. If any Series C Lender shall default in its obligation to make such payment to the Administrative Agent for account of the Issuing Lender, for so long as such default shall continue the Administrative Agent shall at the request of the Issuing Bank withhold from any payments received by the Administrative Agent under this Agreement or any Note for account of such Series C Lender the amount so in default and the Administrative Agent shall pay the same to the Issuing Lender in satisfaction of such defaulted obligation. (f) Upon the making of such payment by a Series C Lender to the Issuing Lender pursuant to clause (e) above in respect of the Series C Letter of Credit, such Lender shall, automatically and without any further action on the part of the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a participation in an amount equal to such payment in the Series C Reimbursement Obligation owing to the Issuing Lender by the Company hereunder and under the Series C Letter of Credit Documents relating to the Series C Letter of Credit and (ii) a participation in a percentage equal to such Lender's Series C Commitment Percentage in any interest or other amounts payable by the Company hereunder and under such Series C Letter of Credit Documents in respect of such Series C Reimbursement Obligation (other than the - 29 - commissions, charges, costs and expenses payable to the Issuing Lender pursuant to clause (g) of this Section 2.03(B)). Upon receipt by the Issuing Lender from the Company of any payment in respect of any Series C Reimbursement Obligation or any such interest or other amount (including by way of setoff or application of proceeds of any collateral security) the Issuing Lender shall promptly pay to the Administrative Agent for account of each Series C Lender entitled thereto, such Series C Lender's Series C Commitment Percentage of such payment, each such payment by the Issuing Lender to be made in the same money and funds in which received by the Issuing Lender. In the event any payment received by the Issuing Lender and so paid to the Series C Lenders hereunder is rescinded or must otherwise be returned by the Issuing Lender, each Series C Lender shall, upon the request of the Issuing Lender (through the Administrative Agent), repay to the Issuing Lender (through the Administrative Agent) the amount of such payment paid to such Lender, with interest as specified in clause (j) of this Section 2.03(B). (g) The Company shall pay to the Administrative Agent for account of the Series C Lenders in respect of the Series C Letter of Credit a letter of credit fee in an amount equal to the product of the Applicable Margin for Eurodollar Loans times the daily average undrawn amount of the Series C Letter of Credit for the period from and including the date of issuance of the Series C Letter of Credit to and including the date the Series C Letter of Credit is drawn in full, expires or is terminated (such fee to be non-refundable, to be paid in arrears on each Quarterly Date and on the Series C Commitment Termination Date and to be calculated, for any day, after giving effect to any payments made under the Series C Letter of Credit on such day). In addition, the Company shall pay to the Administrative Agent for account of the Issuing Lender all commissions, charges, costs and expenses in the amounts customarily charged by the Issuing Lender from time to time in like circumstances with respect to the issuance of the Series C Letter of Credit and drawings and other transactions relating thereto. (h) Promptly following the end of each calendar month, the Issuing Lender shall deliver (through the Administrative Agent) to each Series C Lender and the Company a notice describing the aggregate amount of the Series C Letter of Credit outstanding at the end of such month. Upon the request of any Series C Lender from time to time, the Issuing Lender shall deliver any other information reasonably requested by such Lender with respect to the Series C Letter of Credit. (i) The issuance by the Issuing Lender of the Series C Letter of Credit shall, in addition to the conditions precedent set forth in Section 6 hereof, be subject to the condition precedent that the Company shall have executed and delivered such applications, agreements and other instruments relating to the Series C Letter of Credit as the Issuing Lender shall have reasonably requested consistent with its then current practices and procedures with respect to letters of credit of the same type, provided that in the event of any conflict between any such application, agreement or other instrument and the provisions of this Agreement or any Security Document, the provisions of this Agreement and the Security Documents shall control. (j) To the extent that any Series C Lender fails to pay any amount required to be paid pursuant to clause (e) or (f) of this Section 2.03(B) on the due date therefor, such Lender shall pay interest to the Issuing Lender (through the Administrative Agent) on such amount from and including such due date to but excluding the date such payment is made (i) during the period - 30 - from and including such due date to but excluding the date three Business Days thereafter, at a rate per annum equal to the Federal Funds Rate (as in effect from time to time) and (ii) thereafter, at a rate per annum equal to the Base Rate (as in effect from time to time) plus 2%. (k) The issuance by the Issuing Lender of any modification or supplement to the Series C Letter of Credit hereunder shall be subject to the same conditions applicable under this Section 2.03(B) to the issuance of the Series C Letter of Credit, and no such modification or supplement shall be issued hereunder unless each Series C Lender shall have consented thereto. The Company hereby indemnifies and holds harmless each Series C Lender and the Administrative Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender or the Administrative Agent may incur (or which may be claimed against such Lender or the Administrative Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or refusal to pay by the Issuing Lender under the Series C Letter of Credit; provided that the Company shall not be required to indemnify any Lender or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the Issuing Lender in determining whether a request presented under the Series C Letter of Credit complied with the terms of the Series C Letter of Credit or (y) in the case of the Issuing Lender, such Lender's failure to pay under the Series C Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of the Series C Letter of Credit. Nothing in this Section 2.03(B) is intended to limit the other obligations of the Company, any Lender or the Administrative Agent under this Agreement. 2.04 Changes of Commitments. ---------------------- (a) Series A Commitments. -------------------- (i) The Series A Commitments shall terminate on the Series A Commitment Termination Date. (ii) The Company shall have the right at any time or from time to time (x) so long as no Series A Loans or Series A Letter of Credit Liabilities are outstanding, to terminate the Series A Commitments and (y) to reduce the aggregate unused amount of the Series A Commitments (for which purpose use of the Series A Commitments shall be deemed to include the aggregate amount of Series A Letter of Credit Liabilities); provided that (A) the Company shall give notice of each such termination or reduction as provided in Section 4.05 hereof and (B) each partial reduction shall be in an aggregate amount at least equal to $5,000,000 or in multiples of $1,000,000 in excess thereof. (b) Series B Commitments. -------------------- (i) The Series B Commitments shall terminate on the Series B Commitment Termination Date. - 31 - (ii) The Company shall have the right at any time or from time to time (x) so long as no Series B Loans are outstanding, to terminate the Series B Commitments and (y) to reduce the aggregate amount of the Series B Commitments; provided that (A) the Company shall give notice of each such termination or reduction as provided in Section 4.05 hereof; (B) each partial reduction shall be in an aggregate amount at least equal to $5,000,000 or in multiples of $1,000,000 in excess thereof; and (C) to the extent that, after giving effect to any such reduction, the aggregate principal amount of the Series B Loans would exceed the Series B Commitments, the Company shall prepay the Series B Loans. (c) Series C Commitments. -------------------- (i) The Series C Commitments shall terminate on the Series C Commitment Termination Date. (ii) The Company shall have the right at any time or from time to time (x) so long as no Series C Loans or Series C Letter of Credit Liabilities are outstanding, to terminate the Series C Commitments and (y) to reduce the aggregate unused amount of the Series C Commitments (for which purpose use of the Series C Commitments shall be deemed to include the aggregate amount of Series C Letter of Credit Liabilities); provided that (A) the Company shall give notice of each such termination or reduction as provided in Section 4.05 hereof and (B) each partial reduction shall be in an aggregate amount at least equal to $5,000,000 or in multiples of $1,000,000 in excess thereof. (d) All Commitments. The Commitments once terminated or reduced may not be reinstated. 2.05 Commitment Fee. The Company shall pay to the Administrative Agent for account of (i) each Series A Lender a commitment fee on the daily average unused amount of such Lender's Series A Commitment (for which purpose Series A Letter of Credit Liabilities shall be deemed to be a use of any Lender's Series A Commitment), (ii) each Series B Lender a commitment fee on the daily average unused amount of such Lender's Series B Commitment and (iii) each Series C Lender a commitment fee on the daily average unused amount of such Lender's Series C Commitment (for which purpose Series C Letter of Credit Liabilities shall be deemed to be a use of any Lender's Series C Commitment), in each case for the period from and including the Amendment Effective Date to but not including the date such Commitment is terminated, at a rate per annum equal to the Commitment Fee Rate. Accrued commitment fee shall be payable on each Quarterly Date and on the date the relevant Commitments are terminated. 2.06 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. 2.07 Several Obligations; Remedies Independent. The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan on such date, but neither any Lender nor the Administrative - 32 - Agent shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender, and no Lender shall have any obligation to the Administrative Agent (except as provided in Section 4.06 hereof) or any other Lender for the failure by such Lender to make any Loan required to be made by such Lender. 2.08 Evidence of Debt. ---------------- (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Company to such Lender resulting from each Loan made or continued hereunder by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made or continued hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Company to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this Section 2.08 shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Loans in accordance with the terms of this Agreement. (d) Any Lender may request that Loans made or continued by it hereunder be evidenced by a promissory note(s). In such event, the Company, at its own expense, shall prepare, execute and deliver to such Lender a promissory note(s) payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent and such note(s) shall be evidence of such Loans (and all amounts payable in respect thereof). 2.09 Optional Prepayments and Conversions or Continuations of Loans. Subject to Sections 4.04 and 5.05 hereof, the Company shall have the right to prepay Loans, or to Convert Loans of one Type into Loans of another Type or Continue Loans of one Type as Loans of the same Type, at any time or from time to time, provided that the Company shall give the Administrative Agent notice of each such prepayment, Conversion or Continuation as provided in Section 4.05 hereof (and, upon the date specified in any such notice of prepayment, the amount to be prepaid shall become due and payable hereunder) and provided further that any prepayment of the principal of the Series B Loans shall be applied to reduce the then remaining installments thereof on a pro rata basis (based on the then remaining principal amount of each such installment). Notwithstanding the foregoing, and without limiting the rights and remedies of the Lenders under Section 9 hereof, in the event that any Event of Default shall have occurred and be continuing, the Administrative Agent may (and at the request of the Majority Lenders shall) suspend the right of the Company to Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in which event all Loans shall be Converted (on the - 33 - last day(s) of the respective Interest Periods therefor) or Continued, as the case may be, as Base Rate Loans. 2.10 Mandatory Prepayments and Reductions of Commitments. --------------------------------------------------- (a) Series C Commitments. If the amount of the Series C Letter of Credit is reduced, the aggregate amount of the Series C Commitments shall automatically reduce by an equal amount. Upon the expiry or drawing under the Series C Letter of Credit, the aggregate amount of the Series C Commitments shall automatically reduce in the amount, if any, by which (i) the amount of the Series C Letter of Credit immediately prior to such expiry or drawing exceeds (ii) the amount of the drawing, if any. (b) Casualty Events. Unless the Company or any of its Subsidiaries, as the case may be, shall have irrevocably committed to repair or replace any Property of the Company or such Subsidiary affected by a Casualty Event, on the date 30 days following the receipt by the Company of the proceeds of insurance, condemnation award or other compensation in respect of such Casualty Event affecting such Property (or upon such earlier date as the Company or such Subsidiary, as the case may be, shall have determined not to repair or replace the Property affected by such Casualty Event), the Company shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in clause (f) below), and the Commitments shall be subject to automatic reduction, in an aggregate amount, if any, equal to 75% of the Net Available Proceeds of such Casualty Event not theretofore applied to the repair or replacement of such Property (or reserved by the Company for application to such purposes), such prepayment and reduction to be effected in each case in the manner and to the extent specified in clause (e) of this Section 2.10. Nothing in this clause (b) shall be deemed to limit any obligation of the Company or any of its Subsidiaries pursuant to any of the Security Documents to remit to a collateral or similar account (including, without limitation, the Collateral Account) maintained by the Administrative Agent pursuant to any of the Security Documents the proceeds of insurance, condemnation award or other compensation received in respect of any Casualty Event. (c) Recapture of Proceeds from Asset Sales. In the event of a Disposition, the Company shall deposit 75% of the Net Available Proceeds therefrom into the Collateral Account no later than five Business Days after receipt thereof; provided that prior to such deposit the Company may invest such Net Available Proceeds, or after such deposit the Company may withdraw such Net Available Proceeds from the Collateral Account within 270 days after such Disposition so long as immediately thereafter such Net Available Proceeds are invested, in Property to be used by the Company or any of its Subsidiaries in the lines of business in which the Company or any of its Subsidiaries is engaged as of the Restatement Date or in any business related thereto. No later than 270 days following the occurrence of any such Disposition, the Company will deliver to the Lenders a statement, certified by the chief financial officer of the Company, in form and detail satisfactory to the Administrative Agent, of the amount of the Net Available Proceeds of such Disposition not applied as contemplated by the immediately preceding sentence and, on the first Recapture Date thereafter, the Company shall withdraw the remaining Net Available Proceeds from the Collateral Account and prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in clause (f) below), and the Commitments shall be subject to automatic reduction, in an aggregate amount equal to 75% of - 34 - the Net Available Proceeds received or which become available for prepayment or reduction during such Recapture Period ending on such Recapture Date, such prepayment and reduction to be effected in each case in the manner and to the extent specified in clause (e) of this Section 2.10. In addition to the foregoing, to the extent the remaining 25% of the Net Available Proceeds from such Disposition would become "Excess Proceeds" (as defined in the Senior Subordinated Indenture[s]) under clause (b) of Section 1016 of the Senior Subordinated Indenture[s] (the "Remainder Amount"), the Company shall, immediately prior to such Remainder Amount becoming "Excess Proceeds" as aforesaid, prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in clause (f) below), and the Commitments shall be subject to automatic reduction, in an aggregate amount equal to such Remainder Amount, such prepayment and reduction to be effected in each case in the manner and to the extent specified in clause (e) of this Section 2.10. Nothing in this Section 2.10(c) shall be deemed to excuse or otherwise limit the obligation of the Company to obtain the consent of the Majority Lenders pursuant to Section 8.05 hereof to any Disposition not otherwise permitted hereunder. (d) Reversions. Without limiting the obligation of the Company under Section 8.01(c) hereof, upon any Reversion the Company shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in clause (f) below), and the Commitments shall be subject to automatic reduction, in an aggregate amount equal to 75% of the Net Available Proceeds thereof, such prepayment and reduction to be effected in each case in the manner and to the extent specified in clause (e) of this Section 2.10. (e) Application. Prepayments and reductions of Commitments described in clauses (b) through (d) of this Section 2.10 shall be effected as follows: (i) first, the Series B Loans shall be prepaid in an amount equal to the prepayment or reduction specified in such clauses (such prepayments shall be applied first to Base Rate Loans and then to Eurodollar Loans) and shall be applied to the installments of the Series B Loans on a pro rata basis (based on the then remaining principal amount of each such installment); and (ii) second, any excess over the amount referred to in the foregoing clause (i) shall automatically reduce the Series A Commitments (and to the extent that, after giving effect to such reduction, the aggregate principal amount of Series A Loans, together with the aggregate amount of all Series A Letter of Credit Liabilities, would exceed the Series A Commitments, the Company shall, first, prepay Series A Loans (such prepayments shall be applied first to Base Rate Loans and then to Eurodollar Loans) and, second, provide cover for Series A Letter of Credit Liabilities as specified in clause (f) below, in an aggregate amount equal to such excess). (f) Cover for Letter of Credit Liabilities. In the event that the Company shall be required pursuant to this Section 2.10 to provide cover for Series A Letter of Credit Liabilities, the Company shall effect the same by paying to the Administrative Agent immediately available funds in an amount equal to the required amount, which funds shall be retained by the Administrative Agent in the Collateral Account (as provided therein as collateral security in the first instance for the Series A Letter of Credit Liabilities) until such time as the Series A Letters - 35 - of Credit shall have been terminated and all of the Series A Letter of Credit Liabilities paid in full. Section 3. Payments of Principal and Interest. ---------------------------------- 3.01 Repayment of Loans. ------------------ (a) The Company hereby promises to pay to the Administrative Agent for account of each Series A Lender the entire outstanding principal amount of such Lender's Series A Loans, and each Series A Loan shall mature, on the Series A Commitment Termination Date. (b) Subject to Sections 2.09 and 2.10 hereof, the Company hereby promises to pay to the Administrative Agent for account of each Series B Lender the principal amount of each of such Lender's Series B Loans in twenty (20) consecutive quarterly installments, commencing on the Quarterly Date falling approximately three (3) months after the Series B Commitment Termination Date and on each of the nineteen (19) Quarterly Dates thereafter, the first eight (8) of which shall each be in an amount equal to 2.5% of the initial principal amount of such Series B Loan, the next four (4) of which shall each be in an amount equal to 4% of the initial principal amount of such Series B Loan, the next four (4) of which shall each be in an amount equal to 7% of the initial principal amount of such Series B Loan, and the last four (4) of which shall each be in an amount equal to 9% of the initial principal amount of such Series B Loan. (c) The Company hereby promises to pay to the Administrative Agent for account of each Series C Lender the entire outstanding principal amount of such Lender's Series C Loans, and each Series C Loan shall mature, on the Series C Commitment Termination Date. 3.02 Interest. The Company hereby promises to pay to the Administrative Agent for account of each Lender interest on the unpaid principal amount of each Loan made by such Lender for the period from and including the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: (a) during such periods as such Loan is a Base Rate Loan, the Base Rate (as in effect from time to time) plus the Applicable Margin (if any) and (b) during such periods as such Loan is a Eurodollar Loan, for each Interest Period relating thereto, the Eurodollar Rate for such Loan for such Interest Period plus the Applicable Margin. Notwithstanding the foregoing, the Company hereby promises to pay to the Administrative Agent for account of each Lender interest at the applicable Post-Default Rate on any principal of any Loan made by such Lender, on any Reimbursement Obligation held by such Lender and on any other amount payable by the Company hereunder or under the Notes held by such Lender to or for account of such Lender, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full. Accrued interest on each Loan shall be payable (i) in the case of a Base Rate Loan, quarterly on the Quarterly - 36 - Dates, (ii) in the case of a Eurodollar Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three months, at three-month intervals following the first day of such Interest Period, and (iii) in the case of any Loan, upon the payment or prepayment thereof or the Conversion of such Loan to a Loan of another Type (but only on the principal amount so paid, prepaid or Converted), except that interest payable at the Post-Default Rate shall be payable from time to time on demand. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall give notice thereof to the Lenders to which such interest is payable and to the Company. Section 4. Payments; Pro Rata Treatment; Computations; Etc. ------------------------------------------------ 4.01 Payments. -------- (a) Except to the extent otherwise provided herein, all payments of principal, interest, Reimbursement Obligations and other amounts to be made by the Company under this Agreement and the Notes, and, except to the extent otherwise provided therein, all payments to be made by the Company under any other Basic Document, shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Administrative Agent to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Company, not later than 1:00 p.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). (b) Any Lender for whose account any such payment is to be made may (but shall not be obligated to) debit the amount of any such payment that is not made by such time to any ordinary deposit account of the Company with such Lender (with notice to the Company and the Administrative Agent). (c) The Company shall, at the time of making each payment under this Agreement or any Note for account of any Lender, specify to the Administrative Agent (which shall so notify the intended recipient(s) thereof) the Loans, Reimbursement Obligations or other amounts payable by the Company hereunder to which such payment is to be applied (and in the event that the Company fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may distribute such payment to the Lenders for application in such manner as it or the Majority Lenders, subject to Section 4.02 hereof, may determine to be appropriate). (d) Except to the extent otherwise provided in the last sentence of Sections 2.03(A)(e) and 2.03(B)(e) hereof, each payment received by the Administrative Agent under this Agreement or any Note for account of any Lender shall be paid by the Administrative Agent promptly to such Lender, in immediately available funds, for account of such Lender's Applicable Lending Office for the Loan or other obligation in respect of which such payment is made. - 37 - (e) If the due date of any payment under this Agreement or any Note would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension. 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each borrowing of Loans of a particular Class from the Lenders under Section 2.01 hereof shall be made from the relevant Lenders, each payment of commitment fee under Section 2.05 hereof in respect of Commitments of a particular Class shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments of a particular Class under Section 2.04 hereof and under Section 2.10(e) hereof shall be applied to the respective Commitments of such Class of the relevant Lenders, pro rata according to the amounts of their respective Commitments of such Class; (b) the making, Conversion and Continuation of Series A Loans, Series B Loans and Series C Loans of a particular Type (other than Conversions provided for by Section 5.04 hereof) shall be made pro rata among the relevant Lenders according to the amounts of their respective Series A, Series B and Series C Commitments (in the case of making of Loans) or their respective Series A, Series B and Series C Loans (in the case of Conversions and Continuations of Loans) and the then current Interest Period for each Eurodollar Loan shall be coterminous; (c) each payment or prepayment of principal of Series A Loans, Series B Loans or Series C Loans by the Company shall be made for account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans of such Class held by them; and (d) each payment of interest on Series A Loans, Series B Loans and Series C Loans by the Company shall be made for account of the relevant Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders. 4.03 Computations. Interest on Eurodollar Loans and Reimbursement Obligations and commitment fee and letter of credit fee shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable and interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable. Notwithstanding the foregoing, for each date that the Base Rate is calculated by reference to the Federal Funds Rate, interest on Base Rate Loans shall be computed on the basis of a year of 360 days and actual days elapsed. 4.04 Minimum Amounts. Except for mandatory prepayments made pursuant to Section 2.10 hereof and Conversions or prepayments made pursuant to Section 5.04 hereof, (i) each borrowing, Conversion and partial prepayment of principal of Series A Loans shall be in multiples of $1,000,000, (ii) each borrowing, Conversion or partial prepayment of principal of Series B Loans shall be in multiples of $1,000,000 and (iii) each borrowing, Conversion or partial prepayment of principal of Series C Loans shall be in multiples of $100,000 (borrowings, Conversions or prepayments of or into Loans of different Types, or, in the case of Eurodollar Loans, having different Interest Periods at the same time hereunder to be deemed separate borrowings, Conversions and prepayments for purposes of the foregoing, one for each Type or Interest Period). Anything in this Agreement to the contrary notwithstanding, the aggregate - 38 - principal amount of Eurodollar Loans having the same Interest Period shall be in an amount at least equal to $5,000,000 or in multiples of $1,000,000 in excess thereof and, if any Eurodollar Loans would otherwise be in a lesser principal amount for any period, such Loans shall be Base Rate Loans during such period. 4.05 Certain Notices. Notices by the Company to the Administrative Agent of terminations or reductions of the Commitments, of borrowings, Conversions, Continuations and optional prepayments of Loans and of Classes of Loans and of Types of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by the Administrative Agent not later than 10:00 a.m. New York time on the number of Business Days prior to the date of the relevant termination, reduction, borrowing, Conversion, Continuation or prepayment or the first day of such Interest Period specified below: Number of Business Notice Days Prior - --------------------------------------------- ---------------------- Termination or reduction 3 of Commitments Borrowing or prepayment of, 1 or Conversions into, Base Rate Loans Borrowing or prepayment of, 3 Conversions into, Continuations as, or duration of Interest Period for, Eurodollar Loans provided that a notice to borrow Base Rate Loans to finance the Series C Reimbursement Obligations may be given on a same day basis. Each such notice of termination or reduction shall specify the amount and the Class of the Commitments to be terminated or reduced. Each such notice of borrowing, Conversion, Continuation or optional prepayment shall specify the Class of Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to Section 4.04 hereof) and Type of each Loan to be borrowed, Converted, Continued or prepaid and the date of borrowing, Conversion, Continuation or optional prepayment (which shall be a Business Day). Each such notice of the duration of an Interest Period shall specify the Loans to which such Interest Period is to relate. The Administrative Agent shall promptly notify the Lenders of the contents of each such notice. In the event that the Company fails to select the Type of Loan, or the duration of any Interest Period for any Eurodollar Loan, within the time period and otherwise as provided in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be automatically Converted into a Base Rate Loan on the last day of the then current Interest Period for such Loan or (if outstanding as a Base Rate Loan) will remain as, or (if not then outstanding) will be made as, a Base Rate Loan. 4.06 Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Lender or the Company (the "Payor") prior to the date on which the Payor is to make payment to the Administrative Agent of (in the case of a - 39 - Lender) the proceeds of a Loan to be made by such Lender, or a participation in a Letter of Credit drawing to be acquired by such Lender, hereunder or (in the case of the Company) a payment to the Administrative Agent for account of one or more of the Lenders hereunder (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date; and, if the Payor has not in fact made the Required Payment to the Administrative Agent, the recipient(s) of such payment shall, on demand, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date (the "Advance Date") such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to the Federal Funds Rate for such day and, if such recipient(s) shall fail promptly to make such payment, the Administrative Agent shall be entitled to recover such amount, on demand, from the Payor, together with interest as aforesaid, provided that if neither the recipient(s) nor the Payor shall return the Required Payment to the Administrative Agent within three Business Days of the Advance Date, then, retroactively to the Advance Date, the Payor and the recipient(s) shall each be obligated to pay interest on the Required Payment as follows: (i) if the Required Payment shall represent a payment to be made by the Company to the Lenders, the Company and the recipient(s) shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment at the Post-Default Rate (and, in case the recipient(s) shall return the Required Payment to the Administrative Agent, without limiting the obligation of the Company under Section 3.02 hereof to pay interest to such recipient(s) at the Post-Default Rate in respect of the Required Payment) and (ii) if the Required Payment shall represent proceeds of a loan to be made by the Lenders to the Company, the Payor and the Company shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment at the rate of interest provided for such Required Payment pursuant to Section 3.02 hereof (and, in case the Company shall return the Required Payment to the Administrative Agent, without limiting any claim the Company may have against the Payor in respect of the Required Payment). - 40 - 4.07 Sharing of Payments, Etc. ------------------------- (a) The Company agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for account of the Company at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans, Reimbursement Obligations or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to the Company), in which case it shall promptly notify the Company and the Administrative Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender shall obtain from the Company payment of any principal of or interest on any Loan or Letter of Credit Liability of any Class owing to it or payment of any other amount under this Agreement or any other Basic Document through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Administrative Agent as provided herein), and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Loans or Letter of Credit Liabilities of such Class or such other amounts then due hereunder or thereunder by the Company to such Lender than the percentage received by any other Lender, it shall promptly purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans or Letter of Credit Liabilities of such Class or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Loans or Letter of Credit Liabilities of such Class or such other amounts, respectively, owing to each of the Lender. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) The Company agrees that any Lender so purchasing such a participation (or direct interest) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Company. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 4.07 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.07 to share in the benefits of any recovery on such secured claim. - 41 - Section 5. Yield Protection, Etc. ---------------------- 5.01 Additional Costs. ---------------- (a) The Company shall pay directly to each Lender from time to time such amounts as such Lender may determine to be necessary to compensate such Lender for any costs that such Lender determines are attributable to its making or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar Loans hereunder, or any reduction in any amount receivable by such Lender hereunder in respect of any of such Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change that: (i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or its Notes in respect of any of such Loans (other than taxes imposed on or measured by the overall net income of such Lender or of its Applicable Lending Office for any of such Loans by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit or similar requirements (other than the Reserve Requirement utilized in the determination of the Eurodollar Rate for such Loan) relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender (including, without limitation, any of such Loans or any deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof), or any commitment of such Lender (including, without limitation, the Commitments of such Lender hereunder); or (iii) imposes any other condition affecting this Agreement or its Notes (or any of such extensions of credit or liabilities) or its Commitments. If any Lender requests compensation from the Company under this Section 5.01(a), the Company may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender thereafter to make or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 5.04 hereof shall be applicable), provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) Without limiting the effect of the provisions of paragraph (a) of this Section 5.01, in the event that, by reason of any Regulatory Change, any Lender either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Lender that includes deposits by reference to which the interest rate on Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Lender that includes Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets that it may hold, then, if such Lender so elects by notice to the Company (with a copy to the Administrative Agent), the obligation of such Lender to make or Continue, or to Convert Base - 42 - Rate Loans into, Eurodollar Loans hereunder shall be suspended until such Regulatory Change ceases to be in effect (in which case the provisions of Section 5.04 hereof shall be applicable). (c) Without limiting the effect of the foregoing provisions of this Section 5.01 (but without duplication), the Company shall pay directly to each Lender from time to time on request such amounts as such Lender may determine to be necessary to compensate such Lender (or, without duplication, the bank holding company of which such Lender is a subsidiary) for any costs that it determines are attributable to the maintenance by such Lender (or any Applicable Lending Office or such bank holding company), pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law and whether or not failure to complete therewith would be unlawful) of any court or governmental or monetary authority (i) following any Regulatory Change or (ii) implementing any risk-based capital guideline or other requirement (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) heretofore or hereafter issued by any government or governmental or supervisory authority implementing at the national level the Basle Accord (including, without limitation, the Final Risk-Based Capital Guidelines of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based Capital Guidelines of the Office of the Comptroller of the Currency (12 C.F.R. Part 3, Appendix A)), of capital in respect of its Commitments or Loans (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender (or any Applicable Lending Office or such bank holding company) to a level below that which such Lender (or any Applicable Lending Office or such bank holding company) could have achieved but for such law, regulation, interpretation, directive or request). For purposes of this Section 5.01(c) and Section 5.06 hereof, "Basle Accord" shall mean the proposals for risk-based capital framework described by the Basle Committee on Banking Regulations and Supervisory Practices in its paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988, as amended, modified and supplemented and in effect from time to time or any replacement thereof. (d) Each Lender shall notify the Company of any event occurring after the Amendment Effective Date entitling such Lender to compensation under paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any event within 45 days, after such Lender obtains actual knowledge thereof; provided that (i) if any Lender fails to give such notice within 45 days after it obtains actual knowledge of such an event, such Lender shall, with respect to compensation payable pursuant to this Section 5.01 in respect of any costs resulting from such event, only be entitled to payment under this Section 5.01 for costs incurred from and after the date 45 days prior to the date that such Lender does give such notice and (ii) each Lender will designate a different Applicable Lending Office for the Loans of such Lender affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender, except that such Lender shall have no obligation to designate an Applicable Lending Office located in the United States of America. Each Lender will furnish to the Company a certificate setting forth the basis and amount of each request by such Lender for compensation under paragraph (a) or (c) of this Section 5.01. Determinations and allocations by any Lender for purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or (b) of this Section 5.01, or of the effect of capital maintained pursuant to paragraph (c) of this Section 5.01, - 43 - on its costs or rate of return of maintaining Loans or its obligation to make Loans, or on amounts receivable by it in respect of Loans, and of the amounts required to compensate such Lender under this Section 5.01, shall be conclusive, provided that such determinations and allocations are made on a reasonable basis. 5.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any Eurodollar Base Rate for any Interest Period: (a) the Administrative Agent reasonably determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Eurodollar Loans as provided herein; or (b) if the related Loans are Series A Loans, the Majority Series A Lenders or, if the related Loans are Series B Loans, the Majority Series B Lenders or, if the related Loans are Series C Loans, the Majority Series C Lenders reasonably determine, which determination shall be conclusive, and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rate of interest for Eurodollar Loans for such Interest Period is to be determined are not likely adequately to cover the cost to such Lenders of making or maintaining Eurodollar Loans for such Interest Period; then the Administrative Agent shall give the Company and each Lender prompt notice thereof and, so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Eurodollar Loans, to Continue Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the Company shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans into Base Rate Loans in accordance with Section 2.09 hereof. 5.03 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to honor its obligation to make or maintain Eurodollar Loans hereunder, then such Lender shall promptly notify the Company thereof (with a copy to the Administrative Agent) and such Lender's obligation to make or Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall be suspended until such time as such Lender may again make and maintain Eurodollar Loans (in which case the provisions of Section 5.04 hereof shall be applicable). 5.04 Treatment of Affected Loans. If the obligation of any Lender to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof, such Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Eurodollar Loans (or, in the case of a Conversion required by Section 5.01(b) or 5.03 hereof, on such earlier date as such Lender may specify to the Company with a copy to the Administrative Agent) and, unless and until such Lender gives notice as provided below that - 44 - the circumstances specified in Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Eurodollar Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Eurodollar Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Eurodollar Loans shall be made or Continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be Converted into Eurodollar Loans shall remain as Base Rate Loans. If such Lender gives notice to the Company with a copy to the Administrative Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave rise to the Conversion of such Lender's Eurodollar Loans pursuant to this Section 5.04 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Loans made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by such Lender are held pro rata (as to principal amounts, Types and Interest Periods) in accordance with their respective Commitments. 5.05 Compensation. The Company shall pay to the Administrative Agent for account of each Lender, upon the request of such Lender through the Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost or expense incurred by it that such Lender determines is attributable to: (a) any payment, mandatory or optional prepayment or Conversion of a Eurodollar Loan made by such Lender for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 9 hereof) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by the Company for any reason (including, without limitation, the failure of any of the conditions precedent specified in Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such Lender on the date for such borrowing specified in the relevant notice of borrowing given pursuant to Section 2.02 hereof. Without limiting the effect of the preceding sentence, such compensation shall include an amount equal to the excess, if any, of (i) the amount of interest that otherwise would have accrued on the principal amount so paid, prepaid or Converted or not borrowed for the period from the date of such payment, prepayment, Conversion or failure to borrow to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan that would have commenced on the date specified for such borrowing) at the applicable rate of interest for such Loan provided for herein over (ii) the amount of interest - 45 - that otherwise would have accrued on such principal amount at a rate per annum equal to the interest component of the amount such Lender would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Lender). 5.06 Additional Costs in Respect of Letters of Credit. Without limiting the obligations of the Company under Section 5.01 hereof (but without duplication), if as a result of any Regulatory Change or any risk-based capital guideline or other requirement heretofore or hereafter issued by any government or governmental or supervisory authority implementing at the national level the Basle Accord there shall be imposed, modified or deemed applicable any tax, reserve, special deposit, capital adequacy or similar requirement against or with respect to or measured by reference to Letters of Credit issued or to be issued hereunder and the result shall be to increase the cost to any Lender or Lenders of issuing (or purchasing or maintaining participations in) or maintaining its obligation hereunder to issue (or purchase participations in) any Letter of Credit hereunder or reduce any amount receivable by any Lender hereunder in respect of any Letter of Credit (which increases in cost, or reductions in amount receivable, shall be the result of such Lender's or Lenders' reasonable allocation of the aggregate of such increases or reductions resulting from such event), then, upon demand by such Lender or Lenders (through the Administrative Agent), the Company shall pay immediately to the Administrative Agent for account of such Lender or Lenders, from time to time as specified by such Lender or Lenders (through the Administrative Agent), such additional amounts as shall be sufficient to compensate such Lender or Lenders (through the Administrative Agent) for such increased costs or reductions in amount. A statement as to such increased costs or reductions in amount incurred by any such Lender or Lenders, submitted by such Lender or Lenders to the Company shall be conclusive in the absence of manifest error as to the amount thereof, provided that the determination of such increased costs or reductions are made on a reasonable basis. 5.07 U.S. Taxes. ---------- (a) The Company agrees to pay to each Lender that is not a U.S. Person such additional amounts as are necessary in order that the net payment of any amount due to such non-U.S. Person hereunder after deduction for or withholding in respect of any U.S. Taxes imposed with respect to such payment (or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will not be less than the amount stated herein to be then due and payable, provided that the foregoing obligation to pay such additional amounts shall not apply: (i) to any payment to a Lender hereunder unless such Lender is, on the Amendment Effective Date (or on the date it becomes a Lender as provided in Section 11.06(b) hereof) and on the date of any change in the Applicable Lending Office of such Lender, either entitled to submit a Form 1001 (relating to such Lender and entitling it to a complete exemption from withholding on all interest to be received by it hereunder in respect of the Loans) or Form 4224 (relating to all interest to be received by such Lender hereunder in respect of the Loans), or (ii) to any U.S. Taxes imposed solely by reason of the failure by such non-U.S. Person to comply with applicable certification, information, documentation or - 46 - other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such non-U.S. Person if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Taxes. For the purposes of this Section 5.07(a), (w) "Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America (or in relation to either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or resident of the United States of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America, or any estate or trust that is subject to Federal income taxation regardless of the source of its income and (z) "U.S. Taxes" shall mean any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein. (b) Within 30 days after paying any amount to the Administrative Agent or any Lender from which it is required by law to make any deduction or withholding, and within 30 days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, the Company shall deliver to the Administrative Agent for delivery to such non-U.S. Person evidence satisfactory to such Person of such deduction, withholding or payment (as the case may be). Section 6. Conditions Precedent. -------------------- 6.01 Conditions to Effectiveness. The effectiveness of the amendment and restatement of the Existing Credit Agreement provided for hereby is subject to the receipt by the Administrative Agent of the following documents, each of which shall be satisfactory to the Administrative Agent (and to the extent specified below, to each Lender) in form and substance: (a) Corporate Documents. The following documents, each certified as indicated below: (i) a copy of the charter, as amended and in effect, of the Company certified as of a recent date by the Secretary of State of the State of Delaware (or, if there have been no modifications to such charter from the copy thereof delivered by the Company pursuant to the Existing Credit Agreement, a certificate of the Secretary or an Assistant Secretary of the Company to that effect), and a certificate from such Secretary of State dated as of a recent date as to the good standing of and charter documents filed by the Company; (ii) a certificate of the Secretary or an Assistant Secretary of the Company, dated the Amendment Effective Date and certifying (A) that attached thereto is a true and - 47 - complete copy of the by-laws of the Company as amended and in effect at all times from the date on which the resolutions referred to in clause (B) below were adopted to and including the date of such certificate (or if there have been no modifications to such by-laws from the copy thereof delivered by the Company pursuant to the Existing Credit Agreement, a certificate of the Secretary or an Assistant Secretary of the Company to that effect), (B) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors of the Company authorizing the execution, delivery and performance of the amendment and restatement of the Existing Credit Agreement and such other of the Basic Documents to which the Company is or is intended to be a party and the extensions of credit hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the charter of the Company has not been amended since the date of the certification thereto furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer of the Company executing the amendment and restatement of the Existing Credit Agreement and such other of the Basic Documents to which the Company is intended to be a party and each other document to be delivered by the Company from time to time in connection therewith (and the Administrative Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from the Company to the contrary); and (iii) a certificate of another officer of the Company as to the incumbency and specimen signature of the Secretary or Assistant Secretary, as the case may be, of the Company. (b) Officer's Certificate. A certificate of a senior officer of the Company, dated the Amendment Effective Date, to the effect that (i) no Default shall have occurred and be continuing and (ii) the representations and warranties made by the Company in Section 7 hereof, and in each of the other Basic Documents, are true and correct on and as of the Amendment Effective Date with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). (c) Opinion of Counsel to the Company. An opinion, dated the Amendment Effective Date, of Ropes & Gray, counsel to the Company, in form and substance satisfactory to the Administrative Agent (and the Company hereby instructs such counsel to deliver such opinions to the Lenders and the Administrative Agent). (d) Opinion of Special New York Counsel to Chase. An opinion, dated the Amendment Effective Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase, in form and substance satisfactory to the Administrative Agent. (e) Financial Information. True, correct and complete copies of the financial statements, projections and other information referred to in Section 7.02 hereof. - 48 - (f) Approvals and Consents. Evidence that all necessary governmental and third party filings, licenses, permits, consents and approvals have been obtained by the Company and are in full force and effect on the Amendment Effective Date. (g) Payment of Fees and Expenses. Evidence that the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase in connection with the negotiation, preparation, execution and delivery of the amendment and restatement of the Existing Credit Agreement and the Notes and the other Basic Documents and the extensions of credit hereunder (to the extent that statements for such fees and expenses have been delivered to the Company) shall have been paid in full. (h) Governmental Proceedings; Etc. Evidence that no litigation or similar proceeding is threatened by any governmental agency or authority or any other person with respect to the execution and delivery of the amendment and restatement of the Existing Credit Agreement, the Notes and the other Basic Documents, and the consummation of the transactions herein or therein contemplated which, in each case, the Lenders shall reasonably determine is likely to have a material adverse effect on (i) the assets, business, operations, or condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (ii) the timely payment of the Loans and interest thereon or the enforceability of the Basic Documents or the rights and remedies thereunder. (i) Leverage Ratio. A certificate of a senior officer of the Company, dated the Amendment Effective Date, setting forth the Leverage Ratio as at the Amendment Effective Date. (j) Security Documents. Written confirmation from In-Flight that In-Flight consents to this Agreement and agrees that references in the In-flight Guarantee and Security Agreement to the "Credit Agreement" include this Agreement and that all references to the "Guaranteed Obligations" shall include obligations of the Company in respect of Series C Loans and Series C Reimbursement Obligations, together with stock certificates representing all of the shares not previously delivered of the Persons listed on Annex 2 hereto. (k) Other Documents. Such other documents as the Administrative Agent or any Lender or special New York counsel to Chase may reasonably request. 6.02 Initial and Subsequent Extensions of Credit. The obligation of the Lenders to make any Loan or otherwise extend any credit to the Company upon the occasion of each borrowing or other extension of credit hereunder (including the initial borrowing) is subject to the further conditions precedent that: (a) Both immediately prior to the making of such Loan or other extension of credit and also after giving effect thereto and to the intended use thereof: (i) no Default shall have occurred and be continuing; (ii) the representations and warranties made by the Company in Section 7 hereof, and in each of the other Basic Documents, shall be true and correct on and as of the date of the making of such Loan or other extension of credit with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to - 49 - have been made as of a specific date, as of such specific date). Each notice of borrowing or request for the issuance of a Letter of Credit by the Company hereunder shall constitute a certification by the Company to the effect set forth in the preceding sentence (both as of the date of such notice or request and, unless the Company otherwise notifies the Administrative Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance); and (b) The Administrative Agent shall have received a certificate of a senior financial officer of the Company setting forth in reasonable detail the computations necessary to demonstrate that both immediately prior to the making of such Loan or other extension of credit and immediately after giving effect thereto, the Company is or will be in compliance with Section 1010 of the Senior Subordinated Indentures. Section 7. Representations and Warranties. The Company represents and warrants to the Lenders that: 7.01 Corporate Existence. Each of the Company and its Subsidiaries: (a) is a corporation, partnership or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify could have a Material Adverse Effect. 7.02 Financial Condition. ------------------- (a) The Company has heretofore furnished to each of the Lenders (i) the consolidated balance sheet of the Company and its Subsidiaries as at February 28, 1998 and the related consolidated statements of operations, stockholders' equity and cash flows of the Company and its Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Deloitte & Touche, and (ii) the consolidated balance sheet of the Company and its Subsidiaries as at May 30, 1998 and the related consolidated statements of earnings, stockholders' equity and cash flows of the Company 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 Company and its Subsidiaries as at, and the results of operations for the fiscal year and fiscal quarter, ended on said date, all in accordance with generally accepted accounting principles and practices applied on a consistent basis (subject, in the case of such financial statements as at May 30, 1998, to normal year-end audit adjustments). Neither the Company nor any of its Subsidiaries has on the Restatement Date any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates or in Part A of Schedule I hereto. - 50 - (b) Since February 28, 1998, there has been no material adverse change in the financial condition, operations, business or prospects of the Company and its Subsidiaries from that set forth in said financial statements as at said date. 7.03 Litigation. Except as disclosed to the Lenders in writing prior to the Amendment Effective Date, there are no legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or (to the knowledge of the Company) threatened against the Company or any of its Subsidiaries which, if adversely determined, could have a Material Adverse Effect. 7.04 No Breach. None of the execution and delivery of this Agreement and the Notes and the other Basic Documents, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof will conflict with or result in a breach of, or require any consent under, the charter or by-laws of the Company, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Company or any of its Subsidiaries is a party (including, without limitation, the Senior Subordinated Indentures) or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or (except for Liens created pursuant to the Security Documents) result in the creation or imposition of any Lien upon any Property of the Company or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. 7.05 Action. The Company has all necessary corporate power, authority and legal right to execute, deliver and perform its obligations under each of the Basic Documents; the execution, delivery and performance by the Company of each of the Basic Documents have been duly authorized by all necessary corporate action on its part (including, without limitation, any required shareholder approvals); and this Agreement has been duly and validly executed and delivered by the Company and constitutes, and each of the Notes and the other Basic Documents to which it is a party when executed and delivered (in the case of the Notes, for value) will constitute, its legal, valid and binding obligation, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 7.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange, are necessary for the execution, delivery or performance by the Company of the Basic Documents to which it is a party or for the legality, validity or enforceability hereof or thereof, except for filings and recordings in respect of the Liens created pursuant to the Security Documents. 7.07 Use of Credit. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no - 51 - part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock. 7.08 ERISA. Each Plan, and, to the knowledge of the Company, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law, and no event or condition has occurred and is continuing as to which the Company would be under an obligation to furnish a report to the Lenders under Section 8.01(f) hereof. 7.09 Taxes. The Company and its Domestic Subsidiaries are members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which the Company is the "common parent" (within the meaning of Section 1504 of the Code) of such group. The Company and its Domestic Subsidiaries have filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any of its Domestic Subsidiaries. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Company, adequate. Except as set forth in Schedule VI hereto, the Company has not given or been requested to give a waiver of the statute of limitations relating to the payment of Federal, state, local and foreign taxes or other impositions. 7.10 Investment Company Act. Neither the Company nor any of its Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 7.11 Public Utility Holding Company Act. Neither the Company nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.12 Material Agreements and Liens. ----------------------------- (a) Part A of Schedule I hereto is a complete and correct list, as of the Restatement Date, of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Company or any of its Subsidiaries the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $1,000,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule I. (b) Part B of Schedule I hereto is a complete and correct list, as of the Restatement Date, of each Lien securing Indebtedness the aggregate principal or face amount of which equals or exceeds $1,000,000 of any Person and covering any Property of the Company or any of its Subsidiaries, and the aggregate amount of such Indebtedness secured (or which may be - 52 - secured) by each such Lien and the Property covered by each such Lien is correctly described in Part B of said Schedule I. 7.13 Environmental Matters. Except as set forth in Schedule II hereto, each of the Company and its Subsidiaries has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization would not have a Material Adverse Effect. All of the permits, licenses and authorizations that have been obtained are in full force and effect and each of the Company and its Subsidiaries is in compliance with the terms and conditions thereof, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply therewith would not have a Material Adverse Effect. In addition, except as set forth in Schedule II hereto: (a) To the Company's knowledge after due inquiry, no written notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened by any governmental or other entity with respect to any alleged failure by the Company or any of its Subsidiaries to have any environmental, health or safety permit, license or other authorization required under any Environmental Law in connection with the conduct of the business of the Company or any of its Subsidiaries or with respect to any generation, treatment, storage, recycling, transportation, discharge or disposal, or any Release of any Hazardous Materials generated by the Company or any of its Subsidiaries. (b) Neither the Company nor any of its Subsidiaries owns, operates or leases a treatment, storage or disposal facility requiring a permit under the Resource Conservation and Recovery Act of 1976, as amended, or under any comparable state or local statute; and (i) to the Company's knowledge after due inquiry, no PCB Transformers (as defined in the Toxic Substances Control Act, 15 U.S.C. ss.1601, et seq., as amended, and the regulations relating thereto) are present at any site or facility owned, operated or leased by the Company or any of its Subsidiaries; (ii) to the Company's knowledge after due inquiry, no asbestos or asbestos-containing materials is present at any site or facility owned, operated or leased by the Company or any of its Subsidiaries; (iii) to the Company's knowledge after due inquiry, there are no underground storage tanks or surface impoundments for Hazardous Materials, active or abandoned, at any site or facility owned, operated or leased by the Company or any of its Subsidiaries; and - 53 - (iv) to the Company's knowledge after due inquiry, no Hazardous Materials have been Released by the Company or any of its Subsidiaries at, on or under any site or facility now owned, operated or leased by the Company or any of its Subsidiaries in a reportable quantity established by any Environmental Law. (c) To the Company's knowledge after due inquiry, neither the Company nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location that is listed on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by the Environmental Protection Agency, or listed in the Comprehensive Environmental Response and Liability Information System, as provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"), or on any similar state or local list or that is the subject of Federal, state or local enforcement actions or other investigations that may lead to Environmental Claims against the Company or any of its Subsidiaries. (d) No Liens are presently recorded with the appropriate land records under or pursuant to any Environmental Laws on any site or facility owned, operated or leased by the Company or any of its Subsidiaries, and to the Company's knowledge no government action has been taken or is in process that could subject any such site or facility to such Liens. Neither the Company nor any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any site or facility owned by it in any deed to the real property on which such site or facility is located. (e) There have been no environmental investigations, written studies, audits, tests, reviews or other analyses conducted by or that are in the possession of the Company or any of its Subsidiaries in relation to any site or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries which have not been made available to the Lenders. 7.14 Capitalization. The authorized capital stock of the Company consists, on the Restatement Date, of an aggregate of 51,000,000 shares consisting of (i) 50,000,000 shares of common stock, par value $0.01 per share, of which 22,891,918 shares were, as at February 28, 1998 duly and validly issued and outstanding, each of which shares is fully paid and nonassessable and (ii) 1,000,000 shares of preferred stock, par value $0.01 per share, of which no shares were outstanding as at February 28, 1998. As of the Restatement Date the Company is registered with the Securities and Exchange Commission under the Securities Exchange Act, and its shares of common stock are publicly owned and traded on the NASDAQ National Market System. As of the Restatement Date, (x) except for options to purchase 2,902,001 shares of the common stock of the Company, there are no outstanding Equity Rights with respect to the Company and (y) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of the Company nor are there any outstanding obligations of the Company or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Company or any of its Subsidiaries. - 54 - 7.15 Subsidiaries, Etc. ------------------ (a) Set forth in Part A of Schedule III hereto is a complete and correct list, as of the Restatement Date, of all of the Subsidiaries of the Company, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary, (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests and (iv) the total book value of the assets of each such Subsidiary as of May 30, 1998 (or, in the case of Subsidiaries acquired after May 30, 1998, such other date as specified in Part A of Schedule III hereto). Except as disclosed in Part A of Schedule III hereto, (x) each of the Company and its Subsidiaries owns, free and clear of Liens (other than Liens created pursuant to the Security Documents), and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Part A of Schedule III hereto, (y) all of the issued and outstanding capital stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) there are no outstanding Equity Rights with respect to such Person. (b) Set forth in Part B of Schedule III hereto is a complete and correct list, as of the Restatement Date, of all Investments (other than Investments disclosed in Part A of said Schedule III hereto) of $1,000,000 or more held by the Company or any of its Subsidiaries in any Person and, for each such Investment, (x) the identity of the Person or Persons in which such Investment has been made, (y) the nature of such Investment and (z) the amount of such Investment. Except as disclosed in Part B of Schedule III hereto, each of the Company and its Subsidiaries owns, free and clear of all Liens (other than Liens created pursuant to the Security Documents), all such Investments. (c) Except as set forth in Schedule III hereto, none of the Subsidiaries of the Company is, on the Restatement Date, subject to any indenture, agreement, instrument or other arrangement of the type described in the last sentence of Section 8.17 hereof. 7.16 Title to Assets. The Company owns and has on the Restatement Date, and will own and have on the Amendment Effective Date, good and marketable title (subject only to Liens permitted by Section 8.06 hereof) to the Properties shown to be owned in the most recent financial statements referred to in Section 7.02 hereof (other than Properties disposed of in the ordinary course of business or otherwise permitted to be disposed of pursuant to Section 8.05 hereof). The Company owns and has on the Restatement Date, and will own and have on the Amendment Effective Date, good and marketable title to, and enjoys on the Restatement Date, and will enjoy on the Amendment Effective Date, peaceful and undisturbed possession of, all Properties (subject only to Liens permitted by Section 8.06 hereof) that are necessary for the operation and conduct of its businesses. 7.17 Compliance with Law. Except as set forth in Schedule IV hereto, each of the Company and its Subsidiaries is in compliance with all applicable laws, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities or bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its Property (including Environmental Laws), except such noncompliance as would not, in the aggregate, - 55 - have a Material Adverse Effect on the business, properties, assets, operations, condition (financial or otherwise), or prospects of the Company and its Subsidiaries, taken as a whole. 7.18 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Company to the Administrative Agent or any Lender prior to the Amendment Effective Date in connection with the negotiation, preparation or delivery of this Agreement and the other Basic Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole (together with the Information Memorandum which the Lenders acknowledge contains projections based on certain assumptions therein stated) do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished on or after the Amendment Effective Date by the Company and its Subsidiaries to the Administrative Agent and the Lenders in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to the Company that could have a Material Adverse Effect that has not been disclosed herein, in the other Basic Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lenders for use in connection with the transactions contemplated hereby or thereby. 7.19 Year 2000. Substantially all reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the Company's computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Company's systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be materially completed by July 1, 1999. The cost to the Company of such reprogramming and testing and of the reasonable foreseeable consequences of year 2000 to the Company (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default or a Material Adverse Effect. Nothing herein shall preclude the Company from making the foregoing representation after the making of an Acquisition of any Person that is not in compliance with the above, so long as the Company has prepared a plan prior to such Acquisition that sets forth, in the reasonable judgment of the chief financial officer of the Company, the action that the Company has taken or proposes to take to bring such Person into compliance with the above. Section 8. Covenants of the Company. The Company covenants and agrees with the Lenders and the Administrative Agent that, so long as any Commitment, Loan or Letter of Credit Liability is outstanding and until payment in full of all amounts payable by the Company hereunder: 8.01 Financial Statements, Etc. The Company shall deliver to each of the Lenders: (a) as soon as available and in any event within 60 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Company, consolidated - 56 - statements of earnings, stockholders' equity and cash flows of the Company and its Subsidiaries, for such period and for the period from the beginning of the respective fiscal year to the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, and the related consolidated balance sheet of the Company and its Subsidiaries, as at the end of such period, setting forth in comparative form the corresponding consolidated figures for the last day of the preceding fiscal year, accompanied by a certificate of a senior financial officer of the Company, which certificate shall state that said consolidated financial statements present fairly, in all material respects, the consolidated financial condition and results of operations of the Company and its Subsidiaries, in accordance with generally accepted accounting principles, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); (b) as soon as available and in any event within 105 days after the end of each fiscal year of the Company, consolidated and consolidating statements of operations and stockholders' equity of the Company and its Subsidiaries, and consolidated statements of cash flows of the Company and its Subsidiaries, for such fiscal year and the related consolidated and consolidating balance sheets of the Company and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated and consolidating figures for the preceding fiscal year, and accompanied, (i) in the case of said consolidated statements and balance sheet of the Company, by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements present fairly, in all material respects, the consolidated financial condition and results of operations of the Company and its Subsidiaries as at the end of, and for, such fiscal year in accordance with generally accepted accounting principles, and a report of such accountants stating that, in making the examination necessary for their opinion, nothing came to their attention, except as specifically stated, that caused them to believe that the Company had failed to comply with Sections 8.09, 8.10, 8.11 and 8.12 hereof, or any other provisions hereof, insofar as they relate to accounting matters, and (ii) in the case of said consolidating statements and balance sheets, by a certificate of a senior financial officer of the Company which certificate shall state that said consolidating financial statements fairly present the respective individual unconsolidated financial condition and results of operations of the Company and of each of its Subsidiaries, in each case in accordance with generally accepted accounting principles, consistently applied, as at the end of, and for, such fiscal year; (c) as soon as available and in any event within 105 days after the end of each fiscal year of the Company, statements of information concerning net sales, operating earnings, depreciation and amortization of each division of the Company and its Subsidiaries (including, without limitation, the Seating Products Division, Galley Products Division, In-Flight Entertainment Division and Service Division) for such period setting forth in each case in comparative form the corresponding figures for the preceding fiscal year; (d) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, which the Company shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange; - 57 - (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) as soon as possible, and in any event within ten days after the Company knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior financial officer of the Company setting forth details respecting such event or condition and the action, if any, that the Company or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by the Company or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan; (ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by the Company or an ERISA Affiliate to terminate any Plan; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by the Company or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by the Company or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against the Company or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if the Company or an ERISA - 58 - Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (g) promptly after the Company knows or has reason to believe that any Default has occurred, a notice of such Default describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that the Company has taken or proposes to take with respect thereto; (h) Within 10 Business Days after the date of any Acquisition and at the time of delivery of the financial statements for the first four Fiscal Dates thereafter, pro forma consolidated statements of earnings of the Company and its Subsidiaries for the relevant Calculation Period and related pro forma consolidated balance sheet items necessary for the pro forma calculation of compliance with the covenants in this Agreement of the Company and its Subsidiaries as of the last day of each fiscal quarter of the Company occurring during such Calculation Period, prepared as though such Acquisition had occurred, and any Funded Debt incurred or assumed by the Company or any of its Subsidiaries in connection with such Acquisition had been incurred or assumed, on the first day of such Calculation Period; (i) with the delivery of the financial statements pursuant to Sections 8.01(a) and 8.01(b) hereof, a statement of a senior financial officer of the Company (A) listing each Disposition by the Company and its Subsidiaries that occurred during the quarterly fiscal period ending on the date of such financial statements if the Net Available Proceeds thereof exceeded $100,000 and (B) setting forth in reasonable detail the Net Available Proceeds of each such Disposition and the aggregate Net Available Proceeds since the first day of the then current Recapture Period; and (j) from time to time such other information regarding the financial condition, operations, business or prospects of the Company or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Administrative Agent may reasonably request. The Company will furnish to each Lender, at the time it furnishes each set of financial statements pursuant to paragraph (a), (b) or (h) above, a certificate of a senior financial officer of the Company (i) to the effect that no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail and describing the action that the Company has taken or proposes to take with respect thereto) and (ii) setting forth in reasonable detail (x) the computations necessary to determine whether the Company is in compliance with Sections 8.07(e), 8.07(h), 8.08(f), 8.08(h), 8.09, 8.10, 8.11 and 8.12 hereof, and (y) the Interest Coverage Ratio and the Leverage Ratio as of the end of the respective quarterly fiscal period, fiscal year or Calculation Period. 8.02 Litigation. The Company will promptly give to each Lender notice of all legal or arbitral proceedings, and of all proceedings by or before any governmental or regulatory authority or agency, and any material development in respect of such legal or other proceedings, affecting the Company or any of its Subsidiaries, except proceedings which, if adversely determined, would not have a Material Adverse Effect. Without limiting the generality of the - 59 - foregoing, the Company will give to each Lender notice of the assertion of any Environmental Claim by any Person against, or with respect to the activities of, the Company or any of its Subsidiaries and notice of any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations, other than any Environmental Claim or alleged violation which, if adversely determined, would not have a Material Adverse Effect. 8.03 Existence, Etc. The Company will, and will cause each of its Subsidiaries to: (a) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section 8.03 shall prohibit any transaction expressly permitted under Section 8.05 hereof); (b) comply with the requirements of all applicable laws, rules, regulations and orders of governmental or regulatory authorities if failure to comply with such requirements could have a Material Adverse Effect; (c) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; (d) maintain all of its Properties used or useful in its business in good working order and condition, ordinary wear and tear excepted; (e) keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied; and (f) permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be). 8.04 Insurance. The Company will, and will cause each of its Subsidiaries to, keep insured by financially sound and reputable insurers all Property of a character usually insured by corporations engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations and carry such other insurance as is usually carried by such corporations. 8.05 Prohibition of Fundamental Changes. The Company will not, nor will it permit any of its Subsidiaries to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or Dispose of all or substantially all of its Property. The Company will not, nor will it permit any of its Subsidiaries to, to make any Acquisition except for Investments permitted under Section 8.08 hereof. Notwithstanding the foregoing provisions of this Section 8.05: - 60 - (a) any Subsidiary of the Company may be merged or consolidated with or into: (i) the Company if the Company shall be the continuing or surviving corporation or (ii) any other such Subsidiary; provided that (x) if any such transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving corporation; (b) subject to Section 8.14 hereof, the Company or any Subsidiary of the Company may make any Acquisition; provided that immediately prior to and after giving effect to any such Acquisition, (i) no Default shall have occurred and be continuing and (ii) not more than $50,000,000 of the proceeds of the Series A Loans then outstanding shall have been applied, directly by the Company or indirectly through a Subsidiary, for the purposes specified in clause (1)(ii) of Section 8.16 hereof; and (c) the Company or any Subsidiary of the Company may make any Acquisition from any Subsidiary of the Company in each case for consideration that is not in excess of the fair market value of the Property acquired in such Acquisition as determined in good faith by the chief financial officer of the Company. 8.06 Limitation on Liens. The Company will not, nor will it permit any of its Domestic Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except: (a) Liens created pursuant to the Security Documents; (b) Liens outstanding on the Restatement Date and listed in Part B of Schedule I hereto; (c) Liens imposed by any governmental authority for taxes, assessments or charges not yet due or which are being contested in good faith and by appropriate proceedings if, unless the amount thereof is not material with respect to it or its financial condition, adequate reserves with respect thereto are maintained on the books of the Company or the affected Domestic Subsidiaries, as the case may be, in accordance with GAAP; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings and Liens securing judgments but only to the extent, for an amount and for a period not resulting in an Event of Default under Section 9(h) hereof; (e) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; - 61 - (g) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Company or any of its Domestic Subsidiaries; (h) Liens on Property of any corporation which becomes a Domestic Subsidiary of the Company after the Restatement Date, provided that such Liens are in existence at the time such corporation becomes a Domestic Subsidiary of the Company and were not created in anticipation thereof; (i) subject to the restrictions contained in the Security Documents, Liens upon real and/or tangible personal Property and/or software and license rights with respect to software (including, without limitation, software and license rights with respect to software under the GE Lease Agreement) acquired after the Restatement Date (by purchase, construction or otherwise) by the Company or any of its Domestic Subsidiaries other than in connection with any Acquisition by the Company or any of its Domestic Subsidiaries, each of which Liens either (A) existed on such Property before the time of its acquisition and was not created in anticipation thereof, or (B) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such Property; provided that no such Lien shall extend to or cover any Property of the Company or such Domestic Subsidiary other than the Property so acquired and improvements thereon; and provided, further, that the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the fair market value (as determined in good faith by a senior financial officer of the Company) of such Property at the time it was acquired (by purchase, construction or otherwise); (j) additional Liens upon real and/or tangible personal Property of the Company or any of its Domestic Subsidiaries created after the Restatement Date, provided that the aggregate Indebtedness secured thereby and incurred on and after the Restatement Date shall not exceed $20,000,000 in the aggregate at any one time outstanding; and (k) any extension, renewal or replacement of the foregoing, provided, however, that the Liens permitted hereunder shall not be spread to cover any additional Indebtedness or Property (other than a substitution of like Property). 8.07 Indebtedness. The Company will not, nor will it permit any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness except: (a) Indebtedness to the Lenders hereunder; (b) Indebtedness outstanding or committed on the Restatement Date and, if equal to or in excess of $1,000,000, listed in Part A of Schedule I hereto and any extension, renewal or replacement thereof; - 62 - (c) Indebtedness of Subsidiaries of the Company to the Company to the extent contemplated by Section 8.08(d) hereof; (d) Indebtedness of the Company to its Subsidiaries and Indebtedness of Subsidiaries of the Company to other Subsidiaries of the Company; (e) Indebtedness of the Company and its Subsidiaries secured by Liens permitted under Sections 8.06(i) and 8.06(j) hereof; (f) Guarantees by any Subsidiary of the Company of Indebtedness of the Company or any Subsidiary of the Company; (g) unsecured Indebtedness that has no regularly scheduled maturity or mandatory prepayments on or before the Series A Commitment Termination Date, that does not include required prepayments (including, without limitation, as a result of a change of control or asset sale) on terms less favorable to the Lenders than the Senior Subordinated Indentures, and that is subordinated in right of payment to the Loans at least to the extent provided in the Senior Subordinated Indentures; and (h) additional unsecured Indebtedness of the Company and its Subsidiaries up to but not exceeding in the aggregate $40,000,000 at any one time outstanding; provided that any such Indebtedness of any such individual Subsidiary may not exceed $10,000,000 in the aggregate at any one time outstanding. 8.08 Investments. The Company will not, nor will it permit any of its Subsidiaries to, make or permit to remain outstanding any Investments except: (a) Investments outstanding on the Restatement Date and identified in Schedule III Part B hereto; (b) operating deposit accounts with banks; (c) Permitted Investments; (d) Investments by the Company in Subsidiaries of the Company in the ordinary course of business; provided that (i) the aggregate amount of the Investments by the Company or any of its Subsidiaries in the Specified Subsidiaries shall not exceed $5,000,000 at any one time outstanding and (ii) the aggregate amount of Customer Obligations (as defined in paragraph (h) below) that are not fully secured (whether by a perfected Lien on, or an indefeasible title retention to, the products so sold or leased, or otherwise) plus the aggregate fair market value of all Property (whether now owned or hereafter acquired) of the Company or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Company) sold, assigned, transferred or otherwise disposed of on or after April 3, 1998 to any Minority-Owned Entities (as defined in paragraph (h) below) plus the aggregate book value (at the time of its transfer) of all Property (not including cash and not including any Property that is subject to a - 63 - Lien in favor of the Administrative Agent for the benefit of the Lenders) transferred by the Company to any one or more Subsidiaries since April 3, 1998 shall not exceed in the aggregate at any one time outstanding the greater of (x) $25,000,000 and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for which financial statements have been provided hereunder; (e) subject to the proviso to clause (d) above, Investments by Subsidiaries of the Company in other Subsidiaries of the Company and in the Company in the ordinary course of business; (f) Interest Rate Protection Agreements so long as the aggregate credit exposure under all Interest Rate Protection Agreements calculated at the time any Interest Rate Protection Agreement is entered into does not exceed $10,000,000; (g) Investments permitted by clause (b) of the last sentence of Section 8.05 hereof; and (h) Investments of the Company and its Subsidiaries (i) in corporations, companies, limited liability companies, partnerships and other entities in each case that are not, or do not thereby become, Subsidiaries of the Company ("Minority-Owned Entities") or (ii) representing obligations of customers owing to the Company and its Subsidiaries in respect of the deferred purchase price of products or services sold or the leasing of products to customers ("Customer Obligations"), in each case in the ordinary course of business of the Company and its Subsidiaries as provided for in Section 8.14 hereof and on such terms as the management of the Company may determine in its reasonable business judgment, provided that the aggregate amount of such Customer Obligations that are not fully secured (whether by a perfected Lien on, or an indefeasible title retention to, the products so sold or leased, or otherwise) plus the aggregate fair market value of all Property (whether now owned or hereafter acquired) of the Company or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Company) sold, assigned, transferred or otherwise disposed of on or after April 3, 1998 to any such Minority-Owned Entities plus the aggregate book value (at the time of its transfer) of all Property (not including cash and not including Property that is subject to a Lien in favor of the Administrative Agent for the benefit of the Lenders) transferred by the Company to any one or more Subsidiaries since April 3, 1998 shall not exceed in the aggregate at any one time outstanding the greater of (x) $25,000,000 and (y) 5% of Adjusted Net Worth as of the most recent Fiscal Date for which financial statements have been provided hereunder. 8.09 Restricted Payments. The Company will not, nor will it permit any of its Subsidiaries to, declare or make any Restricted Payment at any time; provided that (i) the Company may make Restricted Payments in an amount up to but not exceeding (A) $25,000,000 in the aggregate plus (B) in any fiscal year of the Company, an aggregate amount up to but not exceeding 25% of the net earnings of the Company for the immediately preceding fiscal year ("Available Net Earnings"), provided that any portion of Available Net Earnings not used for Restricted Payments in any fiscal year (the "Carry-Over Amount") may be used for Restricted Payments in the immediately succeeding fiscal year only, for which purpose Restricted Payments in any fiscal year shall be deemed to have been made first from Available Net Earnings, and only thereafter from any Carry-Over Amount, such Restricted Payments set forth in clauses (i)(A) and - 64 - (B) hereof not to exceed $50,000,000 in the aggregate, and (ii) any Subsidiary of the Company may make Restricted Payments to the Company from time to time. 8.10 Leverage Ratio. The Company will not permit the Leverage Ratio to exceed the following respective ratios at any time during the following respective periods: Period Ratio ------ ----- From (but not including) the Fiscal Date in November 1997 through the Fiscal Date in August 1998. 5.25 to 1 From (but not including) the Fiscal Date in August 1998 through the Fiscal Date in February 1999 4.90 to 1 From (but not including) the Fiscal Date in February 1999 through the Fiscal Date in February 2000 4.50 to 1 From (but not including) the Fiscal Date in February 2000 through the Fiscal Date in February 2001 4.00 to 1 Thereafter.... 3.50 to 1 8.11 Adjusted Net Worth. The Company will not at any date permit Adjusted Net Worth to be less than the sum of (a) $150,000,000 plus (b) 75% of the aggregate amount of Net Available Proceeds of Equity Issuances received after November 29,1997 plus (c) 75% of the sum of consolidated net earnings of the Company and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) for each fiscal quarter of the Company ending after November 29, 1997; provided that consolidated net earnings for any fiscal quarter in which there is a consolidated net loss shall be deemed to be zero. 8.12 Interest Coverage Ratio. The Company will not permit the Interest Coverage Ratio to be less than the following respective ratios during the following respective periods: - 65 - Period Ratio ------ ----- From (but not including) the Fiscal Date in November 1997 through the Fiscal Date in August 1998. 2.00 to 1 From (but not including) the Fiscal Date in August 1998 through the Fiscal Date in February 1999 2.25 to 1 From (but not including) the Fiscal Date in February 1999 through the Fiscal Date in February 2000 2.50 to 1 From (but not including) the Fiscal Date in February 2000 through the Fiscal Date in February 2001 2.75 to 1 Thereafter.... 3.00 to 1 8.13 [Intentionally Omitted.] 8.14 Lines of Business. Neither the Company nor any of its Subsidiaries shall engage to any substantial extent in any line or lines of business activity other than the business of designing, manufacturing, distributing, selling, leasing and servicing products used in the interior of airplanes, buses and trains and servicing and acting as a broker in the sales and leases of such products together with any other business reasonably related to the foregoing. 8.15 Transactions with Affiliates. Except as set forth in Schedule VII hereto or as expressly permitted by this Agreement, the Company will not, nor will it permit any of its Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate with or purchase or acquire Property from an Affiliate; or (d) enter into any other transaction directly or indirectly with or for the benefit of an Affiliate (including, without limitation, guarantees and assumptions of obligations of an Affiliate); provided that (x) any Affiliate who is an individual may serve as a director, officer or employee of the Company or any of its Subsidiaries and receive reasonable compensation for his or her services in such capacity and (y) the Company and its Subsidiaries may enter into transactions (other than extensions of credit by the Company or any of its Subsidiaries to an Affiliate) providing for the leasing of Property, the rendering or receipt of services or the purchase or sale of inventory and other Property in the ordinary course of business if the monetary or business consideration arising therefrom would be - 66 - substantially as advantageous to the Company and its Subsidiaries as the monetary or business consideration which would obtain in a comparable transaction with a Person not an Affiliate. 8.16 Use of Proceeds. The Company will use the proceeds of (1) the Series A Loans hereunder solely (i) to finance ongoing working capital and other capital requirements of the Company and (ii) to finance Acquisitions and to refinance Series C Loans outstanding on the Series C Commitment Termination Date (in compliance with all applicable legal and regulatory requirements), (2) the Series B Loans hereunder solely to finance Acquisitions (subject to clause (b) of the last sentence of Section 8.05) and (3) the Series C Loans solely to finance Series C Reimbursement Obligations; 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 $50,000,000 of the Series A Commitments may be used for the purposes set forth in clause (1)(ii) above. 8.17 Certain Obligations Respecting Subsidiaries. (a) The Company will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that the Company and each of its Subsidiaries at all times owns (subject only to the Lien of the Security Documents) at least the same percentage of the issued and outstanding shares of each class of stock or partnership or other ownership interest of each of its Subsidiaries as is owned on the Restatement Date (or, with respect to any Subsidiary acquired or organized after the date hereof, as of the date of such acquisition or organization). Without limiting the generality of the foregoing, none of the Company nor any of its Subsidiaries shall sell, transfer, pledge or otherwise dispose of any shares of stock or partnership or other ownership interest in any Subsidiary owned by them, nor permit any Subsidiary to issue any shares of stock of any class or partnership or other ownership interest whatsoever to any Person (other than to the Company or the immediate parent of such Subsidiary which is a Wholly Owned Subsidiary of the Company). In the event that (a) any such additional shares of stock or partnership or other ownership interest shall be issued by any such Subsidiary or (b) the Company shall directly or indirectly create any new Material Subsidiary or Acquire any additional Material Subsidiary and shall thereby become the owner, directly or indirectly, of the shares of capital stock or partnership or other ownership interest of such new or additional Material Subsidiary, the Company agrees forthwith to deliver to the Administrative Agent pursuant to security documents satisfactory to the Banks, any shares, certificates of ownership, membership interests or other evidence of ownership, or other securities received as a result therefrom (together with undated stock or other powers executed in blank) and shall give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be necessary or desirable (in the judgment of the Administrative Agent) to create, preserve or validate the security interest created therein, including, without limitation, causing any or all of the Collateral (as defined in the Security Agreement and the In-Flight Guarantee and Security Agreement, respectively) to be transferred of record into the name of the Administrative Agent; provided that if any such Material Subsidiary is organized under the laws of a jurisdiction other than the United States of America or a State thereof, the Company need not pledge to the Administrative Agent more than 65% of the capital stock, partnership or other ownership interest in such Material Subsidiary. - 67 - (b) The Company will not permit any of its Subsidiaries to enter into, after the Restatement Date, any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends, the making of loans, advances or Investments or the sale, assignment, transfer or other disposition of Property. 8.18 Modifications of Certain Documents. The Company will not consent to (i) any modification, supplement or waiver of any of the provisions of the Senior Subordinated Indentures or (ii) to the creation of any class of preferred stock that has a mandatory dividend or redemption date prior to the Series A Commitment Termination Date; provided that any Senior Subordinated Indenture may be amended in connection with, and to facilitate, the purchase, redemption, prepayment, defeasance or other retirement in full of the Indebtedness issued pursuant thereto, which purchase, redemption, prepayment, defeasance or other retirement is permitted hereunder. 8.19 Environmental Matters. (a) The Company will, and will cause each of its Subsidiaries to, comply with all Environmental Laws applicable to the Company and each of its Subsidiaries, except to the extent that failure to comply with such laws would not have a Material Adverse Effect, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and maintain such authorizations in full force and effect. (b) If the Company discovers evidence of the presence of any Hazardous Materials in any amount that is required to be reported under Environmental Law, the Company will promptly clean-up such Hazardous Materials or take such other remedial action as is (a) required by law or (b) deemed necessary by the Company in its reasonable determination, such determination to be based in part on the advice of independent environmental consultants acceptable to the Company and the Administrative Agent. (c) The Company shall promptly furnish to the Administrative Agent all written notices of any Environmental Claims received by the Company or any of its Subsidiaries with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations issued thereunder in connection with the ownership, operation or use of any site or facility or the operation of their businesses or the presence or Release of Hazardous Substances, which Environmental Claim if determined adversely to the Company would have a Material Adverse Effect. 8.20 Security for Loans. The Company shall, no later than 90 days following the request by the Majority Lenders, file in each governmental office or agency in each appropriate jurisdiction as owner of record of each of the Foreign Trademarks identified on Annex 4 to the Security Agreement. - 68 - 8.21 Redemption of Senior Subordinated Indebtedness. Except as permitted by Section 8.09 hereof, the Company will not prepay, redeem, effect a defeasance or covenant defeasance or otherwise retire any of the Indebtedness issued pursuant to the Senior Subordinated Indentures. Section 9. Events of Default. If one or more of the following events (herein called "Events of Default") shall occur and be continuing: (a) The Company shall (i) default in the payment of any principal of any Loan or any Reimbursement Obligation when due (whether at stated maturity or upon mandatory or optional prepayment) or (ii) default in the payment of any interest on any Loan, any fee or any other amount payable by it hereunder or under any other Basic Document when due (whether at stated maturity or upon mandatory or optional prepayment or otherwise) and such default shall have continued unremedied for three or more Business Days; or (b) The Company or any of its Subsidiaries shall default in the payment when due of any principal of or interest on any of its other Indebtedness aggregating $5,000,000 or more, or in the payment when due of any amount aggregating $5,000,000 or more under any Interest Rate Protection Agreement; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness or any event specified in any Interest Rate Protection Agreement shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity or to have the interest rate thereon reset to a level so that securities evidencing such Indebtedness trade at a level specified in relation to the par value thereof or, in the case of an Interest Rate Protection Agreement, to permit the payments owing under such Interest Rate Protection Agreement to be liquidated in an amount aggregating $5,000,000 or more; or (c) Any representation, warranty or certification made or deemed made herein or in any other Basic Document (or in any modification or supplement hereto or thereto) by the Company, or any certificate furnished to any Lender or the Administrative Agent pursuant to the provisions hereof or thereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or (d) The Company shall default in the performance of any of its obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11 or 8.12 hereof or the Company shall default in the performance of any of its obligations under Section 5.02 of the Security Agreement; or the Company shall default in the performance of any of its other obligations in this Agreement or any other Basic Document and such default shall continue unremedied for a period of thirty days after notice thereof to the Company by the Administrative Agent or any Lender (through the Administrative Agent); or In-Flight shall default in the performance of any of its obligations under Section 6.02 of the In-Flight Guarantee and Security Agreement; or - 69 - (e) The Company or any of its Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (f) The Company or any of its Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its Property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (g) A proceeding or case shall be commenced, without the application or consent of the Company or any of its Subsidiaries, in any court of competent jurisdiction, seeking (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Company or such Subsidiary or of all or any substantial part of its Property, or (iii) similar relief in respect of the Company or such Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief against the Company or such Subsidiary shall be entered in an involuntary case under the Bankruptcy Code; or (h) A final judgment or judgments for the payment of money in excess of $5,000,000 in the aggregate (exclusive of judgment amounts fully covered by insurance where the insurer has admitted liability in respect of such judgment) or in excess of $20,000,000 in the aggregate (regardless of insurance coverage) shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against the Company or any of its Subsidiaries and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Company or the relevant Subsidiary shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) An event or condition specified in Section 8.01(f) hereof shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, the Company or any ERISA Affiliate shall incur or in the opinion of the Majority Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) which would constitute, in the determination of the Majority Lenders, a Material Adverse Effect; or (j) A reasonable basis shall exist for the assertion against the Company or any of its Subsidiaries of (or there shall have been asserted against the Company or any of its Subsidiaries) claims or liabilities, whether accrued, absolute or contingent, based on or arising - 70 - from the generation, storage, transport, handling or disposal of Hazardous Materials by the Company or any of its Subsidiaries or Affiliates, or any predecessor in interest of the Company or any of its Subsidiaries or Affiliates, or relating to any site or facility owned, operated or leased by the Company or any of its Subsidiaries or Affiliates, which claims or liabilities (insofar as they are payable by the Company or any of its Subsidiaries but after deducting any portion thereof which is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor), in the judgment of the Majority Lenders are reasonably likely to be determined adversely to the Company or any of its Subsidiaries, and the amount thereof is, singly or in the aggregate, reasonably likely to have a Material Adverse Effect; or (k) Any "person" or "group" (as such terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act (other than Amin or Robert Khoury, their lineal descendants or trusts established by such Persons for their respective lineal descendants)) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the aggregate voting rights of the outstanding capital stock of the Company (on a fully diluted basis); or during any consecutive 25-month period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by the stockholders of the Company was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or (l) Except for expiration in accordance with its terms, any of the Security Documents shall be terminated or shall cease to be in full force and effect, for whatever reason; THEREUPON: (1) in the case of an Event of Default other than one referred to in clause (f) or (g) of this Section 9 with respect to the Company, the Administrative Agent may, by notice to the Company, terminate the Commitments and/or declare the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by the Company hereunder and under the Notes (including, without limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be forthwith due and payable (provided that (x) if so requested by the Majority Series A Lenders, the Administrative Agent shall take such action with respect to the Series A Commitments and/or the Series A Loans, Series A Reimbursement Obligations and such interest and other amounts to the extent owed to the Series A Lenders, (y) if so requested by the Majority Series B Lenders, the Administrative Agent shall take such action with respect to the Series B Commitments and the Series B Loans and such interest and other amounts to the extent owed to the Series B Lenders) and (z) if so requested by the Majority Series C Lenders, the Administrative Agent shall take such action with respect to the Series C Commitments and/or the Series C Loans, Series C Reimbursement Obligations and such interest and other amounts to the extent owed to the Series C Lenders, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company; and (2) in the case of the occurrence of an Event of Default referred to in clause (f) or (g) of this Section 9 with - 71 - respect to the Company, the Commitments shall automatically be terminated and the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by the Company hereunder and under the Notes (including, without limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company. In addition, upon the occurrence and during the continuance of any Event of Default (if the Administrative Agent has declared the principal amount then outstanding of, and accrued interest on, the Series A Loans and all other amounts payable by the Company hereunder and under the Notes to be due and payable), the Company agrees that it shall, if requested by the Administrative Agent, or the Majority Series A Lenders (in the case of Series A Letters of Credit) or the Majority Series C Lenders (in the case of Series C Letters of Credit) through the Administrative Agent (and, in the case of any Event of Default referred to in clause (f) or (g) of this Section 9 with respect to the Company, forthwith, without any demand or the taking of any other action by the Administrative Agent or such Lenders) provide cover for such Series A or Series C Letter of Credit Liabilities by paying to the Administrative Agent immediately available funds in an amount equal to the then aggregate undrawn face amount of all such Letters of Credit, which funds shall be held by the Administrative Agent in the Collateral Account as collateral security in the first instance for such Series A or Series C Letter of Credit Liabilities and be subject to withdrawal only as therein provided. Section 10. The Administrative Agent. 10.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Basic Documents with such powers as are specifically delegated to the Administrative Agent by the terms of this Agreement and of the other Basic Documents, together with such other powers as are reasonably incidental thereto. The Administrative Agent (which term as used in this sentence and in Section 10.05 and the first sentence of Section 10.06 hereof shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Basic Documents, and shall not by reason of this Agreement or any other Basic Document be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any other Basic Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Basic Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any Note or any other Basic Document or any other document referred to or provided for herein or therein or for any failure by the Company or any other Person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Basic Document; and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Basic Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. - 72 - The Administrative Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with the Administrative Agent, together with the consent of the Company to such assignment or transfer (to the extent provided in Section 11.06(b) hereof). 10.02 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including, without limitation, any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Basic Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Majority Lenders or, if provided herein, in accordance with the instructions given by the Majority Series A Lenders, the Majority Series B Lenders, the Majority Series C Lenders or all of the Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. 10.03 Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received notice from a Lender or the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 10.07 hereof) take such action with respect to such Default as shall be directed by the Majority Lenders or, if provided herein, the Majority Series A Lenders, the Majority Series B Lenders or the Majority Series C Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Majority Lenders, the Majority Series A Lenders, the Majority Series B Lenders, the Majority Series C Lenders or all of the Lenders. 10.04 Rights as a Lender. With respect to its Commitments and the Loans made by it, Chase (and any successor acting as Administrative Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. Chase (and any successor acting as Administrative Agent) and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in and generally engage in any kind of banking, trust or other business with the Company (and any of its Subsidiaries or Affiliates) as if it were not acting as the Administrative Agent, and Chase and its affiliates may accept fees and other consideration - 73 - from the Company for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 10.05 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed under Section 11.03 hereof, but without limiting the obligations of the Company under said Section 11.03, and including in any event any payments under any indemnity that the Administrative Agent is required to issue to any bank referred to in Section 4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and Security Agreement to which remittances in respect of Accounts, as defined therein, are to be made) ratably in accordance with the aggregate principal amount of the Loans and Reimbursement Obligations held by the Lenders (or, if no Loans or Reimbursement Obligations are at the time outstanding, ratably in accordance with their respective Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Administrative Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Basic Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses that the Company is obligated to pay under Section 11.03 hereof, and including also any payments under any indemnity that the Administrative Agent is required to issue to any bank referred to in Section 4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and Security Agreement to which remittances in respect of Accounts, as defined therein, are to be made, but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. 10.06 Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company and its Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Company of this Agreement or any of the other Basic Documents or any other document referred to or provided for herein or therein or to inspect the Properties or books of the Company or any of its Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Company or any of its Subsidiaries (or any of their affiliates) that may come into the possession of the Administrative Agent or any of its affiliates. - 74 - 10.07 Failure to Act. Except for action expressly required of the Administrative Agent hereunder and under the other Basic Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Section 10.05 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 10.08 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Company, and the Administrative Agent may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, after consultations with the Company, appoint a successor Administrative Agent, that shall be a bank which has an office in New York, New York with a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 10 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. 10.09 Consents under Basic Documents. Except as otherwise provided in Section 11.04 hereof with respect to this Agreement, the Administrative Agent may, with the prior consent of the Majority Lenders (but not otherwise), (i) consent to any modification, supplement or waiver under any of the Basic Documents or (ii) agree to additional Indebtedness being secured under the Security Documents if the proceeds of such Indebtedness are used by the Company directly or indirectly to finance any Acquisition; provided that, without the consent of each Lender, the Administrative Agent shall not (except as provided herein or in the Security Documents) release any collateral or otherwise terminate any Lien under the Security Documents, or (except as otherwise provided in clause (ii) above) agree to additional obligations being secured by such collateral security (unless the Lien for such additional obligations shall be junior to the Lien in favor of the other obligations secured by such Security Documents), except that no such consent shall be required, and the Administrative Agent is hereby authorized, to release any Lien covering Property which (a) is the subject of a Disposition of Property permitted hereunder or to which the Majority Lenders have consented, (b) consists of the membership interests in In-Flight to which release the Majority Lenders have consented or (c) consists of shares of any Subsidiary of the Company that is no longer a Material Subsidiary. 10.10 Collateral Sub-Agents. Each Lender by its execution and delivery of this Agreement agrees, as contemplated by Section 4.03 of the Security Agreement and Section 5.02 - 75 - of the In-Flight Guarantee and Security Agreement, that, in the event it shall hold any Permitted Investments referred to therein, such Permitted Investments shall be held in the name and under the control of such Lender, and such Lender shall hold such Permitted Investments as a collateral sub-agent for the Administrative Agent thereunder. The Company by its execution and delivery of this Agreement hereby consents to the foregoing. 10.11 Documentation Agent. The Documentation Agent identified on the front cover page of this Agreement shall have no duties or responsibilities hereunder other than as a Bank hereunder. Section 11. Miscellaneous. 11.01 Waiver. No failure on the part of the Administrative Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or any Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement or any Note preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 11.02 Notices. All notices, requests and other communications provided for herein and under the Security Documents (including, without limitation, any modifications of, or waivers or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at (i) in the case of the Company and the Administrative Agent, the "Address for Notices" specified below its name on the signature pages hereof) and (ii) in the case of each of the Lenders, the address (or telecopy number) set forth in its Administrative Questionnaire; or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 11.03 Expenses, Etc. The Company agrees to pay or reimburse each of the Lenders and the Administrative Agent for paying: (a) all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase), in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the other Basic Documents and the extension of credit hereunder and (ii) any modification, supplement or waiver of any of the terms of this Agreement or any of the other Basic Documents; (b) all reasonable costs and expenses of the Lenders and the Administrative Agent (including, without limitation, reasonable counsels' fees) in connection with (i) any Default and any enforcement or collection proceedings resulting therefrom or in connection with the negotiation of any restructuring or "work-out" (whether or not consummated), or the obligations of the Company hereunder and (ii) the enforcement of this Section 11.03; and (c) all transfer, stamp, documentary, intangibles or other similar taxes, assessments or charges levied by any - 76 - governmental or revenue authority in respect of this Agreement or any of the other Basic Documents or any other document referred to herein or therein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Basic Document or any other document referred to therein. The Company hereby agrees (i) to indemnify the Administrative Agent and each Lender and their respective directors, officers, employees, attorneys and agents from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them (including, without limitation, any and all losses, liabilities, claims, damages or expenses incurred by the Administrative Agent to any Lender, whether or not the Administrative Agent or any Lender is a party thereto) arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to the extensions of credit hereunder or any actual or proposed use by the Company or any of its Subsidiaries of the proceeds of any of the extensions of credit hereunder, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified) and (ii) not to assert any claim against the Administrative Agent, any Lender, any of their affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any of the transactions contemplated herein or in any other Basic Document. Without limiting the generality of the foregoing, the Company will (x) indemnify the Administrative Agent for any payments that the Administrative Agent is required to make under any indemnity issued to any bank referred to in Section 4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and Security Agreement to which remittances in respect to Accounts, as defined therein, are to be made and (y) indemnify the Administrative Agent and each Lender from, and hold the Administrative Agent and each Lender harmless against, any losses, liabilities, claims, damages or expenses described in the preceding sentence (but excluding, as provided in the preceding sentence, any loss, liability, claim, damage or expense incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified) arising under any Environmental Law as a result of the past, present or future operations of the Company or any of its Subsidiaries (or any predecessor in interest to the Company or any of its Subsidiaries), or the past, present or future condition of any site or facility owned, operated or leased by the Company 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. 11.04 Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be modified or supplemented only by an - 77 - instrument in writing signed by the Company, the Administrative Agent and the Majority Lenders, or by the Company and the Administrative Agent acting with the consent of the Majority Lenders, and any provision of this Agreement may be waived by the Majority Lenders or by the Administrative Agent acting with the consent of the Majority Lenders; provided that: (a) no modification, supplement or waiver shall, unless by an instrument signed by all of the Lenders or by the Administrative Agent acting with the consent of all of the Lenders: (i) increase, or extend the term of any of the Commitments, or extend the time or waive any requirement for the reduction or termination of any of the Commitments, (ii) extend the date fixed for the payment of principal of or interest on any Loan, the Reimbursement Obligations or any fee hereunder, (iii) reduce the amount of any such payment of principal, (iv) reduce the rate at which interest is payable thereon or any fee is payable hereunder, (v) alter the rights or obligations of the Company to prepay Loans, (vi) alter the terms of this Section 11.04, (vii) modify the definition of the term "Majority Lenders", "Majority Series A Lenders", "Majority Series B Lenders" or "Majority Series C Lenders", or modify in any other manner the number or percentage of the Lender required to make any determinations or waive any rights hereunder or to modify any provision hereof, or (viii) waive any of the conditions precedent set forth in Section 6 hereof; (b) any modification or supplement of Section 10 hereof shall require the consent of the Administrative Agent; and (c) notwithstanding the above, (i) Sections 2.01(a), 2.03(A), 2.04(a) and 2.05(i), may be modified or supplemented only by an instrument in writing signed by the Company, the Administrative Agent and the Series A Lenders, or by the Company and the Administrative Agent acting with the consent of the Series A Lenders, and any such provision may be waived by the Series A Lenders or by the Administrative Agent acting with the consent of the Series A Lenders, (ii) Sections 2.01(b), 2.04(b) and 2.05(ii) may be modified or supplemented only by an instrument in writing signed by the Company, the Administrative Agent and the Series B Lenders, or by the Company and the Administrative Agent acting with the consent of the Series B Lenders, and any such provision may be waived by the Series B Lenders or by the Administrative Agent acting with the consent of the Series B Lenders, (iii) Sections 2.01(c), 2.03(B), 2.04(c) and 2.05(iii), may be modified or supplemented only by an instrument in writing signed by the Company, the Administrative Agent and the Series C Lenders, or by the Company and the Administrative Agent acting with the consent of the Series C Lenders, and any such provision may be waived by the Series C Lenders or by the Administrative Agent acting with the consent of the Series C Lenders and (iv) Section 5.06 may be modified or supplemented only by an instrument in writing signed by the Company, the Administrative Agent and the Series A Lenders and Series C Lenders, or by the Company and the Administrative Agent acting with the consent of the Series A Lenders and Series C Lenders, and any such provision may be waived by the Series A Lenders and Series C Lenders or by the Administrative Agent acting with the consent of the Series A Lender and Series C Lenders. 11.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 11.06 Assignments and Participations. ------------------------------ (a) The Company may not assign any of its rights or obligations hereunder or under the Notes without the prior consent of all of the Lenders and the Administrative Agent. - 78 - (b) Each Lender may assign any of its Loans, its Notes, its Commitments, and, if such Lender is a Series A Lender or Series C Lender, its Letter of Credit Interest (but only with the consent of the Company and the Administrative Agent and, in the case of a Series A Commitment, Series A Letter of Credit Interest or Series C Letter of Credit Interest, the Issuing Lender, which consents in the case of the Company and the Administrative Agent shall not be unreasonably withheld or delayed); provided that (i) no such consent by the Company, the Administrative Agent or the Issuing Lender shall be required in the case of any assignment by Chase of its Series C Commitment, Series C Letter of Credit Interest or Series C Loans so long as Chase continues to hold a Series C Commitment in excess of $25,000,000, (ii) no such consent by the Company or the Administrative Agent shall be required in the case of any assignment to another Lender or an affiliate thereof; (iii) any such partial assignment shall be in an amount at least equal to $5,000,000; (iv) unless the Company and the Administrative Agent shall otherwise consent (which consents shall not be unreasonably withheld or delayed), each such assignment by a Lender of its Series A Loans, Series A Note, Series A Commitment or Series A Letter of Credit Interest shall be made in such manner so that the same percentage of its Series A Loans, Series A Note, Series A Commitment and Series A Letter of Credit Interest, Series B Loans, Series B Note and Series B Commitment is assigned to the respective assignee; (v) unless the Company and the Administrative Agent shall otherwise consent (which consents shall not be unreasonably withheld or delayed), each such assignment by a Lender of its Series B Loans, Series B Note or Series B Commitment shall be made in such manner so that the same percentage of its Series B Loans, Series B Note and Series B Commitment, Series A Loans, Series A Note, Series A Commitment and Series A Letter of Credit Interest is assigned to the respective assignee and (vi) unless the Company and the Administrative Agent shall otherwise consent (which consents shall not be unreasonably withheld or delayed), each such assignment by a Lender of its Series C Loans, Series C Note, Series C Commitment or Series C Letter of Credit Interest shall be made in such manner so that the same percentage of its Series C Loans, Series C Note, Series C Commitment and Series C Letter of Credit Interest is assigned to the respective assignee. Upon execution and delivery by the assignee to the Company, the Administrative Agent and the Issuing Lender of an instrument in writing pursuant to which such assignee agrees to become a "Lender" hereunder (if not already a Lender) having the Commitment(s), Loans, and, if applicable, Letter of Credit Interest specified in such instrument, and upon consent thereto by the Company, the Administrative Agent and the Issuing Lender, to the extent required above, the assignee shall have, to the extent of such assignment (unless otherwise provided in such assignment with the consent of the Company, the Administrative Agent and the Issuing Lender), the obligations, rights and benefits of a Lender hereunder holding the Commitment(s), Loans and, if applicable, Letter of Credit Interest (or portions thereof) assigned to it (in addition to the Commitment(s), Loans and Letter of Credit Interest, if any, theretofore held by such assignee) and the assigning Lender shall, to the extent of such assignment, be released from the Commitment(s) (or portion(s) thereof) so assigned. Upon each such assignment the assigning Lender shall pay the Administrative Agent an assignment fee of $3,000. (c) A Lender may sell or agree to sell to one or more other Persons a participation in all or any part of any Loans or Letter of Credit Interest held by it, or in its Commitments, in which event each purchaser of a participation (a "Participant") shall be entitled to the rights and benefits of the provisions of Section 8.01(j) hereof with respect to its participation in such Loans, - 79 - Letter of Credit Interest and Commitments as if (and the Company shall be directly obligated to such Participant under such provisions as if) such Participant were a "Lender" for purposes of said Section, but, except as otherwise provided in Section 4.07(c) hereof, shall not have any other rights or benefits under this Agreement or any Note or any other Basic Document (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreements executed by such Lender in favor of the Participant). All amounts payable by the Company to any Lender under Section 5 hereof in respect of Loans, Letter of Credit Interest held by it, and its Commitments, shall be determined as if such Lender had not sold or agreed to sell any participations in such Loans, Letter of Credit Interest and Commitments, and as if such Lender were funding each of such Loan, Letter of Credit Interest and Commitments in the same way that it is funding the portion of such Loan, Letter of Credit Interest and Commitments in which no participations have been sold. In no event shall a Lender that sells a participation agree with the Participant to take or refrain from taking any action hereunder or under any other Basic Document except that such Lender may agree with the Participant that it will not, without the consent of the Participant, agree to (i) increase or extend the term, or extend the time or waive any requirement for the reduction or termination, of such Lender's related Commitment, (ii) extend the date fixed for the payment of principal of or interest on the related Loan or Loans, Reimbursement Obligations or any portion of any fee hereunder payable to the Participant, (iii) reduce the amount of any such payment of principal, (iv) reduce the rate at which interest is payable thereon, or any fee hereunder payable to the Participant, to a level below the rate at which the Participant is entitled to receive such interest or fee, (v) alter the rights or obligations of the Company to prepay the related Loans or (vi) consent to any modification, supplement or waiver hereof or of any of the other Basic Documents to the extent that the same, under Section 10.10 or 11.04 hereof, requires the consent of each Lender. (d) In addition to the assignments and participations permitted under the foregoing provisions of this Section 11.06, any Lender may assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (e) A Lender may furnish any information concerning the Company or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 11.12(b) hereof. (f) Anything in this Section 11.06 to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan or Reimbursement Obligation held by it hereunder to the Company or any of its Affiliates or Subsidiaries without the prior written consent of each Lender. 11.07 Survival. The obligations of the Company under Sections 5.01, 5.05, 5.06, 5.07 and 11.03 hereof and the obligations of the Lenders under Sections 10.05 and 11.12 hereof shall survive the repayment of the Loans and Reimbursement Obligations and the termination of the Commitments. In addition, each representation and warranty made, or deemed to be made by a notice of any extension of credit (whether by means of a Loan or a Letter of Credit), herein or - 80 - pursuant hereto shall survive the making of such representation and warranty, and no Lender shall be deemed to have waived, by reason of making any extension of credit hereunder (whether by means of a Loan or a Letter of Credit), any Default which may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that such Lender or the Administrative Agent may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such extension of credit was made. 11.08 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 11.09 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. 11.10 Governing Law; Submission to Jurisdiction. This Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. The Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division), and any other appellate court in the State of New York, for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Company irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.12 Treatment of Certain Information; Confidentiality. (a) The Company acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Company 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 Company hereby authorizes each Lender to share any information delivered to such Lender by the Company 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 clause (b) below as if it were a Lender hereunder. - 81 - (b) Each Lender and the Administrative Agent agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Company pursuant to this Agreement which is identified by the Company as being confidential at the time the same is delivered to the Lenders or the Administrative Agent, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Lenders or the Administrative Agent, (iii) to bank examiners, auditors or accountants, (iv) to the Administrative Agent or any other Lender (or to Chase Securities Inc.), (v) in connection with any litigation to which any one or more of the Lenders or the Administrative Agent is a party, (vi) to a subsidiary or affiliate of such Lender as provided in clause (a) above or (vii) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to the respective Lender a Confidentiality Agreement substantially in the form of Exhibit B hereto; provided, further, that (x) unless specifically prohibited by applicable law or court order, each Lender and the Administrative Agent shall, prior to disclosure thereof, notify the Company of any request for disclosure of any such non-public information (A) by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) or (B) pursuant to legal process and (y) in no event shall any Lender or the Administrative Agent be obligated or required to return any materials furnished by the Company. 11.13 Amended and Restated Security Agreement. The Company hereby confirms that all references in the Security Agreement to the "Credit Agreement" mean this Agreement as modified and supplemented and in effect from time to time and that, as of the Amendment Effective Date, Annex 1 to the Security Agreement is amended to read in its entirety as Annex 2 hereto and Annex 7 to the Security Agreement is amended to read in its entirety as Annex 3 hereto. - 82 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By ---------------------------- Title: Address for Notices: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, Florida 33414 Attention: Jeffrey P. Holtzman, Vice President and Treasurer Telecopier No.: (561) 791-3966 Telephone No.: (561) 791-5000 with a copy to: Ropes & Gray One International Place Boston, MA 02110 Attention: Winthrop G. Minot, Esq. Telecopier No.: (617) 951-7050 Telephone No.: (617) 951-7000 - 83 - LENDERS THE CHASE MANHATTAN BANK By ------------------------- Title: NATIONSBANK, N.A. By ------------------------- Title: CREDIT LYONNAIS ATLANTA AGENCY By ------------------------- Title: LASALLE BUSINESS CREDIT, INC. By ------------------------- Title: - 84 - THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By ------------------------- Title: THE FUJI BANK AND TRUST COMPANY By ------------------------- Title: WACHOVIA BANK, N.A. By ------------------------- Title: AMSOUTH BANK By ------------------------- Title: THE BANK OF NEW YORK By ------------------------- Title: - 85 - DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH By ------------------------- Title: By ------------------------- Title: FIRST UNION NATIONAL BANK By ------------------------- Title: SUNTRUST BANK, SOUTH FLORIDA, N.A. By ------------------------- Title: ABN AMRO BANK N.V. By ------------------------- Title: By ------------------------- Title: - 86 - THE CHASE MANHATTAN BANK, as Administrative Agent By ------------------------- Title: Address for Notices to Chase as Administrative Agent: The Chase Manhattan Bank Loan and Agency Services Group 1 Chase Manhattan Plaza New York, New York 10081 Annex 1
Series A Series B Series C Total Bank Commitment Commitment Commitments Commitments - ---- ---------- ---------- ----------- ----------- The Chase Manhattan Bank $ 11,000,000 $ 11,000,000 $ 15,000,000 $ 37,000,000 NationsBank, N.A. $ 10,000,000 $ 10,000,000 $ 15,000,000 $ 35,000,000 Credit Lyonnais Atlanta Agency $ 9,500,000 $ 9,500,000 $ 9,000,000 $ 28,000,000 LaSalle Business Credit, Inc. $ 9,500,000 $ 9,500,000 $ 12,000,000 $ 31,000,000 The Long-Term Credit Bank $ 9,500,000 $ 9,500,000 $ 9,000,000 $ 28,000,000 of Japan, Ltd. The Fuji Bank and Trust Company $ 9,500,000 $ 9,500,000 $ 12,000,000 $ 31,000,000 Wachovia Bank, N.A. $ 9,500,000 $ 9,500,000 $ 12,000,000 $ 31,000,000 Amsouth Bank $ 6,000,000 $ 6,000,000 $ 0 $ 12,000,000 The Bank of New York $ 6,000,000 $ 6,000,000 $ 9,000,000 $ 21,000,000 DG Bank Deutsche Genossenschaftsbank $ 6,000,000 $ 6,000,000 $ 9,000,000 $ 21,000,000 Cayman Island Branch First Union National Bank $ 6,000,000 $ 6,000,000 $ 12,000,000 $ 24,000,000 SunTrust Bank, South Florida, N.A. $ 6,000,000 $ 6,000,000 $ 6,000,000 $ 18,000,000 ABN Amro Bank N.V. $ 1,500,000 $ 1,500,000 $ 0 $ 3,000,000 ------------ ------------ ------------ ------------ Totals $100,000,000 $100,000,000 $120,000,000 $320,000,000
SCHEDULE I Material Agreements and Liens [See Sections 7.12 and 8.07(b)] Part A - Material Agreements ------------------- 1. Indenture dated as of February 13, 1998 between the Company, as issuer, and the United States Trust Company of New York, as trustee, in connection with $250,000,000 of 8% Senior Subordinated Notes of the Company. 2. Loan agreement dated February 24, 1993 between the Company's subsidiary B/E Aerospace (UK) Limited, a Northern Ireland corporation, ("BEA-UK") and Barclays Bank PLC ("Barclays"), as amended, providing for an overdraft facility in the aggregate principal amount of (pound)5,000,000. 3. Guarantee dated February 24, 1993 by the Company to Barclays Limited to (pound)2,750,000 of the indebtedness of B/E Aerospace (UK) Limited described in Item 2 above. 4. Loan agreement between Royal Inventum B.V. and InG Bank dated July 14, 1993 in the aggregate principal amount of Dfl. 2,000,000. 5. Acquisition Agreement among the Company, Elinor T. Nordskog and Nordskog Industries, Inc. dated July 27, 1993. (Acquisition purchase price adjustments unknown). 6. Capitalized lease obligations B/E Aerospace (UK) Limited for machinery and equipment in the aggregate amount of $600,000. 7. Indebtedness of BE Aerospace (Netherlands) B.V. to the Company in an aggregate principal amount not in excess of Dfls. 49,385,000. 8. Indenture dated as of January 24, 1996 between the Company and First National Bank of Connecticut, as trustee, in connection with $100,000,000 of 9-7/8% Senior Subordinated Notes due 2006. 9. Acquisition Agreement dated as of December 14, 1995, among the Company, Burns Aerospace Corporation, Eagle Industrial Products Corporation, Eagle Industries, Inc. and Great American Management and Investment, Inc. (Acquisition purchase price adjustment unknown.) 10. Agreement and Plan of Reorganization and Merger by and among BE Aerospace, Inc., BE Acquisition Corp., Aerospace Interiors, Inc., Gregory and Deborah - 2 - Fodell Partnership, Ltd., Gregory and Deborah Fodell Partnership II, Ltd. and Gregory N. Fodell dated March 27, 1998 ($5.6 million). 11. Stock Purchase Agreement dated as of March 31, 1998 by and between Puritan-Bennett Aero Systems Corp. and BE Aerospace, Inc. ($69.7 million, subject to purchase price adjustments). 12. Re-Formation Agreement dated as of February 10, 1998 among the Company, In-Flight, Harris Corporation, In-Flight Phone Corporation and B/E Harris LiveTV, LLC. 13. Amended and Restated Limited Liability Company Agreement dated as of February 10, 1998 of B/E Harris LiveTV, LLC. 14. Fifth Amended and Restated Credit Agreement dated as of October 29, 1993 amended and restated as of August 7, 1998 between BE Aerospace, Inc. and The Chase Manhattan Bank. 15. Amended and Restated Security Agreement dated as of October 29, 1993, amended and restated as of April 3, 1998 between BE Aerospace, Inc. and The Chase Manhattan Bank. 16. Amended and Restated Guarantee and Security Agreement dated as of November 19, 1997 amended and restated as of August 7, 1998 between In-Flight Entertainment, LLC and The Chase Manhattan Bank. 17. Asset Purchase Agreement dated as of April 16, 1998 between Stanford Aerospace Group, Inc. and BE Aerospace, Inc. ($117.3 million). 18. Agreement and Plan of Reorganization and Merger dated as of July 30, 1998 by and among BE Aerospace, Inc., BE Aerospace Acquisition Corp., Aerospace Lighting Corporation and the Stockholders of Aerospace Lighting Corporation ($31.3 million). 19. Acquisition Agreement dated as of July 21, 1998 by and among BE Aerospace, Inc. and the SMR Sellers for the outstanding stock of SMR Aerospace, Inc. ($142 million). - 3 - Part B - Liens ----- BE Aerospace, Inc. - ------------------ 1. California a. UCC - Secretary of State (i) 1st Source Bank, filed September 3, 1993, file number 93180963. Certain leased machining equipment (ii) The Chase Manhattan Bank, filed November 3, 1993, file number 93221435. Blanket filing. (iii) UJB Leasing Corporation, filed December 1, 1994, file number 9435361073. Miscellaneous equipment. (iv) Hewlett-Packard Company Finance and Remark, filed December 4, 1994, file number 9435560656. Miscellaneous equipment. (v) British Airways PLC, filed May 20, 1996, file number 9614460354. Miscellaneous equipment. (vi) Hewlett-Packard Company Finance and Remark, filed May 6, 1997, file number 9712861105. Certain leased equipment and related tangible and intangible property. (vii) Pullman Bank & Trust Company, filed August 20, 1997, file number 9723460500. Certain leased equipment and related tangible property. (viii) Telogy, Inc., filed December 15, 1997, file number 975360190. Certain leased equipment. 2. Connecticut ----------- a. UCC - Secretary of State (i) The Chase Manhattan Bank, filed November 3, 1993, file number 1034166; Blanket; Amendment filed February 1, 1996, file number 1678686 (Debtor address change); Partial Release filed December 16, 1996, file number 1741071 (miscellaneous equipment). - 4 - (ii) UJB Leasing Corporation, filed August 23, 1994, file number 1070220. Miscellaneous leased equipment. (iii) UJB Leasing Corporation, filed September 8, 1994, file number 1574243. Miscellaneous leased equipment. (iv) UJB Leasing Corporation, filed January 23, 1995, file number 1600177. Miscellaneous Leased Equipment. (v) Bankers Leasing Association, Inc., filed December 20, 1996, file number 1739286. Miscellaneous office equipment. (vi) General Electric Capital Corporation, filed March 5, 1997, file number 1754332. Leased aircraft. 3. Florida ------- a. UCC - Secretary of State (i) NationsBanc Leasing Corporation, filed March 22, 1993, file number 9360950. Certain leased equipment; Continuation, filed March 3, 1998, file number 9846659. (ii) The Chase Manhattan Bank, filed November 4, 1993, file number 930000227345, Blanket; Amendment filed January 31, 1996, file number 960000020922 (Debtor address change); Partial Release filed December 16, 1996, file number 960000262425 (miscellaneous equipment); Partial Release filed December 3, 1997, file number 970000271483 (miscellaneous equipment); Amendment filed December 11, 1997, file number 970000277923. (iii) UJB Leasing Corporation, filed September 6, 1994, file number 940180451. Miscellaneous leased equipment. (iv) United Jersey Bank, filed September 7, 1994, file number 940182527. Miscellaneous leased equipment. (v) General Electric Capital Corporation filed March 5, 1997, file number 97047206. Leased aircraft. (vi) General Electric Capital Corporation filed December 3, 1997, file number 970271431. Leased computer system. (vii) General Electric Capital Corporation filed March 11, 1998, file number 98054023. Leased computer equipment. - 5 - b. UCC - Palm Beach County Clerk of Circuit Court, Florida (i) General Electric Capital Corporation filed December 3, 1997, file number 97-430801. Leased computer system. (ii) General Electric Capital Corporation filed March 12, 1998, file number 98-086001. Leased computer equipment. 4. North Carolina -------------- a. UCC - Secretary of State (i) The Chase Manhattan Bank N.A. filed January 30, 1996, file number 1304283, blanket; partial release filed December 3, 1997, file number 001520696. (ii) General Electric Capital Corporation filed June 23, 1997, file number 1467282, leased machinery. (iii) General Electric Capital Corporation filed December 3, 1997, file number 001528953. Leased computer system. b. UCC - Forsyth County, North Carolina (i) The Chase Manhattan Bank, filed January 29, 1996, file number 215975, blanket; partial release filed December 3, 1997, file number 224501. (ii) General Electric Capital Corporation filed December 3, 1997, file number 224500. Leased computer system. (iii) General Electric Capital Corporation filed March 11, 1998, file number 226702. Leased computer system. In-Flight Entertainment, LLC - ---------------------------- 1. California ---------- a. UCC - Secretary of State (i) The Chase Manhattan Bank, filed December 11, 1997, file number 9734960163. Blanket filing. - 6 - 2. In-Flight Entertainment, LLC, doing business as BE Aerospace, Inc. a. UCC - California Secretary of State (i) The Chase Manhattan Bank, filed December 11, 1997, file number 9734960155. Blanket filing. 3. In-Flight Entertainment, LLC, doing business as In-Flight Entertainment a. UCC - California Secretary of State (i) The Chase Manhattan Bank, filed December 11, 1997, file number 9734960171. Blanket filing. B/E Aerospace (UK) Limited - -------------------------- The Indebtedness of B/E Aerospace (UK) Limited identified in Section 2 of Part A of this Schedule I is cross-collateralized in the U.K. by the following: 1. A Debenture over the assets of B/E Aerospace (UK) Limited on Barclays' standard form dated 19th November 1982. 2. The Company's guarantee referred to in Section 4 of Part A of this Schedule I. 3. A Letter of Set Off allowing Barclays' to combine any account, Sterling or Currency dated May 8, 1989. SCHEDULE II Hazardous Materials ------------------- [See Section 7.13] 1. Litchfield, CT, facility historically did not have state or federal clean Water Act permits authorizing discharge of wastewater to the Bantam River. The discharge has been substantially eliminated as of this date. 2. Litchfield, CT, facility may not have required air permits for air emissions associated with paint booths and adhesive operations. A request for determination of the need for permits has been made to the state officials. 3. In 1992, the Garden Grove, CA, facility paid a $45,000 penalty for violation of air pollution regulations. 4. The Route 209 facility of Pullman in Bantam, CT, is an interim status facility under RCRA. There appears to be documentary evidence that waste from the Route 209 facility may have been transshipped through the Litchfield, CT, facility, raising potential issues of RCRA compliance relating to the Litchfield, CT facility. 5. Asbestos-containing materials may be present in the Litchfield, CT, facility. A preliminary investigation has been completed and does not indicate any large-scale concerns. 6. Hazardous Materials have been detected in the soils and groundwater at the Litchfield, CT facility. A groundwater assessment is ongoing under the supervision of the CTDEP. The latest groundwater monitoring reports show that contaminant levels in groundwater meet applicable standards. 7. Certain sites to which the Company and its Subsidiaries may have sent waste which are listed on CERCLIS, or any similar state or local list or are under investigation by governmental agencies are set forth in Exhibits 3-2, 3-3, 3-4 and 3-5 of the ICF Kaiser, Engineers report entitled "Environmental Assessment of PTC Aerospace and Aircraft Products Companies Final Report" dated February 14, 1992 and, with respect to the Burns Aerospace facility, in a report entitled "Phase I Environmental Due Diligence Examination of the Burns Aerospace Corporation, Winston-Salem, North Carolina, dated January 1994, prepared by ENSR Consulting and Engineering". 8. The Litchfield, CT, facility has two utility-owned transformers, one contains less than 50 ppm PCBs. The other contains 63 ppm PCBs. 9. Hazardous waste from the Altamonte Springs, Florida facility was sent to the Chemical Conservation Corporation landfill in Valdosta, Georgia which is on the CERCLIS list. - 2 - 10. Hazardous waste from the Altamonte Springs, Florida site may have been disposed of at the Seabord Chemical site in North Carolina, which is being remediated under consent order with the State of North Carolina. 11. Certain wells upgradient of the Anaheim, California site have been impacted by dichlorodifluoromethane (refrigerant) and trichloroethane (degreaser), both of which are believed to have been used by the predecessor of Acurex. 12. At a facility in Santa Ana, California which EECO Incorporated, a former owner of part of the BE Avionics business, owned and later leased, there may have been some seepage into the soil of toxic materials involved in metal plating, including arsenic. The Company purchased the BE Avionics business from EECO in a 1989 asset acquisition, and EECO has subsequently filed for bankruptcy protection and is no longer in operation. The BE Avionics business was never conducted in the affected facility. 13. Certain of the ovens manufactured by Nordskog prior to 1981 contain asbestos. 14. Hazardous waste originating from the Burns Aerospace, Winston-Salem, North Carolina facility may have been shipped to the Seaboard Chemical site in North Carolina which is listed on CERCLIS. In 1991, a letter was received from the North Carolina Department of Environment, Health and National Resources indicating that Fairchild Burns Company was a de minimis contributor of waste to that site. By letter dated February 26, 1992 Burns Aerospace Corporation notified Fairchild Industries, from whom it had acquired the Winston-Salem facility, that Fairchild Industries was responsible for that liability. 15. In May, 1994, the Company received notice that it was considered a de minimis PRP with respect to the Frontier Chemical Site in Niagara Falls, NY relating to a shipment of waste from the Litchfield, CT facility in 1992. The Company joined a group of de minimis PRPs that performed certain actions under an Administrative Consent Order with EPA. The Company believes that it has fully settled its liability with respect to the site through payment to the group. 16. The roof at the Chesham, UK facility may contain asbestos cement-root sheeting. Compliance Issues - ----------------- PTC Aerospace, Litchfield, CT - ----------------------------- (1) Facility is listed on the CERCLIS Data Base. (2) Pursuant to a Notice of Violation issued by the Connecticut DEP in March, 1992, the Facility has implemented a RCRA closure plan and has upgraded record keeping and training functions. - 3 - PTC Aerospace, Garden Grove, CA - ------------------------------- (1) Oily compressor blowdown is discharged directly to the ground. (2) Facility does not comply with state RCRA regulations governing generators of less than 1,000 kilograms of hazardous waste per month. (3) Facility does not comply with state OSHA requirements governing a written respiratory protection program, personnel training and record keeping, personnel medical monitoring, and other worker safety and health requirements. (4) Facility may require NPDES storm water discharge permit. Aircraft Products Company, Delray Beach, FL - ------------------------------------------- (1) Facility has not applied for an air emissions permit or conditional exemption from the State for its air emission sources. (2) Paint booth filters, empty drums, and solvent-contaminated rags are disposed of as nonhazardous solid wastes. (3) Not all hazardous waste drums were properly labeled. (4) Unused chemicals are stored onsite that are no longer used in the production process and should be disposed of as hazardous waste. (5) Plant does not have a written respiratory protection program or a hearing conservation program, although such protection is provided to employees. (6) Plant may require an NPDES storm water discharge permit. Aircraft Products Company, Jacksonville, FL - ------------------------------------------- (1) Facility has no data to indicate that its nonhazardous solid wastes, which include solvent-contaminated rags, are properly disposed of as nonhazardous waste. (2) The facility qualifies currently as a large quantity generator of regulated hazardous wastes but does not comply with the RCRA requirements applicable to these generators or to the storage of wastes onsite for less than 90 days. (3) Unused chemicals are stored onsite that are no longer used in the production process and should be disposed of as nonhazardous waste. - 4 - (4) Areas designed for hazardous waste drum storage are not posted as such or signs are obscured. (5) Plant personnel with responsibility to handle hazardous wastes have not received the requisite health and safety training. (6) Containers of hazardous materials are not consistently labeled as to the hazards they may present to worker health and safety. (7) Plant does not have a written respiratory protection program nor are employees fit tested to wear respirators as required by OSHA. (8) Plant may require an NPDES storm water discharge permit. Nordskog Industries, Inc., Van Nuys, CA - --------------------------------------- (1) Several facilities to which hazardous waste may have been shipped for disposal are on the CERCLIS data base, as noted in Table 1 of the June 4, 1993 Draft Phase I Environmental Site Assessment. (2) There may be a compliance issue concerning the mixing of hazardous and non-hazardous wastes prior to 1984. (3) The facility has had historical problems meeting effluent standards for metal finishing. Wastewater is treated in an on-site clarifier prior to discharge to the municipal sewer. (4) Nordskog received a Notice to Comply dated July 21, 1993 from the South Coast Air Quality Management District requiring Nordskog to (i) keep more detailed usage records as required by Rule 109, including all "VOC" and vapor pressure information, (ii) use only HLVP or 65% efficient spray equipment, (iii) use only closed containers for all solvents, and (iv) use only Rule 1171 and 1124 compliance cleaning solvents. Status of Mountain View, CA Property - ------------------------------------ The Prudential Insurance Company of America ("Prudential") is the owner of property known as 485 Clyde Avenue (Building 1), Mountain View, California (the "Property"). Acurex Corporation ("Acurex") owned the Property in the early 1970s and then entered into a sale-leaseback arrangement with Prudential in connection with the Property. The Property itself sits on part of a very large contamination plume said to result from discharges into the soil and groundwater from a nearby Hewlett Packard manufacturing facility. As of the date hereof, the Company believes that the municipal authorities in Mountain View do not intend to commence an environmental clean-up in connection with the plume and do not intend to permit any owner of property on or contiguous with the plume to commence a clean-up of such owner's property. - 5 - In 1992, pursuant to an Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") among Acurex, Xeruca, Inc. and others, the lease was assigned from Acurex to Xeruca. The Merger Agreement included an indemnity from Xeruca to Acurex for, among other things, those liabilities associated with the Property. In connection with the expiration of the lease for the Property on July 13, 1993, Prudential requested that Acurex execute an indemnification agreement whereby Xeruca would agree to clean-up the Property (if and when permitted by the municipal authorities) and provide a general indemnity for matters related to the clean-up while Acurex would agree to guarantee Xeruca's performance and indemnify Prudential for Xeruca's failure to perform its obligations. Acurex refused to enter into this agreement, and Prudential threatened to sue Acurex to compel it to acknowledge such alleged indemnification obligations. This dispute between Acurex and Prudential was resolved by an Agreement made as of August 27, 1993 (the "Settlement Agreement") among Prudential, Xeruca and Acurex. Pursuant to the Settlement Agreement, Xeruca agreed to indemnify Prudential with respect to environmental claims related to the Property. In addition, Acurex assigned to Prudential the benefit of the indemnification provisions from Xeruca under the Merger Agreement with respect to environmental claims related to the Property. As a result of the Settlement Agreement, Acurex is now a co-beneficiary with Prudential of Xeruca's indemnification obligations and Prudential has released and forever discharged Acurex from any and all claims that Acurex is obligated to sign an indemnification agreement with Prudential. No lawsuit is currently pending or threatened against Acurex in connection with the Property. Burns Aerospace - Winston-Salem, NC - ----------------------------------- Contaminants have been detected in the soil and groundwater at the former Burns-Aerospace facility at levels that may require remediation under the regulations of the North Carolina Department of Environmental Health and Natural Resources. Initial conditions at the site at the time of purchase are described in a report entitled "Site Characterization Report" dated January 19, 1996, prepared by Groundwater Technology. Further site assessment work is being conducted by the Company that includes groundwater and soils testing. The Company has informed the Seller of the facility, Eagle Industries, that the environmental remedial costs are subject to the indemnification claims of the purchase contract. Certain other compliance issues at the facility are identified in a report entitled "Environmental Survey and Compliance Evaluation," prepared by Environmental Quality Management, dated February 21, 1996. SCHEDULE III Subsidiaries and Investments [See Sections 7.17 and 8.08(a)] Part A - Subsidiaries ------------
Book Value Jurisdiction of Assets of (in millions) Subsidiary Organization Owners Ownership as of 5/30/98 - ---------- ------------ ------ --------- ------------- 1BE Aerospace Barbados Acurex 100% Non-material International, Ltd. ("N.M.") BE Aerospace (UK) England BEA 100% $107 Holdings Limited ("BEA-Holdings") BE Aerospace (UK) Northern Ireland BEA Holdings 100% $107 Limited ("BEA-UK") ------ 1Fort Hill Aircraft Northern Ireland BEA-UK 100% N.M. Limited ("AFL") --- 1AFI Holdings Limited Northern Ireland BEA-UK 100% N.M. 1Burns Aerospace France BEA 100% N.M. S.A.R.L. 1BE Aerospace France BEA 98.00% N.M. (France) S.A.R.L. K.A.D. 1.00% Companies, Inc. 1.00% Marc Leveille (director) BE Aerospace Delaware BEA 100% N.M. (U.S.A.), Inc. Puritan-Bennett California BEA 100% $43 Aero Systems Corp.
- 2 -
Book Value Jurisdiction of Assets of (in millions) Subsidiary Organization Owners Ownership as of 5/30/97 - ---------- ------------ ------ --------- ------------- BE Intellectual Delaware BEA 100% $ 3 Property, Inc. BE Aerospace Netherlands BEA 90% $37 (Netherlands) B.V. BEA (U.S.A.) 10% ("BEA-Neth") Royal Inventum B.V. Netherlands BEA-Neth 96.60%* $36 BE Aerospace (Sales Netherlands BEA-Neth 100% N.M. and Services) B.V. Acurex Corporation Delaware BEA 100% $63 ("Acurex") B/E Aerospace Delaware BEA 100% $11 Services, Inc. B/E Advanced Thermal Delaware BEA 100% $ 1 Technologies, Inc. 1Nordskog California BEA 100% N.M. Industries, Inc. Aerospace Interiors, Texas BEA 100% $ 3 Inc. In-Flight Entertain- Delaware BEA 100% $64 ment, LLC Aerospace Lighting New York BEA 100% $3** Corporation SMR Aerospace, Inc. Ohio BEA 100% $44**
- 3 - - ---------------- 1 Specified Subsidiary as defined in the Credit Agreement. * The balance of these shares were lost prior to the sale of the shares of this entity to BEA. ** Book value of assets as of December 31, 1997. Part B - Investments In addition to the Investments set forth in Part A above, as of the date hereof the Company has the following outstanding Investments: a. an Investment in a Middle East sales office in an amount not to exceed $200,000; b. cash and money market funds in the amount, as of July 31, 1998 of approximately $20 million. SCHEDULE IV Approvals and Compliance ------------------------ [See Section 7.17] None, except compliance with certain Environmental Laws disclosed in the materials set forth in Schedule II hereto. SCHEDULE V Existing Letters of Credit -------------------------- [See Section 2.03] Letters of Credit Outstanding:
Issue Date Amount ($) LC# Expiry Date Beneficiary ---------- ---------- --- ----------- ----------- December 11, 1995 534,000.00 P-258984 December 11, 1998 National Union Fire Ins. Co. January 10, 1995 800,000.00 P-754546 January 10, 1999 National Union Fire Ins. Co. January 22, 1996 1,400,000.00 P-259114 January 31, 1999 Eagle Industries March 25, 1992 307,817.00 P-751178 February 28, 1999 National Union Fire Ins. Co. March 16, 1995 505,000.00 P-754750 March 16, 1999 National Union fire Ins. Co. December 20, 1993 313,719.00 P-753306 May 1, 1999 CA Self Insurance Plans May 30, 1996 786,380.00 P-259468 May 29, 1999 National Union Fire Ins. Co. Total Letters of Credit 4,646,916.00 Outstanding:
SCHEDULE VI Taxes ----- [See Section 7.09] Jurisdiction Tax Year Extended To ------------ -------- ----------- Federal 2/25/95 1/3/99 Connecticut 7/29/91 - 2/26/94 12/31/98 SCHEDULE VII Transactions with Affiliates ---------------------------- [See Section 8.15] [None.] EXHIBIT C FORM OF STANDBY LETTER OF CREDIT The Chase Manhattan Bank Global Trade Services Group P.O. Box 44, Church Street Station Cable Address: CHAMANBANK New York New York, NY 10008-0044 DATE: AUGUST __, 1998 Irrevocable Standby Letter Of Credit Number P-374721 Applicant: BE AEROSPACE 1400 Corporate Center Way Wellington, Florida 33414 Beneficiaries: Oscar J. Mifsud and Patrick L. Ryan and David B. Smith and Oscar J. Misfud Trust - Patrick L. Ryan Trust - David B. Smith Trust - 1998 1998 1998 541 Leeds Gate Lane 624 Tamarac Trail 520 West Point Drive Wadsworth, OH 44281 Wadsworth, OH 44281 Akron, OH 44333 Attn: Oscar Mifsud Attn: Patrick L. Ryan Attn: David B. Smith Telecopier: 330-335-3216 Telecopier: 330-336-0228 Telecopier: 330-665-5302 We hereby notify Oscar J. Mifsud, Oscar J. Misfud Trust - 1998, Patrick L. Ryan, Patrick L. Ryan Trust - 1998, and David B. Smith, David B. Smith Trust - 1998 that we have issued our Irrevocable Standby Letter of Credit Number P-374721 in your favor by order and for account of: BE AEROSPACE 1400 Corporate Center Way Wellington, Florida 33414 Up to an aggregate amount of One Hundred Twenty Million U.S. Dollars and no cents ($120,000,000.00) Available by a single beneficiaries' draft at sight drawn on The Chase Manhattan Bank, New York, New York 10041. - 2 - ACCOMPANIED BY: A signed certification by all of the beneficiaries that: (1) "The date is December 31, 1998 and BE Aerospace, Inc., of 1400 Corporate Center Way, Wellington, Florida 33414 has failed to pay the amounts owed to the beneficiaries pursuant to Section 2 of the Share Disposition Agreement dated as of August 7, 1998 among Oscar J. Mifsud, Oscar J. Mifsud Trust - 1998, Patrick L. Ryan, Patrick L. Ryan Trust - 1998, David B. Smith, David B. Smith Trust - 1998 and BE Aerospace and the amount of the draft accompanying this certification is not in excess of the amount owed by BE Aerospace to the beneficiaries thereunder" or (2) "BE Aerospace, Inc. of 1400 Corporate Center Way, Wellington, Florida 33414 has filed a petition for reorganization or other relief under the Federal Bankruptcy laws and the amount of the draft accompanying this certification is not in excess of the amount owed by BE Aerospace to the beneficiaries pursuant to Section 2 of the Share Disposition Agreement dated as of August 7, 1998 among Oscar J. Mifsud, Oscar J. Mifsud Trust - 1998, Patrick L. Ryan, Patrick L. Ryan Trust- 1998, David B. Smith, David B. Smith Trust - 1998 and BE Aerospace." The available amount hereunder shall be reduced by the amount which the beneficiaries certify to us has been paid by BE Aerospace to the beneficiaries pursuant to Section 2 of the Share Disposition Agreement dated as of August 7, 1998 among Oscar J. Mifsud, Oscar J. Mifsud Trust - 1998, Patrick L. Ryan, Patrick L. Ryan Trust - 1998, David B. Smith, David B. Smith Trust - 1998 and BE Aerospace. Draft must be drawn and presented at this office at 55 Water Street, Trade Services, Room 1708, New York, New York 10041 not later than January 19, 1999. The draft drawn hereunder must be marked: "Drawn under The Chase Manhattan Bank, New York Letter of Credit Number P-374721" and indicate the date hereof. We hereby engage with the beneficiary that the draft drawn under and in compliance with the terms of this credit will be duly honored. This Letter of Credit shall be governed by the law of the State of New York, and shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Publication No. 500 (the "UCP") and, in the event of any conflict between the law of the State of New York and the UCP, the UCP shall control. THE CHASE MANHATTAN BANK By --------------------------- Authorized Signatory
ANNEX 2 PLEDGED STOCK - -------------------------------- ----------------------- ------------------------------- --------------------------------- Issuer Certificate Nos. Registered Owner Number of Shares - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- Flight Equipment and 26 BE Avionics, Inc. (now known 350,000 ordinary shares, 1 (British Engineering Limited as BE Aerospace, Inc.) Pound) par value - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- BE Aerospace (Netherlands) B.V. 1-23 BE Aerospace, Inc. 23 shares of capital stock, (uncertificated dfl. 1,000 par value shares) - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- BE Aerospace (USA), Inc. 2 BE Aerospace, Inc. 65 shares of common stock, par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- Acurex Inc. 2 BE Aerospace, Inc. 100 shares of common stock, par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- B/E Services, Inc. 1 BE Aerospace, Inc. 1,000 shares of common stock, par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- Aerospace Interiors, Inc. 1 BE Aerospace, Inc. 1,000 shares of common stock, par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- Puritan-Bennett Aero Systems 43 BE Aerospace, Inc. 77,500 shares of common stock, Co. par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- BE Intellectual Property, Inc. 1 BE Aerospace, Inc. 100 shares of common stock, par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- Aerospace Lighting Corporation 49 BE Aerospace, Inc. 660 shares of common stock, without par value - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- SMR Aerospace, Inc. 7 BE Aerospace, Inc. 300 shares of common stock, par value $0.01 - -------------------------------- ----------------------- ------------------------------- --------------------------------- - -------------------------------- ----------------------- ------------------------------- --------------------------------- 64 637,332.78 shares of common Flight Structures, Inc. BE Aerospace, Inc. stock - -------------------------------- ----------------------- ------------------------------- ---------------------------------
EXHIBIT A-1 AMENDED AND RESTATED SECURITY AGREEMENT AMENDED AND RESTATED SECURITY AGREEMENT dated as of October 29, 1993, AMENDED AND RESTATED AS OF April 3, 1998, between BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK, as agent for certain lenders or other financial institutions or entities party, as lenders, to the Credit Agreement referred to below (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The Company, certain lenders and the Administrative Agent are parties to a Credit Agreement dated as of October 29, 1993 amended and restated as of April 3, 1998 (as modified and supplemented and in effect from time to time, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit (by making of loans and issuing letters of credit) to be made by said lenders to the Company. The Company and the Administrative Agent are party to a Revolving Credit Security Agreement and a Term Loan Security Agreement, each dated October 29, 1993. To induce said lenders to enter into the Credit Agreement and to extend credit thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company has agreed to amend and restate the foresaid Revolving Credit Security Agreement and Term Loan Security Agreement so that, as so amended and restated, they are combined into one document and read in their entirety as herein provided. Accordingly, the parties hereto agree as follows: Section 1. Definitions. Terms defined in the Credit Agreement are used herein as defined therein. In addition, as used herein: "Accounts" shall have the meaning ascribed thereto in Section 3(d) hereof. "Collateral" shall have the meaning ascribed thereto in Section 3 hereof. "Collateral Account" shall have the meaning ascribed thereto in Section 4.01 hereof. "Copyright Collateral" shall mean all Copyrights, whether now owned or hereafter acquired by the Company, including each Copyright identified in Annex 2 hereto. "Copyrights" shall mean all copyrights, copyright registrations and applications for copyright registrations, including, without limitation, all renewals and extensions thereof, the right to recover for all past, present and future infringements thereof, and all other rights of any kind whatsoever accruing thereunder or pertaining thereto. "Documents" shall have the meaning ascribed thereto in Section 3(j) hereof. "Equipment" shall have the meaning ascribed thereto in Section 3(h) hereof. "Instruments" shall have the meaning ascribed thereto in Section 3(e) hereof. "Intellectual Property" shall mean all Copyright Collateral, all Patent Collateral and all Trademark Collateral, together with (a) all inventions, processes, production methods, proprietary information, know-how and trade secrets; (b) all licenses or user or other agreements granted to the Company with respect to any of the foregoing, in each case whether now or hereafter owned or used including, without limitation, the licenses or other agreements with respect to the Copyright Collateral, the Patent Collateral or the Trademark Collateral, listed in Annex 5 hereto; (c) all information, customer lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs; (d) all field repair data, sales data and other information relating to sales or service of products now or hereafter manufactured; (e) all accounting information and all media in which or on which any information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data; (f) all licenses, consents, permits, variances, certifications and approvals of governmental agencies now or hereafter held by the Company; and (g) all causes of action, claims and warranties now or hereafter owned or acquired by the Company in respect of any of the items listed above. "Inventory" shall have the meaning ascribed thereto in Section 3(f) hereof. "Issuers" shall mean, collectively, (a) the respective corporations identified on Annex 1 hereto under the caption "Issuer" and (b) to the extent not otherwise identified on Annex 1 hereto, each other Subsidiary of the Company. "LLC Agreements" shall have the meaning ascribed thereto in Section 3(m) hereof. -2- "LLC Collateral" shall have the meaning ascribed thereto in Section 3(m) hereof. "LLC Issuers" shall mean the respective limited liability companies identified on Annex 7 hereto. "Motor Vehicles" shall mean motor vehicles, tractors, trailers and other like property, whether or not the title thereto is governed by a certificate of title or ownership. "Patent Collateral" shall mean all Patents, whether now owned or hereafter acquired by the Company, including each Patent identified in Annex 3 hereto. "Patents" shall mean all patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein together with the reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, all income, royalties, damages and payments now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, the right to sue for past, present and future infringements thereof, and all rights corresponding thereto throughout the world. "Pledged Membership Interests" shall have the meaning ascribed thereto in Section 3(m) hereof. "Pledged Stock" shall have the meaning ascribed thereto in Section 3(a) hereof. "Secured Obligations" shall mean, collectively, (a) the principal of and interest on the Loans made by the Lenders to, and the Note(s) held by each Lender of, the Company and all other amounts from time to time owing to the Lenders or the Administrative Agent by the Company under the Basic Documents including, without limitation, all Reimbursement Obligations and interest thereon and (b) all obligations of the Company to the Lenders and the Administrative Agent hereunder. "Stock Collateral" shall mean, collectively, the Collateral described in clauses (a) through (c) of Section 3 hereof and the proceeds of and to any such property and, to the extent related to any such property or such proceeds, all books, correspondence, credit files, records, invoices and other papers. "Trademark Collateral" shall mean all Trademarks, whether now owned or hereafter acquired by the Company, including each Trademark identified in Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral does not and shall not include any Trademark which would be rendered invalid, abandoned, void or unenforceable by reason of its being included as part of the Trademark Collateral. "Trademarks" shall mean all trade names, trademarks and service marks, logos, trademark and service mark registrations, and applications for trademark and service -3- mark registrations, including, without limitation, all renewals of trademark and service mark registrations, all rights corresponding thereto throughout the world, the right to recover for all past, present and future infringements thereof, all other rights of any kind whatsoever accruing thereunder or pertaining thereto, together, in each case, with the product lines and goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark and service mark. "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York. Section 2. Representations and Warranties. The Company represents and warrants to the Revolving Credit Lenders and the Agent that: (a) The Company is the sole beneficial owner of the Collateral and no Lien exists or will exist upon the Collateral at any time (and no right or option to acquire the same exists in favor of any other Person), except for Liens permitted under Section 8.06 of the Credit Agreement and except for the pledge and security interest in favor of the Agent for the benefit of the Lenders created or provided for herein, which pledge and security interest constitute a first priority perfected pledge and security interest in and to all of the Collateral (other than Intellectual Property registered or otherwise located outside of the United States of America). (b) The Pledged Stock represented by the certificates identified in Annex 1 hereto is, and all other Pledged Stock in which the Company shall hereafter grant a security interest pursuant to Section 3 hereof will be, duly authorized, validly existing, fully paid and non-assessable and none of such Pledged Stock is or will be subject to any contractual restriction, or any restriction under the charter or by-laws of the respective Issuer, upon the transfer of such Pledged Stock (except for any such restriction contained herein or in the Credit Agreement). (c) The Pledged Stock represented by the certificates identified in Annex 1 hereto constitutes at least 65% of the issued and outstanding shares of capital stock of any class of the Issuers beneficially owned by the Company on the date hereof (whether or not registered in the name of the Company) and said Annex 1 correctly identifies, as at the date hereof, the respective Issuers of such Pledged Stock, the respective class and par value of the shares comprising such Pledged Stock and the respective number of shares (and registered owners thereof) represented by each such certificate. (d) Annex 2, 3 and 4 hereto set forth a complete and correct list of all Copyrights, Patents and Trademarks owned by the Company on the date hereof; except pursuant to licenses and other user agreements entered into by the Company in the ordinary course of business, which are listed in Annex 5 hereto, the Company owns and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any -4- Copyright, Patent or Trademark listed in said Annex 2, 3 and 4, and all registrations listed in said Annex 2, 3 and 4 are valid and in full force and effect; except as may be set forth in said Annex 5, the owns and possesses the right to use all Copyrights, Patents and Trademarks. (e) Annex 5 hereto sets forth a complete and correct list of all licenses and other user agreements included in the Intellectual Property on the date hereof. (f) To the Company's knowledge, (i) except as set forth in Annex 5 hereto, there is no violation by others of any right of the Company with respect to any Copyright, Patent or Trademark listed in Annex 2, 3 and 4 hereto and (ii) the Company is not infringing in any respect upon any Copyright, Patent or Trademark of any other Person; and no proceedings have been instituted or are pending against the Company or, to the Company's knowledge, threatened, and no claim against the Company has been received by the Company, alleging any such violation, except as may be set forth in said Annex 5. (g) The Company does not own any Trademarks registered in the United States of America to which the last sentence of the definition of Trademark Collateral applies. (h) Any goods now or hereafter produced by the Company or any of its Subsidiaries included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended. (i) the Pledged Membership Interests, and all other Pledged Membership Interests in which the Company shall hereafter grant a security interest pursuant to Section 3 hereof, will be duly authorized, validly existing, fully paid and non-assessable and none of such Pledged Membership Interests is or will be subject to any contractual restriction, upon the transfer of such Pledged Membership Interests (except for any such restriction contained herein). (j) the Pledged Membership Interests constitute all of the ownership interests in the LLC Issuers held by the Company on the date hereof (whether or not registered in the name of the Company), and the Company is the registered owner of all such ownership interests." Section 3. Collateral. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Company hereby pledges and grants to the Administrative Agent, for the benefit of the Lenders as hereinafter provided, a security interest in all of the Company's right, title and interest in the following property, whether now owned by the Company or hereafter acquired and whether now existing or hereafter coming into existence (all being collectively referred to herein as "Collateral"): -5- (a) the shares of capital stock of the Issuers represented by the certificates identified in Annex 1 hereto and, subject to the limitation set forth in Section 5.04(a)(1) hereof, all other shares of capital stock of whatever class of the Issuers, now or hereafter owned by the Company, in each case together with the certificates evidencing the same (collectively, the "Pledged Stock"); (b) all shares, securities, moneys or property representing a dividend on any of the Pledged Stock, or representing a distribution or return of capital upon or in respect of the Pledged Stock, or resulting from a split-up, revision, reclassification or other like change of the Pledged Stock or otherwise received in exchange therefor, and any subscription warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Stock; (c) without affecting the obligations of the Company under any provision prohibiting such action hereunder or under the Credit Agreement, in the event of any consolidation or merger in which the Issuer is not the surviving corporation, all shares of each class of the capital stock of the successor corporation formed by or resulting from such consolidation or merger (the Pledged Stock, together with all other certificates, shares, securities, properties or moneys as may from time to time be pledged hereunder pursuant to clause (a) or (b) above and this clause (c) being herein collectively called the "Stock Collateral"); (d) all accounts and general intangibles (each as defined in the Uniform Commercial Code) of the Company constituting any right to the payment of money, including (but not limited to) all moneys due and to become due to the Company in respect of any loans or advances or for Inventory or Equipment or other goods sold or leased or for services rendered, all moneys due and to become due to the Company under any guarantee (not including a letter of credit) of the purchase price of Inventory or Equipment sold by the Company and all tax refunds (such accounts, general intangibles and moneys due and to become due being herein called collectively "Accounts"); (e) all instruments, chattel paper or letters of credit (each as defined in the Uniform Commercial Code) of the Company evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances (herein collectively called "Instruments"); (f) all inventory (as defined in the Uniform Commercial Code) of the Company, including Motor Vehicles held by the Company for lease (including lease to Subsidiaries of the Company), fuel, tires and other spare parts, all goods obtained by the Company in exchange for such inventory, and any products made or processed from such inventory including all substances, if any, commingled therewith or added thereto (herein collectively called "Inventory"); -6- (g) all Intellectual Property and all other accounts or general intangibles of the Company not constituting Intellectual Property or Accounts; (h) all equipment (as defined in the Uniform Commercial Code) of the Company, including all Motor Vehicles (herein collectively called "Equipment"); (i) each contract and other agreement of the Company relating to the sale or other disposition of Inventory or Equipment; (j) all documents of title (as defined in the Uniform Commercial Code) or other receipts of the Company covering, evidencing or representing Inventory or Equipment (herein collectively called "Documents"); (k) all rights, claims and benefits of the Company against any Person arising out of, relating to or in connection with Inventory or Equipment purchased by the Company, including, without limitation, any such rights, claims or benefits against any Person storing or transporting such Inventory or Equipment; (l) the balance from time to time in the Collateral Account; (m) the ownership interests of the Company in the LLC Issuers identified in Annex 7 hereto, all certificates (if any) representing or evidencing such ownership interests, and all right, title and interest in, to and under the limited liability company agreements (the "LLC Agreements") of such LLC Issuers (including without limitation all of the right, title and interest (if any) as a member to participate in the operation or management of the LLC Issuers and all of its ownership interests under the LLC Agreements), and all present and future rights of the Company to receive payment of money or other distribution of payments arising out of or in connection with its ownership interests and its rights under the LLC Agreements, now or hereafter owned by the Company, in each case together with any certificates evidencing the same (collectively, the "Pledged Membership Interests" and, together with the Collateral pledged hereunder pursuant to clauses (n) through (r) being herein collectively called the "LLC Collateral"); (n) any and all moneys, and any and all rights to receive such moneys, due or to become due to the Company now or in the future by way of a distribution made to the Company in its capacity as a member of any of the LLC Issuers or otherwise pursuant to the LLC Agreements; (o) any other property or assets, and any and all rights to receive such property or assets, of any of the LLC Issuers to which the Company now or in the future may be entitled in its capacity as a member of such LLC Issuers; -7- (p) any other claim which the Company now has or may in the future acquire in its capacity as a member of any of the LLC Issuers against any such LLC Issuer and its property or arising out of or for breach of or default under the LLC Agreements or otherwise relating to the property of any of the LLC Issuers; (q) all rights to terminate, amend, supplement, modify or waive performance under the LLC Agreements, to perform thereunder and to compel performance and to otherwise exercise all remedies thereunder; (r) all other tangible and intangible property of the Company, including, without limitation, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of the Company described in the preceding clauses of this Section 3 (including, without limitation, any proceeds of insurance thereon) and, to the extent related to any property described in said clauses or such proceeds, products and accessions, all books, correspondence, credit files, records, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of the Company or any computer bureau or service company from time to time acting for the Company. Section 4. Cash Proceeds of Collateral. 4.01 Collateral Account. The Administrative Agent may establish with Chase a cash collateral account (the "Collateral Account"), which may be a "securities account" (within the meaning of Section 8-501 of the Uniform Commercial Code), in the name and under the sole control of the Administrative Agent into which there shall be deposited from time to time the cash proceeds of any of the Collateral (including proceeds of insurance thereon) required to be delivered to the Administrative Agent pursuant hereto and into which the Company may from time to time deposit any additional amounts which it wishes to pledge to the Administrative Agent for the benefit of the Lenders as additional collateral security hereunder. The balance from time to time in the Collateral Account shall constitute part of the Collateral hereunder and shall not constitute payment of the Secured Obligations until applied as hereinafter provided. Except as expressly provided in the next sentence, the Administrative Agent shall remit the collected balance outstanding to the credit of the Collateral Account to or upon the order of the Company as the Company shall from time to time instruct; provided that the Net Available Proceeds from Dispositions deposited in the Collateral Account (but not the investment earnings thereof) shall remain in the Collateral Account until withdrawn as permitted or required by Section 2.10(c) of the Credit Agreement. However, at any time following the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Lenders as specified in Section 10.03 of the Credit Agreement, shall) in its (or their) discretion apply or cause to be applied (subject to collection) the balance from time to time outstanding to the credit of the Collateral Account to the payment of the Secured Obligations in the manner specified in Section 5.09 hereof. The balance from time to time in the Collateral -8- Account shall be subject to withdrawal only as provided herein and in Section 2.10(c) of the Credit Agreement. 4.02 Proceeds of Accounts. At any time after the occurrence and during the continuance of an Event of Default, the Company shall, upon the request of the Administrative Agent, instruct all account debtors and other Persons obligated in respect of all Accounts to make all payments in respect of the Accounts either (a) directly to the Administrative Agent (by instructing that such payments be remitted to a post office box which shall be in the name and under the control of the Administrative Agent) or (b) to one or more other banks in the United States of America (by instructing that such payments be remitted to a post office box which shall be in the name and under the control of the Administrative Agent) under arrangements, in form and substance satisfactory to the Administrative Agent pursuant to which the Company shall have irrevocably instructed such other bank (and such other bank shall have agreed) to remit all proceeds of such payments directly to the Administrative Agent for deposit into the Collateral Account. All payments made to the Administrative Agent, as provided in the preceding sentence, shall be immediately deposited in the Collateral Account. In addition to the foregoing, the Company agrees that, at any time after the occurrence and during the continuance of an Event of Default, if the proceeds of any Collateral hereunder (including the payments made in respect of Accounts) shall be received by it, the Company shall as promptly as possible deposit such proceeds into the Collateral Account. Until so deposited, all such proceeds shall be held in trust by the Company for and as the property of the Administrative Agent and shall not be commingled with any other funds or property of the Company. 4.03 Investment of Balance in Collateral Account. Amounts on deposit in the Collateral Account shall be invested from time to time in such Permitted Investments as the Company (or, after the occurrence and during the continuance of a Default, the Administrative Agent) shall determine, which Permitted Investments shall if the Collateral Account is a "securities account" (within the meaning of Section 8-501 of the Uniform Commercial Code) be credited to the Collateral Account and otherwise shall be held in the name and be under the control of the Administrative Agent and may be credited to the Collateral Account; provided that (i) at any time after the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Lenders as specified in Section 10.03 of the Credit Agreement, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Permitted Investments and to apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations in the manner specified in Section 5.09 hereof and (ii) if requested by the Company, such Permitted Investments may be held in the name and under the control of one or more of the Lenders (and in that connection each Lender, pursuant to Section 10.10 of the Credit Agreement, has agreed that such Permitted Investments shall be held by such Lender as a collateral sub-Administrative Agent for the Administrative Agent hereunder). 4.04 Cover for Letter of Credit Liabilities. Amounts deposited into the Collateral Account as cover for Letter of Credit Liabilities under the Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held by the Administrative Agent in a separate -9- sub-account (designated "Letter of Credit Liabilities Sub-Account") and all amounts held in such sub-account shall constitute collateral security first for the Letter of Credit Liabilities outstanding from time to time and second as collateral security for the other Secured Obligations hereunder. Section 5. Further Assurances; Remedies. In furtherance of the grant of the pledge and security interest pursuant to Section 3 hereof, the Company hereby agrees with each Lender and the Administrative Agent as follows: 5.01 Delivery and Other Perfection. The Company shall: (a) (i) with respect to any Pledged Membership Interests acquired, received or hereafter held by the Company, take such action as the Agent shall deem necessary or appropriate to perfect the pledge and security interest granted by Section 3 of this Agreement in such Pledged Membership Interests, including without limitation (a) to the extent that they constitute Securities (as defined in Section 8-102(a)(15) of the Uniform Commercial Code) which are not represented by a certificate, cause the LLC Issuer of such Pledged Membership Interests to either register the Agent as the registered owner thereof or agree that it will comply with Instructions (as defined in Section 8-102(a)(12) of the Uniform Commercial Code) originated by the Agent with respect to such Pledged Membership Interests without further consent by the Company and (b) to the extent that they constitute Securities (as defined in Section 8-102(a)(15) of the Uniform Commercial Code) which are represented by a certificate, deliver to the Agent any such certificates representing the Pledged Membership Interests and (ii) subject to Section 5.04(a)(1) hereof, if any of the above-described shares, securities, moneys or property required to be pledged by the Company under clauses (a), (b) and (c) of Section 3 hereof are received by the Company, forthwith either (x) transfer and deliver to the Administrative Agent such shares or securities so received by the Company (together with the certificates for any such shares and securities duly endorsed in blank or accompanied by undated stock powers duly executed in blank), all of which thereafter shall be held by the Administrative Agent, pursuant to the terms of this Agreement, as part of the Collateral or (y) take such other action as the Administrative Agent shall deem necessary or appropriate to duly record the Lien created hereunder in such shares, securities, moneys or property in said clauses (a), (b) and (c); (b) deliver and pledge to the Administrative Agent any and all Instruments, endorsed and/or accompanied by such instruments of assignment and transfer in such form and substance as the Administrative Agent may request; provided, that so long as no Default shall have occurred and be continuing, the Company may retain for collection in the ordinary course any Instruments received by the Company in the ordinary course of business and the Administrative Agent shall, promptly upon request of the Company, make appropriate arrangements for making any other Instrument pledged by the Company available to the Company for purposes of presentation, collection or renewal -10- (any such arrangement to be effected, to the extent deemed appropriate by the Administrative Agent, against trust receipt or like document); (c) 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, perfect or validate the security interest granted pursuant hereto or to enable the Administrative Agent to exercise and enforce its rights hereunder with respect to such pledge and security interest, including, without limitation, causing any or all of the Stock Collateral to be transferred of record into the name of the Administrative Agent or its nominee (and the Administrative Agent agrees that if any Stock Collateral is transferred into its name or the name of its nominee, the Administrative Agent will thereafter promptly give to the Company copies of any notices and communications received by it with respect to the Stock Collateral), provided that notices to account debtors in respect of any Accounts or Instruments shall be subject to the provisions of clause (i) below; (d) from time to time as requested by any Lender, cause the Administrative Agent to be listed as the lienholder of any Equipment covered by a certificate of title or ownership and within 120 days of such request deliver evidence of the same to the Administrative Agent; (e) keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Administrative Agent may reasonably require in order to reflect the security interests granted by this Agreement; (f) furnish to the Administrative Agent from time to time (but, unless a Default shall have occurred and be continuing, no more frequently than quarterly) statements and schedules further identifying and describing the Copyright Collateral, the Patent Collateral and the Trademark Collateral and such other reports in connection with the Copyright Collateral, the Patent Collateral and the Trademark Collateral, as the Administrative Agent may reasonably request, all in reasonable detail; (g) promptly upon request of the Administrative Agent, following receipt by the Administrative Agent of any statements, schedules or reports pursuant to clause (f) above, modify this Agreement by amending Annex 2, 3 and/or 4 hereto to include any Copyright, Patent or Trademark which becomes part of the Collateral under this Agreement; (h) permit representatives of the Administrative Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Collateral, and permit representatives of the Administrative Agent to be present at the Company's place of business to receive copies of all communications and remittances relating to the Collateral, and forward copies of any -11- notices or communications received by the Company with respect to the Collateral, all in such manner as the Administrative Agent may require; (i) upon the occurrence and during the continuance of any Event of Default, upon request of the Administrative Agent, promptly notify (and the Company hereby authorizes the Administrative Agent so to notify) each account debtor in respect of any Accounts or Instruments that such Collateral has been assigned to the Administrative Agent hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Administrative Agent. 5.02 Other Financing Statements and Liens. Except as otherwise permitted under Section 8.06 of the Credit Agreement, without the prior written consent of the Administrative Agent (granted with the authorization of the Lenders as specified in Section 10.09 of the Credit Agreement), the Company shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which the Administrative Agent is not named as the sole secured party for the benefit of the Lenders. 5.03 Preservation of Rights. The Administrative Agent shall not be required to take steps necessary to preserve any rights against prior parties to any of the Collateral. 5.04 Special Provisions Relating to Certain Collateral. (a) Stock Collateral. (1) The Company will cause the Stock Collateral to constitute at all times 100% of the total number of shares of each class of capital stock of each Issuer then outstanding; provided that if any such Issuer is organized under the laws of jurisdiction other than the United States of America or a State thereof, the Company need only cause the Stock Collateral of such Issuer to constitute not less than 65% of the total number of shares of each class of capital stock of such Issuer then outstanding. (2) So long as no Event of Default shall have occurred and be continuing, the Company shall have the right to exercise all voting, consensual and other powers of ownership pertaining to the Stock Collateral for all purposes not inconsistent with the terms of this Agreement, the Credit Agreement, the Notes or any other instrument or agreement referred to herein or therein, provided that the Company agrees that it will not vote the Stock Collateral in any manner that is inconsistent with the terms of this Agreement, the Credit Agreement, the Notes or any such other instrument or agreement; and the Administrative Agent shall execute and deliver to the Company or cause to be executed and delivered to the Company all such proxies, powers of attorney, dividend and other orders, and all such instruments, without recourse, as the Company may reasonably request for the purpose of enabling the Company to exercise the rights and powers which it is entitled to exercise pursuant to this Section 5.04(a)(2). -12- (3) Unless and until an Event of Default has occurred and is continuing, the Company shall be entitled to receive and retain any dividends on the Stock Collateral paid in cash out of earned surplus. (4) If any Event of Default shall have occurred, then so long as such Event of Default shall continue, and whether or not the Administrative Agent or any Lender exercises any available right to declare any Secured Obligations due and payable or seeks or pursues any other relief or remedy available to it under applicable law or under this Agreement, the Credit Agreement, the Notes or any other agreement relating to such Secured Obligations, all dividends and other distributions on the Stock Collateral shall be paid directly to the Administrative Agent and retained by it in the Collateral Account as part of the Stock Collateral, subject to the terms of this Agreement, and, if the Administrative Agent shall so request in writing, the Company agrees to execute and deliver to the Administrative Agent appropriate additional dividend, distribution and other orders and documents to that end, provided that if such Event of Default is cured, any such dividend or distribution theretofore paid to the Administrative Agent shall, upon request of the Company (except to the extent theretofore applied to the Secured Obligations), be returned by the Administrative Agent to the Company. (b) Intellectual Property. (1) For the purpose of enabling the Administrative Agent to exercise rights and remedies under Section 5.05 hereof at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Company hereby grants to the Administrative Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Company) to use, assign, license or sublicense any of the Intellectual Property now owned or hereafter acquired by the Company, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. (2) Notwithstanding anything contained herein to the contrary, but subject to the provisions of Section 8.05 of the Credit Agreement which limit the right of the Company to dispose of its property, so long as no Event of Default shall have occurred and be continuing, the Company will be permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of the business of the Company. In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing the Administrative Agent shall from time to time, upon the request of the Company, execute and deliver any instruments, certificates or other documents, in the form so requested, which the Company shall have certified are appropriate (in its judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to clause (1) immediately above as to any specific Intellectual Property). Further, upon the payment in full of all of the Secured Obligations and cancellation or termination of the Commitments and Letter of Credit Liabilities or earlier expiration of this Agreement or release of the Collateral, the Administrative Agent shall grant back to the Company the license granted -13- pursuant to clause (1) immediately above. The exercise of rights and remedies under Section 5.05 hereof by the Administrative Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by the Company in accordance with the first sentence of this clause (2). (c) LLC Collateral. (1) The Company will cause the LLC Collateral to constitute at all times 100% of the aggregate ownership and membership interests of each LLC Issuer then outstanding. (2) So long as no Event of Default shall have occurred and be continuing, the Company shall have the right to exercise all voting, consensual and other powers of ownership pertaining to the LLC Collateral for all purposes not inconsistent with the terms of this Agreement, the Credit Agreement, the Notes or any other instrument or agreement referred to herein or therein, provided that the Company agrees that it will not vote the LLC Collateral in any manner that is inconsistent with the terms of this Agreement, the Credit Agreement, the Notes or any such other instrument or agreement; and the Agent shall execute and deliver to the Company or cause to be executed and delivered to the Company all such proxies, powers of attorney, dividend and other orders, and all such instruments, without recourse, as the Company may reasonably request for the purpose of enabling the Company to exercise the rights and powers that they are entitled to exercise pursuant to this Section 5.04(c). (3) Unless and until an Event of Default has occurred and is continuing, the Company shall be entitled to receive and retain any distributions and dividends payable in respect of the LLC Collateral. (4) If any Event of Default shall have occurred, then so long as such Event of Default shall continue, and whether or not the Agent or any Lender exercises any available right to declare any Secured Obligations due and payable or seeks or pursues any other relief or remedy available to it under applicable law or under this Agreement, the Credit Agreement, the Notes or any other agreement relating to such Secured Obligations, all distributions and dividends on the LLC Collateral, whether consisting of cash, checks and other near-cash items, shall be paid directly to the Agent and retained by it as part of the Collateral, subject to the terms of this Agreement, and, if the Agent shall so request in writing, the Company agrees to execute and deliver to the Agent appropriate additional dividend, distribution and other orders and documents to that end, and if the Company shall receive any such amounts, it shall hold the same in trust for the Agent and deliver the same forthwith to the Agent in the exact form received, duly indorsed by the Company to the Agent, if required; provided that if such Event of Default is cured, any such dividend or distribution theretofore paid to the Agent shall, upon request of the Company (except to the extent theretofore applied to the Secured Obligations), be returned by the Agent to the Company. 5.05 Events of Default, Etc. During the period during which an Event of Default shall have occurred and be continuing: -14- (a) the Company shall, at the request of the Administrative Agent, assemble the Collateral owned by it at such place or places, reasonably convenient to both the Administrative Agent and the Company, designated in the Administrative Agent's request; (b) the Administrative Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral; (c) the Administrative Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code (whether or not said Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Administrative Agent were the sole and absolute owner thereof (and the Company agrees to take all such action as may be appropriate to give effect to such right); (d) the Administrative Agent in its discretion may, in its name or in the name of the Company or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and (e) the Administrative Agent may, upon ten Business Days' prior written notice to the Company of the time and place, with respect to the Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Administrative Agent, the Lenders or any of their respective agents, sell, lease, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Administrative Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Administrative Agent or any Lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Company, any such demand, notice and right or equity being hereby expressly waived and released. In the event of any sale, assignment, or other disposition of any of the Trademark Collateral, the goodwill connected with and symbolized by the Trademark Collateral subject to such disposition -15- shall be included, and the Company shall supply to the Administrative Agent or its designee, for inclusion in such sale, assignment or other disposition, all Intellectual Property relating to such Trademark Collateral. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. The proceeds of each collection, sale or other disposition under this Section 5.05, including by virtue of the exercise of the license granted to the Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance with Section 5.09 hereof. The Company recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Company acknowledges that any such private sales may be at prices and on terms less favorable to the Administrative Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the Administrative Agent or issuer thereof to register it for public sale. 5.06 Deficiency. If the proceeds of sale, collection or other realization of or upon the Collateral pursuant to Section 5.05 hereof are insufficient to cover the costs and expenses of such realization and the payment in full of the Secured Obligations, the Company shall remain liable for any deficiency. 5.07 Removals, Etc. Without at least 30 days' prior written notice to the Administrative Agent, the Company shall not (i) maintain any of its books and records with respect to the Collateral at any office or maintain its principal place of business at any place, or permit any Inventory or Equipment to be located anywhere, other than at the address indicated beneath the signature of the Company to the Credit Agreement or at one of the locations identified in Part A of Annex 6 hereto or in transit from one of such locations to another or (ii) change its name, or the name under which it does business, from the name shown on the signature pages hereto; provided, however, that the Company may do business in the states and under the names specified in Part B of Annex 6 hereto. 5.08 Private Sale. The Administrative Agent and the Lenders shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 5.05 hereof conducted in a commercially reasonable manner. The Company hereby waives any claims against the Administrative Agent or any Lender arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the -16- price which might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Administrative Agent accepts the first offer received and does not offer the Collateral to more than one offeree. 5.09 Application of Proceeds. Except as otherwise herein expressly provided and except as provided below in this Section 5.09, the proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant hereto, and any other cash at the time held by the Administrative Agent under Section 4 hereof or this Section 5, shall be applied by the Administrative Agent: First, to the payment of the costs and expenses of such collection, sale or other realization, including reasonable out-of-pocket costs and expenses of the Administrative Agent and the reasonable fees and expenses of its agents and counsel, and all reasonable expenses incurred and advances made by the Administrative Agent in connection therewith; Next, to the payment in full of the Secured Obligations, in each case equally and ratably in accordance with the respective amounts thereof then due and owing or as the Lenders holding the same may otherwise agree; and Finally, to the payment to the Company, or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining. Notwithstanding the foregoing, the proceeds of any cash or other amounts held in the "Letter of Credit Liabilities Sub-Account" of the Collateral Account pursuant to Section 4.04 hereof shall be applied first to the Letter of Credit Liabilities outstanding from time to time and second to the other Secured Obligations in the manner provided above in this Section 5.09. As used in this Section 5, "proceeds" of Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Collateral, including any thereof received under any reorganization, liquidation or adjustment of debt of the Company or any issuer of or obligor on any of the Collateral. 5.10 Attorney-in-Fact. Without limiting any rights or powers granted by this Agreement to the Administrative Agent while no Event of Default has occurred and is continuing, upon the occurrence and during the continuance of any Event of Default the Administrative Agent is hereby appointed the attorney-in-fact of the Company for the purpose of carrying out the provisions of this Section 5 and taking any action and executing any instruments which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as the Administrative Agent shall be entitled under this Section 5 to make collections in respect of the Collateral, the Administrative Agent shall have the right and power to receive, endorse and collect all checks made payable to -17- the order of the Company representing any dividend, payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. 5.11 Perfection. Prior to or concurrently with the execution and delivery of this Agreement, the Company shall (i) file such financing statements and other documents in such offices as the Administrative Agent may request to perfect the security interests granted by Section 3 of this Agreement, (ii) cause the Administrative Agent (to the extent requested by any Lender) to be listed as the lienholder on all certificates of title or ownership relating to Motor Vehicles owned by the Company, (iii) deliver to the Administrative Agent all certificates identified in Annex 1 hereto, accompanied by undated stock powers duly executed in blank and (iv) in the case of the Pledged Membership Interests, take such action as the Agent shall deem necessary or appropriate to perfect the pledge and security interest granted by Section 3 of this Agreement in such Pledged Membership Interests, including without limitation (x) to the extent that they constitute Securities (as defined in Section 8-102(a)(15) of the Uniform Commercial Code) which are not represented by a certificate, cause the LLC Issuer of such Pledged Membership Interests to either register the Agent as the registered owner thereof or agree that it will comply with Instructions (as defined in Section 8-102(a)(12) of the Uniform Commercial Code) originated by the Agent with respect to such Pledged Membership Interests without further consent by the Company and (y) to the extent that they constitute Securities (as defined in Section 8-102(a)(15) of the Uniform Commercial Code) which are represented by a certificate, deliver to the Agent any such certificates representing the Pledged Membership Interests. 5.12 Termination. When all Secured Obligations shall have been paid in full and the Commitments of the Lenders under the Credit Agreement and all Letter of Credit Liabilities shall have expired or been terminated, this Agreement shall terminate, and the Administrative Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Company and to be released and canceled all licenses and rights referred to in Section 5.04(b) hereof. The Administrative Agent shall also execute and deliver to the Company upon such termination such Uniform Commercial Code termination statements, certificates for terminating the Liens on the Motor Vehicles and such other documentation as shall be reasonably requested by the Company to effect the termination and release of the Liens on the Collateral. 5.13 Expenses. The Company agrees to pay to the Administrative Agent all reasonable out-of-pocket expenses (including reasonable expenses for legal services of every kind) of, or incident to, the enforcement of any of the provisions of this Section 5, or performance by the Administrative Agent of any obligations of the Company in respect of the Collateral which the Company has failed or refused to perform, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of the Administrative Agent in respect thereof, by litigation or otherwise, including expenses of -18- insurance, and all such expenses shall be Secured Obligations to the Administrative Agent secured under Section 3 hereof. 5.14 Further Assurances. The Company agrees that, from time to time upon the written request of the Administrative Agent, the Company will execute and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request in order fully to effect the purposes of this Agreement. 5.15 Release of Motor Vehicles. So long as no Event of Default shall have occurred and be continuing, upon the request of the Company, the Administrative Agent shall execute and deliver to the Company such instruments as the Company shall reasonably request to remove the notation of the Administrative Agent as lienholder on any certificate of title for any Motor Vehicle; provided that any such instruments shall be delivered, and the release effective only upon receipt by the Administrative Agent of a certificate from the Company stating that the Motor Vehicle the lien on which is to be released is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss). Section 6. Miscellaneous. 6.01 No Waiver. No failure on the part of the Administrative Agent or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Administrative Agent or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. 6.02 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. 6.03 Notices. All notices, requests, consents and demands hereunder shall be in writing and telexed, telecopied or delivered to the intended recipient at its "Address for Notices" specified pursuant to Section 11.02 of the Credit Agreement and shall be deemed to have been given at the times specified in said Section 11.02. 6.04 Waivers, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Company and the Administrative Agent (with the consent of the Lenders as specified in Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be binding upon the Administrative Agent and each Lender, each holder of any of the Secured Obligations and the Company. -19- 6.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Company, the Administrative Agent, the Lenders and each holder of any of the Secured Obligations (provided, however, that the Company shall not assign or transfer its rights hereunder without the prior written consent of the Administrative Agent). 6.06 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and either of the parties hereto may execute this Agreement by signing any such counterpart. 6.07 Agents. The Administrative Agent may employ agents and attorneys-in-fact in connection herewith and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. 6.08 Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Administrative Agent and the Lenders in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. -20- IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By -------------------------------- Title: THE CHASE MANHATTAN BANK as Administrative Agent By -------------------------------- Title: -21-
ANNEX 1 PLEDGED STOCK [See Section 2(b) and (c).] - ------------------------------- ------------------- ------------------------ ------------------------------------ Certificate Nos. Issuer Registered Owner Number of Shares - ------------------------------- ------------------- ------------------------ ------------------------------------ - ------------------------------- ------------------- ------------------------ ------------------------------------ BE Avionics, Inc. (now Flight Equipment and known as BE Aerospace, 325,000 ordinary shares ,(pound)1 par Engineering Limited 26 Inc.) value - ------------------------------- ------------------- ------------------------ ------------------------------------ - ------------------------------- ------------------- ------------------------ ------------------------------------ 1-23 BE Aerospace (Netherlands) (uncertificated BE Aerospace, Inc. 23 shares of capital stock, dfl. B.V. shares) 1,000 par value - ------------------------------- ------------------- ------------------------ ------------------------------------ - ------------------------------- ------------------- ------------------------ ------------------------------------ BE Aerospace (USA), Inc. BE Aerospace, Inc. 65 shares of common stock, par 2 value $0.01 - ------------------------------- ------------------- ------------------------ ------------------------------------ - ------------------------------- ------------------- ------------------------ ------------------------------------ BE Aerospace, Inc. 100 shares of common stock, par Acurex Inc. 2 value $0.01 - ------------------------------- ------------------- ------------------------ ------------------------------------ - ------------------------------- ------------------- ------------------------ ------------------------------------ BE Aerospace, Inc. 1,000 shares of common stock, par B/E Services, Inc. 1 value $0.01 - ------------------------------- ------------------- ------------------------ ------------------------------------
ANNEX 2 LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND APPLICATIONS FOR COPYRIGHT REGISTRATIONS [See Section 2(d).] Title Date Filed Registration No. Effective Date - --------------------------------------------------------------- ANNEX 3 LIST OF PATENTS AND PATENT APPLICATIONS [See Section 2(d).] File Patent Country Registration No. Date - --------------------------------------------------------- ANNEX 4 LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS, TRADEMARK AND SERVICE MARK REGISTRATIONS AND APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS [See Section 2(d).] U.S. Trademarks --------------- Application (A) Registration (R) Registration Mark or Series No. (S) or Filing Date Foreign Trademarks ------------------ Application (A) Registration or Mark Registration (R) Country Filing Date (F) ANNEX 5 LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS [See Section 2(d), (e) and (f).] ANNEX 6 LIST OF LOCATIONS AND TRADE NAMES [See Section 5.07.] Part A - List of Locations Part B - Trade Names/State ANNEX 7
PLEDGED MEMBERSHIP INTERESTS =========================== -------------------------- ---------------------------- =========================== Certificate Nos. Percentage of Ownership LLC Issuer (if any) Registered Owner Interest =========================== ========================== ============================ =========================== In-Flight Entertainment, LLC None BE Aerospace, Inc. 100% =========================== ========================== ============================ ===========================
EXHIBIT A-2 AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT dated as of November 19, 1997, amended and restated as of April 3, 1998, between In-Flight Entertainment, LLC, a limited liability company duly organized and validly existing under the laws of Delaware (the "Guarantor"); and THE CHASE MANHATTAN BANK, as agent for the lenders or other financial institutions or entities party, as lenders, to the Credit Agreement referred to below (in such capacity, together with its successors in such capacity, the "Administrative Agent"). BE Aerospace, Inc., a Delaware corporation (the "Company"), certain lenders (the "Lenders") and the Administrative Agent are parties to a Credit Agreement dated as of October 29, 1993, as amended and restated as of April 3, 1998 (as modified and supplemented and in effect from time to time, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit (by making of loans and issuing letters of credit) to be made by said Lenders to the Company. To induce the Lenders to enter into the Credit Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor has agreed to guarantee the Guaranteed Obligations (as hereinafter defined), and to pledge and grant a security interest in the Collateral (as so defined) as security for the Secured Obligations (as so defined). Accordingly, the parties hereto agree as follows: Section 1. Definitions. Terms defined in the Credit Agreement (as amended by Amendment No. 1) are used herein as defined therein. In addition, as used herein: "Accounts" shall have the meaning ascribed thereto in Section 4(a) hereof. "Collateral" shall have the meaning ascribed thereto in Section 4 hereof. "Collateral Account" shall have the meaning ascribed thereto in Section 5.01 hereof. "Copyright Collateral" shall mean all Copyrights, whether now owned or hereafter acquired by the Guarantor, including each Copyright identified in Annex 1 hereto. "Copyrights" shall mean all copyrights, copyright registrations and applications for copyright registrations, including, without limitation, all renewals and extensions thereof, the right to recover for all past, present and future infringements thereof, and all other rights of any kind whatsoever accruing thereunder or pertaining thereto. "Documents" shall have the meaning ascribed thereto in Section 4(g) hereof. "Equipment" shall have the meaning ascribed thereto in Section 4(e) hereof. "Guaranteed Obligations" shall have the meaning ascribed thereto in Section 2.01 hereof. "Instruments" shall have the meaning ascribed thereto in Section 4(b) hereof. "Intellectual Property" shall mean, collectively, all Copyright Collateral, all Patent Collateral and all Trademark Collateral, together with (a) all inventions, processes, production methods, proprietary information, know-how and trade secrets; (b) all licenses or user or other agreements granted to the Guarantor with respect to any of the foregoing, in each case whether now or hereafter owned or used including, without limitation, the licenses or other agreements with respect to the Copyright Collateral, the Patent Collateral or the Trademark Collateral, listed in Annex 4 hereto; (c) all information, customer lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs; (d) all field repair data, sales data and other information relating to sales or service of products now or hereafter manufactured; (e) all accounting information and all media in which or on which any information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data; (f) all licenses, consents, permits, variances, certifications and approvals of governmental agencies now or hereafter held by the Guarantor; and (g) all causes of action, claims and warranties now or hereafter owned or acquired by the Guarantor in respect of any of the items listed above. "Inventory" shall have the meaning ascribed thereto in Section 4(c) hereof. "LiveTV LLC" shall mean B/E Harris LiveTV LLC, a Delaware limited liability company. "LiveTV LLC Agreement" shall mean the Limited Liability Company Agreement of B/E Harris LiveTV LLC. "Motor Vehicles" shall mean motor vehicles, tractors, trailers and other like property, whether or not the title thereto is governed by a certificate of title or ownership. -2- "Patent Collateral" shall mean all Patents, whether now owned or hereafter acquired by the Guarantor, including each Patent identified in Annex 2 hereto. "Patents" shall mean all patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein together with the reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, all income, royalties, damages and payments now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, the right to sue for past, present and future infringements thereof, and all rights corresponding thereto throughout the world. "Secured Obligations" shall mean, collectively, (a) all obligations of the Guarantor in respect of its Guarantee under Section 2 hereof and (b) all other obligations of the Guarantor to the Lenders and the Administrative Agent hereunder. "Trademark Collateral" shall mean all Trademarks, whether now owned or hereafter acquired by the Guarantor, including each Trademark identified in Annex 3 hereto. Notwithstanding the foregoing, the Trademark Collateral does not and shall not include any Trademark that would be rendered invalid, abandoned, void or unenforceable by reason of its being included as part of the Trademark Collateral. "Trademarks" shall mean all trade names, trademarks and service marks, logos, trademark and service mark registrations, and applications for trademark and service mark registrations, including, without limitation, all renewals of trademark and service mark registrations, all rights corresponding thereto throughout the world, the right to recover for all past, present and future infringements thereof, all other rights of any kind whatsoever accruing thereunder or pertaining thereto, together, in each case, with the product lines and goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark and service mark. "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York. Section 2. The Guarantee. 2.01 The Guarantee. The Guarantor hereby guarantees to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans made by the Lenders to, and the Note(s) held by each Lender of, the Company and all other amounts from time to time owing to the Lenders or the Administrative Agent by the Company under the Credit Agreement and under the Basic Documents and all Reimbursement Obligations and interest thereon, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). -3- The Guarantor hereby further agrees that if the Company shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2.02 Obligations Unconditional. The obligations of the Guarantor under Section 2.01 hereof are absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of the Credit Agreement, the Basic Documents or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 2.02 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of the Credit Agreement or the Basic Documents or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under the Credit Agreement or the Basic Documents or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected. The Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Company under the Credit Agreement or the Basic Documents or any other agreement or instrument referred to herein or therein, or against -4- any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. 2.03 Reinstatement. The obligations of the Guarantor under this Section 2 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Company in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 2.04 Subrogation. The Guarantor hereby agrees that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration or termination of the Commitments and all Letter of Credit Liabilities of the Lenders under the Credit Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 2.01 hereof, whether by subrogation or otherwise, against the Company or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. 2.05 Remedies. The Guarantor agrees that, as between the Guarantor and the Lenders, the obligations of the Company under the Credit Agreement and the Basic Documents may be declared to be forthwith due and payable as provided in Section 9 of the Credit Agreement (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9) for purposes of Section 2.01 hereof notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Company and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Company) shall forthwith become due and payable by the Guarantor for purposes of said Section 2.01. 2.06 Instrument for the Payment of Money. The Guarantor hereby acknowledges that the guarantee in this Section 2 constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by the Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. 2.07 Continuing Guarantee. The guarantee in this Section 2 is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. -5- 2.08 General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Guarantor under Section 2.01 hereof would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under said Section 2.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by the Guarantor, the Administrative Agent, the Lenders or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. Section 3. Representations and Warranties. The Guarantor represents and warrants to the Lenders and the Administrative Agent that: 3.01 Action. The Guarantor has all necessary power and authority to execute, deliver and perform its obligations under this Agreement; the execution, delivery and performance by the Guarantor of this Agreement have been duly authorized by all necessary action on its part; and this Agreement has been duly and validly executed and delivered by the Guarantor and constitutes its legal, valid and binding obligation, enforceable 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). 3.02 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange are necessary for the execution, delivery or performance by the Guarantor of this Agreement or for the validity or enforceability hereof, except for filings and recordings of the Liens created pursuant to this Agreement. 3.03 Collateral. (a) When the Guarantor acquires any rights therein, the Guarantor will be the sole beneficial owner of the Collateral and no Lien will exist upon the Collateral at any time (and no right or option to acquire the same will exist in favor of any other Person), except for Liens permitted under Section 8.06 of the Credit Agreement and except for the pledge and security interest in favor of the Administrative Agent for the benefit of the Lenders created or provided for herein, which pledge and security interest constitute a first priority perfected pledge and security interest in and to all of the Collateral (other than Intellectual Property registered or otherwise located outside of the United States of America). -6- (b) Annexes 1, 2 and 3 hereto, respectively, set forth a complete and correct list of all Copyrights, Patents and Trademarks owned by the Guarantor on the date hereof; except pursuant to licenses and other user agreements entered into by the Guarantor in the ordinary course of business, that are listed in Annex 4 hereto, the Guarantor owns and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any Copyright, Patent or Trademark listed in said Annexes 1, 2 and 3, and all registrations listed in said Annexes 1, 2 and 3 are valid and in full force and effect; except as may be set forth in said Annex 4, the Guarantor owns and possesses the right to use all Copyrights, Patents and Trademarks. (c) Annex 4 hereto sets forth a complete and correct list of all licenses and other user agreements included in the Intellectual Property on the date hereof. (d) To the Guarantor's knowledge, (i) except as set forth in Annex 4 hereto, there is no violation by others of any right of the Guarantor with respect to any Copyright, Patent or Trademark listed in Annexes 1, 2 and 3 hereto, respectively, and (ii) the Guarantor is not infringing in any respect upon any Copyright, Patent or Trademark of any other Person; and no proceedings have been instituted or are pending against the Guarantor or, to the Guarantor's knowledge, threatened, and no claim against the Guarantor has been received by the Guarantor, alleging any such violation, except as may be set forth in said Annex 4. (e) The Guarantor does not own any Trademarks registered in the United States of America to which the last sentence of the definition of Trademark Collateral applies. (f) Any goods now or hereafter produced by the Guarantor included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended. Section 4. Collateral. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Guarantor hereby pledges and grants to the Administrative Agent, for the benefit of the Lenders as hereinafter provided, a security interest in all of the Guarantor's right, title and interest in the following property, whether now owned by the Guarantor or hereafter acquired and whether now existing or hereafter coming into existence (all being collectively referred to herein as "Collateral"): (a) all accounts and general intangibles (each as defined in the Uniform Commercial Code) of the Guarantor constituting any right to the payment of money, including (but not limited to) all moneys due and to become due to the Guarantor in respect of any loans or advances or for Inventory or Equipment or other goods sold or leased or for services rendered, all moneys due and to become due to the Guarantor under any guarantee (not including a letter of credit) of the purchase price of Inventory or -7- Equipment sold by the Guarantor and all tax refunds (such accounts, general intangibles and moneys due and to become due being herein called collectively "Accounts"); (b) all instruments, chattel paper or letters of credit (each as defined in the Uniform Commercial Code) of the Guarantor evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances (herein collectively called "Instruments"); (c) all inventory (as defined in the Uniform Commercial Code) of the Guarantor, including Motor Vehicles held by the Guarantor for lease (including lease to Subsidiaries of the Guarantor), fuel, tires and other spare parts, all goods obtained by the Guarantor in exchange for such inventory, and any products made or processed from such inventory including all substances, if any, commingled therewith or added thereto (herein collectively called "Inventory"); (d) all Intellectual Property and all other accounts or general intangibles not constituting Intellectual Property or Accounts; (e) all equipment (as defined in the Uniform Commercial Code) of the Guarantor, including all Motor Vehicles (herein collectively called "Equipment"); (f) each contract and other agreement of the Guarantor relating to the sale or other disposition of Inventory or Equipment; (g) all documents of title (as defined in the Uniform Commercial Code) or other receipts of the Guarantor covering, evidencing or representing Inventory or Equipment (herein collectively called "Documents"); (h) all rights, claims and benefits of the Guarantor against any Person arising out of, relating to or in connection with Inventory or Equipment purchased by the Guarantor, including, without limitation, any such rights, claims or benefits against any Person storing or transporting such Inventory or Equipment; (i) the balance from time to time in the Collateral Account; and (j) all other tangible and intangible personal property of the Guarantor, including, without limitation, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of the Guarantor described in the preceding clauses of this Section 4 (including, without limitation, any proceeds of insurance thereon) and, to the extent related to any property described in said clauses or such proceeds, products and accessions, all books, correspondence, credit files, records, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of the -8- Guarantor or any computer bureau or service company from time to time acting for the Guarantor. Notwithstanding the foregoing, the Collateral does not and shall not include: (i) any ownership interest in, or right, title or interest of the Guarantor as a member in LiveTV LLC, but shall include (w) any and all moneys, and any and all rights to receive such moneys, due or to become due to the Guarantor now or in the future by way of distribution made to the Guarantor in its capacity as a member of LiveTV LLC or otherwise pursuant to the LiveTV LLC Agreement, (x) any other property or assets, and any and all rights to receive such property or assets, of LiveTV LLC to which the Guarantor now or in the future may be entitled in its capacity as a member of LiveTV LLC, (y) any other claim which the Guarantor now has or may acquire in its capacity as a member of LiveTV LLC against LiveTV LLC and its property or arising out of or for breach or default under the LiveTV Limited Liability Agreement and (z) all proceeds of and to any of the foregoing clauses (w) through (y); and (ii) the assets to be transferred to LiveTV LLC, including, without limitation, rights and claims of the Company against In-Flight Phone Corporation transferred to the Guarantor, whether asserted or unasserted with respect to matters prior to the formation of LiveTV LLC and the rights to certain technology, trademarks and trade names licensed to the Guarantor by the Company and to be licensed by the Guarantor to LiveTV LLC. Section 5. Cash Proceeds of Collateral. 5.01 Collateral Account. The Administrative Agent may establish with Chase a cash collateral account (the "Collateral Account"), which may be a "securities account" (within the meaning of Section 8-501 of the Uniform Commercial Code), in the name and under the sole control of the Administrative Agent into which there shall be deposited from time to time the cash proceeds of any of the Collateral (including proceeds of insurance thereon) required to be delivered to the Administrative Agent pursuant hereto and into which the Guarantor may from time to time deposit any additional amounts that it wishes to pledge to the Administrative Agent for the benefit of the Lenders as additional collateral security hereunder. The balance from time to time in the Collateral Account shall constitute part of the Collateral hereunder and shall not constitute payment of the Secured Obligations until applied as hereinafter provided. Except as expressly provided in the next sentence, the Administrative Agent shall remit the collected balance outstanding to the credit of the Collateral Account to or upon the order of the Guarantor as the Guarantor shall from time to time instruct. However, at any time following the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Lenders as specified in Section 10.03 of the Credit Agreement, shall) in its (or their) discretion apply or cause to be applied (subject to collection) the balance from time to time outstanding to the credit of the Collateral Account to the payment of the Secured Obligations in -9- the manner specified in Section 6.09 hereof. The balance from time to time in the Collateral Account shall be subject to withdrawal only as provided herein. 5.02 Proceeds of Accounts. At any time after the occurrence and during the continuance of an Event of Default, the Guarantor shall, upon the request of the Administrative Agent, instruct all account debtors and other Persons obligated in respect of all Accounts to make all payments in respect of the Accounts either (a) directly to the Administrative Agent (by instructing that such payments be remitted to a post office box which shall be in the name and under the control of the Administrative Agent) or (b) to one or more other banks in the United States of America (by instructing that such payments be remitted to a post office box which shall be in the name and under the control of the Administrative Agent) under arrangements, in form and substance satisfactory to the Administrative Agent pursuant to which the Guarantor shall have irrevocably instructed such other bank (and such other bank shall have agreed) to remit all proceeds of such payments directly to the Administrative Agent for deposit into the Collateral Account. All payments made to the Administrative Agent, as provided in the preceding sentence, shall be immediately deposited in the Collateral Account. In addition to the foregoing, the Guarantor agrees that, at any time after the occurrence and during the continuance of an Event of Default, if the proceeds of any Collateral hereunder (including the payments made in respect of Accounts) shall be received by it, the Guarantor shall as promptly as possible deposit such proceeds into the Collateral Account. Until so deposited, all such proceeds shall be held in trust by the Guarantor for and as the property of the Administrative Agent and shall not be commingled with any other funds or property of the Guarantor. 5.03 Investment of Balance in Collateral Account. Amounts on deposit in the Collateral Account shall be invested from time to time in such Permitted Investments as the Guarantor (or, after the occurrence and during the continuance of a Default, the Administrative Agent) shall determine, which Permitted Investments shall if the Collateral Account is a "securities account" (within the meaning of Section 8-501 of the Uniform Commercial Code) be credited to the Collateral Account and otherwise shall be held in the name and be under the control of the Administrative Agent, provided that (i) at any time after the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Lenders as specified in Section 10.03 of the Credit Agreement, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Permitted Investments and to apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations in the manner specified in Section 6.09 hereof and (ii) if requested by the Guarantor, such Permitted Investments may be held in the name and under the control of one or more of the Lenders (and in that connection each Lender, pursuant to Section 10.10 of the Credit Agreement) has agreed that such Permitted Investments shall be held by such Lender as a collateral sub-agent for the Administrative Agent hereunder). 5.04 Cover for Letter of Credit Liabilities. Amounts deposited into the Collateral Account as cover for Letter of Credit Liabilities under the Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held by the Administrative Agent in a separate sub-account (designated "Letter of Credit Liabilities Sub-Account") and all amounts held in such -10- sub-account shall constitute collateral security first for the Letter of Credit Liabilities outstanding from time to time and second as collateral security for the other Secured Obligations hereunder. Section 6. Further Assurances; Remedies. In furtherance of the grant of the pledge and security interest pursuant to Section 4 hereof, the Guarantor hereby agrees with each Lender and the Administrative Agent as follows: 6.01 Delivery and Other Perfection. The Guarantor shall: (a) deliver and pledge to the Administrative Agent any and all Instruments, endorsed and/or accompanied by such instruments of assignment and transfer in such form and substance as the Administrative Agent may request; provided, that so long as no Default shall have occurred and be continuing, the Guarantor may retain for collection in the ordinary course any Instruments received by the Guarantor in the ordinary course of business and the Administrative Agent shall, promptly upon request of the Guarantor, make appropriate arrangements for making any Instrument pledged by the Guarantor available to the Guarantor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by the Administrative Agent, against trust receipt or like document); (b) 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, perfect or validate the security interest granted pursuant hereto or to enable the Administrative Agent to exercise and enforce its rights hereunder with respect to such pledge and security interest, provided that notices to account debtors in respect of any Accounts or Instruments shall be subject to the provisions of clause (h) below; (c) from time to time as requested by any Lender, cause the Administrative Agent to be listed as Lienholder of any Equipment covered by a certificate of title or ownership, and within 120 days of such request deliver evidence of the same to the Administrative Agent; (d) keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Administrative Agent may reasonably require in order to reflect the security interests granted by this Agreement; (e) furnish to the Administrative Agent from time to time (but, unless a Default shall have occurred and be continuing, no more frequently than quarterly) statements and schedules further identifying and describing the Copyright Collateral, the Patent Collateral and the Trademark Collateral, and such other reports in connection with the -11- Copyright Collateral, the Patent Collateral and the Trademark Collateral, as the Administrative Agent may reasonably request, all in reasonable detail; (f) promptly upon request of the Administrative Agent, following receipt by the Administrative Agent of any statements, schedules or reports pursuant to clause (e) above, modify this Agreement by amending Annexes 1, 2 and/or 3 hereto, as the case may be, to include any Copyright, Patent or Trademark which becomes part of the Collateral under this Agreement; (g) permit representatives of the Administrative Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Collateral, and permit representatives of the Administrative Agent to be present at the Guarantor's place of business to receive copies of all communications and remittances relating to the Collateral, and forward copies of any notices or communications received by the Guarantor with respect to the Collateral, all in such manner as the Administrative Agent may require; and (h) upon the occurrence and during the continuance of any Event of Default, upon request of the Administrative Agent, promptly notify (and the Guarantor hereby authorizes the Administrative Agent so to notify) each account debtor in respect of any Accounts or Instruments that such Collateral has been assigned to the Administrative Agent hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Administrative Agent. 6.02 Other Financing Statements and Liens. Except as otherwise permitted under Section 8.06 of the Credit Agreement, without the prior written consent of the Administrative Agent (granted with the authorization of the Lenders as specified in Section 10.09 of the Credit Agreement), the Guarantor shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which the Administrative Agent is not named as the sole secured party for the benefit of the Lenders. 6.03 Preservation of Rights. The Administrative Agent shall not be required to take steps necessary to preserve any rights against prior parties to any of the Collateral. 6.04 Special Provisions Relating to Certain Collateral. (a) Intellectual Property. (1) For the purpose of enabling the Administrative Agent to exercise rights and remedies under Section 6.05 hereof at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Guarantor hereby grants to the Administrative Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Guarantor) to use, -12- assign, license or sublicense any of the Intellectual Property now owned or hereafter acquired by the Guarantor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. (2) Notwithstanding anything contained herein to the contrary, but subject to the provisions of Section 8.05 of the Credit Agreement which limit the right of the Company and its Subsidiaries to dispose of their property, so long as no Event of Default shall have occurred and be continuing, the Guarantor will be permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of the business of the Guarantor. In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing the Administrative Agent shall from time to time, upon the request of the Guarantor, execute and deliver any instruments, certificates or other documents, in the form so requested, that the Guarantor shall have certified are appropriate (in its judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to clause (1) immediately above as to any specific Intellectual Property). Further, upon the payment in full of all of the Secured Obligations and cancellation or termination of the Commitments and Letter of Credit Liabilities or earlier expiration of this Agreement or release of the Collateral, the Administrative Agent shall grant back to the Guarantor the license granted pursuant to clause (1) immediately above. The exercise of rights and remedies under Section 6.05 hereof by the Administrative Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by the Guarantor in accordance with the first sentence of this clause (2). 6.05 Events of Default, Etc. During the period during which an Event of Default shall have occurred and be continuing: (a) the Guarantor shall, at the request of the Administrative Agent, assemble the Collateral owned by it at such place or places, reasonably convenient to both the Administrative Agent and the Guarantor, designated in its request; (b) the Administrative Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral; (c) the Administrative Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code (whether or not said Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Administrative Agent were the sole and absolute owner thereof (and -13- the Guarantor agrees to take all such action as may be appropriate to give effect to such right); (d) the Administrative Agent in its discretion may, in its name or in the name of the Guarantor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and (e) the Administrative Agent may, upon ten Business Days prior written notice to the Guarantor of the time and place, with respect to the Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of the Administrative Agent, the Lenders or any of their respective agents, sell, lease, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Administrative Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Administrative Agent or any Lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Guarantor, any such demand, notice and right or equity being hereby expressly waived and released. In the event of any sale, assignment, or other disposition of any of the Trademark Collateral, the goodwill connected with and symbolized by the Trademark Collateral subject to such disposition shall be included, and the Guarantor shall supply to the Administrative Agent or its designee, for inclusion in such sale, assignment or other disposition, all Intellectual Property relating to such Trademark Collateral. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. The proceeds of each collection, sale or other disposition under this Section 6.05, including by virtue of the exercise of the license granted to the Administrative Agent in Section 6.04(b) hereof, shall be applied in accordance with Section 6.09 hereof. The Guarantor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Guarantor acknowledges that any such private sales may be at prices and on terms less favorable to the Administrative Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have -14- been made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the respective Issuer or issuer thereof to register it for public sale. 6.06 Deficiency. If the proceeds of sale, collection or other realization of or upon the Collateral pursuant to Section 6.05 hereof are insufficient to cover the costs and expenses of such realization and the payment in full of the Secured Obligations, the Guarantor shall remain liable for any deficiency. 6.07 Removals, Etc. Without at least 30 days prior written notice to the Administrative Agent, the Guarantor shall not (i) maintain any of its books and records with respect to the Collateral at any office or maintain its principal place of business at any place, or permit any Inventory or Equipment to be located anywhere, other than at the address indicated beneath its signature hereto or at one of the locations identified in Part A of Annex 5 hereto or in transit from one of such locations to another or (ii) change its corporate name, or the name under which it does business, from the name shown on the signature pages hereto; provided, however, that the Guarantor may do business in the states and under the names specified in Part B of Annex 5 hereto. 6.08 Private Sale. The Administrative Agent and the Lenders shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 6.05 hereof conducted in a commercially reasonable manner. The Guarantor hereby waives any claims against the Administrative Agent or any Lender arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Administrative Agent accepts the first offer received and does not offer the Collateral to more than one offeree. 6.09 Application of Proceeds. Except as otherwise herein expressly provided and except as provided below in this Section 6.09, the proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant hereto, and any other cash at the time held by the Administrative Agent under Section 5 hereof or this Section 6, shall be applied by the Administrative Agent: First, to the payment of the costs and expenses of such collection, sale or other realization, including reasonable out-of-pocket costs and expenses of the Administrative Agent and the reasonable fees and expenses of its agents and counsel, and all reasonable expenses incurred and advances made by the Administrative Agent in connection therewith; Next, to the payment in full of the Secured Obligations, in each case equally and ratably in accordance with the respective amounts thereof then due and owing or as the Lenders holding the same may otherwise agree; and -15- Finally, to the payment to the Guarantor, or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining. Notwithstanding the foregoing, the proceeds of any cash or other amounts held in the "Letter of Credit Liabilities Sub-Account" of the Collateral Account pursuant to Section 5.04 hereof shall be applied first to the Letter of Credit Liabilities outstanding from time to time and second to the other Secured Obligations in the manner provided above in this Section 6.09. As used in this Section 6, "proceeds" of Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Collateral, including any thereof received under any reorganization, liquidation or adjustment of debt of the Guarantor or any issuer of or obligor on any of the Collateral. 6.10 Attorney-in-Fact. Without limiting any rights or powers granted by this Agreement to the Administrative Agent while no Event of Default has occurred and is continuing, upon the occurrence and during the continuance of any Event of Default the Administrative Agent is hereby appointed the attorney-in-fact of the Guarantor for the purpose of carrying out the provisions of this Section 6 and taking any action and executing any instruments that the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as the Administrative Agent shall be entitled under this Section 6 to make collections in respect of the Collateral, the Administrative Agent shall have the right and power to receive, endorse and collect all checks made payable to the order of the Guarantor representing any dividend, payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. 6.11 Termination. When all Secured Obligations shall have been paid in full and the Commitments of the Lenders under the Credit Agreement and all Letter of Credit Liabilities shall have expired or been terminated, this Agreement shall terminate, and the Administrative Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Guarantor and to be released and canceled all licenses and rights referred to in Section 6.04(a) hereof. The Administrative Agent shall also execute and deliver to the Guarantor upon such termination such Uniform Commercial Code termination statements, certificates for terminating the Liens on the Motor Vehicles and such other documentation as shall be reasonably requested by the Guarantor to effect the termination and release of the Liens on the Collateral. 6.12 Further Assurances. The Guarantor agrees that, from time to time upon the written request of the Administrative Agent, the Guarantor will execute and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request in order fully to effect the purposes of this Agreement. -16- 6.13 Release of Motor Vehicles. So long as no Event of Default shall have occurred and be continuing, upon the request of the Guarantor, the Administrative Agent shall execute and deliver to the Guarantor such instruments as the Guarantor shall reasonably request to remove the notation of the Administrative Agent as lienholder on any certificate of title for any Motor Vehicle; provided that any such instruments shall be delivered, and the release effective only upon receipt by the Administrative Agent of a certificate from the Guarantor stating that the Motor Vehicle the lien on which is to be released is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss). Section 7. Miscellaneous. 7.01 No Waiver. No failure on the part of the Administrative Agent or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Administrative Agent or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. 7.02 Notices. All notices, requests, consents and demands hereunder shall be in writing and telexed, telecopied or delivered to the intended recipient at the "Address for Notices" specified beneath its name on the signature pages hereof or, as to either party, at such other address as shall be designated by such party in a notice to the other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 7.03 Expenses. The Guarantor agrees to reimburse each of the Lenders and the Administrative Agent for all reasonable out-of-pocket costs and expenses of the Lenders and the Administrative Agent (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any Default and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with (w) performance by the Administrative Agent of any obligations of the Guarantor in respect of the Collateral that the Guarantor has failed or refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of the Administrative Agent in respect thereof, by litigation or otherwise, including expenses of insurance, (y) judicial or regulatory proceedings and (z) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 7.03, -17- and all such costs and expenses shall be Secured Obligations entitled to the benefits of the collateral security provided pursuant to Section 4 hereof. 7.04 Amendments, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Guarantor and the Administrative Agent (with the consent of the Majority Lenders as specified in Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be binding upon the Administrative Agent and each Lender, each holder of any of the Secured Obligations and the Guarantor. 7.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Guarantor, the Administrative Agent, the Lenders and each holder of any of the Secured Obligations (provided, however, that the Guarantor shall not assign or transfer its rights hereunder without the prior written consent of the Administrative Agent). 7.06 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 7.07 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and either of the parties hereto may execute this Agreement by signing any such counterpart. 7.08 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. The Guarantor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division), and of any other appellate court in the State of New York, for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 7.09 Waiver of Jury Trial. EACH OF THE GUARANTOR, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. -18- 7.10 Agents and Attorneys-in-Fact. The Administrative Agent may employ agents and attorneys-in-fact in connection herewith and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. 7.11 Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Administrative Agent and the Lenders in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. -19- IN WITNESS WHEREOF, the parties hereto have caused this Guarantee and Security Agreement to be duly executed and delivered as of the day and year first above written. IN-FLIGHT ENTERTAINMENT, LLC By: BE Aerospace, Inc., Member By -------------------------- Title: Address for Notices: In-Flight Entertainment, LLC 17481 Red Hill Avenue Irvine, California 92614 Attn: Thomas P. McCaffrey THE CHASE MANHATTAN BANK, as Administrative Agent By ------------------------- Title: Address for Notices: The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue 38th Floor New York, New York 10017 Attention: Matthew H. Massie with a copy to: The Chase Manhattan Bank Agent Bank Services Group 8th Floor 1 Chase Manhattan Plaza New York, New York 10081 Attention: Frank Giacalone ANNEX 1 LIST OF COPYRIGHTS, COPYRIGHT REGISTRATION AND APPLICATIONS FOR CORPYRIGHT REGISTRATIONS Title Date Filed Registration No. Effective Date - --------------------------------------------------------------------------- [None] ANNEX 2 LIST OF PATENTS AND PATENT APPLICATIONS File Patent Country Registration No. Date - ---------------------------------------------------------------------------- [None] ANNEX 3 LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS, TRADEMARK AND SERVICE MARK REGISTRATIONS AND APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS U.S. Trademarks --------------- Application (A) Registration (R) Registration Mark or Series No. (S) or Filing Date - ------------------------------------------------------------------------------ [None] Foreign Trademarks ------------------ Application (A) Registration or Mark Registration (R) Country Filing Date (F) - ---------------------------------------------------------------------------- [None] ANNEX 4 LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS [None] ANNEX 5 LIST OF LOCATIONS Part A - List of Locations. Part B - Trade Names/State Trade Name State BE Aerospace, Inc. California In-Flight Entertainment California EXHIBIT B [Form of Confidentiality Agreement] CONFIDENTIALITY AGREEMENT [Date] [Insert Name and Address of Prospective Participant or Assignee] Re: Fourth Amended and Restated Credit Agreement dated as of October 29, 1993 and amended and restated as of April 3, 1998 (as so amended and restated, the "Credit Agreement"), between BE Aerospace, Inc. (the "Company"), the lenders named therein and The Chase Manhattan Bank, as Administrative Agent. Ladies and Gentlemen: As a Lender party to the Credit Agreement, we have agreed with the Company pursuant to Section 11.12 of the Credit Agreement to use reasonable precautions to keep confidential, except as otherwise provided therein, all non-public information identified by the Company as being confidential at the time the same is delivered to us pursuant to the Credit Agreement. As provided in said Section 11.12, we are permitted to provide you, as a prospective [holder of a participation in the Loans (as defined in the Credit Agreement)] [assignee Lender], with certain of such non-public information subject to the execution and delivery by you, prior to receiving such non-public information, of a Confidentiality Agreement in this form. Such information will not be made available to you until your execution and return to us of this Confidentiality Agreement. Accordingly, in consideration of the foregoing, you agree (on behalf of yourself and each of your affiliates, directors, officers, employees and representatives) that (A) such information will not be used by you except in connection with the proposed [participation][assignment] mentioned above and (B) you shall use reasonable precautions, in accordance with your customary procedures for handling confidential information and in accordance with safe and sound banking practices, to keep such information confidential, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to your counsel or to counsel for any of the Lenders or the Administrative Agent, (iii) to bank examiners, auditors or accountants, (iv) to the Administrative Agent or any other Lender (or to Chase Securities Inc.), (v) in connection with any litigation to which you or any one or more of the Lenders or the Administrative Agent are a party, (vi) to a subsidiary or affiliate of yours as provided in Section 11.12(a) of the Credit Agreement or (vii) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first executes and delivers to you a Confidentiality Agreement substantially in the form hereof; provided, further, that (x) unless specifically prohibited by applicable law or court order, you agree, prior to disclosure thereof, to notify the Company of any request for disclosure of any such non-public information (A) by any governmental agency or representative thereof (other than any such request in connection with an examination of your financial condition by such governmental agency) or (B) pursuant to legal process and (y) that in no event shall you be obligated to return any materials furnished to you pursuant to this Confidentiality Agreement. Please indicate your agreement to the foregoing by signing as provided below the enclosed copy of this Confidentiality Agreement and returning the same to us. Very truly yours, [INSERT NAME OF LENDER] By -------------------------- The foregoing is agreed to as of the date of this letter. [INSERT NAME OF PROSPECTIVE PARTICIPANT OR ASSIGNEE] By ------------------------ EX-23.1 4 INDEPENDENT AUDITORS' CONSENT Conformed Copy Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 333-60209 of B/E Aerospace, Inc. on Form S-3 of our report dated April 15, 1998, appearing in and incorporated by reference in the Annual Report on Form 10-K of B/E Aerospace, Inc. for the year ended February 28, 1998 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ DELOITTE & TOUCHE LLP Costa Mesa, California September 8, 1998 EX-23.2 5 CONSENT OF COUNSEL Exhibit 23.2 CONSENT OF SHEARMAN & STERLING [INCLUDED IN EXHIBIT 5.1] EX-23.3 6 CONSENT OF INDEPENDENT AUDITORS Conformed Copy Exhibit 23.3 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated February 7, 1998, except for Note 20, as to which the date is August 7, 1998, relating to the consolidated and combined financial statements of SMR Aerospace, Inc. (an S Corporation), its affiliates, and subsidiaries, which appears in the Form 8-K of B/E Aerospace, Inc. dated August 7, 1998 and to the reference to our Firm under the caption "Experts" in the Form S-3. /s/ Zalik, Torok, Kirgesner, Cook & Co. Cleveland, Ohio September 10, 1998 EX-99.1 7 EXHIBIT 99.1 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER BY AND AMONG BE AEROSPACE, INC., BE ACQUISITION CORP., AEROSPACE INTERIORS, INC., GREGORY AND DEBORAH FODELL PARTNERSHIP, LTD., GREGORY AND DEBORAH FODELL PARTNERSHIP II, LTD. AND GREGORY N. FODELL MARCH 27, 1998 TABLE OF CONTENTS 1. Definitions............................................................1 1.1. Rules of Construction......................................9 2. The Merger............................................................10 2.1. Constituent Corporations; Surviving Corporation...........10 2.2. Articles of Incorporation and By-Laws of the Surviving Corporation.............................................10 2.3. Directors and Officers of the Surviving Corporation.......10 2.4. Conversion of the Shares..................................10 2.5. The Closing...............................................11 2.6. Deliveries at the Closing.................................11 2.7. Surrender of Shares; Stock Transfer Books.................11 2.8. Further Assurances........................................12 3. Representations and Warranties of the Sellers.........................12 3.1. Organization of the Company...............................12 3.2. Capitalization and Ownership of the Company...............13 3.3. Authorization of Transaction..............................13 3.4. Noncontravention..........................................14 3.5. Brokers' Fees.............................................14 3.6. Title to Assets...........................................14 3.7. All Assets Necessary to Conduct Business..................14 3.8. Subsidiaries..............................................15 3.9. Financial Statements......................................15 3.10. Indebtedness; Guarantees..................................15 3.11. Absence of Changes........................................15 3.12. Absence of Undisclosed Liabilities........................17 3.13. Legal and Other Compliance................................18 3.14. No Material Adverse Change................................18 3.15. Taxes.....................................................18 3.16. Property, Plant and Equipment.............................20 3.17. Intellectual Property.....................................22 3.18. Inventories...............................................24 3.19. Contracts.................................................25 3.20. Notes and Accounts Receivable.............................26 3.21. Powers of Attorney........................................27 3.22. Insurance and Risk Management.............................27 3.23. Litigation................................................28 3.24. Product Warranties; Defects; Liability....................28 -i- 3.25. Employees.................................................28 3.26. Employee Benefits.........................................29 3.27. Environment, Health, and Safety...........................31 3.28. Affiliated Transactions...................................33 3.29. Government Contracts......................................33 3.30. Distributors, Customers, Suppliers........................33 3.31. No Illegal Payments.......................................34 3.32. Books and Records.........................................34 3.33. Consents..................................................34 3.34. Disclosure................................................34 3.35. Officers and Employees....................................34 3.36. Investment Intent; Related Matters, including Securities Law Matters.............................................35 4. Representations and Warranties of the Buyer and Acquisition...........36 4.1. Organization of the Buyer.................................36 4.2. Authorization of Transaction..............................36 4.3. Noncontravention..........................................36 4.4. Brokers' Fees.............................................36 4.5. Investment Intent.........................................36 4.6. Status of B/E Common Stock................................37 4.7. Information Concerning Buyer..............................37 4.8. No Reliance...............................................37 5. Covenants.............................................................37 5.1. General...................................................37 5.2. Notices and Consents......................................37 5.3. Operation of Business.....................................37 5.4. Preservation of Business..................................38 5.5. Full Access...............................................38 5.6. Notice of Developments....................................38 5.7. Exclusivity...............................................38 5.8. Title Insurance...........................................38 5.9. Access to Records after Closing...........................38 5.10. Escrow of Shares Pending Resolution of Certain Pre-Closing Matters.....................................39 5.11. Pooling of Interests Accounting Treatment.................41 5.12. Plan of Reorganization and other Tax Matters..............41 5.13. Registration Rights.......................................42 5.14. Insurance...............................................49 5.15. Future Assurances.........................................49 -ii- 6. Conditions to Obligation to Close.....................................50 6.1. Conditions to Obligation of the Buyer.....................50 6.2. Conditions to Obligations of the Sellers..................52 7. Confidentiality.......................................................53 8. Noncompetition........................................................53 9. Indemnification.......................................................54 9.1. Survival of Representations and Warranties................54 9.2. Indemnity by Sellers......................................54 9.3. [Reserved]................................................55 9.4. Indemnity by Buyer........................................55 9.5. Matters Involving Third Parties...........................55 9.6. Other Indemnification Provisions..........................57 9.7. Exclusive Remedy. ........................................57 10. Termination...........................................................57 10.1. Termination of Agreement..................................57 10.2. Effect of Termination.....................................58 11. Miscellaneous.........................................................58 11.1. Press Releases and Public Announcements...................58 11.2. No Third Party Beneficiaries..............................58 11.3. Entire Agreement..........................................58 11.4. Succession and Assignment.................................58 11.5. Counterparts..............................................58 11.6. Headings..................................................58 11.7. Notices...................................................58 11.8. Governing Law.............................................60 11.9. Amendments and Waivers....................................60 11.10.Severability..............................................60 11.11.Expenses..................................................60 11.12.Construction..............................................60 11.13.Incorporation of Exhibits and Schedules...................61 11.14.Specific Performance......................................61 11.15.Arbitration...............................................61 11.16.Waiver of Jury Trial......................................62 -iii- Exhibits A - Letter of Instruction to Escrow Agent B - Articles of Merger C - Financial Statements D - Form of Employment, Consulting and Noncompetition Agreement E - Form of Opinion of Bracewell & Patterson, counsel to the Company and the Sellers F - Form of Opinion of Ropes & Gray, counsel to the Buyer Schedules Disclosure Schedule -- Exceptions to Representations and Warranties -iv- AGREEMENT AND PLAN OF REORGANIZATION AND MERGER This Agreement and Plan of Reorganization and Merger (the "Agreement") is entered into on March 27, 1998, by and among (i) BE AEROSPACE, INC., a Delaware corporation (the "Buyer"), (ii) BE ACQUISITION CORP., a Texas corporation and a wholly-owned subsidiary of the Buyer ("Acquisition"), (iii) AEROSPACE INTERIORS, INC., a Texas corporation (the "Company"), (iv) GREGORY AND DEBORAH FODELL PARTNERSHIP, LTD. and GREGORY AND DEBORAH FODELL PARTNERSHIP II, LTD. (collectively, the "Stockholders"), the holders of all of the outstanding capital stock of the Company (the "Shares") and (v) Gregory N. Fodell ("Mr. Fodell" and collectively with the Stockholders, the "Sellers"). The Buyer, Acquisition, the Company and the Sellers are collectively referred to herein as the "Parties." RECITALS 1. This Agreement contemplates a transaction in which Acquisition will be merged with and into the Company as a result of which the Company will be the surviving corporation and a wholly-owned subsidiary of Buyer, upon the terms and subject to the conditions set forth herein and pursuant to the Business Corporation Act of the State of Texas (the "Texas BCA"). The Parties intend that this transaction will constitute a "reorganization" described in ss. 368(a)(2)(E) of the Code (as hereinafter defined) and that the Buyer will be able to account for the acquisition on a "pooling of interests" method (as such term is used in Accounting Principles Board Opinion No. 16). 2. Mr. Fodell is a general partner and limited partner of each of the Stockholders and thereby has control of, and a substantial portion of the economic interest in, such entities and, as a result, will receive a substantial portion of the economic benefits of the transactions contemplated hereby. Buyer has informed Mr. Fodell that Buyer would not be willing to enter into this Agreement without Mr. Fodell being a party hereto on the terms and conditions set forth herein, and Mr. Fodell wishes to induce the Buyer to enter into this Agreement and consummate the transactions contemplated hereby. AGREEMENT Therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Definitions. "Acquisition" has the meaning set forth in the preamble. "Affiliate" means, as to the Company (or, if another Person is specified, as to such other specified Person), (i) each Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company (or such specified Person), including without limitation, in the case of the Company, each Seller, (ii) any Person who is or has been within two years of the time in question an officer, director or direct or indirect beneficial holder of at least 5% of any class of the outstanding capital stock of any Person referred to in clause (i) above and the members of the immediate family of each such officer, director or holder (and, if such specified Person is a natural person, of such specified Person), and (iii) each Person of which the Company (or such specified Person) or an Affiliate (as defined in clauses (i) or (ii) above) thereof shall, directly or indirectly, beneficially own at least 5% of any class of outstanding capital stock or other evidence of beneficial interest. "Affiliated Group" means any affiliated group within the meaning of Code ss. 1504(a) or any similar group defined under a similar provision of state, local, or foreign Law. "Aggregate Merger Consideration Amount" means $5,605,772.82. "Agreement" has the meaning set forth in the preamble. "Articles of Merger" means the articles of merger attached as Exhibit B hereto. "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that could reasonably be expected to form the basis for any specified consequence. "B/E Common Stock" means the common stock of the Buyer, par value $0.01 per share. "B/E Shares" has the meaning set forth in ss. 2.4. "Buyer" has the meaning set forth in the preamble. "Certificates" has the meaning set forth in ss. 2.7(a). "Chemical Substance" means any chemical substance, including but not limited to any (i) pollutant, contaminant, irritant, chemical, raw material, intermediate, product, by-product, slag, construction debris; (ii) industrial, solid, liquid or gaseous toxic or hazardous substance, material or waste, (iii) petroleum or any fraction thereof; (iv) asbestos or asbestos-containing material; (v) polychlorinated biphenyl; (vi) chlorofluoracarbons; and (vii) other substance, material or waste, which is identified or regulated under any Environmental Law or Safety Law, as now and hereinafter in effect, or other comparable laws. "Class A Common Stock" has the meaning set forth in ss. 3.2. -2- "Class B Common Stock" has the meaning set forth in ss. 3.2. "Closing" has the meaning set forth in ss. 2.5. "Closing Date" has the meaning set forth in ss. 2.5. "Code" means the Internal Revenue Code of 1986, as amended. "Company" has the meaning set forth in the preamble. "Company Common Stock" has the meaning set forth in ss. 3.2. "Confidential Information" means any and all material information concerning the affairs of any Party or its Affiliates other than that information which is already generally known by or readily obtainable by the public through no fault of another Party. "Contractual Obligation" means, with respect to any Person, any contract, agreement, deed, mortgage, lease, license, indenture, commitment, undertaking, arrangement or understanding, written or oral, or other document or instrument, including, without limitation, any document or instrument evidencing or otherwise relating to any indebtedness but excluding the Charter and By-laws of such Person, to which or by which such Person is a party or otherwise subject or bound or to which or by which any property or right of such Person is subject or bound. "Controlled Group of Corporations" has the meaning set forth in Code ss. 1563. "Deferred Intercompany Transaction" has the meaning set forth in Treas. Reg. ss. 1.1502- 13. "Disclosing Party" has the meaning set forth in ss. 7. "Disclosure Schedule" has the meaning set forth in ss. 3. "Effective Date" means the date on which the Effective Time occurs. "Effective Time" means the time at which the Articles of Merger shall be duly filed in the office of the Secretary of State of the State of Texas, which in any event shall be as soon as practicable immediately following the Closing. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) -3- qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or material fringe benefit plan or program or (e) profit sharing, bonus, stock option, stock purchase, equity, stock appreciation, deferred compensation, incentive, severance plan or other benefit plan. "Employee Pension Benefit Plan" has the meaning set forth in ERISA ss. 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss. 3(1). "Environment" means soil, land surface or subsurface strata, real property, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwater, water body sediments, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource. "Environmental Laws" mean the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act, and the Clean Water Act, each, as amended or hereinafter in effect and any other federal, state, local or foreign Law or legal requirement, as now or hereinafter in effect, relating to: (a) the Release, containment, removal, remediation, response, cleanup or abatement of any sort of any Chemical Substance; (b) the manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, use, treatment, handling, storage, recycling, disposal or transportation of any Chemical Substance; (c) exposure of persons, including employees, to any Chemical Substance; (d) the physical structure, use or condition of a building, facility, fixture or other structure, including, without limitation, those relating to the management, use, storage, disposal, cleanup or removal of asbestos, asbestos-containing materials, polychlorinated biphenyls or any other Chemical Substance; (e) the pollution, protection or clean up of the Environment; or (f) noise. "Environmental Liabilities and Costs" means all Losses incurred: (i) to comply with any Environmental Law; (ii) as a result of a Release of any Chemical Substance; or, (iii) as a result of any environmental conditions present at, created by or arising out of the past or present operations of Sellers or the Company through the Closing Date or of any prior owner or operator of a facility or site at which Sellers or the Company now operate or have previously operated. "Environmental Permit" means any Permit or authorization from any governmental authority required under, issued pursuant to, or authorized by any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. -4- "Escrow Agent" has the meaning set forth in ss. 5.10. "Escrowed Shares" has the meaning set forth in ss. 2.4. "Extremely Hazardous Substance" has the meaning set forth in ss. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended. "Fiduciary" has the meaning set forth in ERISA ss. 3(21). "Financial Statements" has the meaning set forth in ss. 3.9. "Formula Price Per Share" means $27.765625. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Indebtedness" has the meaning set forth in ss. 3.10. "Indemnified Party" has the meaning set forth in ss. 9.5(a). "Indemnifying Party" has the meaning set forth in ss. 9.5(a). "Intellectual Property" means the entire right, title and interest in and to all proprietary rights of every kind and nature, including patents, copyrights, Trademarks, mask works, trade secrets and proprietary information, all applications for any of the foregoing, and any license or agreements granting rights related to the foregoing (i) subsisting in, covering, reading on, directly applicable to or existing in the Products or the Technology; (ii) that are owned, licensed or controlled in whole or in part by the Company and relate to the business of the Company; or (iii) that are used in or necessary to the development, manufacture, sales, marketing or testing of the Products. "Knowledge" means actual knowledge after reasonable investigation and, when used with respect to the Sellers or the Company, shall include the knowledge of each member of the Management Group. "Laws" means all laws, rules, regulations, codes, injunctions, judgments, orders, decrees, rulings, interpretations, constitution, ordinance, common law, or treaty, of any federal, state, local municipal and foreign, international, or multinational government or administration and related agencies. "Liability" means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether -5- liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes. "Lien" means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for the purpose of subjection to the payment of any Indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom; provided, however, that the term "Lien" shall not include (i) statutory liens for Taxes to the extent that the payment thereof is not in arrears or otherwise due, (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the uses of real property if the same do not detract from the value of the property encumbered thereby or impair the use of such property in the business of the Company as currently conducted or proposed to be conducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due, (iv) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance, old age pension programs mandated under applicable Laws or other social security regulations and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, which secure obligations to the extent that payment thereof is not in arrears or otherwise due in the case of (i) - (v), which have been incurred in the Ordinary Course of Business. "Losses" has the meaning set forth in ss. 9.2. "Management Group" has the meaning set forth in ss. 3.35. "Material Adverse Effect" means any adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Company which, when considered either singly or in the aggregate together with all other such effects with respect to which such phrase is used in this Agreement, constitutes a material adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Company taken as a whole. "Merger" shall mean the merger of Acquisition with and into the Company, with the Company being the Surviving Corporation, in accordance with the provisions of this Agreement and the Articles of Merger. "Most Recent Balance Sheet" has the meaning set forth in ss. 3.9. "Most Recent Financial Statements" means the Financial Statements for the Most Recent Fiscal Year End. -6- "Most Recent Fiscal Year End" has the meaning set forth in ss. 3.9. "Multiemployer Plan" has the meaning set forth in ERISA ss. 3(37). "Ordinary Course of Business" means the ordinary course of business of the Company consistent with past custom and practice (including with respect to quantity and frequency). "Party" and "Parties" have the meanings set forth in the preamble. "PBGC" means the Pension Benefit Guaranty Corporation. "Per-Share Consideration Amount" means an amount equal to (x) the Aggregate Merger Consideration Amount divided by (y) the aggregate number of shares of Company Common Stock outstanding at the Effective Time. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Products" means all current products and services of the Company, any subsequent versions of such products or services currently being developed, any products or services currently being developed by the Company which are designed to supersede, replace or function as a component of such products or services, and any upgrades, enhancements, improvements and modifications to the foregoing. "Prohibited Transaction" has the meaning set forth in ERISA ss. 406 and Code ss. 4975. "Public Offering" has the meaning set forth in ss. 5.13(a)(ii) "Registrable Securities" has the meaning set forth in ss. 5.13(a)(i). "Release" means any actual, threatened or alleged spilling, leaking, pumping, pouring, emitting, dispersing, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any Chemical Substance into the Environment that may cause an Environmental Liability and Cost (including the disposal or abandonment of barrels, containers, tanks or other receptacles containing or previously containing any Chemical Substance). "Release Date" has the meaning set forth in ss. 5.10(a). "Reportable Event" has the meaning set forth in ERISA ss. 4043. -7- "Safety Laws" means any federal, state, local and foreign Law or legal requirement relating to health or safety, including the Occupational Safety and Health Act, as amended, as now or hereinafter in effect relating to (a) exposure of employees to any Chemical Substance or (b) the physical structure, use or condition of a building, facility, fixture or other structure, including, without limitation, those relating to equipment or manufacturing processes, or the management, use, storage, disposal, cleanup or removal of any Chemical Substance. "Safety Liabilities and Costs" means all Losses incurred to comply with any Safety Law or as a result of any health or safety conditions present at, created by or arising out of the past or present operations of the Company through the Closing Date. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Sellers" has the meaning set forth in the preamble. "Shares" has the meaning set forth in the preamble. "Subsidiary" means with respect to any Person, (i) any corporation at least a majority of whose outstanding voting stock is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; (ii) any general partnership, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner or at least a majority of whose ownership interests is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; and (iv) any limited liability company at least a majority of whose ownership interests is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries. For the purposes of this definition, "voting stock" or "ownership interests" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. "Surviving Corporation" has the meaning set forth in ss. 2.1. -8- "Tax" or "Taxes" means taxes, fees, levies, duties, tariffs, imposts, and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any federal, state, local or foreign taxing authority, including, without limitation, income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code ss. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Technology" means all inventions, copyrightable works, discoveries, innovations, know-how, information (including ideas, research and development, know-how, formulas, compositions, processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, business and marketing plans and proposals, documentation, and manuals), computer software, computer hardware, integrated circuits and integrated circuit masks , electronic, electrical and mechanical equipment and all other forms of technology, including improvements, modifications, derivatives or changes, whether tangible or intangible, embodied in any form, whether or not protectible or protected by patent, copyright, mask work right, trade secret law or otherwise. "Texas BCA" has the meaning set forth in the recitals. "Third Party Claim" has the meaning set forth in ss. 9.5(a). "Trademarks" means any trademarks, service marks, trade dress, and logos, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith. 1.1. Rules of Construction. The following provisions shall be applied wherever appropriate herein: (a) "herein", "hereby", "hereunder", "hereof" and other equivalent words shall refer to this Agreement as an entirety and not solely to the particular portion of this Agreement in which any such word is used; (b) all definitions set forth herein shall include the singular and the plural; (c) wherever used herein, any pronoun shall be deemed to include both the singular and plural and to cover all genders; (d) except as otherwise stated herein, all references or citations in this Agreement to statutes or regulations or statutory regulatory provisions, shall, when the context requires, be considered citations to such statutes, regulations or provisions as in effect from time to time, including any successor statutes, regulations or provisions directly or indirectly superseding such statutes, regulations or -9- provisions; and (e) any references herein to a particular Section, Article, Exhibit or Schedule means a Section or Article of, or Schedule or Exhibit to, this Agreement unless another agreement is specified. 2. The Merger. 2.1. Constituent Corporations; Surviving Corporation. Acquisition and the Company shall be the constituent corporations to the Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, Acquisition shall be merged with and into the Company in accordance with the Texas BCA, and the Company shall be the surviving corporation of the Merger (the "Surviving Corporation"). At the Effective Time, the identity and separate existence of Acquisition shall cease, and the Surviving Corporation shall continue its corporate existence under the laws of the State of Texas as a wholly-owned subsidiary of Buyer. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, powers, franchises, properties and other interests of the Company and Acquisition. 2.2. Articles of Incorporation and By-Laws of the Surviving Corporation. From and after the Effective Time and thereafter until amended as provided by law, (i) the Articles of Incorporation of the Surviving Corporation shall be the Articles of Incorporation of Acquisition, except that the name of the Surviving Corporation shall be "Aerospace Interiors, Inc." and (ii) the Bylaws of the Surviving Corporation shall be the By-laws of Acquisition. 2.3. Directors and Officers of the Surviving Corporation. The directors and officers of the Surviving Corporation immediately following the Merger shall be the directors and officers of Acquisition immediately prior to the Merger and all such directors and officers shall hold office until their respective successors are duly elected and qualified. 2.4. Conversion of the Shares. At the Effective Time by virtue of the Merger and without any action on the part of Acquisition or any Seller: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to ss. 2.4(b)) shall be canceled and shall be converted automatically into the right to receive a number of shares of B/E Common Stock equal to (w) the Per-Share Consideration Amount divided by (x) the Formula Price Per Share; provided, however, that (y) a portion of the shares of B/E Common Stock issuable pursuant to the Merger in respect of the Shares shall be delivered into escrow and held as specified in ss. 5.10 (all such shares issuable pursuant to the Merger, including the Escrowed Shares, being referred to herein as the "B/E Shares" and said portion of the B/E Shares subject to the escrow provisions of ss. 5.10 being referred to herein as the "Escrowed Shares") and the Escrowed Shares shall be distributed to the Sellers only upon release by the Escrow Agent as provided in ss. 5.10 upon and subject to resolution of the -10- matters referred to in ss. 9.2 and (z) no fractional shares of B/E Common Stock shall be issued pursuant to the Merger, with each Person otherwise entitled to such a fractional share being entitled to cash, payable by check of the Surviving Corporation, in an amount equal to such fractional share valued at Formula Price Per Share. (b)Notwithstanding the provisions of paragraph (a) of this ss. 2.4, each Share held in the treasury of the Company and each Share owned by Acquisition or by Buyer immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto. (c)Each share of Acquisition common stock, par value $.01 per share, issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. 2.5. The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Bracewell & Patterson in Houston, Texas, commencing at 10:00 a.m. Houston time on March 27, 1998 or such other date as the Parties may mutually determine (the "Closing Date"). 2.6. Deliveries at the Closing. At the Closing, (a) the Sellers will deliver to the Buyer the various certificates, instruments and documents referred to in ss. 6.1, and (b) the Buyer will deliver the certificates, instruments and documents referred to in ss. 6.2. 2.7. Surrender of Shares; Stock Transfer Books. (a) As promptly as practicable after the Effective Time, each holder (other than the Company, Acquisition or the Buyer, if applicable) of any outstanding certificate or certificates theretofore representing the Shares converted in the Merger as described in ss. 2.4(a) shall surrender the same to the Surviving Corporation for cancellation (the "Certificates"). Upon surrender of a Certificate to the Surviving Corporation, the holder of such certificate shall be entitled to receive in exchange therefor a certificate or certificates representing the number of B/E Shares to which such holder is entitled pursuant to the Merger (subject to the escrow provisions contemplated by ss.ss. 2.4 and 5.10) and cash in lieu of any fractional share otherwise to be so issued. The Buyer shall take all steps necessary to enable and cause the Surviving Corporation to fulfill promptly its obligations under this ss. 2.7. Subject to the restrictions on transfer referred to in the last sentence of ss. 5.10, if the B/E Shares are to be issued to a Person other than the Person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of issuance of such B/E Shares that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the Person requesting such payment shall have paid all transfer and other -11- Taxes required by reason of the issuance of B/E Shares pursuant to the Merger in accordance with ss. 2.4 to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such Taxes either have been paid or are not applicable. (b) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and subject to such other conditions as the Board of Directors of the Surviving Corporation may impose, the Surviving Corporation shall cause the Buyer to issue in exchange for such lost, stolen or destroyed Certificate the B/E Shares deliverable in respect thereof as determined in accordance herewith (subject to the escrow provisions contemplated by ss.ss. 2.4 and 5.11). When authorizing such issue of the B/E Shares in exchange therefor, the Board of Directors of the Surviving Corporation (or any authorized officer thereof) may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give the Surviving Corporation a bond in such sum as the Board of Directors may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed. (c) At the close of business on the Effective Date, the stock transfer books of the Company shall be closed, and no transfer of Shares shall thereafter be made on such books. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares except as otherwise provided herein or by applicable law. 2.8. Further Assurances. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other acts or things are necessary or desirable to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in or to any of the rights, properties or assets of the Company or Acquisition or otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its officers and directors shall be authorized to execute and deliver, in the name and on behalf of the Company or Acquisition, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of the Company or Acquisition, all such other acts and things necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to or under such rights, properties or assets in the Surviving Corporation or otherwise to carry out the purposes of this Agreement. 3. Representations and Warranties of the Sellers. The Sellers jointly and severally represent and warrant to the Buyer as follows as of the date of this Agreement: 3.1. Organization of the Company. The Company is a Texas corporation, duly organized, validly existing, and in good standing under the Laws of the State of Texas. Copies -12- of the articles of incorporation and bylaws of the Company, each as amended to date, have been heretofore delivered to Buyer and are accurate and complete. The Company is qualified to do business and is in good standing as a foreign corporation in each jurisdiction listed in ss. 3.1 of the Disclosure Schedule, which such jurisdictions are the only jurisdictions where the nature of the activities conducted by the Company or the character of the property owned, leased or operated by it make such qualification necessary or appropriate, except for those jurisdictions where the failure to be so qualified will not have a Material Adverse Effect. 3.2. Capitalization and Ownership of the Company. The authorized capital stock of the Company consists of 1,000,000 shares of Class A Common Stock, $0.10 par value per share (the "Class A Common Stock"), and 1,000,000 shares of Class B Common Stock, $0.10 par value per share (the "Class B Common Stock" and collectively with the Class A Common Stock, the "Company Common Stock"). As of the date hereof, there are issued and outstanding (a) 10,000 shares of Class A Common Stock and 100,000 shares of Class B Common Stock, of which no shares are held as treasury stock and 10,000 shares of Class A Common Stock and 100,000 shares of Class B Common Stock are held of record and beneficially by the Persons and in the respective amounts set forth on ss. 3.2 of the Disclosure Schedule, free and clear of any Liens, except as set forth in ss. 3.2 of the Disclosure Schedule. All of the outstanding shares of Company Common Stock have been validly issued, are fully paid and nonassessable. Except as set forth in ss. 3.2 to the Disclosure Schedule, there are no agreements restricting the transfer of, or affecting the rights of any holder of, the shares of Company Common Stock or any other shares of the Company's capital stock, there are no preemptive rights on the part of any holder of any class of securities of the Company and no outstanding options, warrants, rights, or other agreements or commitments of any kind obligating the Company, contingently or otherwise, to issue or sell any shares of its capital stock or any securities or obligations convertible into, or exchangeable for, any shares of its capital stock, and no authorization therefor has been given. Section 3.2 of the Disclosure Schedule sets forth the names of the record holders of all outstanding options, warrants or other rights to purchase, sell or otherwise dispose of, or rights to exchange or convert into, any shares of the Company's capital stock and the number of shares, exercise prices and expiration dates of such options, warrants or other rights. None of the outstanding shares of capital stock of the Company was issued in violation of the Securities Act or the securities or blue sky laws of any state or jurisdiction, which violation would have a Material Adverse Effect. Each Stockholder has full right, power and authority to transfer the Shares in the respective amounts as set forth in ss. 3.2 of the Disclosure Schedule to Buyer, free and clear of any Liens, other than as set forth in ss. 3.2 of the Disclosure Schedule. 3.3. Authorization of Transaction. Each of the Sellers and the Company has the legal capacity, power and authority (including, in the case of the Company, full corporate power and authority) to execute and deliver this Agreement and to perform their respective obligations hereunder. All corporate and other actions or proceedings to be taken by or on the part of the Company or the Sellers to authorize and permit the execution and delivery by the Company and the Sellers of this Agreement and the respective instruments required to be -13- executed and delivered by the Company and the Sellers pursuant hereto, the performance by the Company and the Sellers of their respective obligations hereunder, and the consummation by the Company and the Sellers of the transactions contemplated herein, have been duly and properly taken. This Agreement has been duly executed and delivered by each of the Company and the Sellers and constitutes the legal, valid and binding obligation of each of the Company and the Sellers, enforceable in accordance with its terms and conditions. 3.4. Noncontravention. Except as set forth in ss. 3.4 of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including any of the agreements and instruments required to be delivered pursuant to ss. 2), will (i) violate any Law or other restriction of any government, governmental agency, or court to which any of the Company or the Sellers or any of their property is subject or any provision of the articles of incorporation or by-laws of the Company or the limited partnership agreements of the Sellers or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contractual Obligation to which any of the Company or the Sellers is a party or by which any of them is bound or to which any of their assets is subject (or result in the imposition of any Lien upon any of their assets). Neither the Company nor the Sellers needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement except for the filing of the Articles of Merger with the Secretary of State of the State of Texas. 3.5. Brokers' Fees. Except as disclosed in ss. 3.5 of the Disclosure Schedule, none of the Company or the Sellers has any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer or the Company could become liable or obligated. 3.6. Title to Assets. Except as disclosed in ss. 3.6 of the Disclosure Schedule, the Company has good and marketable title to, or a valid and subsisting leasehold interest in, and the power to sell the properties and assets used by it, located on its premises, or reflected on the Most Recent Balance Sheet or acquired after the date thereof, free and clear of all Liens, except for properties and assets disposed of in the Ordinary Course of Business since the date of the Most Recent Balance Sheet. 3.7. All Assets Necessary to Conduct Business. The assets, properties and rights of the Company reflected in the Most Recent Balance Sheet comprise all of the assets, properties and rights of every type and description, real, personal, tangible and intangible used by the Company in, and, in the reasonable opinion of the management of the Company, necessary to, the conduct of the Company's business as currently conducted. -14- 3.8. Subsidiaries. The Company has no Subsidiaries and does not own, directly or indirectly, any capital stock of any partnership or other ownership interest in, or any other security issued by, any other Person. 3.9. Financial Statements. Attached hereto as Exhibit C are the following financial statements (collectively the "Financial Statements"): unaudited balance sheets and statements of income as of and for the fiscal years ended December 31, 1994, 1995, 1996 and 1997 (December 31, 1997 being the "Most Recent Fiscal Year End") and an unaudited consolidated balance sheet as of January 31, 1998 (the January 31, 1998 balance sheet being the "Most Recent Balance Sheet") for the Company. Except as disclosed in ss. 3.9 of the Disclosure Schedule, the Financial Statements, are correct and complete and present fairly the financial condition of the Company as of such dates and the results of operations of the Company for such periods and are consistent with the books and records of the Company. 3.10. Indebtedness; Guarantees. Except as set forth in the Most Recent Balance Sheet, the Company has no indebtedness for borrowed money or for the deferred purchase price of property or services (other than trade payables and other accrued current liabilities incurred in the Ordinary Course of Business), or capital lease obligations, conditional sale or other title retention agreements ("Indebtedness"). The Company is not a guarantor or otherwise liable for any Liability or obligation of any other Person. 3.11. Absence of Changes. Since the Most Recent Fiscal Year End and except as disclosed in ss. 3.11 of the Disclosure Schedule, the Company has conducted its business only in the Ordinary Course of Business and there has not been: (a) any sale, lease, transfer, or assignment of any of the Company's assets, tangible or intangible, other than sales of inventory for a fair consideration in the Ordinary Course of Business; (b) any Contractual Obligation (or series of Contractual Obligations) entered into by the Company other than in the Ordinary Course of Business and in an amount not in excess of $10,000; (c) any acceleration, termination, modification, or cancellation of any Contractual Obligation (or series of Contractual Obligations) to which the Company is a party or by which it or any of its assets is bound; (d) any creation or imposition of any Lien upon any of the Company's assets, tangible or intangible; (e) any capital expenditure (or series of related capital expenditures) involving more than $10,000 singly or $50,000 in the aggregate; -15- (f) any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions); (g) any issuance of any note, bond, or other debt security or created, incurred, assumed, or guaranteed any Indebtedness; (h) any delay or postponement of payment of accounts payable or other Liabilities outside the Ordinary Course of Business; (i) any cancellation, compromise, waiver, or release of any right or claim or Indebtedness (or series of related rights and claims); (j) any grant of any license or sublicense of any rights or modified any rights under or with respect to, or entered into any settlement regarding any infringement of its rights to, any Intellectual Property; (k) any issuance, sale, or other disposition of any capital stock, or grant of any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of capital stock; (l) any dividend or distribution (whether in cash or in kind) or repurchase, redemption or retirement any of capital stock; (m) any threat or notification, orally or in writing, that one or more material distributors, customers or suppliers have terminated or intend to terminate or are considering terminating its business relationships or have modified or intend to modify such relationships with the Company in a manner which is less favorable to the Company or have agreed not to or will not agree to do business on such terms and subject to conditions at least as favorable terms and conditions as provided to the Company on the date of the Most Recent Balance Sheet Date or any actual termination or modification of such relationships and neither the Sellers nor the Company have any Knowledge of any Basis for such termination or modification; (n) any damage, destruction, or loss (whether or not covered by insurance) to its property in the aggregate in excess of $ 10,000; (o) any loan to, or any other transaction with, any of the Company's Affiliates or, outside the Ordinary Course of Business, with any other employee; -16- (p) any employment Contractual Obligation or collective bargaining agreement, written or oral, or modification of the terms of any existing such Contractual Obligation or agreement; (q) any increase, modification or change in the compensation, bonus structure or benefits of any of the Company's directors, officers, consultants, agents and employees outside the Ordinary Course of Business; (r) any adoption, amendment, modification or termination of any Employee Benefit Plan or other plan, contract, or commitment for the benefit of any director, officer, consultant, agent or employee of the Company (or taken any such action with respect to any other Employee Benefit Plan); (s) any payment pursuant to any Employee Benefit Plan or other plan, contract or commitment for the benefit of any director, officer, consultant, agent or employee of the Company; (t) any modification or change in the employment terms for any of its directors, officers, consultants, agents or employees outside the Ordinary Course of Business; (u) any pledge to make or any charitable or other capital contribution and no such contribution was made; (v) any other occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving the Company which could reasonably be expected to have a Material Adverse Effect; (w) any Contractual Obligation entered into pursuant to which a party thereto is entitled to a commission based on sales to or revenues or profits derived from one or more customers, success fees, finders fees or other compensation related to sales; and (x) any commitment to any of the foregoing by any of the Company or the Sellers. 3.12. Absence of Undisclosed Liabilities. The Company has no Liability (and, to the Knowledge of the Sellers, there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any Seller giving rise to any Liability of the Company), except for (i) Liabilities disclosed in the Disclosure Schedule or not required to be disclosed in the Disclosure Schedule because of a materiality qualifier in a representation or warranty; (ii) Liabilities set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (iii) Liabilities which have arisen after the date of -17- the Most Recent Balance Sheet in the Ordinary Course of Business (none of which Liabilities referred to under subsection (iii) of this ss. 3.12 results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of Law, and none of which could lead to a Material Adverse Effect). 3.13. Legal and Other Compliance. Except as disclosed in ss. 3.13 of the Disclosure Schedule, the Company is, and at all times prior to the date of this Agreement has been, in compliance in all material respects with all applicable Laws the violation of which could have a Material Adverse Effect and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against the Company alleging any failure so to comply. Except as disclosed in ss. 3.13 of the Disclosure Schedule, neither the transfer of the Shares to the Buyer and consummation of the transactions contemplated hereby nor use of any of the properties of the Company nor the conduct of its business conflicts with the rights of any other Person or violates, or with the giving of notice or the passage of time or both will violate, conflict with or result in a default, right to accelerate or loss of rights under, any terms or provisions of any of its charter or by-laws or any Lien, Contractual Obligation or Law to which the Company is a party or by which it or any of its assets may be bound or affected. None of the Company or the Sellers has Knowledge of any proposed governmental taking or condemnation which would be applicable to the Company's business, operations or properties and which could lead to a Material Adverse Effect. 3.14. No Material Adverse Change. Since the date of the Most Recent Financial Statements, there has not been any change which has resulted in a Material Adverse Effect and to the Knowledge of the Sellers no event has occurred or circumstances exists that may reasonably be expected to result in such a Material Adverse Effect. 3.15. Taxes. (a) The Company has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid. Except as disclosed in ss. 3.15 of the Disclosure Schedule, the Company currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that the Company may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. (b) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. -18- (c) There is no dispute, audit, investigation, proceeding or claim concerning any Liability with respect to Taxes of the Company either (i) claimed or raised by any authority in writing or (ii) as to which any of the Company or the Sellers has Knowledge based upon contact with any such authority. Except as set forth in ss. 3.15 of the Disclosure Schedule, (i) no federal, state, local, and foreign income Tax Returns filed with respect to the Company have been audited and (ii) none are currently open or the subject of audit. The Sellers have delivered to the Buyer correct and complete copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by any of the Company for the last three taxable years. (d) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. Except as set forth in ss. 3.15 of the Disclosure Schedule, there are no powers of attorney with respect to Taxes of the Company currently in force. (e) The Company is not nor has it been a party to any Tax allocation or sharing agreement or a member of an Affiliated Group filing a consolidated federal income Tax Return. The Company does not have any Liability for the Taxes of any Person other than the Company under Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise. (f) The Company has not filed a consent under Code ss. 341(f) concerning collapsible corporations. The Company has not made any payments, nor is it obligated to make any payments, nor is it a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code ss.ss. 162, 280G or 404. The Company has not been a United States real property holding corporation within the meaning of Code ss. 897(c)(2) during the applicable period specified in Code ss. 897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of the Code ss. 6662. (g) Section 3.15 of the Disclosure Schedule sets forth the following information with respect to the Company as of the most recent practicable date, (i) the Tax basis of the Company in its assets; (ii) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign Tax, excess charitable contribution adjustments under Code ss. 481 and other Tax attributes of the Company; and (iii) the amount of any deferred gain or loss allocable to the Company arising out of any Deferred Intercompany Transaction. -19- (h) The unpaid Taxes of the Company (A) did not, as of the date of the Most Recent Balance Sheet, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company. 3.16. Property, Plant and Equipment. (a) Section 3.16(a)(i) of the Disclosure Schedule lists all real property that Company owns. Except as set forth in ss. 3.16(a)(ii), with respect to each such parcel of owned real property: (i) the Company has good and marketable title to the parcel of real property, free and clear of any Lien; (ii) there are no pending or, to the Knowledge of the Sellers, threatened condemnation proceedings, lawsuits, or administrative actions relating to the property which would adversely affect the use, occupancy, or value thereof; (iii) the legal description for the parcel contained in the deed thereof describes such parcel fully and adequately, and the buildings and improvements are located within the boundary lines of such parcels of land, are not in violation of applicable setback requirements, zoning laws, and ordinances (and none of the properties or buildings or improvements thereon are subject to "permitted non-conforming use" or "permitted non-conforming structure" classifications), and do not encroach on any easement, the land does not serve any adjoining property for any purpose and the property is not located within any flood plain or subject to any similar type restriction for which any permits or licenses necessary to the use thereof have not been obtained; (iv) each facility on such parcel has received all approvals of governmental authorities (including licenses and permits) required in connection with the ownership or operation thereof and have been operated and maintained in accordance with applicable laws, rules, and regulations; (v) there are no leases, subleases, licenses, concessions, or other agreements, written or oral, granting to any party or parties the right of use or occupancy of the parcel or any portion thereof; (vi) there are no outstanding options or rights of first refusal to purchase such parcel or any portion thereof or interest therein; -20- (vii) there are no parties (other than the Company) in possession of such parcel; (viii) each facility located on such parcel is supplied with utilities and other services necessary for the operation of such facility, including gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of which services are adequate in accordance with all applicable laws, ordinances, rules and regulations and are provided via public roads or via permanent, irrevocable, appurtenant easements benefitting such parcel; and (ix) each parcel abuts and has direct vehicular access to a public road, or has access to a public road via a permanent, irrevocable, exclusive, unrestricted appurtenant easement benefitting such parcel, and access to the property is provided by paved public right-of-way with adequate curb cuts available. (b) Section 3.16(b) of the Disclosure Schedule lists all real property leased or subleased to the Company. The Company has delivered to the Buyer correct and complete copies of the leases and subleases listed in ss. 3.16(b) of the Disclosure Schedule and such leases and subleases have not been amended or modified since the date thereof. With respect to each lease and sublease listed in ss. 3.16(b) of the Disclosure Schedule: (i) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect; (ii) none of the Sellers or the Company, or to their Knowledge, any other party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iii) no party to the lease or sublease has repudiated any provision thereof; (iv) there are no disputes, oral or written agreements, or forbearance programs in effect as to the lease or sublease; (v) with respect to each sublease, the representations and warranties set forth in subsections (i) through (iv) above are true and correct with respect to the underlying lease; -21- (vi) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; (vii) all facilities leased or subleased thereunder have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable Laws; and (viii) all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities. (c) The Company owns or leases all buildings, real property, improvements, machinery, equipment, and other tangible assets necessary for the conduct of its business as presently conducted. Each such tangible asset is free from defects (patent and latent), has been maintained in accordance with normal industry practice, is in satisfactory operating condition and repair (subject to normal wear and tear), and is suitable, adequate and sufficient for the purposes for which it presently is used and presently is proposed to be used. 3.17. Intellectual Property. (a) The Company owns or has the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary or desirable for the operation of the business of the Company as presently conducted and as presently proposed to be conducted. Subject to obtaining all necessary consents as disclosed in ss. 3.33 of the Disclosure Schedule, each item of Intellectual Property owned or used by the Company in the business immediately prior to the Closing hereunder will be owned or available for use by the Buyer on identical terms and conditions immediately subsequent to the Closing hereunder. Except as disclosed in ss. 3.17(a) of the Disclosure Schedule, the Company has taken all necessary and desirable action to maintain and protect each item of Intellectual Property that the Company owns or uses. (b) Except as disclosed in ss. 3.17(b) of the Disclosure Schedule, the Company has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and there has never been any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that the Company must license or refrain from using any Intellectual Property rights of any third party). To the Knowledge of the Sellers and the Company, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of the Company. -22- (c) Section 3.17(c) of the Disclosure Schedule identifies each patent or registration which has been issued to the Company with respect to the Company's Intellectual Property, identifies each pending patent application or application for registration which has been made with respect to the Company's Intellectual Property, and identifies each license, agreement, or other permission which the Company has granted to any third party with respect to any of the Intellectual Property (together with any exceptions). The Company has delivered to the Buyer correct and complete copies of all such patents, registrations, applications, licenses, agreements, and permissions (as amended to date) and has made available to the Buyer correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item. Section 3.17(c) of the Disclosure Schedule also identifies each trade name or unregistered trademark or servicemark used by the Company. With respect to each item of Intellectual Property required to be identified in ss. 3.17(c) of the Disclosure Schedule: (i) except as disclosed in ss. 3.17(c) of the Disclosure Schedule, the Company possesses all right, title, and interest in and to the item, free and clear of any Lien, license, or other restriction; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or, to the Knowledge of the Sellers or the Company, is threatened, which challenges the legality, validity, enforceability, use, or ownership of the item; and (iv) the Company has not agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict with respect to the item. (d) Section 3.17(d) of the Disclosure Schedule identifies each item of Intellectual Property that any third party owns and that the Company uses pursuant to license, sublicense, agreement, or permission. The Company has delivered to the Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). With respect to each item of Intellectual Property required to be identified in ss. 3.17(d) of the Disclosure Schedule: (i) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable, and in full force and effect; -23- (ii) subject to obtaining necessary consents as disclosed in ss. 3.33 of the Disclosure Schedule, the license, sublicense, agreement, or permission will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in ss. 2); (iii) no party to the license, sublicense, agreement, or permission is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iv) to the Knowledge of the Sellers and the Company, no party to the license, sublicense, agreement, or permission has repudiated any provision thereof; (v) with respect to each sublicense, the representations and warranties set forth in subsections (i) through (v) above are true and correct with respect to the underlying license; (vi) the underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (vii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or, to the Knowledge of the Sellers and the Company, is threatened, which challenges the legality, validity, or enforceability of the underlying item of Intellectual Property; and (viii) the Company has not granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission. (e) To the Knowledge of the Sellers and the Company, the Buyer will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties as a result of the continued operation of the Company's business as presently conducted. 3.18. Inventories. Section 3.18 of the Disclosure Schedule lists all of the inventory that is owned by Persons other than the Company, which is currently being held by the Company for the benefit of such Persons. The inventory owned by the Company consists of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, substantially all of which is merchantable and fit or suitable and usable for the production or completion of merchantable products for sale in the Ordinary Course of Business, and none of which is slow-moving, obsolete, below standard quality, damaged, or -24- defective, subject only to the reserve for inventory writedown set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date and the past custom and practice of the Company. The inventory, taken as a whole, as reflected in the Most Recent Balance Sheet and books and records of the Company is reflected on the basis of a complete physical count and is valued at the lower of cost (on a first-in, first-out basis) or market, consistently applied. Since the Most Recent Balance Sheet Date, no inventory has been sold or disposed of except through sales in the Ordinary Course of Business. 3.19. Contracts. Section 3.19 of the Disclosure Schedule lists the following Contractual Obligations (including the Contractual Obligations listed on ss.ss. 3.11, 3.16 and 3.17 of the Disclosure Schedule, but excluding any Contractual Obligations that are terminable by the Company on not more than 30 days notice without penalty) to which the Company is a party: (a) any Contractual Obligation (or group of Contractual Obligations) for the lease of personal property to or from any Person providing for lease payments in excess of $ 10,000; (b) any Contractual Obligation (or group of related Contractual Obligations) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year or involves consideration in excess of $ 10,000; (c) any Contractual Obligation concerning a partnership, limited liability company or joint venture; (d) any Contractual Obligation (or group of related Contractual Obligations) under which it has created, incurred, assumed, or guaranteed any Indebtedness in excess of $ 10,000 or under which it has imposed a Lien on any of its assets, tangible or intangible; (e) any Contractual Obligation concerning confidentiality or noncompetition; (f) any Contractual Obligation relating to the Company, its assets, liabilities or business between or among the Company and its Affiliates; (g) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, consultants, agents or employees; -25- (h) any collective bargaining agreement; (i) any Contractual Obligation providing for the employment or consultancy with any individual on a full-time, part-time, consulting or other basis in excess of $ 10,000 or providing severance or retirement benefits; (j) any Contractual Obligation under which it has advanced or loaned any amount to any of its stockholders, Affiliates, directors, officers, consultants, agents or employees other than in the Ordinary Course of Business; (k) any Contractual Obligation under which the consequences of a default or termination could have a Material Adverse Effect; (l) any other Contractual Obligation (or group of related Contractual Obligations) the performance of which involves consideration in excess of $ 10,000; or (m) any Contractual Obligation pursuant to which a party thereto is entitled to a commission based on sales to or revenues or profits derived from one or more customers, success fees, finders fees or other compensation related to sales. The Company has delivered to the Buyer a correct and complete copy of each written Contractual Obligation listed in ss. 3.19 of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and conditions of each oral Contractual Obligation referred to in ss. 3.19 of the Disclosure Schedule. Except as disclosed in ss. 3.19 of the Disclosure Schedule, with respect to each such Contractual Obligation, to the Knowledge of the Sellers and the Company (i) the Contractual Obligation is legal, valid, binding, enforceable, and in full force and effect; (ii) subject to the Buyer obtaining the necessary consents disclosed in ss. 3.33 of the Disclosure Schedule, the Contractual Obligation will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iii) no party is in breach or material default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the Contractual Obligation; and (iv) no party has repudiated any provision of the Contractual Obligation. 3.20. Notes and Accounts Receivable. All notes and accounts receivable of the Company are reflected properly on its books and records, are valid receivables, arose from bona fide transactions in the Ordinary Course of Business subject to no setoffs or counterclaims except as recorded as accounts payable are current and collectible and will be collected in accordance with their terms at their recorded amounts without having to or threaten to resort to any collection efforts or legal proceedings outside the ordinary course of business, except as reflected as net of allowance for bad debts on the face of the Most Recent -26- Balance Sheet (rather than in any notes thereto or reserve therefor) as adjusted for the passage of time in accordance with the past practice and custom of the Company. The Company has delivered to Buyer as ss. 3.20 of the Disclosure Schedule a true and correct list of all receivables which have been deemed uncollectible and are not reflected in the Most Recent Balance Sheet. 3.21. Powers of Attorney. Except pursuant to this Agreement and the Exhibits hereto and as disclosed in ss. 3.21 of the Disclosure Schedule, there are no outstanding powers of attorney executed on behalf of the Company, in respect of the Company, its assets, liabilities or business. 3.22. Insurance and Risk Management. Section 3.22 of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which the business operations of the Company have been a party, a named insured, or otherwise the beneficiary of coverage from the period from January 31, 1997 to the date hereof: (a) the name, address, and telephone number of the agent; (b) the name of the insurer, the name of the policyholder, and the name of each covered insured; (c) the policy number, the period of coverage and premium; and (d) a description of any retrospective premium adjustments or other loss- sensitive premium arrangements. With respect to each such insurance policy (other than those which have expired in accordance with their terms): (i) the policy is legal, valid, binding, enforceable, and in full force and effect; (ii) the transactions contemplated hereby will not result in the cancellation or modification of such policies; (iii) neither the Company nor, to the Knowledge of the Sellers and the Company, any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; (iv) the Company has delivered true and complete copies of all policies and related indemnity or premium payment agreements to Buyer; (v) the policy has not been amended or modified and no riders have been issued in respect of such policies referred to in (vi) above without the consent of the Buyer; and (vii) no party to the policy has repudiated any provision thereof. Section 3.22 of the Disclosure Schedule describes any self-insurance arrangements affecting the Company. -27- 3.23. Litigation. Except as disclosed in ss. 3.23 of the Disclosure Schedule, there are no judicial or administrative actions, claims, suits, proceedings or investigations pending or, to the Sellers' and the Company's Knowledge, threatened, that have a material risk of resulting in a Material Adverse Effect, or that question the validity of this Agreement or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement nor, to the Knowledge of the Company and the Sellers, is there any Basis for any such action, claim, suit, proceeding or investigation. There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against the Company affecting any of its assets, business or operations under any federal, state or local Law. 3.24. Product Warranties; Defects; Liability. Each product manufactured, sold, leased, or delivered by the Company has been in conformity in all material respects with all applicable federal, state, local or foreign Laws, Contractual Obligations and all express and implied warranties, and the Company has no Liability (and to the Knowledge of the Sellers there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand giving rise to any Liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) which such reserve is adequate to address all such Liabilities. Except as disclosed in ss. 3.24 of the Disclosure Schedule, no product manufactured, sold, leased, or delivered by the Company is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease. Section 3.24 of the Disclosure Schedule includes copies of the standard terms and conditions of sale or lease for the Company (containing applicable guaranty, warranty, and indemnity provisions). The Company has no Liability (and to the Knowledge of the Sellers there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company giving rise to any Liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by the Company and there has been no inquiry or investigation made in respect thereof by any Person including any governmental or administrative agency other than such Liability for which the Company has obtained insurance coverage pursuant to insurance policies listed in ss. 3.22 of the Disclosure Schedule which such policies will remain in full force and effect without modification or increase in premium as a result of the transactions contemplated hereby. 3.25. Employees. To the Knowledge of the Company and the Sellers, no executive, key employee, or group of employees has any plans to terminate employment with the Company, provided that such persons are offered employment following the Closing on terms that are substantially the same as, or better than, the terms of their existing employment. The Company has not experienced any labor disputes or work stoppage due to labor disagreements. The Company is in compliance with all applicable Laws respecting employment and employment practices and terms and conditions of employment. The Company is not nor has -28- it ever been a party to any collective bargaining agreements and the Company has not been the subject of any organizational activity. 3.26. Employee Benefits. (a) Section 3.26 of the Disclosure Schedule lists each Employee Benefit Plan that the Company maintains or to which the Company contributes relating to current or former employees, officers or directors of the Company. (i) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) materially complies in form and in operation in all respects with the applicable requirements of ERISA, the Code, and other applicable Laws. (ii) All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code ss. 4980B have been met with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan subject to such Part. (iii) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date which are not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Company. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. (iv) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan intended to be qualified under Code ss. 401(a) is so qualified. (v) The market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or exceeds the present value of all vested and nonvested Liabilities thereunder determined in accordance with PBGC methods, factors, and assumptions applicable to an Employee Pension Benefit Plan terminating on the date for determination. -29- (vi) The Company has delivered to the Buyer correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan. (b) With respect to each Employee Benefit Plan that any of the Company and the Controlled Group of Corporations which includes the Company maintains or ever has maintained or to which any of them contributes, ever has contributed, or ever has been required to contribute: (i) Except as disclosed in ss. 3.26(b)(i) of the Disclosure Schedule, no such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer Plan) has been completely or partially terminated or been the subject of a Reportable Event as to which notices would be required to be filed with the PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit Plan (other than any Multiemployer Plan) has been instituted or threatened. (ii) There have been no Prohibited Transactions with respect to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or threatened. Neither the Sellers nor the Company has any Knowledge of any Basis for any such action, suit, proceeding, hearing, or investigation. (iii) The Company has not incurred, and none of the Sellers has any reason to expect that the Company will incur, any Liability to the PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA (including any withdrawal Liability) or under the Code with respect to any such Employee Benefit Plan which is an Employee Pension Benefit Plan. (c) None of the Company or the other members of the Controlled Group of Corporations that has ever included the Company contributes to, ever has contributed to, or ever has been required to contribute to any Multiemployer Plan or has any Liability (including withdrawal Liability) under any Multiemployer Plan. -30- (d) The Company does not maintain or contribute to nor has it ever maintained or contributed to, or ever been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code ss. 4980B). (e) At or prior to the Closing, the Company will have terminated all Employee Benefit Plans and Employee Welfare Benefit Plans, and the Buyer shall incur no Liability as a result of such terminations or in respect thereto. (f) The transactions contemplated by this Agreement shall not alone or upon the occurrence of any additional or subsequent event, result in any payment of severance or otherwise, or acceleration, vesting or increase in benefits under any Employee Benefit Plan for the benefits of any current or former director, officer or employee of the Company. 3.27. Environment, Health, and Safety. (a) Except as disclosed in ss. 3.27 of the Disclosure Schedule: (i) the Company is and has been in compliance with all applicable Environmental Laws and Safety Laws the violation of which could have a Material Adverse Effect; (ii) the Company has obtained, and is and has been in material compliance with the conditions of, all Environmental Permits required for the continued conduct of the business of the Company in the manner now conducted and presently proposed to be conducted; (iii) the Company has filed all required applications, notices and other documents necessary to effect the timely renewal or issuance of all Environmental Permits for the continued conduct of the business of the Company in the manner now conducted and presently proposed to be conducted; (iv) there are no past or present events, conditions or circumstances related to environmental or health and safety matters that are likely to have a Material Adverse Effect or which would interfere with compliance with any Environmental Law or Permit or Safety Law; (v) there are no circumstances or conditions present at or arising out of the present or, to the Knowledge of the Sellers, former assets, properties, leaseholds, businesses or operations of the Company in respect of off-site -31- storage, transportation or disposal of, or any off-site Release of, a Chemical Substance which reasonably may be expected to give rise to any Environmental Liabilities and Costs; (vi) there are no circumstances or conditions present at or arising out of the present or former assets, properties, leaseholds, businesses or operations of the Company, including but not limited to any on-site Storage, use, disposal or Release of a Chemical Substance, which reasonably may be expected to give rise to any Environmental Liabilities and Costs or Safety Liability and Costs; (vii) none of the Company or the Sellers or the present or past assets, properties, business, leaseholds or operations of the Company has received or is subject to, or within the past three years has been subject to, any outstanding order, decree, judgment, complaint, agreement, claim, citation, or notice or is subject to any ongoing judicial or administrative proceeding indicating that the Company, the Sellers or the past and present assets of the Company are or may be: (A) in violation of any Environmental Law; (B) in violation of any Safety Laws; (C) responsible for the on-site or off-site storage or Release of any Chemical Substance; or, (D) liable for any Environmental Liabilities and Costs or Safety Liabilities and Costs; (viii) none of the Company or the Sellers have any reason to believe that the Company will become subject to a matter identified in subsection (vii); and, no investigation or review with respect to such matters is pending or, to the Knowledge of the Company or the Sellers, is threatened, nor has any authority or other third-party indicated an intention to conduct the same; (ix) neither the business of the Company nor any of its properties or assets is subject to, or as a result of the transactions contemplated by this Agreement will be subject to, the requirements of any Environmental Laws which require notice, disclosure, cleanup or approval prior to transfer of the shares or the business of the Company or which will impose Liens on any such asset or property or otherwise interfere with or affect the business of the Company; (x) Section 3.27 of the Disclosure Schedule lists all property presently or previously leased, owned or operated by the Company and identifies all such property (and the area within that property) that has been used by the Company or, to the Knowledge of the Sellers, by any other Person (including a prior owner or operator) for the storage or disposal of Chemical Substances; -32- (xi) Section 3.27 of the Disclosure Schedule lists all off-site locations, including, without limitation, commercial waste disposal facilities or municipal landfills, to which or at which Chemical Substances originating from the Company, or its assets, properties or business have been sent (or otherwise have come to be located) in amounts that would require a waste manifest under the Resource Conservation and Recovery Act of 1976 as now in effect for treatment, storage, disposal, reuse or recycling; (xii) Section 3.27 of the Disclosure Schedule sets forth a list of all underground storage tanks owned or operated at any time by the Company and except as disclosed in ss. 3.27 of the Disclosure Schedule, no such tank is leaking or has leaked at any time in the past, and there is no pollution or contamination of the Environment caused by or contributed to or threatened by a Release of a Chemical Substance from any such tank; and (xiii) Section 3.27 of the Disclosure Schedule lists all environmental audits, inspections, assessments, investigations or similar reports in the Company's possession or of which the Sellers or the Company have Knowledge relating to the assets, properties, or business of the Company or the compliance of the same with applicable Environmental Laws and Safety Laws. (b) For purposes of this ss. 3.27 only, all references to the "Company" are intended to include any and all other entities to which, to the Knowledge of the Sellers, the Company may be considered a successor under applicable Environmental Laws. The representations and warranties in this ss. 3.27 are the only representations and warranties with respect to Environmental Laws or Environmental Liabilities and Costs, or Safety Laws or Safety Liabilities and Costs notwithstanding any other language in this Agreement of general applicability. 3.28. Affiliated Transactions. Except as set forth in ss. 3.28 of the Disclosure Schedule, the Company is not a party to or bound by any Contractual Obligation with any of the Stockholders or any of its Affiliates or any member of their family and none of the Stockholders, directors or officers of the Company or any of its Affiliates or members of their family owns or otherwise has any rights to or interests in any asset, tangible or intangible, which is used in the business of the Company. 3.29. Government Contracts. Except as set forth in ss. 3.29 of the Disclosure Schedule, the Company has not been and is not a party to any Contractual Obligation with any federal, state or local government agency. 3.30. Distributors, Customers, Suppliers. Section 3.30 of the Disclosure Schedule sets forth a complete and accurate list of (i) all of the distributors for the Company's products -33- indicating the specific product, existing Contractual Obligation, if any, with each such distributor and the volume of products distributed, (ii) the ten largest customers (by dollar volume) of the Company during the Most Recent Fiscal Year, indicating the existing Contractual Obligation with each such customer by product and (iii) all suppliers of significant materials or services to the Company, including, without limitation, manufacturing subcontractors, indicating the Contractual Obligation for continued supply from such Person. 3.31. No Illegal Payments, Etc. None of the Sellers or the Company nor any of their directors, officers, consultants, employees or agents, has (a) directly or indirectly given or agreed to give any illegal gift, contribution, payment or similar benefit to any supplier, customer, governmental official or employee or other Person who was, is or may be in a position to help or hinder the Company (or assist in connection with any actual or proposed transaction) or made or agreed to make any illegal contribution, or reimbursed any illegal political gift or contribution made by any other Person, to any candidate for federal, state, local or foreign public office (i) which might subject any of the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding or (ii) the non- continuation of which has had or might have a Material Adverse Effect or (b) established or maintained any unrecorded fund or asset or made any false entries on any books or records for any purpose. 3.32. Books and Records. Except as disclosed in ss. 3.32 of the Disclosure Schedule; the books and all corporate (including minute books and stock record books) and financial records of the Company are complete and correct in all material respects and have been maintained in accordance with applicable sound business practices, Laws and other requirements. 3.33. Consents. Section 3.33 of the Disclosure Schedule sets forth a true, correct and complete list of the identities of any Person whose consent or approval is required and the matter or Contractual Obligation to which such consent relates in connection with the transactions contemplated by this Agreement. 3.34. Disclosure. The representations and warranties contained in this ss. 3 (including the Disclosure Schedule and any other schedules and exhibits required to be delivered by Sellers to Buyer pursuant to this Agreement) and any certificate furnished or to be furnished by Sellers to Buyer do not contain and will not contain any untrue statement of a material fact, and the Disclosure Schedule does not omit to state any material fact necessary in order to make the statements and information contained in the Disclosure Schedule not misleading. 3.35. Officers and Employees. Other than Gregory Fodell, Brian Zaitz, Glen Souder, Jeff Maynard and David Kleb (the "Management Group"), there are no other officers, consultants, agents or principal employees of the Company who have Knowledge of, or possess material information concerning, the financial matters, the operations of, or the -34- conduct of business of, the Company that differs from or is in addition to the Knowledge of such information in the possession of the Management Group. 3.36. Investment Intent; Related Matters, including Securities Law Matters. (a) Each Seller is acquiring the shares of B/E Common Stock to be acquired by such Seller hereunder as a result of the Merger for such Seller's own account, for investment, and not with a view to, or for sale in connection with, any distribution thereof within the meaning of the Securities Act, in a manner which is or would be in violation of any applicable Law, including, without limitation, the Securities Act. (b) Such Seller understands and agrees that the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger will not be registered or qualified under the Securities Act or state "blue-sky" or other securities laws and therefore cannot be resold unless such resale is registered under the Securities Act and applicable state laws or unless an exemption from such registration requirement is available. (c) Such Seller is able to bear the economic risk of holding the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger for an indefinite period of time and is experienced and has such knowledge and experience in financial and business matters that such Seller is capable of evaluating the risks and merits of acquiring the shares of B/E Common Stock. Such Seller acknowledges that the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger will bear a legend to the effect that transfers are restricted unless (i) the transfer is exempt from the registration requirements under the Securities Act and the Buyer receives an opinion of counsel satisfactory to the Buyer to that effect or (ii) the transfer is made pursuant to an effective registration statement under the Securities Act. (d) Such Seller understands that, except as provided in ss. 5.13, the Buyer is under no obligation to effect a registration of any shares of B/E Common Stock under the Securities Act. (e) Such Seller has been provided access to such information and documents regarding the Buyer as such Seller has requested and has been afforded an opportunity to ask questions of and receive answers from representatives of the Buyer concerning the terms and conditions of this Agreement and the business, assets and condition, financial and otherwise, of the Buyer. -35- 4. Representations and Warranties of the Buyer and Acquisition. The Buyer and Acquisition jointly and severally represent and warrant to the Sellers as follows as of the date of this Agreement: 4.1. Organization of the Buyer. Each of Buyer and Acquisition is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware and Texas, respectively. 4.2. Authorization of Transaction. Each of Buyer and Acquisition has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its respective obligations hereunder. All corporate and other actions or proceedings to be taken by or on the part of Buyer or Acquisition to authorize and permit the execution and delivery by Buyer and Acquisition of this Agreement and the respective instruments required to be executed and delivered by Buyer and Acquisition pursuant hereto, the performance by Buyer and Acquisition of their respective obligations hereunder, and the consummation by the Buyer and acquisition of the transactions contemplated herein, have been duly and properly taken. This Agreement has been duly executed and delivered by each of the Buyer and Acquisition and constitutes the valid and legally binding obligation of the Buyer and Acquisition, enforceable in accordance with its terms and conditions. 4.3. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate any Law or other restriction of any government, governmental agency, or court to which the Buyer or Acquisition is subject or any provision of their respective charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contractual Obligation to which the Buyer or Acquisition is a party or by which it is bound or to which any of their assets are subject. Neither the Buyer nor Acquisition needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except for the filing of the Articles of Merger with the Secretary of State of the State of Texas and listing of the B/E Shares on the Nasdaq National Market. 4.4. Brokers' Fees. Neither Buyer nor Acquisition has any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Sellers could become liable or obligated. 4.5. Investment Intent. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of ss. 2(11) of the Securities Act. -36- 4.6. Status of B/E Common Stock. When issued to the Sellers pursuant to the Merger, the shares of B/E Common Stock so issued will be duly authorized, validly issued, fully paid and nonassessable. 4.7. Information Concerning Buyer. The Buyer's Registration Statement on Form S-4 as filed with the Securities and Exchange Commission on March 9, 1998, copies of which have been furnished to the Sellers, as of its date did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading; and since March 9, 1998, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Buyer and its Subsidiaries, taken as a whole. 4.8. No Reliance. In executing this Agreement and consummating the transactions contemplated hereby, Buyer has not relied upon any representation, warranty, statement or other information made or provided by the Company, the Sellers or any of their employees, agents or other representatives that is not contained in this Agreement, the Disclosure Schedules or the certificates or other documents required to be delivered by the Company or the Sellers pursuant to this Agreement. 5. Covenants. The Parties agree as follows: 5.1. General. Each of the Parties will use its best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in ss. 6). 5.2. Notices and Consents. The Company and Sellers have given any notices to third parties, and will each use their best efforts to obtain any third party consents, that are required in connection with the transactions contemplated by this Agreement, as set forth in ss. 3.33 to the Disclosure Schedule. 5.3. Operation of Business. The Company will not engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, the Company (i) will not (A) issue, sell or otherwise dispose of any of its capital stock or grant any options, warranties or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock, declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, purchase, or otherwise acquire any of its capital stock, (B) otherwise engage in any practice, take any action, or enter into any transaction of the sort described in ss. 3.11, and (ii) will (A) keep available to Buyer the services of the Company's present officer's, employees, agents and independent contractors and (B) preserve for the benefit of Buyer the goodwill of the Company's customers, suppliers, landlords and others having business relations with it. -37- 5.4. Preservation of Business. The Company will keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees. 5.5. Full Access. The Company will permit representatives of the Buyer to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company, to all premises, properties, personnel, books, records (including Tax records), contacts, and documents of or pertaining to the Company. 5.6. Notice of Developments. Each Party will give prompt written notice to the other Party of any development causing a breach of any of its own representations and warranties in ss. 3 and ss. 4. No disclosure by any Party pursuant to this ss. 5.6, however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentations, breach of warranty, or breach of covenant. 5.7. Exclusivity. Neither the Company nor the Sellers will (and the Company will not cause or permit any of its officers, directors, agents or Affiliates to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating or enter into or consummate any transaction relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets (other than sales of inventory for a fair value in the Ordinary Course of Business), including any acquisition structured as a merger, consolidation, or share exchange or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. The Company will notify the Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. 5.8. Title Insurance. The Sellers will deliver to the Buyer the most recent title insurance policies and all riders and endorsements thereto for each parcel of real estate that the Company owns. 5.9. Access to Records after Closing. For a period of five years after the Closing Date, the Sellers and their representatives shall have reasonable access to all of the books and records of the Company to the extent that such access may reasonably be required by the Sellers in connection with matters relating to or affected by the operations of the Company prior to the Closing Date. Such access shall be afforded by Buyer upon receipt of reasonable advance notice and during normal business hours. Sellers shall be solely responsible for any costs or expenses incurred by them pursuant to this ss. 5.10. If Buyer shall desire to dispose of any of such books and records prior to the expiration of such five-year period, Buyer shall, prior to such disposition, give the Sellers a reasonable opportunity, at Sellers' expense, to segregate and remove such books and records as Sellers may select. -38- 5.10. Escrow of Shares Pending Resolution of Certain Pre-Closing Matters. Upon consummation of the Merger, Boston Equiserve, as transfer agent and escrow agent (the "Escrow Agent"), will hold certificates issued in the name of each of the Stockholders representing a portion, rounded to the nearest whole share, of the B/E Shares having a value (calculating the value per share at the Formula Price Per Share) in the aggregate of $499,975 (the "Escrow Amount") in a separate account subject to a global stop order and the Escrowed Shares shall be held and either released to the Sellers or surrendered to the Buyer according to the provisions of this ss.5.10 and the Letter of Instruction in the form attached hereto as Exhibit A to be delivered to the Escrow Agent. The Escrowed Shares of each Seller shall be applied to indemnify and hold harmless the Buyer and its Affiliates against and in respect of any and all Losses specified in ss. 9.2 for which the Buyer and its Affiliates are entitled to indemnification pursuant to the provisions of ss. 9, the amount of such indemnification to be determined as provided in ss. 9; provided, however, that, subject to ss. 9.2, Buyer's recourse against Sellers shall not be limited by the existence or amount of the escrow provided hereunder. Each Seller shall be entitled to vote such Escrowed Shares as are, from time to time, held for such Seller's account as Escrowed Shares and to receive any dividend or distribution thereon (other than dividends or distributions in the form of capital stock of the Buyer or otherwise falling within the definition of "Escrowed Shares" hereunder, which shall be delivered to the Escrow Agent and held as part of the Escrowed Shares). (a) Term of Escrow. Except as provided in ss. 5.10(b), the Escrowed Shares shall be released from escrow on the earlier of (i) the date twenty (20) days following the date on which the Buyer's independent auditors shall deliver their signed report on their audit of the Buyer's financial statements for the fiscal year ending February 27, 1999, or (ii) the date one year from the Closing Date (such earlier date being hereinafter sometimes referred to as the "Release Date"). (b) Sale of Shares. In the event that the Sellers notify Buyer of their intent to sell or transfer any of the Escrowed Shares, the Buyer and Sellers shall negotiate in good faith an escrow agreement reasonably satisfactory to both parties to provide for the escrow of the proceeds from any such sale or transfer in accordance with the terms of this Agreement, including without limitation this ss. 5.10, until the Release Date. (c) Formula for Number of Escrowed Shares to be Returned to the Buyer. The number of Escrowed Shares to be returned to the Buyer in respect of each Loss for which it is entitled to indemnity hereunder shall be computed by dividing the dollar amount of the Sellers' liability in respect of such Loss by the dollar amount of the Formula Per Share Price (subject to appropriate adjustment in the event of a stock dividend on, or stock split or combination of shares or other recapitalization of, or in respect of, the Escrowed Shares or in the event that other securities or property have been deposited in escrow in connection with any merger, consolidation or liquidation of -39- the Buyer); and such Escrowed Shares to be so returned to the Buyer shall be allocated among the Sellers in proportion to their then respective interests in the Escrowed Shares. (d) Certification of Losses, Return of Shares to the Buyer and Delivery of Balance to the Sellers. (i) The Buyer may, from time to time, following written notice to and with the written consent of the Sellers given prior to the Release Date, apply all or any part of the Escrowed Shares to the payment, reimbursement, settlement or discharge of any Loss that has occurred or will or may occur by instructing the Escrow Agent to return such Escrowed Shares to the Buyer; provided, however, that such notice shall specify the circumstances of such asserted Loss and the number of Escrowed Shares to be applied in respect thereof. (ii) The Buyer shall defer instructing the Escrow Agent to return Escrowed Shares to it if within 10 days after delivery of the notice to the Sellers referred to in ss. 5.10(c)(i): (x) it has received written notice from the Sellers claiming that any Losses claimed are not subject to indemnification pursuant to ss. 9.2, in which case such dispute shall be referred to arbitration in accordance with ss. 11.15; or (y) it has received written notice stating that the Sellers dispute and intend to defend the Liability, claim or action giving rise to such Loss or potential Loss, provided that, and for so long as, such defense is being conducted by such the Sellers at the expense of the Sellers and in a manner reasonably deemed by the Buyer to be satisfactory and effective to protect the Buyer against such Loss. (iii) Promptly after the Release Date, but in no event more than ten days after such date, the Escrowed Shares, or any balance thereof held by the Escrow Agent as to which notice shall not have been given by the Buyer as aforesaid on or prior to the Release Date, shall be delivered to the Sellers; and such Escrowed Shares to be so returned shall be allocated among the Sellers in proportion to their then respective interests in the Escrowed Shares. Any Escrowed Shares held by the Escrow Agent on the Release Date the application of which to an indemnifiable Loss has been deferred pursuant to clause (ii) of this paragraph (c) shall, upon final determination or settlement of the Loss being determined or contested (or, in the event that the Buyer has provided the notice to Sellers provided for in clause (i) of this paragraph (c) and no dispute is raised pursuant to clause (ii) of this paragraph -40- (c), upon determination of the amount of such Loss by the Buyer), be applied thereto and any balance delivered to the Sellers in proportion to their then respective interests in the Escrowed Shares. 5.11. Pooling of Interests Accounting Treatment. The Company and the Sellers acknowledge that the Buyer intends to account for the Merger and the consummation of the transactions contemplated hereby as a "pooling of interests" under generally accepted accounting principles and principles applied by the SEC, all as from time to time in effect. The Company and each Seller acknowledge, represent, warrant and agree that (a) the Company is not and has never been a division or more than 50% owned Subsidiary of any corporation nor been part of an acquisition which was later rescinded, (b) neither the Company nor such Seller has taken, within the previous two years, or will take, prior to the Closing, any action (i) to change the equity interest of the voting common stock of the Company (or amended the terms of any securities of the Company or of any Contractual Obligation relating thereto) in contemplation of the transactions contemplated by this Agreement, including, without limitation, any additional issuance, exchange or retirement of any securities of the Company, (ii) to permit the Company to reacquire any shares of its voting common stock or (iii) to permit the Company or any Subsidiary of the Company to dispose of a significant portion of its assets in contemplation of the transactions contemplated by this Agreement, (c) none of the Sellers has entered into any agreement that would restrict any such Person's voting rights with respect to the B/E Shares to be issued pursuant to the Merger in accordance with ss. 2.4, (d) the ratio of the interest in the Company of each holder of Company Common Stock to each other holder of Company Common Stock will not be changed by the consummation of the transactions contemplated by this Agreement and (e) neither the Company nor any Seller has at any time since January 1, 1996 acquired any shares of B/E Common Stock, nor will any Seller acquire any shares of B/E Common Stock prior to the Closing. In addition, each Seller agrees that such Seller will not sell or otherwise dispose of any of the B/E Shares to be received by such Seller, or in any other way reduce such Seller's risk relative to such B/E Shares, prior to the date on which the Buyer files with the SEC or makes publicly available financial results covering at least 30 days of post-merger combined operations, and that the certificates evidencing the B/E Shares shall bear a legend setting forth the foregoing restriction in the manner required by the corporate laws of the State of Delaware. 5.12. Plan of Reorganization and other Tax Matters. (a) This Agreement shall constitute a "plan of reorganization" for purposes of Section 368 of the Code. (b) Each Seller hereby waives (and releases the Company, the Buyer, Acquisition and their respective Affiliates from) any claims or Liabilities relating to or arising from, any and all Taxes imposed upon such Seller or any of its Affiliates in the event that the Merger and the consummation of the other transactions contemplated hereby -41- are determined not to constitute a reorganization which is Tax-free under Section 368 of the Code. (c) The parties hereto shall, and shall cause the Company to, provide such necessary information as any other party hereto may reasonably request in connection with the preparation of such party's Tax Returns, or to respond to or contest any audit, prosecute any claim for refund or credit or otherwise satisfy any legal requirement relating to Taxes and the Company. (d) The obligations of the parties set forth in this Agreement relating to Taxes shall, except as otherwise agreed in writing, be unconditional and absolute and shall remain in effect without limitation as to time or amount of recovery by the Buyer, Acquisition and the Sellers. (e) There shall be withheld from any amount payable hereunder such amounts as may be required to be withheld under applicable law. (f) The Sellers shall be liable for, shall hold the Buyer and the Company harmless against, and agree to pay all sales, transfer, stamp, value added, use, real property transfer and similar Taxes incurred in connection with the transactions contemplated by this Agreement. (g) At Closing, the Sellers shall obtain an opinion from their counsel that the Merger and the consummation of the other transactions contemplated hereby will qualify as a Tax-free reorganization pursuant to ss. 368(a) of the Code. 5.13. Registration Rights. (a) General. (i) Within 120 days after the Closing, the Buyer shall file (and shall use reasonable efforts to cause to become effective as soon as practicable following the date on which the Buyer files with the SEC or makes publicly available financial results covering at least 30 days of post-Merger combined operations of the Buyer and the Company) a registration statement on Form S-3 under the Securities Act, covering the Registrable Securities, which registration statement shall be kept in effect in the manner and for the period specified in ss. 5.13(c)(ii). As used herein, the term "Registrable Securities" shall mean (i) the B/E Shares at any time outstanding and that are owned by any of the Sellers, (ii) any shares of common stock or other securities issued as (or issuable upon the conversion or exercise of any warrant, right, class of common stock or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Buyer -42- generally for, or in replacement by the Buyer generally of, such B/E Shares, and (iii) any securities issued in exchange for such B/E Shares in any merger or reorganization of the Buyer; provided, however, that once issued, such B/E Shares and other securities shall cease to be Registrable Securities when (x) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (y) they shall have been sold pursuant to Rule 144 or shall no longer be subject to restriction on resale due to the termination of the holding period requirements (as in effect from time to time) of Rule 144, or (z) they shall have ceased to be outstanding. (ii) Whenever the Buyer proposes to register any of its Common Stock for its own or others' account under the Securities Act for a public offering (each a "Public Offering"), the Buyer shall furnish each Seller prompt notice of its intent to do so. Upon the request of any Seller given by written notice to the Buyer in accordance with ss. 11.7 hereof within ten (10) business days after the giving of such notice, the Buyer will use reasonable efforts to cause to be included in such registration all of the Registrable Securities which the Sellers request to be included in the Public Offering. Notwithstanding the foregoing provisions of this clause (ii): (x) if the Buyer is advised in writing by any managing underwriter of the securities being offered pursuant to any Public Offering that the Registrable Securities to be sold by the Sellers exercising incidental ("piggyback") rights to include in such Public Offering is greater than the number of Registrable Securities which can be included in such Public Offering without adversely affecting such Public Offering, the Buyer may reduce pro rata (based upon the number of Registrable Securities requested to be included by the Sellers exercising such "piggyback" rights) the number of Registrable Securities offered for the accounts of such Seller to a number of Registrable Securities deemed satisfactory by such managing underwriter and (y) no holder of Registrable Securities shall have any right of participation or otherwise with respect to any Public Offering on Form S-4 or Form S-8 or any similar form then in effect. (iii) Notwithstanding clause (ii) above, on one occasion only the Buyer may postpone taking action with respect to the registration statement referred to above or may require that the Sellers cease making sales under an effective registration statement for a reasonable period of time (not exceeding sixty (60) days), if, in the good faith opinion of the Buyer, effecting the registration or allowing such sales would adversely affect a material financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Buyer to make public disclosure of information the public disclosure of which could reasonably be expected to have a material adverse effect upon the Buyer. -43- (b) Expenses. The Buyer shall pay all expenses incident to the Buyer's performance of or compliance with its obligations under this ss. 5.13 to effect the registration of Registrable Securities required hereunder, including, without limitation, all registration, filing, securities exchange listing and NASDAQ fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger, shipping and delivery expenses, the fees and disbursement of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding any legal fees and expenses of counsel retained by the holders of the Registrable Securities being registered, and further excluding any underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities, which discounts, commissions and taxes in respect of Registrable Securities shall be payable by the holders thereof (in the case of an underwritten offering and the underwriter's fees, expenses, discounts or commissions, pro rata among such holders in proportion to the number of Registrable Securities being sold by them). (c) Further Obligations. Without limiting the foregoing, the Buyer will: (i) prepare and file with the SEC, the registration statement on Form S-3 to effect such registration (including such audited financial statements as may be required by the Securities Act) and use its reasonable efforts to cause such registration statements to become effective in the time frame outlined in ss. 5.13(a). (ii) prepare and file with the SEC such amendments and supplements to the registration statement referred to above and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply in all material respects with the requirements of the Securities Act with respect to the disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (i) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (ii) one hundred twenty (120) days after such registration statement becomes effective and in the event that any Registrable Securities remain unsold at the end of such period, the Buyer may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status; (iii) promptly notify each holder of Registrable Securities and the underwriter or underwriters, if any: -44- (w) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (x) of any written request by the SEC for amendments or supplements to such registration statement or prospectus or for supplemental information; (y) of the notification to the Buyer by the SEC of its initiation of any proceeding with respect to the issuance by the SEC of, or of the issuance by the SEC of, any stop order suspending the effectiveness of such registration statement; and (z) of the receipt by the Buyer of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction; (iv) furnish to each holder of Registrable Securities included in the registration statement such number of conformed copies of the registration statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any prospectus supplement) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such holder's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of such holder's Registrable Securities; (v) use reasonable efforts to register or qualify all Registrable Securities included in the registration statement under such other securities or blue sky laws of such jurisdictions as each holder thereof shall reasonably request which request is made within ten (10) days following the original filing of the registration statement and to keep such registration or qualification in effect for so long as the registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that the Buyer shall not for any such purpose be required (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (e) be obligated to be so qualified, (ii) to consent to general service of process in any such jurisdiction or (iii) to subject itself to taxation in any such jurisdiction by reason of such registration or qualification; and -45- (vi) use its reasonable efforts to obtain withdrawal of any order suspending the effectiveness of a registration statement, or the lifting any suspension of qualification (or exemption from qualification) of the offer and sale of any of the Registration Securities in any jurisdiction. The Buyer may require each Person whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish the Buyer and any underwriters with such information and affidavits regarding such holder and the distribution of such securities as the Buyer and such underwriters may from time to time reasonably request in writing and to otherwise cooperate in connection with such registration. At any time during the effectiveness of the registration statement covering Registrable Securities offered by a holder, if such holder becomes aware of any change materially affecting the accuracy of the information contained in such registration statement or the prospectus (as then amended or supplemented) relating to such holder, it will promptly notify the Buyer of such change. Upon receipt of any notice from the Buyer of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, each holder of Registrable Securities will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement until such holder receives copies of a supplemented or amended prospectus from the Buyer and, if so directed by the Buyer, shall deliver to the Buyer (at the Buyer's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event the Buyer shall give any such notice (or in the event that the Buyer exercises it right under ss. 5.13(a)(iii) to require cessation for up to 60 days of sales under an effective registration statement), the period referred to in paragraph (ii) of this ss. 5.13(c) shall be extended by a number of days equal to the number of days during the period from the giving of such notice from the Buyer to stop trading to the date when the copies of the supplemented or amended prospectus are sent to holders whose Registrable Securities are included in such registration statement (or, in the case of a cessation of trading under ss. 5.13(a)(iii) a number of days equal to the period of time the Buyer so causes cessation of trading under such registration statement). In the event that the SEC issues a stop order suspending the effectiveness of any registration statement filed under this ss. 5.13, the period referred to in paragraph (ii) of this ss. 5.13(c) shall also be extended by a number of days equal to the number of days during which such stop order is in effect. (d) Indemnification. -46- (i) The Buyer shall, to the full extent permitted by law, indemnify and hold harmless each seller of Registrable Securities included in the registration statement filed pursuant to this ss. 5.13, its directors, officers, and partners, and each other Person, if any, who controls any such seller within the meaning of the Securities Act, against any Losses to which such seller or any such director, officer, partner or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or claims, actions, suits, proceedings, arbitration or investigations in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in such registration statement, any preliminary prospectus, final prospectus or prospectus supplement contained therein or filed with the SEC, or any amendment or supplement thereto, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading; provided, that the Buyer shall not be liable in any such case to the extent that any such Loss (or any claim, action, suit, proceeding, arbitration or investigation in respect thereof) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such registration statement, preliminary prospectus, final prospectus, amendment or supplement in reliance upon and in conformity with information furnished to the Buyer by such seller. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, partner or controlling Person, and shall survive the transfer of such securities by such seller. (ii) Each Person whose Registrable Securities are included or are to be included in the registration statement filed pursuant to this ss. 5.13, as a condition to including such holder's Registrable Securities in each registration statement, shall to the full extent permitted by law, indemnify and hold harmless the Buyer, its directors and officers, and each other Person, if any, who controls the Buyer within the meaning of the Securities Act, against any Losses to which the Buyer or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or claims, actions, suits, proceedings, arbitrations or investigations in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or prospectus supplement contained therein or filed with the SEC, or any amendment or supplement thereto, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, if such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Buyer by such seller -47- specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, amendment or supplement. Notwithstanding any contrary provision of ss. 9.2, the indemnification obligation of the Sellers under this ss. 5.13(c) shall in no way be limited to (and the Buyer shall not be constrained to seek in response to any failure to provide indemnity pursuant to this ss. 5.13(d)) recourse against Escrowed Shares. The foregoing indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Buyer or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. Such holders shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors and each other Person, if any, who controls any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to the Buyer. (iii) Promptly after receipt by any party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraph (i) or (ii) of this ss. 5.13(d), such party shall, if a claim in respect thereof is to be made against another party pursuant to such paragraphs, give written notice to the latter of the commencement of such action, provided that any failure of any Person to give notice as provided herein shall not relieve any other Person of its obligations under the preceding paragraph of this ss. 5.13(d), except to the extent that such other Person is actually prejudiced by such failure. In case any such action is brought, the party obligated to indemnify pursuant to the foregoing provisions of this ss. 5.13(d) shall be entitled to participate in and, unless, in the reasonable judgment of any indemnified party, a conflict of interest between such indemnified party and any indemnifying party exists with respect to such claim, to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that the indemnified party may participate in such defense at the indemnified party's expense. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to each indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld. -48- (iv) If the indemnity and reimbursement obligation provided for in any paragraph of this ss. 5.13(d) is unavailable or insufficient to hold harmless a party entitled to indemnification hereunder in respect of any Losses (or claims, actions, suits, proceedings, arbitrations or investigations with respect thereto) for which indemnification is provided therein, the party obligated to indemnify hereunder shall contribute to the amount paid or payable by the indemnified party as a result of such Losses (or claims, actions, suits, proceedings, arbitration or investigations) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of ss. 11(f) of the Securities Act) shall be entitled to contribution from any Person not guilty of such fraudulent misrepresentation. 5.14. Insurance. After the Closing, the Buyer shall use commercially reasonable efforts to obtain representation and warranty insurance (the "Insurance") for coverage in the amount of $1 million reasonably satisfactory to the Parties and the Sellers agree to use reasonable efforts in assisting the Buyer in obtaining such insurance. 5.15. Future Assurances. At any time and from time to time after the Closing, at the request of Buyer and without further consideration, Sellers will execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation and take such action as Buyer may reasonably determine is necessary to transfer, convey and assign to Buyer, and to confirm Buyer's title to or interest in the Company, to put Buyer in actual possession and operating control thereof and to assist Buyer in exercising all rights with respect thereto. The Sellers hereby constitute and appoint Buyer and its successors and assigns as their true and lawful attorneys in fact in connection with the transactions contemplated by this instrument, with full power of substitution, in the name and stead of the Sellers but on behalf of and for the benefit of the Buyer and its successors and assigns, to demand and receive any and all of the assets, properties, rights and business hereby conveyed, assigned, and transferred or intended so to be, and to give receipt and releases for and in respect of the same and any part thereof, and from time to time to institute and prosecute, in the name of the Sellers or otherwise, for the benefit of the Buyer or its successors and assigns, proceedings at law, in equity, or -49- otherwise, which the Buyer or its successors or assigns reasonably deem proper in order to collect or reduce to possession or endorse any of the assets of the Company and to do all acts and things in relation to the assets which the Buyer or its successors or assigns reasonably deem desirable. 6. Conditions to Obligation to Close. 6.1. Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (a) Representations and Warranties. The representations and warranties set forth in ss. 3 shall be true and correct when made and shall be deemed to have been made again at and as of the Closing Date and shall then be true and correct; (b) Performance by Sellers. The Sellers shall have performed and complied with all of their covenants, agreements and obligations hereunder through the Closing; (c) Consents. The Sellers shall have procured all of the governmental approvals, consents or authorizations and third party consents specified in ss. 3.33 and ss. 5.2; (d) Absence of Litigation. No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (iii) affect adversely the right of the Buyer to own the Shares, to operate the former businesses of the Company (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (e) Employment Agreement. Gregory Fodell shall have entered into an Employment Agreement substantially in the form of Exhibit D hereto and the same shall be in full force and effect; (f) No Loss of Material Distributors, Customers or Suppliers. None of the Sellers or the Company shall have been threatened or notified, orally or in writing, by one or more material distributors, customers or suppliers that such Persons have, and such Persons shall not have, terminated or intend to terminate or are considering terminating their respective business relationships with the Company or are modifying such relationships with the Company in a manner which is less favorable to the Company or have agreed not to or will not agree to do business with Buyer on and after the Closing on such terms and subject to conditions at least as favorable as provided to -50- the Company prior to Closing and the Sellers have no Knowledge of any facts which would form the Basis therefor; (g) Certificates. The Sellers shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in ss.ss. 6.1(a)-(f), and (j)-(l) are satisfied in all respects; (h) Opinion. The Buyer shall have received from counsel to the Company and the Sellers an opinion in form and substance as set forth in Exhibit E attached hereto, addressed to the Buyer, and dated as of the Closing Date; (i) Due Diligence. The Buyer shall have completed to its satisfaction its due diligence investigation of the Company, including, without limitation, a Phase I study of the land and facility at 419 Van Molan, Houston, Texas; (j) No Material Adverse Change. There shall not have been any change which has resulted in a Material Adverse Effect and no event has occurred or circumstance exists that may result in such a Material Adverse Effect; (k) Stockholder Approval. All stockholder approvals necessary for the consummation of the transactions contemplated hereby shall have been obtained and shall be in full force and effect; (l) Resignations. The Buyer shall have received the resignations, dated as of the Closing Date, of each officer and director of the Company; (m) Affidavit. Each of the Sellers shall have delivered to Buyer an affidavit (in form and substance reasonably satisfactory to Buyer) meeting the requirements necessary to establish that the Sellers are eligible for the exemption from withholding provided by Code ss. 1445(b)(2); (n) Pooling Treatment. The Buyer shall be satisfied that there is not a material risk that the transactions contemplated hereby may not be accounted for by the Buyer as a pooling of interests; and (o) All Necessary Actions. All actions to be taken by Sellers in connection with the consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer. -51- The Buyer may waive any condition specified in this ss. 6.1 if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Agreement unless the writing specifically so states. 6.2. Conditions to Obligations of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (a) Representations and Warranties. The representations and warranties set forth in ss. 4 shall be true and correct at and as of the Closing Date; (b) Performance by Buyer. The Buyer shall have performed and complied with all of its covenants hereunder through the Closing; (c) Absence of Litigation. No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (d) Certificates. The Buyer shall have delivered to the Company a certificate to the effect that each of the conditions specified above in ss. 6.2(a)-(c) is satisfied in all respects; (e) Opinion. The Company and the Sellers shall have received from counsel to the Buyer an opinion in form and substance as set forth in Exhibit F attached hereto, addressed to the Company, and dated as of the Closing Date; (f) Tax Opinion. The Sellers shall have received from their counsel an opinion that the Merger and the consummation of the other transactions contemplated hereby will qualify as a Tax-free reorganization pursuant to ss. 368(a) of the Code; and (g) All Necessary Actions. All actions to be taken by Buyer in connection with the consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Sellers. The Sellers may waive any condition specified in this ss. 6.2 if they execute a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Agreement unless the writing specifically so states. -52- 7. Confidentiality. Each of the Parties will treat and hold as confidential all of the Confidential Information relating to the other Parties or to the Company or its assets, properties or business, will refrain from using or disclosing to any Person any such Confidential Information (except to their respective counsel, accountants and representatives in connection with this Agreement), and will deliver promptly to the Party who provided the Confidential Information (or, at the request and option of that Party, destroy) all tangible embodiments (and all copies) of such Confidential Information which are in his, her or its possession. In the event that any of the Parties is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Party will notify the Party who disclosed such Confidential Information (the "Disclosing Party") promptly of the request or requirement so that the Disclosing Party may seek an appropriate protective order or waive compliance with the provisions of this ss. 7. If, in the absence of a protective order or the receipt of a waiver hereunder, any of the Parties is, on the advice of counsel, compelled to disclose any Confidential Information of another Party to any tribunal or else stand liable for contempt, that such Party may disclose the Confidential Information to the tribunal; provided, however, that such Party shall use its best efforts to obtain, at the request of the Disclosing Party, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Disclosing Party shall designate. Each of the Sellers also hereby covenants and agrees that on and after the Closing, such Seller shall maintain the confidentiality of any Confidential Information relating to the assets, properties or business of the Company. The Buyer shall have no further obligation under this ss. 7 after the Closing. 8. Noncompetition. (a) Each Seller agrees that, in consideration of the purchase by Buyer hereunder, it shall not, on or prior to the date which is five (5) years after the Closing Date, directly or indirectly, run, own, manage, operate, control, be employed by, provide consulting services to, be an officer or director of, participate in, lend his, her or its name to, invest in or be connected in any manner with the management, ownership, operation or control of any business, venture or activity which competes with the business (including parts and accessories therefor) being conducted at the Closing Date by the Company or relating to products performing functions similar to those of the Products; provided, however, no Seller shall be considered to be in default of this ss. 8 solely by virtue of holding for portfolio purposes as a passive investor not more than five percent (5%) of the issued and outstanding equity securities of a corporation, if equity securities of the same class and type of such corporation or quoted on a stock exchange or an over-the-counter market within the United States. (b) Each of the Sellers further agrees that for a period of five (5) years after the Closing Date such Seller will not directly or indirectly, without the prior written consent of Buyer, recruit, offer employment, employ, engage as a consultant, lure or entice away or in any other manner persuade or attempt to persuade any person who is an employee of the Company, the Buyer or any Subsidiary, group, or division of Buyer or any Affiliate thereof -53- leave the employ of Buyer unless such person has been terminated by the Buyer or an Affiliate of Buyer. 9. Indemnification. 9.1. Survival of Representations and Warranties. All of the representations and warranties of the Sellers (except for those contained in ss.ss. 3.2 (Capitalization and Ownership of the Company), 3.3 (Authorization of Transaction), 3.5 (Brokers Fees), 3.15 (Taxes) and 3.27 (Environment, Health and Safety)) contained herein or in any document certificate or other instrument required to be delivered hereunder shall survive the Closing and continue in full force and effect until two years after Closing (the "Survival Period"). The representations and warranties of Sellers contained in ss. 3.27 shall survive the Closing and shall continue in full force and effect for a period of six years thereafter. The representations and warranties of Sellers contained in ss.ss. 3.2, 3.3, 3.5 and 3.15 shall survive the Closing and shall continue in full force and effect without limit as to time (subject to any applicable statutes of limitations and any extensions or waivers thereof). The liability of any Party to any other Party for breach of any representations or warranties contained in this Agreement shall be limited to claims for which the Party asserting such claim shall deliver notice to the Party against whom such claim is made prior to the expiration of the Survival Period. All of the representations and warranties of the Buyer contained in ss. 4 shall survive the Closing and shall continue in full force and effect until three years after the Closing. All covenants and indemnities of any Party in this Agreement or in any document or certificate delivered hereunder shall, unless otherwise specifically provided therein, remain in full force and effect forever. 9.2. Indemnity by Sellers. The Sellers hereby agree to jointly and severally indemnify, defend and hold harmless Buyer, Acquisition and the Company and each of their directors, officers and Affiliates against and in respect of all Liabilities, obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings, damages, dues, assessments, Taxes, losses, fines, penalties, expenses, fees, costs, amounts paid in settlement (including reasonable attorneys' and expert witness fees and disbursements in connection with investigating, defending or settling any action or threatened action), arising out of any claim, damages, complaint, demand, cause of action, audit, investigation, hearing, action, suit or other proceeding asserted or initiated or otherwise existing in respect of any matter (collectively, the "Losses") that results from (a) the inaccuracy or breach of any representation or warranty made by Sellers herein, or resulting from any misrepresentation or breach of warranty or from any misrepresentation in or omission from any schedule, document, certificate or other instrument required to be furnished by Sellers hereunder; provided, however, that for purposes of this ss. 9.2(a) all qualifications in the representations and warranties as to materiality, including without limitation Material Adverse Effect, shall be determined as follows (i) with respect to any individual item of Loss or related items of Loss, if such item or items exceed $10,000 and (ii) if the aggregate dollar amount of Losses which would otherwise be indemnifiable pursuant to ss. 9.2(a) exceeds $100,000, in which case the -54- Sellers will be liable for all Losses and Sellers' liability under ss. 9.2(a); provided, further, that the foregoing limitations shall not apply to any Losses resulting from representations set forth in ss. 3 which were fraudulently made or any breach or inaccuracy of the representations and warranties contained in ss.ss. 3.2, 3.3, 3.5, 3.15 or 3.27 and (b) nonfulfillment of any agreement or covenant of Sellers contained herein or in any agreement or instrument required to be entered into in connection herewith. Sellers' liability under ss. 9.2(a) in respect of Losses shall not exceed (c) in the event that the Buyer obtains the Insurance, $1,500,000 and (d) in the event that the Buyer does not obtain the Insurance, $2,000,000; provided, further, that in the event that the Buyer does not obtain the Insurance, the Sellers shall not be responsible for the first $100,000 of indemnifiable Losses in excess of $500,000. The foregoing limitation shall not apply to any Losses resulting from representations set forth in ss. 3 which were fraudulently made or any breach or inaccuracy of the representations and warranties contained in ss.ss. 3.2, 3.3, 3.5, 3.15 or 3.27. The amounts payable by the Sellers pursuant to this ss. 9.2 shall be net of any proceeds actually received by the Buyer from the Insurance. Buyer shall provide Sellers written notice for any claim made in respect of the indemnification provided in this ss. 9.2, whether or not arising out of a claim by a third party. 9.3. [Reserved]. 9.4. Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and hold harmless Sellers and their respective directors, officers and Affiliates against and in respect of all Liabilities, obligations, judgments, liens, injunctions, charges, orders, decrees, rulings, damages, dues, assessments, Taxes, losses, fines, penalties, damages, expenses, fees, costs, amounts paid in settlement (including reasonable attorneys' and expert witness fees and disbursements in connection with investigating, defending or settling any action or threatened action) arising out of any claim, complaint, demand, cause of action, audit, investigation, hearing, action, suit or other proceeding asserted or initiated in respect of any matter that results from the inaccuracy of any representation or warranty made by Buyer herein, or resulting from any misrepresentation, breach of warranty or nonfulfillment of any agreement or covenant of Buyer contained herein or in any agreement or instrument required to be entered into in connection herewith or from any misrepresentation in or omission from any schedule, document, certificate or other instrument required to be furnished by Buyer hereunder or any Liabilities of the Company or the Surviving Corporation other than those for which indemnification by the Sellers is expressly provided herein. 9.5. Matters Involving Third Parties. (a) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this ss. 9, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any -55- Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (b) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (iv) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, and (v) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. (c) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with ss. 9.5(b), (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not unreasonably be withheld), and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim unless written agreement is obtained releasing the Indemnified Party from all liability thereunder. (d) In the event any of the conditions in ss. 9.5(b) is or becomes unsatisfied, however, (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including attorneys' fees and expenses), and (iii) the Indemnifying Parties will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this ss. 9. -56- 9.6. Other Indemnification Provisions. Each of the Sellers hereby agrees that he or it will not make any claim for indemnification against any of the Buyer, the Company or any of their Subsidiaries and other Affiliates solely by reason of the fact that he or it was a director, officer, employee, or agent of the Company or was serving at the request of any such entity as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, Losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Buyer or the Company against such Seller (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable Law, or otherwise). 9.7. Exclusive Remedy. This Agreement shall provide the sole and exclusive remedy for any and all Losses sustained or incurred by Buyer, the Company or Sellers or their respective successors and assigns other than for equitable actions and fraud. 10. Termination. 10.1. Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below: (a) the Parties may terminate this Agreement by mutual written consent at any time prior to the Closing; (b) the Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (i) in the event the Sellers have breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer or Acquisition has notified the Sellers of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (ii) if the Closing shall not have occurred on or before April 30, 1998 by reason of the failure of any condition precedent under ss. 6.1 (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (c) the Sellers or the Company may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (i) in the event the Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Sellers or the Company has notified the Buyer of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (ii) if the Closing shall not have occurred on or before April 30, 1998 by reason of the failure of any condition precedent under ss. 6.2 (unless the failure results primarily -57- from the Company itself breaching any representation, warranty, or covenant contained in this Agreement). 10.2. Effect of Termination. If any Party terminates this Agreement pursuant to ss. 10.1, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach), other than the provisions of ss.ss. 7, 11.1 and 11.7. 11. Miscellaneous. 11.1. Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable Law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will provide the other Party with the opportunity to review in advance the disclosure). 11.2. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. 11.3. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. 11.4. Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party. 11.5. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 11.6. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 11.7. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication -58- hereunder shall be deemed duly given (i) upon confirmation of facsimile, (ii) one business day following the date sent when sent by overnight delivery and (iii) five business days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid at the following address: If to the Sellers: Gregory N. Fodell 16202 Crystal Creek Spring, TX 77379 Copy to: Bracewell & Patterson, L.L.P. 711 Louisiana Street, 26th Floor Houston, TX 77002-2781 Attn: Charles Still, Esq. If to the Buyer or Acquisition: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, FL 33414 Attn: Thomas P. McCaffrey or Edmund J. Moriarty With a copy to: B/E Aerospace Services, Inc. 230 West Blueridge Avenue Orange, CA 92865 Attn: Sam G. Ayoub Copy to: Ropes & Gray One International Place Boston, MA 02110 Attn: Winthrop G. Minot, Esq. -59- Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. 11.8. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic Laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. 11.9. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 11.10. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 11.11. Expenses. Each of the Buyer and the Sellers will bear his or its own costs and expenses (including legal and accounting fees and expenses) and the Sellers will bear all of the costs and expenses (including legal and accounting fees and expenses) of the Company incurred in connection with this Agreement and the transactions contemplated hereby. The Company also agrees that it has not paid any amount to any third party, and will not pay any amount to any third party, with respect to any of the costs and expenses of the Company and the Sellers (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. 11.12. Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall -60- mean including without limitation. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with particularity and describes the relevant facts in detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. 11.13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 11.14. Specific Performance. Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity. 11.15. Arbitration. (a) Generally. Except solely as set forth in ss. 11.14 and ss. 11.15(c), each dispute, difference, controversy or claim arising in connection with or related or incidental to, or question occurring under, this Agreement or the subject matter hereof shall be finally settled under the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") by an arbitral tribunal composed of three arbitrators, at least one of whom shall be an attorney experienced in corporate transactions, appointed by agreement of the Parties in accordance with said Rules. In the event the Parties fail to agree upon a panel of arbitrators from the first list of potential arbitrators proposed by the AAA, the AAA will submit a second list in accordance with said Rules. In the event the Parties shall have failed to agree upon a full panel of arbitrators from said second list, any remaining arbitrators to be selected shall be appointed by the AAA in accordance with said Rules. If, at the time of the arbitration, the Parties agree in writing to submit the dispute to a single arbitrator, said single arbitrator shall be appointed by agreement of the parties in accordance with the -61- foregoing procedure, or, failing such agreement, by the AAA in accordance with said Rules. The foregoing arbitration proceedings may be commenced by any Party by notice to all other Parties. (b) Place of Arbitration. The venue of such arbitration shall be Los Angeles, California or any other place mutually agreed to by Buyer and Sellers. (c) Recourse to Courts. Subject to ss. 11.14, the Parties hereby exclude any right of appeal to any court on the merits of the dispute. The provisions of this ss. 11.15 may be enforced in any court having jurisdiction over the award or any of the Parties or any of their respective assets, and judgment on the award (including without limitation equitable remedies) granted in any arbitration hereunder may be entered in any such court. Nothing contained in this ss. 11.15 shall prevent any Party from seeking interim measures of protection in the form of pre-award attachment of assets or preliminary or temporary equitable relief. (d) Decision of Arbitral Tribunal. In the event of a dispute between the Parties hereunder, each Party shall present an offer of settlement which shall address all issues in dispute such that adoption of such offer of settlement would conclusively settle all items then in dispute. The arbitral tribunal shall be limited in its decision to choosing between the offers of settlement presented to it. The decision of the arbitral tribunal shall be final and binding on the Parties and non-appealable. The Party whose offer of settlement is not chosen by the arbitral tribunal shall pay all of the expenses of the arbitration. 11.16. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE SELLERS HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR PASSED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. -62- ***** IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. BE AEROSPACE, INC. By: ______________________________ Title: ____________________________ BE ACQUISITION CORP. By: ______________________________ Title: ____________________________ AEROSPACE INTERIORS, INC. By: ______________________________ Title: ____________________________ GREGORY AND DEBORAH FODELL PARTNERSHIP, LTD. By: Gregory N. Fodell, as General Partner ---------------------------------- By: Deborah Fodell, as General Partner ---------------------------------- -63- GREGORY AND DEBORAH FODELL PARTNERSHIP II, LTD. By: Gregory N. Fodell, as General Partner ---------------------------------- By: Deborah Fodell, as General Partner ---------------------------------- ---------------------------------- GREGORY N. FODELL -64- EX-99.2 8 EXHIBIT 99.2 Conformed Copy Exhibit 99.2 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER by and among BE Aerospace, Inc., BE Aerospace Acquisition Corp., Aerospace Lighting Corporation and The Stockholders of Aerospace Lighting Corporation JULY 30, 1998 TABLE OF CONTENTS 1. Definitions............................................................1 1.1. Rules of Construction.....................................10 2. The Merger............................................................10 2.1. Constituent Corporations; Surviving Corporation...........10 2.2. Certificate of Incorporation and Bylaws of the Surviving Corporation.............................................10 2.3. Directors and Officers of the Surviving Corporation.......10 2.4. Conversion of the Shares..................................11 2.5. Sellers' Representatives..................................11 2.6. The Closing...............................................12 2.7. Surrender of Shares; Stock Transfer Books.................12 2.8. Further Assurances........................................13 3. Representations and Warranties of the Sellers.........................13 3.1. Organization of the Company...............................13 3.2. Capitalization and Ownership of the Company...............14 3.3. Authorization of Transaction..............................14 3.4. Noncontravention..........................................15 3.5. Brokers' Fees.............................................15 3.6. Title to Assets...........................................15 3.7. Subsidiaries..............................................16 3.8. Financial Statements......................................16 3.9. Indebtedness; Guarantees..................................17 3.10. Absence of Changes........................................17 3.11. Absence of Undisclosed Liabilities........................19 3.12. Legal and Other Compliance................................20 3.13. No Material Adverse Change................................20 3.14. Taxes.....................................................20 3.15. Property, Plant and Equipment.............................22 3.16. Intellectual Property.....................................23 3.17. Inventories...............................................25 3.18. Contracts.................................................26 3.19. Notes and Accounts Receivable.............................27 3.20. Powers of Attorney........................................28 3.21. Insurance and Risk Management.............................28 3.22. Litigation................................................28 3.23. Product Warranties; Defects; Liability....................28 3.24. Employees.................................................29 -i- 3.25. Employee Benefits.........................................29 3.26. Environment, Health, and Safety...........................30 3.27. Affiliated Transactions...................................32 3.28. Government Contracts......................................33 3.29. Distributors, Customers, Suppliers........................33 3.30. No Illegal Payments.......................................33 3.31. Books and Records.........................................33 3.32. Disclosure................................................34 3.33. Investment Intent; Related Matters, Including Securities Law Matters.............................................34 4. Representations and Warranties of the Buyer and Acquisition...........35 4.1. Organization of the Buyer.................................35 4.2. Authorization of Transaction..............................35 4.3. Noncontravention..........................................35 4.4. Brokers' Fees.............................................36 4.5. Investment Intent.........................................36 4.6. Status of B/E Common Stock................................36 4.7. Information Concerning Buyer..............................36 4.8. Capitalization of Acquisition.............................36 5. Covenants.............................................................36 5.1. Access to Records after Closing...........................36 5.2. Escrow of Shares Pending Resolution of Certain Pre-Closing Matters.....................................37 5.3. Pooling of Interests Accounting Treatment.................38 5.4. Plan of Reorganization and other Tax Matters..............38 5.5. Registration Rights.......................................40 5.6. Compliance With New York Law..............................49 6. Deliveries at Closing.................................................49 6.1. Deliveries by Sellers.....................................49 6.2. Deliveries of the Buyer...................................50 7. Confidentiality.......................................................50 8. Noncompetition........................................................50 9. Indemnification.......................................................51 9.1. Survival of Representations and Warranties................51 Indemnity by Sellers..................................................52 9.3. Indemnity by Buyer........................................53 -ii- 9.5. Matters Involving Third Parties...........................54 9.6. Other Indemnification Provisions..........................55 10. Miscellaneous.........................................................55 10.1. Press Releases and Public Announcements.............55 10.2. No Third Party Beneficiaries........................55 10.3. Entire Agreement....................................55 10.4. Succession and Assignment...........................56 10.5. Counterparts........................................56 10.6. Headings............................................56 10.7. Notices.............................................56 10.8. Governing Law; Submission to Jurisdiction...........57 10.9. Amendments and Waivers..............................58 10.10. Severability........................................58 10.11. Expenses............................................58 10.12. Construction........................................58 10.13. Incorporation of Exhibits and Schedules.............59 10.14. Specific Performance................................59 10.15. Arbitration.........................................59 10.16. Waiver of Jury Trial................................60 -iii- Exhibits A - Form of Escrow Agreement B - Certificate of Merger C - Financial Statements D - Form of Consulting Agreement E - Form of Severance and Non-Competition Agreement F - Form of Opinion of Winthrop, Stimson, Putnam & Roberts, counsel to the Company and the Sellers G - Form of Opinion of Ropes & Gray, counsel to the Buyer Schedules Disclosure Schedule -- Exceptions to Representations and Warranties -iv- AGREEMENT AND PLAN OF REORGANIZATION AND MERGER This Agreement and Plan of Reorganization and Merger (the "Agreement") is entered into on July 30, 1998, by and among (i) BE AEROSPACE, INC., a Delaware corporation (the "Buyer"), (ii) BE AEROSPACE ACQUISITION CORP., a New York corporation and a wholly-owned subsidiary of the Buyer ("Acquisition"), (iii) AEROSPACE LIGHTING CORPORATION, a New York corporation (the "Company"), and (vi) the holders (the "Sellers") of all of the outstanding capital stock of the Company (the "Shares"), all of whom are signatories hereto. The Buyer, Acquisition, the Company and the Sellers are collectively referred to herein as the "Parties." This Agreement contemplates a transaction in which Acquisition will be merged with and into the Company as a result of which the Company will be the surviving corporation and a wholly-owned subsidiary of Buyer, upon the terms and subject to the conditions set forth herein and pursuant to the Business Corporation Law of the State of New York (the "New York Business Corporation Law"). The Parties intend that this transaction will constitute a "reorganization" described in ss. 368(a) of the Code (as hereinafter defined) and that the Buyer will be able to account for the acquisition of the Company by Buyer on a "pooling of interests" method (as such term is used in Accounting Principles Board Opinion No. 16). AGREEMENT Therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Definitions. "AAA" has the meaning set forth in ss. 10.15(a). "Acquisition" has the meaning set forth in the preamble. "Affiliate" means, as to the Company (or, if another Person is specified, as to such other specified Person), (i) each Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company (or such specified Person), including without limitation, in the case of the Company, each Subsidiary of the Company and each Seller, (ii) any Person who is or has been within two years of the time in question an officer, director or direct or indirect beneficial holder of at least 5% of any class of the outstanding capital stock of any Person referred to in clause (i) above and the members of the immediate family of each such officer, director or holder (and, if such specified Person is a natural person, of such specified Person), and (iii) each Person of which the Company (or such specified Person) or an Affiliate (as defined in clauses (i) or (ii) above) thereof shall, directly or indirectly, beneficially own at least 5% of any class of outstanding capital stock or other evidence or type of beneficial interest. "Affiliated Group" means any affiliated group within the meaning of Code ss. 1504(a) or any similar group defined under a similar provision of Law. "Aggregate Merger Consideration Amount" means $28,073,654. "Aggregate Deductible" has the meaning set forth in ss. 9.2. "Aggregate Threshold" has the meaning set forth in ss. 9.2. "Agreement" has the meaning set forth in the preamble. "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could reasonably be expected to form the basis for any specified consequence. "B/E Common Stock" means the common stock of the Buyer, par value $0.01 per share. "B/E Shares" has the meaning set forth in ss. 2.4. "Blackout Period" has the meaning set forth in ss. 5.5. "Buyer" has the meaning set forth in the preamble. "Certificate of Merger" means the certificate of merger attached as Exhibit B hereto. "Certificates" has the meaning set forth in ss. 2.7(a). "Chemical Substance" means any chemical substance, including but not limited to any (i) pollutant, contaminant, irritant, chemical, raw material, intermediate, product, by-product, slag, construction debris; (ii) industrial, solid, liquid or gaseous toxic or hazardous substance, material or waste; (iii) petroleum or any fraction thereof; (iv) asbestos or asbestos-containing material; (v) polychlorinated biphenyl; (vi) chlorofluoracarbons; and (vii) other substance, material or waste, which is identified or regulated under any Environmental Law or Safety Law, as in effect from time to time to the date hereof, or other comparable Laws as in effect from time to time to the date hereof. "Closing" has the meaning set forth in ss. 2.6. "Closing Date" means the date of this Agreement. -2- "Code" means the Internal Revenue Code of 1986, as amended. "Company" has the meaning set forth in the preamble. "Company Common Stock" has the meaning set forth in ss. 3.2. "Confidential Information" means any and all material information concerning the affairs of any Party or its Affiliates other than that information which is already generally known by or readily obtainable by the public through no fault of another Party. "Contractual Obligation" means, with respect to any Person, any legally binding contract, agreement, deed, mortgage, lease, license, indenture, commitment, undertaking, arrangement or understanding, written or oral, or other document or instrument, including, without limitation, any document or instrument evidencing or otherwise relating to any indebtedness but excluding the charter and by-laws of such Person, to which or by which such Person is a party or otherwise subject or bound or to which or by which any property or right of such Person is subject or bound. "Controlled Group of Corporations" has the meaning set forth in Code ss. 1563. "Deferred Intercompany Transaction" has the meaning set forth in Treas. Reg. ss. 1.1502-13. "Disclosure Schedule" has the meaning set forth in ss. 3. "Effective Date" means the date on which the Effective Time occurs. "Effective Time" means the time at which the Certificate of Merger shall be duly filed in the office of the Secretary of State of the State of New York. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or other fringe benefit plan or program or (e) profit sharing, bonus, stock option, stock purchase, equity, stock appreciation, deferred compensation, incentive, severance plan or other benefit plan. "Employee Pension Benefit Plan" has the meaning set forth in ERISA ss. 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss. 3(1). -3- "Environment" means soil, land surface or subsurface strata, real property, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwater, water body sediments, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource. "Environmental Laws" mean the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act, and the Clean Water Act, each as from time to time in effect to the date hereof and any other Law, as from time to time in effect to the date hereof, relating to: (a) the Release, containment, removal, remediation, response, cleanup or abatement of any sort of any Chemical Substance; (b) the manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, use, treatment, handling, storage, recycling, disposal or transportation of any Chemical Substance; (c) exposure of persons, including employees, to any Chemical Substance; (d) the management, use, storage, disposal, cleanup or removal of asbestos, asbestos-containing materials, polychlorinated biphenyls or any other Chemical Substance; (e) the pollution, protection or clean up of the Environment; or (f) noise. "Environmental Liabilities and Costs" means all Losses incurred by the Buyer or the Company: (i) for the Company to comply with any Environmental Law; (ii) as a result of a Release of any Chemical Substance; or (iii) as a result of any environmental conditions created by or arising out of the past or present operations of Sellers or the Company or any Subsidiary of the Company through the Closing Date or any environmental conditions present at any facility or site now or previously owned by the Company. "Environmental Permit" means any permit or authorization from any governmental authority required under, issued pursuant to, or authorized by any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as from time to time in effect to the date hereof. "Escrow Agent" has the meaning set forth in ss. 5.2. "Escrow Agreement" means the escrow agreement executed on the date hereof in the form of Exhibit A hereto. "Escrowed Shares" has the meaning set forth in ss. 2.4. "Extremely Hazardous Substance" has the meaning set forth in ss. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended from time to time in effect to the date hereof. -4- "Fiduciary" has the meaning set forth in ERISA ss. 3(21). "Financial Statements" has the meaning set forth in ss. 3.8. "Formula Price Per Share" means the amount that is equal to the arithmetic average of the closing sale prices of a share of B/E Common Stock as reported on the NASDAQ National Market System for the twenty consecutive trading days ending on July 23, 1998. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Indebtedness" has the meaning set forth in ss. 3.9. "Indemnified Party" has the meaning set forth in ss. 9.5(a). "Indemnifying Party" has the meaning set forth in ss. 9.5(a). "Individual Deductible" has the meaning set forth in ss. 9.2. "Individual Threshold" has the meaning set forth in ss. 9.2. "Intellectual Property" means the entire right, title and interest in and to all proprietary rights of every kind and nature, including patents, copyrights, Trademarks, mask works, trade secrets and proprietary information, all applications for any of the foregoing, and any license or agreements granting rights related to the foregoing (i) subsisting in, covering, reading on, directly applicable to or existing in the Products or the Technology, (ii) that are owned, licensed or controlled in whole or in part by the Company or any Subsidiary of the Company and relate to the business of the Company or any Subsidiary of the Company, or (iii) that are used in or necessary to the development, manufacture, sales, marketing or testing of the Products. "Knowledge" means actual knowledge after reasonable investigation and, when used with respect to the Sellers or the Company, shall mean the knowledge of each of Michael Tenzyk, Fred Buckholtz, William Brown, Louis Francisco, Scott Bohan, Gerard Stoehr, Joseph Westrick, William Reisenauer, and Allan Rosen; provided, however, that reasonable investigation shall not require investigation of third parties external to the Company, their activities or their documents. "Laws" means all laws, rules, regulations, codes, injunctions, judgments, orders, decrees, rulings, interpretations, constitution, ordinance, common law, treaty, or any other legal requirement of any federal, state, local municipal and foreign, international, or multinational government or administration and related agencies. -5- "Liability" means any liability or obligation (whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated and whether incurred or consequential), including, without limitation, any liability for Taxes. "Lien" means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for the purpose of subjection to the payment of any Indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom; provided, however, that the term "Lien" shall not include any of the following: (i) statutory liens for Taxes to the extent that the payment thereof is not in arrears or otherwise due, (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the uses of real property if the same do not detract from the value of the property encumbered thereby or impair the use of such property in the business of the Company and its Subsidiaries as currently conducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due, (iv) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance, old age pension programs mandated under applicable Laws or other social security regulations and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, which secure obligations to the extent that payment thereof is not in arrears or otherwise due, to the extent incurred in the Ordinary Course of Business. "Losses" has the meaning set forth in ss. 9.2. "Material Adverse Effect" means any adverse effect on the business, assets, operations or condition, financial or otherwise, of the Company or any of its Subsidiaries which, when considered either singly or in the aggregate together with all other such effects with respect to which such phrase is used in this Agreement, constitutes a material adverse effect on the business, assets, operations or condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole. "Merger" shall mean the merger of Acquisition with and into the Company, with the Company being the Surviving Corporation, in accordance with the provisions of this Agreement and the Certificate of Merger. "Most Recent Balance Sheet" means the unaudited consolidated balance sheet for the Company and its Subsidiaries as of June 30, 1998 referred to in ss. 3.8. -6- "Most Recent Financial Statements" means the audited Financial Statements for the Most Recent Fiscal Year End. "Most Recent Fiscal Year End" has the meaning set forth in ss. 3.8. "Multiemployer Plan" has the meaning set forth in ERISA ss. 3(37). "New York Business Corporation Law" has the meaning set forth in the recitals. "Ordinary Course of Business" means the ordinary course of business of the Company and its Subsidiaries consistent with past custom and practice (including with respect to quantity and frequency taking into account the then current level of business of the Company and its Subsidiaries taken as a whole). "Original Disclosing Party" has the meaning set forth in ss. 7. "Party" and "Parties" have the meanings set forth in the preamble. "PBGC" means the Pension Benefit Guaranty Corporation. "Per-Share Consideration Amount" means an amount equal to (x) the Aggregate Merger Consideration Amount divided by (y) the aggregate number of shares of Company Common Stock outstanding at the Effective Time. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Products" means all past and current products and services of the Company and, to the extent that they are currently being developed by the Company, (i) any subsequent versions of such products or services, (ii) any products or services which are designed to supersede, replace or function as a component of such products or services, and (iii) any upgrades, enhancements, improvements and modifications to the foregoing. "Prohibited Transaction" has the meaning set forth in ERISA ss. 406 and Code ss. 4975. "Public Offering" has the meaning set forth in ss. 5.5(a)(ii). "Registrable Securities" has the meaning set forth in ss. 5.5(a)(i). "Release" means any actual or threatened spilling, leaking, pumping, pouring, emitting, dispersing, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any -7- Chemical Substance into the Environment by the Company or its operations that has caused or could reasonably be expected to cause an Environmental Liability and Cost (including the disposal or abandonment of barrels, containers, tanks or other receptacles containing or previously containing any Chemical Substance). "Release Date" has the meaning set forth in ss. 5.2(a). "Reportable Event" has the meaning set forth in ERISA ss. 4043. "Safety Laws" means any Law relating to health or safety, including without limitation the Occupational Safety and Health Act, as amended, each as from time to time in effect to the date hereof relating to (a) exposure of employees to any Chemical Substance or (b) the management, use, storage, disposal, cleanup or removal of any Chemical Substance. "Safety Liabilities and Costs" means all Losses incurred by the Buyer or the Company for the Company to comply with any Safety Law or as a result of any health or safety conditions created by or arising out of the past or present operations of the Company or any of its Subsidiaries through the Closing Date. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Sellers" has the meaning set forth in the preamble. "Sellers' Litigation Representative" has the meaning set forth in ss. 2.5. "Sellers' Representative" has the meaning set forth in ss. 2.5. "Shares" has the meaning set forth in the preamble. "Subsidiary" means with respect to any Person, (i) any corporation at least a majority of whose outstanding voting stock is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or collectively by such Person and one or more of its Subsidiaries; (ii) any general partnership, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person or by one or more of its Subsidiaries, or collectively by such Person and one or more of its Subsidiaries; (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner or at least a majority of whose ownership interests is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or collectively by such Person and one or more of its -8- Subsidiaries; and (iv) any limited liability company at least a majority of whose ownership interests is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or collectively by such Person and one or more of its Subsidiaries. For the purposes of this definition, "voting stock" or "ownership interests" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency which has not occurred and which is not reasonably likely to occur. "Surviving Corporation" has the meaning set forth in ss. 2.1. "Tax" or "Taxes" means taxes, fees, levies, duties, tariffs, imposts and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any federal, state, local, or foreign taxing authority, including, without limitation, income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code ss. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Technology" means all inventions, copyrightable works, discoveries, innovations, know-how, ideas, research and development, formulas, compositions, processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, business and marketing plans, proposals, documentation, manuals, computer software, computer hardware, integrated circuits and integrated circuit masks, electronic, electrical and mechanical equipment and all other forms of technology, including improvements, modifications, derivatives or changes, whether tangible or intangible, embodied in any form, whether or not protectible or protected by patent, copyright, mask work right, trade secret law or otherwise. "Third Party Claim" has the meaning set forth in ss. 9.5(a). "Trademarks" means any trademarks, service marks, trade dress, and logos, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith. -9- 1.1. Rules of Construction. The following provisions shall be applied wherever appropriate herein: (a) "herein", "hereby", "hereunder", "hereof" and other equivalent words shall refer to this Agreement as an entirety and not solely to the particular portion of this Agreement in which any such word is used; (b) all definitions set forth herein shall include the singular and the plural; (c) wherever used herein, any pronoun shall be deemed to include both the singular and plural and to cover all genders; (d) all accounting terms not specifically defined herein shall be construed in accordance with GAAP; (e) except as otherwise stated herein, all references or citations in this Agreement to statutes or regulations or statutory regulatory provisions, shall, when the context requires and unless otherwise indicated, be considered citations to such statutes, regulations or provisions as in effect from time to time, including any successor statutes, regulations or provisions directly or indirectly superseding such statutes, regulations or provisions; and (f) any references herein to a particular Section, Article, Exhibit or Schedule means a Section or Article of, or Schedule or Exhibit to, this Agreement unless another agreement is specified. 2. The Merger. 2.1. Constituent Corporations; Surviving Corporation. Acquisition and the Company, which was originally formed under the New York Business Corporation Law under the name "Avialume Corp.," shall be the constituent corporations to the Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, Acquisition shall be merged with and into the Company in accordance with the New York Business Corporation Law, and the Company shall be the surviving corporation of the Merger (the "Surviving Corporation"). At the Effective Time, the identity and separate existence of Acquisition shall cease, and the Surviving Corporation shall continue its corporate existence under the laws of the State of New York as a wholly-owned subsidiary of Buyer. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, powers, franchises, properties and other interests of the Company and Acquisition. 2.2. Certificate of Incorporation and Bylaws of the Surviving Corporation. From and after the Effective Time and thereafter until amended as provided by Law, (i) the Certificate of Incorporation of the Surviving Corporation shall be the Certificate of Incorporation of Acquisition, except that the name of the Surviving Corporation shall be "Aerospace Lighting Corporation", and (ii) the bylaws of the Surviving Corporation shall be the bylaws of Acquisition. 2.3. Directors and Officers of the Surviving Corporation. The directors and officers of the Surviving Corporation immediately following the Merger shall be the directors and officers of Acquisition immediately prior to the Merger and all such directors and officers shall hold office until their respective successors are duly elected and qualified. -10- 2.4. Conversion of the Shares. At the Effective Time by virtue of the Merger and without any action on the part of Acquisition or any Seller: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to ss. 2.4(b)) shall be canceled and shall be converted automatically into the right to receive a number of shares of B/E Common Stock equal to (w) the Per-Share Consideration Amount divided by (x) the Formula Price Per Share; provided, however, that (y) a portion of the shares of B/E Common Stock issuable pursuant to the Merger in respect of the Shares shall be delivered into escrow and held as specified in ss. 5.2 (all such shares issuable pursuant to the Merger, including the Escrowed Shares being referred to herein as the "B/E Shares" and said portion of the B/E Shares subject to the escrow provisions of ss. 5.2 being referred to herein as the "Escrowed Shares") and the Escrowed Shares shall be distributed, to the Sellers only upon release by the Escrow Agent as provided in ss. 5.2 upon and subject to resolution of the matters referred to in ss. 9.2 and (z) no fractional shares of B/E Common Stock shall be issued pursuant to the Merger, with each Person otherwise entitled to such a fractional share being entitled to cash, payable by check of the Surviving Corporation, in an amount equal to such fractional share valued at the Formula Price Per Share. (b) Notwithstanding the provisions of ss. 2.4(a), each Share held in the treasury of the Company and each Share owned by Acquisition or by Buyer immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto. (c) Each share of Acquisition common stock, par value $.01 per share, issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. 2.5. Sellers' Representatives. Each individual listed on ss. 2.5 of the Disclosure Schedule hereby is irrevocably appointed attorney-in-fact and authorized and empowered to act, for and on behalf of the Seller or Sellers listed opposite his name on such Schedule (with full power of substitution in the premises) under the escrow provisions of ss. 5.2, the Escrow Agreement, the registration rights provisions of ss. 5.5, the notice provisions of this Agreement and such other matters (other than any amendment or modification of this Agreement pursuant to ss. 10.9) as are reasonably necessary for the consummation of the transactions contemplated hereby (each of the above named representatives, as well as any subsequent representatives of the Sellers appointed by such representatives or after such representative's death or incapacity appointed by the Sellers being referred to herein as a "Seller's Representative" and collectively as the "Sellers' Representatives"); provided, however, that Michael J. Tenzyk is appointed as the agent for all of the Sellers with respect to matters concerning Third Party Litigation pursuant to ss. 9.5 (the "Sellers' Litigation Representative"). By their execution hereof, each of -11- Michael Tenzyk, Louis J. Francisco and William Brown hereby accepts such appointment and agrees to act as Seller's Representative hereunder. Each of Buyer and Acquisition and their respective Affiliates (including, after the Closing, the Company) shall be entitled to rely on such appointment and treat each Seller's Representative as the duly appointed attorney-in-fact of the Sellers set forth opposite such Person's name in ss. 2.5 of the Disclosure Schedule. Each Seller who executes this Agreement or votes in favor of the Merger pursuant to the terms hereof, by such execution or vote, confirms such appointment and authority and acknowledges and agrees that such appointment is irrevocable and coupled with an interest, it being understood that the willingness of the Buyer to enter into this Agreement is based, in part, on the appointment of such representatives to act on behalf of the Sellers. 2.6. The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the New York Conference Center of Ropes & Gray, 885 Third Avenue, New York, New York, commencing at 10:00 a.m. New York time on the date of this Agreement (the "Closing Date"). 2.7. Surrender of Shares; Stock Transfer Books. (a) At the Effective Time, each holder (other than the Company, Acquisition or the Buyer, if applicable) of any outstanding certificate or certificates theretofore representing the Shares converted in the Merger as described in ss. 2.4(a) (the "Certificates") shall surrender the same to the Surviving Corporation for cancellation. Upon surrender of a Certificate to the Surviving Corporation, the holder of such certificate shall receive in exchange therefor a certificate or certificates representing the number of B/E Shares to which such holder is entitled pursuant to the Merger (subject to the escrow provisions contemplated by ss.ss. 2.4 and 5.2) and cash in lieu of any fractional share otherwise to be so issued. Subject to the restrictions on transfer referred to in the last sentence of ss. 5.2, if the B/E Shares are to be issued to a Person other than the Person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of issuance of such B/E Shares that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the Person requesting such payment shall have paid all transfer and other Taxes required by reason of the issuance of B/E Shares pursuant to the Merger in accordance with ss. 2.4 to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such Taxes either have been paid or are not applicable. (b) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and subject to such other conditions as the Board of Directors of the Surviving Corporation may impose, the Surviving Corporation shall cause the Buyer to issue in exchange for such lost, stolen or destroyed Certificate the B/E Shares deliverable in -12- respect thereof as determined in accordance herewith (subject to the escrow provisions contemplated by ss.ss. 2.4 and 5.2). When authorizing such issue of the B/E Shares in exchange therefor, the Board of Directors of the Surviving Corporation (or any authorized officer thereof) may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give the Surviving Corporation a bond in such sum as the Board of Directors may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed. (c) At the close of business on the Effective Date, the stock transfer books of the Company shall be closed, and no transfer of Shares shall thereafter be made on such books. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares except as otherwise provided herein or by applicable Law. 2.8. Further Assurances. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other acts or things are necessary or desirable to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in or to any of the rights, properties or assets of the Company or Acquisition or otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its officers and directors shall be authorized to execute and deliver, in the name and on behalf of the Company or Acquisition, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of the Company or Acquisition, all such other acts and things necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to or under such rights, properties or assets in the Surviving Corporation or otherwise to carry out the purposes of this Agreement. 3. Representations and Warranties of the Sellers. The Sellers severally (and not jointly or jointly and severally) represent and warrant to the Buyer that the statements contained in this ss. 3 are correct and complete as of the date of this Agreement, except as set forth in the corresponding section of the disclosure schedule accompanying this Agreement (collectively, the "Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this ss. 3. 3.1. Organization of the Company. The Company is a New York corporation, duly organized under the Laws of the State of New York as then in effect, and is validly existing and in good standing under the Laws of the State of New York as now in effect and has the requisite corporate power and authority to carry on its business and now conducted and to own and lease its properties. Copies of the certificate of incorporation and bylaws of the Company, each as amended to date, have been heretofore delivered to Buyer and are accurate and complete. The Company is qualified to do business and is in good standing as a foreign corporation in each jurisdiction listed in ss. 3.1 of the Disclosure Schedule, which such -13- jurisdictions are the only jurisdictions where the nature of the activities conducted by the Company or the character of the property owned, leased or operated by it make such qualification necessary or appropriate. The minute book (containing the records of meetings of stockholders, the board of directors and any committees of the board of directors) of the Company is a correct and complete record of actions taken, and copies thereof have been made available to Buyer. The Company is not in default under or in violation of any provision of its certificate of incorporation or bylaws. 3.2. Capitalization and Ownership of the Company. The authorized capital stock of the Company consists of 1,000 shares of common stock, no par value per share (the "Company Common Stock"). Each holder of Company Common Stock is entitled to one vote per share of Company Common Stock owned by such holder. As of the date hereof, there are issued (a) 810 shares of Company Common Stock, of which 150 shares are held as treasury stock and 660 shares are outstanding and held of record and beneficially by the Persons and in the respective amounts set forth on ss. 3.2 of the Disclosure Schedule, free and clear of any Liens. All of the outstanding shares of Company Common Stock have been validly issued, are fully paid and nonassessable. There are no agreements restricting the transfer of, or affecting the rights of any holder of, the shares of Company Common Stock or any other shares of the Company's capital stock, there are no preemptive rights on the part of any holder of any class of securities of the Company and no outstanding options, warrants, rights, or other agreements or commitments of any kind obligating the Company, contingently or otherwise, to issue or sell any shares of its capital stock or any securities or obligations convertible into, or exchangeable for, any shares of its capital stock, and no authorization therefor has been given. Section 3.2 of the Disclosure Schedule sets forth the names of the record holders of all outstanding options, warrants or other rights to purchase, sell or otherwise dispose of, or rights to exchange or convert into, any shares of the Company's capital stock and the number of shares, exercise prices and expiration dates of such options, warrants or other rights. None of the outstanding shares of capital stock of the Company was issued in violation of the Securities Act or the securities or blue sky Laws of any state or other jurisdiction, as the same were then in effect. Each Seller has full right, power and authority to transfer the Shares in the respective amounts as set forth in ss. 3.2 of the Disclosure Schedule to Buyer, free and clear of any Liens, and no Person, other than the Sellers, has any right, title or interest in the Company or any of its Subsidiaries or any profits, earnings, cash flows, equity, gains or losses with respect thereto. 3.3. Authorization of Transaction. Each of the Sellers and the Company has the legal capacity, power and authority (including, in the case of the Company, full corporate power and authority) to execute and deliver this Agreement and to perform their respective obligations hereunder. All corporate and other actions or proceedings to be taken by or on the part of the Company or the Sellers to authorize and permit the execution and delivery by Company and the Sellers of this Agreement and the respective instruments required to be executed and delivered by the Company and the Sellers pursuant hereto, the performance by -14- the Company and the Sellers of their respective obligations hereunder, and the consummation by the Company and the Sellers of the transactions contemplated herein, have been duly and properly taken by the Sellers and the Company. This Agreement has been duly executed and delivered by each of the Company and the Sellers and constitutes the legal, valid and binding obligation of each of the Company and the Sellers, enforceable in accordance with its terms and conditions, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors' rights generally. 3.4. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including transfer of the Shares and any of the agreements and instruments required to be delivered pursuant to ss. 2 and ss. 6), will (i) violate any provision of the charter or bylaws of the Company or any of its Subsidiaries, (ii) violate any Law or other restriction of any government, governmental agency or court to which any of the Company, its Subsidiaries or the Sellers or any of their property is subject or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or consent under any Contractual Obligation to which any of the Company, its Subsidiaries or the Sellers is a party or by which any of them is bound or to which any of their assets is subject (or result in the imposition of any Lien upon any of their assets). None of the Company, its Subsidiaries or the Sellers needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except for the filing of the Certificate of Merger with the Secretary of State of the State of New York. 3.5. Brokers' Fees. None of the Company, its Subsidiaries or the Sellers has any Liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer or the Company or any of its Subsidiaries could become liable or obligated. 3.6. Title to Assets. The Company and each of its Subsidiaries has good and marketable title to, or a valid and subsisting leasehold interest in, and, in the case of owned property and assets, the power to sell the properties and assets used by it, located on its premises, or reflected on the Most Recent Balance Sheet or acquired after the date thereof, free and clear of all Liens, except for properties and assets disposed of in the Ordinary Course of Business since the date of the Most Recent Balance Sheet and other assets having a net book value in the aggregate at the time of disposition of not more than $5,000 and a fair market value in the aggregate at the time of disposition of not more than $50,000. Each such tangible asset is free from patent defects, has been maintained in accordance with normal industry practice, is in satisfactory operating condition and repair (subject to normal wear and tear), and is suitable, adequate and sufficient for the purposes for which it presently is used. -15- 3.7. Subsidiaries. Section 3.7 of the Disclosure Schedule sets forth for each of the Company's Subsidiaries (i) its name and jurisdiction of incorporation, (ii) the number of shares of authorized capital stock of each class of its capital stock, (iii) the number of issued and outstanding shares of each class of its capital stock, the names of the record and beneficial holders thereof, and the number of shares held by each such holder, (iv) the number of shares of its capital stock held in treasury and (v) its directors and officers. Each Subsidiary is a corporation duly organized under the Laws of the jurisdiction of its incorporation as then in effect, and is validly existing and in good standing under the Laws of the jurisdiction of its incorporation as the same are now in effect. Each Subsidiary is duly authorized to conduct business and is in good standing as a foreign corporation in each jurisdiction listed in ss. 3.7 of the Disclosure Schedule, which such jurisdictions are the only jurisdictions where the nature of the activities conducted by it or the character of the property owned, leased or operated by it make such qualification necessary or appropriate. Each Subsidiary has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company has delivered to the Buyer correct and complete copies of the charter and bylaws of each Subsidiary (each as amended to date). All of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and are validly issued, fully paid, and nonassessable. The Company owns of record and beneficially all of the outstanding shares of each Subsidiary, free and clear of any Taxes, Liens, options, warrants, purchase rights, contracts and commitments. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require any of the Company or any of its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any of its Subsidiaries or that could require any Subsidiary to issue, sell, or otherwise cause to become outstanding any of its own capital stock (other than pursuant to this Agreement). There are no outstanding stock appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary. The minute books (containing the records of meetings of stockholders, the board of directors and any committees of the board of directors), the stock certificate books, and the stock record books of each Subsidiary are all correct and complete records of actions taken, and copies thereof have been made available to Buyer. None of the Subsidiaries of the Company is in default under or in violation of any provision of its charter or bylaws. None of the Company or its Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in or ownership interest in any Person which is not a Subsidiary of the Company. 3.8. Financial Statements. Attached hereto as Exhibit C are the following financial statements (collectively the "Financial Statements"): (i) audited consolidated and unaudited consolidating balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended December 31, 1995, 1996 and 1997 (December 31, 1997 being the "Most Recent Fiscal Year End") for the Company and its Subsidiaries, and -16- (ii) unaudited consolidated and consolidating balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal quarters ended (and portions of the fiscal year then ended) March 31 and June 30, 1998 for the Company and its Subsidiaries. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, are correct and complete in all material respects and present fairly the financial condition of the Company and its Subsidiaries as of such dates and the results of operations of the Company and its Subsidiaries for such periods and are consistent in all material respects with the books and records of the Company and its Subsidiaries. 3.9. Indebtedness; Guarantees. Except as set forth in the Most Recent Balance Sheet, neither the Company, nor any of its Subsidiaries had as of the date of the Most Recent Balance Sheet any indebtedness for borrowed money or for the deferred purchase price of property or services (other than trade payables and other accrued current liabilities incurred in the Ordinary Course of Business), or capital lease obligations, conditional sale or other title retention agreements ("Indebtedness"). Neither the Company, nor any of its Subsidiaries is a guarantor or otherwise liable for any Liability or obligation of any other Person other than with respect to the endorsement of checks for deposit in the Ordinary Course of Business. 3.10. Absence of Changes. Since June 30, 1998, the Company has conducted its business only in the Ordinary Course of Business and there has not been: (a) any sale, lease, transfer, or assignment of any of the assets of the Company or any of its Subsidiaries, tangible or intangible, having a net book value in the aggregate at the time of disposition in excess of $5,000 or a fair market value in the aggregate at the time of disposition in excess of $50,000, other than sales of inventory for a fair consideration in the Ordinary Course of Business; (b) any Contractual Obligation (or series of Contractual Obligations) entered into by the Company or any of its Subsidiaries other than in the Ordinary Course of Business and in an amount not in excess of $10,000 individually; (c) any acceleration, termination, modification, or cancellation of any material Contractual Obligation of the Company or any of its Subsidiaries (or series of Contractual Obligations), except for expirations of such Contractual Obligations in accordance with their respective terms, to which the Company or any of its Subsidiaries is a party or by which it or any of its assets is bound; (d) any capital expenditure (or series of related capital expenditures) involving more than $10,000 in the aggregate; -17- (e) any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions other than extensions of credit in the Ordinary Course of Business); (f) other than as disclosed in ss. 3.9 of the Disclosure Schedule any issuance of any note, bond, or other debt security or created, incurred, assumed, or guaranteed any Indebtedness in excess of $10,000 in the aggregate; (g) any delay or postponement of payment of accounts payable or other Liabilities outside the Ordinary Course of Business; (h) any cancellation, compromise, waiver, or release of any right or claim or Indebtedness (or series of related rights and claims) outside of the Ordinary Course of Business; (i) any grant of any license or sublicense of any rights or modified any rights under or with respect to, or entered into any settlement regarding any infringement of its rights to, any Intellectual Property; (j) any issuance, sale, or other disposition of any capital stock, or grant of any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of capital stock; (k) any dividend or distribution (whether in cash or in kind) or repurchase, redemption or retirement any of capital stock; (l) any threat or notification in writing or, to the Knowledge of the Sellers and the Company, orally, that one or more distributors, customers or suppliers listed in ss. 3.29 of the Disclosure Schedule have terminated or intend to terminate or are considering terminating its business relationships or have modified or intend to modify such relationships with the Company or any of its Subsidiaries in a manner which is materially less favorable to the Company or any of its Subsidiaries or have agreed not to or will not agree to do business on such terms and subject to conditions at least as favorable terms and conditions as provided to the Company and its Subsidiaries on the date of the Most Recent Balance Sheet Date or any actual termination or adverse modification of such relationships. (m) any damage, destruction, or loss (whether or not covered by insurance) to its property in excess of $10,000 in the aggregate; (n) any loan to, or any other transaction with, any of the Company's Affiliates or, outside the Ordinary Course of Business, with any other employee; -18- (o) any employment Contractual Obligation or collective bargaining agreement, written or oral, or modification of the terms of any existing such Contractual Obligation or agreement; (p) any increase, modification or change in the compensation, bonus structure or benefits of any directors, officers, consultants, agents and employees of the Company or any of its Subsidiaries outside the Ordinary Course of Business; (q) any adoption, amendment, modification or termination of any Employee Benefit Plan or other plan, contract, or commitment for the benefit of any director, officer, consultant, agent or employee of the Company or any of its Subsidiaries; (r) any payment pursuant to any Employee Benefit Plan or other plan, contract or commitment for the benefit of any director, officer, consultant, agent or employee of the Company or any of its Subsidiaries inconsistent with the terms thereof; (s) any modification or change in the employment terms for any of its directors, officers, consultants, agents or employees outside the Ordinary Course of Business; (t) any pledge to make any charitable contribution and no such contribution was made; (u) any modification or change in the application of GAAP from the manner in which it was applied in the Most Recent Financial Statements; (v) any other occurrence, event, incident, action, failure to act or transaction outside the Ordinary Course of Business with respect to the Company or any of its Subsidiaries and involving the expenditures by the Company or its Subsidiaries in excess of $25,000 in the aggregate or any material future actions by the Company or any of its Subsidiaries; (w) any Contractual Obligation entered into pursuant to which a party thereto is entitled to a commission based on sales to or revenues or profits derived from one or more customers, or success fees, finders fees or other compensation related to sales; or (x) any legally binding commitment to any of the foregoing by any of the Company, its Subsidiaries or the Sellers. 3.11. Absence of Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has any Liability (and, to the Knowledge of the Sellers, there is no Basis for any -19- present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company or any of its Subsidiaries giving rise to any such Liability of the Company or any of its Subsidiaries), except for (i) Liabilities disclosed in the Disclosure Schedule or not required to be disclosed in the Disclosure Schedule because of a materiality qualifier or a dollar limitation or threshold in a representation or warranty, (ii) Liabilities set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto), (iii) Liabilities which have arisen after the date of the Most Recent Balance Sheet in the Ordinary Course of Business and (iv) Liabilities that result from or arise out of circumstances, events, facts or occurrences that are the subject matter of any other representation or warranty contained in ss.3 of this Agreement. 3.12. Legal and Other Compliance. The Company and each of its Subsidiaries is, and at all times prior to the date of this Agreement has been, in compliance in all material respects with all applicable material Laws (as then in effect or as now in effect, as applicable), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against the Company or any of its Subsidiaries alleging any failure so to comply. 3.13. No Material Adverse Change. Since the date of the Most Recent Financial Statements, there has not been any change which has resulted in a Material Adverse Effect and, to the Knowledge of the Sellers and the Company, no event has occurred and no circumstances exist that could reasonably be expected to result in a Material Adverse Effect. 3.14. Taxes. (a) The Company and each of its Subsidiaries has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete. All Taxes due and payable by the Company and each of its Subsidiaries (whether or not shown on any Tax Return) have been paid. Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return. No claim has been made in the last five years by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that they may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of the Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax other than liens for Taxes that are (i) being contested in good faith by appropriate proceedings and have been reserved in accordance with GAAP and (ii) set forth on ss. 3.14 of the Disclosure Schedule. (b) The Company and each of its Subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. -20- (c) There is no dispute, audit, investigation, proceeding or claim concerning any Liability with respect to Taxes of the Company or any of its Subsidiaries either (i) claimed or raised by any authority in writing or (ii) as to which any of the Company or the Sellers has Knowledge based upon contact with any such authority. All federal, state, local, and foreign income Tax Returns filed with respect to the Company and each of its Subsidiaries have been audited and closed or are Tax Returns with respect to which the applicable statute of limitations has run, and none of the foregoing are currently open or the subject of audit. The Company or the Sellers have made available to the Buyer correct and complete copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by any of the Company or any of its Subsidiaries for the last five taxable years. (d) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency or has granted any power of attorney with respect to Taxes which is currently in force. (e) Neither the Company nor any of its Subsidiaries is or has been a party to any Tax allocation or sharing agreement or a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company). Neither the Company nor any of its Subsidiaries has any Liability for the Taxes of any Person other than the Company and its Subsidiaries under Treas. Reg. ss. 1.1502-6 (or any similar provision of Law as now in effect), as a transferee or successor, by contract, or otherwise. (f) Neither the Company nor any of its Subsidiaries has filed a consent under Code ss. 341(f) concerning collapsible corporations. Neither the Company nor any of its Subsidiaries has made any payments, nor is it obligated to make any payments, nor is it a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code ss.ss. 162, 280G or 404. Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code ss. 897(c)(2) during the applicable period specified in Code ss. 897(c)(1)(A)(ii). (g) The unpaid Taxes of the Company and its Subsidiaries (i) did not, as of the date of the Most Recent Balance Sheet, exceed the reserve for Tax Liability (other than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company. -21- (h) The Company has been an S corporation, within the meaning of the Code and for all state and local Tax Law purposes, except in those states and localities that do not recognize S corporation status, at all times since January 1, 1998 and has filed all forms and taken all actions necessary to maintain such status. Neither the Company nor any Seller has taken any action, or omitted to take any action, which action or omission could result in the loss of S corporation status for such period prior to the Closing Date, other than the loss of such status anticipated to occur as a result of the Merger pursuant to this Agreement. (i) Each Subsidiary of the Company is and has at all times been properly classified as a domestic international sales corporation within the meaning of ss. 922 of the Code. 3.15. Property, Plant and Equipment. (a) Neither the Company nor any of its Subsidiaries owns any real property. (b) Section 3.15(b) of the Disclosure Schedule lists all real property leased or subleased to the Company or any of its Subsidiaries. The Company has made available to the Buyer correct and complete copies of the leases and subleases listed in ss. 3.15(b) of the Disclosure Schedule and such leases and subleases have not been amended or modified since the date thereof. With respect to each lease and sublease listed in ss. 3.15(b) of the Disclosure Schedule: (i) the lease or sublease is legal, valid, binding and enforceable against the Company, and, to the Knowledge of the Sellers and the Company, in full force and effect, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors' rights generally; (ii) neither the Company nor any of the Company's Subsidiaries, or to the Knowledge of the Company or the Sellers, any other party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iii) neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company and the Sellers, any other party to the lease or sublease has repudiated any provision thereof; -22- (iv) there are no disputes, oral or written agreements, or forbearance programs in effect as to the lease or sublease; (v) neither the Company nor any Subsidiary of the Company has assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; (vi) the Company and its Subsidiaries have received all approvals of governmental authorities (including licenses and permits) for all facilities leased or subleased by the Company required to be obtained by the Company in connection with the operation of the business of the Company thereon; and (vii) all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities as currently operated. 3.16. Intellectual Property. (a) The Company and its Subsidiary own or, to the Knowledge of the Sellers and the Company, have the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary for the operation of the business of the Company and its Subsidiaries as presently conducted and as presently proposed to be conducted with respect to the Products listed in ss. 3.16(a) of the Disclosure Schedule. Section 3.16(a) of the Disclosure Schedule lists each Product which is currently being developed by the Company or any of its Subsidiaries. Other than with respect to Intellectual Property used under a license, the Company has taken commercially reasonable action to maintain and protect each item of Intellectual Property that the Company or any of its Subsidiaries owns. (b) With respect to the Intellectual Property owned by the Company, neither the Company nor any of its Subsidiaries has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and there has never been any written (or, to the Knowledge of the Company and the Sellers, any other) charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that the Company or any of its Subsidiaries must license or refrain from using any Intellectual Property rights of any third party). To the Knowledge of the Sellers and the Company, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of the Company or any of its Subsidiaries. -23- (c) Section 3.16(c)(i) of the Disclosure Schedule identifies each patent or registration which has been issued to the Company or any of its Subsidiaries with respect to the Intellectual Property of the Company or any of its Subsidiaries, identifies each pending patent application or application for registration which has been made with respect to the Intellectual Property of the Company or any of its Subsidiaries, and identifies each license, agreement, or other permission which the Company or any of its Subsidiaries has granted to any third party with respect to any of such Intellectual Property (together with any exceptions). The Company has made available to the Buyer correct and complete copies of all such patents, registrations, applications, licenses, agreements, and permissions (as amended to date) and has made available to the Buyer correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item. Section 3.16(c)(ii) of the Disclosure Schedule also identifies each trade name or unregistered trademark or servicemark used by the Company or any of its Subsidiaries. With respect to each item of Intellectual Property required to be identified in ss. 3.16(c)(i) of the Disclosure Schedule: (i) the Company and its Subsidiaries possess all right, title, and interest in and to the item, free and clear of any Lien, license, or other restriction; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or, to the Knowledge of the Sellers or the Company, is threatened, which challenges the legality, validity, enforceability, use, or ownership of the item; and (iv) except in the Ordinary Course of Business, neither the Company nor any of its Subsidiaries has agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict with respect to the item. (d) Section 3.16(d) of the Disclosure Schedule identifies each item of Intellectual Property that any third party owns and that the Company or any of its Subsidiaries uses pursuant to license, sublicense, agreement, or permission. The Company has made available to the Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). With respect to each item of Intellectual Property required to be identified in ss. 3.16(d) of the Disclosure Schedule: (i) the license, sublicense, agreement, or permission covering the item is legal, valid, binding and enforceable against the Company, and, to the -24- Knowledge of the Sellers and the Company, in full force and effect, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors' rights generally; (ii) the license, sublicense, agreement, or permission will continue to be legal, valid, binding and enforceable against the Company, and, to the Knowledge of the Sellers and the Company, in full force and effect on identical terms immediately following the consummation of the transactions contemplated hereby, subject to the terms and conditions thereof and except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors' rights generally; (iii) neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company and the Sellers, any other party to the license, sublicense, agreement, or permission is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iv) to the Knowledge of the Sellers and the Company, no party to the license, sublicense, agreement, or permission has repudiated any provision thereof; (v) to the Knowledge of the Sellers and the Company, the underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (vi) to the Knowledge of the Sellers and the Company, no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or, to the Knowledge of the Sellers and the Company, is threatened, which challenges the legality, validity, or enforceability of the underlying item of Intellectual Property; and (vii) neither the Company nor any of its Subsidiaries has granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission. The representations and warranties in this ss. 3.16 are the only representations and warranties with respect to Intellectual Property, notwithstanding any other language of general applicability in this Agreement. 3.17. Inventories. Section 3.17 of the Disclosure Schedule lists all of the inventory that is owned by Persons other than the Company and which is currently being held by the -25- Company for the benefit of other Persons. The inventory, taken as a whole, as reflected in the Most Recent Balance Sheet and books and records of the Company and its Subsidiaries is reflected on the basis of a complete physical count as of December 31, 1997 as updated by the Company's cycle counts and is valued at the lower of cost (on a first-in, first-out basis) or market in accordance with GAAP, consistently applied. Since the Most Recent Balance Sheet Date, no inventory has been sold or disposed of except through sales in the Ordinary Course of Business. 3.18. Contracts. Section 3.18 of the Disclosure Schedule lists the following Contractual Obligations (excluding any Contractual Obligations that are terminable by the Company or any of its Subsidiaries on not more than 30 days notice without penalty) to which the Company or any of its Subsidiaries is a party: (a) any Contractual Obligation (or group of Contractual Obligations) for the lease of personal property to or from any Person providing for lease payments in excess of $25,000 annually; (b) any Contractual Obligation (or group of related Contractual Obligations) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year or involves consideration in excess of $25,000; (c) any Contractual Obligation creating or making the Company or any of its Subsidiaries a party in a partnership, limited liability company or joint venture; (d) any Contractual Obligation (or group of related Contractual Obligations) under which it has created, incurred, assumed, or guaranteed any Indebtedness in excess of $10,000 or under which it has imposed a Lien on any of its assets, tangible or intangible, except for the endorsement of checks for deposit in the Ordinary Course of Business; (e) any Contractual Obligation concerning confidentiality or noncompetition; (f) any material Contractual Obligation relating to the Company or any of its Subsidiaries, their assets, liabilities or business between or among the Company and its Affiliates (other than between the Company and any of the Company's Subsidiaries); (g) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, consultants, agents or employees; -26- (h) any collective bargaining agreement; (i) any Contractual Obligation providing for the employment or consultancy with any individual on a full-time, part-time, consulting or other basis in excess of $10,000 or providing severance or retirement benefits in excess of $25,000 in the aggregate; (j) any Contractual Obligation under which it has advanced or loaned any amount to any of its stockholders, Affiliates, directors, officers, consultants, agents or employees other than in the Ordinary Course of Business; (k) any other Contractual Obligation (or group of related Contractual Obligations) the performance of which involves consideration in excess of $10,000; or (l) any Contractual Obligation pursuant to which a party thereto is entitled to a commission based on sales to or revenues or profits derived from one or more customers, or success fees, finders fees or other compensation related to sales. The Company has made available to the Buyer a correct and complete copy of each written Contractual Obligation listed in ss. 3.18 of the Disclosure Schedule and a written summary setting forth the terms and conditions of each oral Contractual Obligation referred to in ss. 3.18 of the Disclosure Schedule. With respect to each such Contractual Obligation: (i) to the Knowledge of the Company and the Sellers, (a) the Contractual Obligation is legal, valid, binding and enforceable against the Company, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors' rights generally, and, to the Knowledge of the Sellers and the Company, in full force and effect, and (b) the Contractual Obligation will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms immediately following the consummation of the transactions contemplated hereby; (ii) none of the Company, any of its Subsidiaries, any Seller or (to the Knowledge of the Company and the Sellers) any other party thereto is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the Contractual Obligation; and (iii) none of the Company, any of its Subsidiaries, any Sellers or (to the Knowledge of the Company and the Sellers) any other party thereto has repudiated any provision of the Contractual Obligation. 3.19. Notes and Accounts Receivable. All notes and accounts receivable of the Company and each of its Subsidiaries are reflected properly on its books and records in accordance with GAAP without regard to any concept of materiality other than one based solely on such accounts receivable. The Company has delivered to Buyer as ss. 3.19 of the Disclosure Schedule a true and correct list of all receivables which have been deemed by the Company uncollectible and are not reflected in the Most Recent Balance Sheet. -27- 3.20. Powers of Attorney. Except pursuant to this Agreement and the Exhibits hereto, there are no outstanding powers of attorney executed on behalf of the Company or any of its Subsidiaries, in respect of the Company or any of its Subsidiaries, their assets, liabilities or business. 3.21. Insurance and Risk Management. Section 3.21 of the Disclosure Schedule sets forth a list of each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which the business operations of the Company or any of its Subsidiaries is a party, a named insured, or otherwise the beneficiary of coverage. With respect to each such insurance policy (other than those which have expired in accordance with their terms) to the Knowledge of the Sellers and the Company: (i) the policy is legal, valid, binding and enforceable against the Company, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors; rights generally, and in full force and effect; (ii) the transactions contemplated hereby will not result in the cancellation or modification of such policies; (iii) neither the Company nor any of its Subsidiaries any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; (iv) the Company has made available true and complete copies of all policies and related indemnity or premium payment agreements to Buyer; (v) no party to the policy has repudiated any provision thereof. Section 3.21 of the Disclosure Schedule describes any self-insurance arrangements with respect to the Company or any of its Subsidiaries. 3.22. Litigation. There are no judicial or administrative actions, claims, suits, proceedings or investigations pending or, to the Sellers' and the Company's Knowledge, threatened, affecting the Company, any of its Subsidiaries or any of their assets, or that question the validity of this Agreement or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement nor, to the Knowledge of the Company and the Sellers, is there any Basis for any such action, claim, suit, proceeding or investigation that question the validity of this Agreement or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement. There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against the Company or any of its Subsidiaries affecting any of its assets, business or operations under any Law as in effect from time to time to the date hereof. 3.23. Product Warranties; Defects; Liability. No Product manufactured, sold, leased, or delivered by the Company is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease other than those that arise in accordance with applicable Law. Section 3.23 of the Disclosure Schedule includes copies of the standard terms and conditions of sale for the Company (containing applicable guaranty, -28- warranty, and indemnity provisions). The representations and warranties in this ss. 3.23 are the only representations and warranties with respect to Product warranties, Product defects and Product Liabilities, notwithstanding any other language of general applicability in this Agreement. 3.24. Employees. To the Knowledge of the Company and the Sellers, no executive, key employee or group of employees has any plans to terminate employment with the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has experienced any material labor disputes or any work stoppages due to labor disagreements. The Company and each of its Subsidiaries is in compliance in all material respects with all applicable Laws as in effect as of the date hereof respecting employment and employment practices and terms and conditions of employment. Neither the Company nor any of its Subsidiaries is or has ever been a party to any collective bargaining agreements and, to the Knowledge of the Sellers and the Company, neither the Company nor any of its Subsidiaries has been the subject of any organizational activity. 3.25. Employee Benefits. (a) Section 3.25 of the Disclosure Schedule lists each Employee Benefit Plan that the Company or any of its Subsidiaries maintains or to which the Company or any of its Subsidiaries contributes relating to current or former employees, officers or directors of the Company or any of its Subsidiaries or any of their dependents or beneficiaries. (i) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in all respects with the applicable requirements of ERISA, the Code, and other applicable Laws. (ii) All required reports and descriptions (including, without limitation, Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code ss. 4980B have been met with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan subject to such Part. (iii) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date which are not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Company and its -29- Subsidiaries. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. (iv) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan intended to be qualified under Code ss. 401(a) is so qualified. (v) The Company has made available to the Buyer correct and complete copies of the plan documents and summary plan descriptions, and where applicable the most recent determination letter received from the Internal Revenue Service, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan. (b) Neither the Company nor any past or current member of the Controlled Group of Corporations which includes the Company has ever maintained or been required to contribute to any Employee Pension Benefit Plan subject to Title IV of ERISA. (c) Neither the Company nor any of its Subsidiaries maintains or contributes to nor has it ever maintained or contributed to, or ever been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code ss. 4980B). (d) The transactions contemplated by this Agreement shall not alone or upon the occurrence of any additional or subsequent event, result in any payment of severance or otherwise, or acceleration, vesting or increase in benefits under any Employee Benefit Plan for the benefits of any current or former director, officer or employee of the Company or any of its Subsidiaries. 3.26. Environment, Health, and Safety. (a) Except as disclosed in ss. 3.26 of the Disclosure Schedule: (i) the Company and each of its Subsidiaries is and has been in compliance in all material respects with all applicable Environmental Laws and Safety Laws; (ii) the Company and each of its Subsidiaries has obtained, and is and has been in material compliance with the conditions of, all Environmental -30- Permits required for the continued conduct of the business of the Company and its Subsidiaries in the manner now conducted; (iii) the Company and each of its Subsidiaries has filed all required applications, notices and other documents necessary to effect the timely renewal or issuance of all Environmental Permits for the continued conduct immediately after the Closing of the business of the Company and its Subsidiaries in the manner now conducted; (iv) there are no past or present events, conditions or circumstances caused by the Company or its operations related to environmental or health and safety matters or Environmental Laws or Permits or Safety Laws which could reasonably be expected to have a Material Adverse Effect or which could reasonably be expected to interfere in any material respect with compliance with any Environmental Law or Permit or Safety Law; (v) there are no circumstances or conditions caused by the Company or its operations present at or arising out of the present or former assets, properties, leaseholds, businesses or operations of the Company or any of its Subsidiaries, including but not limited to any off-site or on-site storage, transportation, use, disposal or Release of a Chemical Substance, which could reasonably be expected to give rise to any Environmental Liabilities and Costs; (vi) none of the Company, its Subsidiaries or the Sellers or the present or, to the Knowledge of the Sellers or the Company, past, assets, properties, business, leaseholds or operations of the Company or any of its Subsidiaries has received within the past three years or is subject to, or within the past three years has been subject to, any outstanding written, or to the Knowledge of the Sellers and the Company, oral, order, decree, judgment, complaint, agreement, claim, citation, or notice or is subject to any ongoing judicial or administrative proceeding indicating that any of the Company, its Subsidiaries, the Sellers or the past and present assets of the Company are or may be: (A) in violation of any Environmental Law; (B) in violation of any Safety Laws in any material respect; (C) responsible for the on-site or off-site storage or Release of any Chemical Substance; or, (D) liable for any Environmental Liabilities and Costs or Safety Liabilities and Costs; (vii) no investigation or review with respect to such matters is pending or, to the Knowledge of the Company or the Sellers, is threatened, nor has any authority or other third party indicated to the Company in writing an intention to conduct the same; -31- (viii) neither the business of the Company or any of its Subsidiaries nor any of their properties or assets is subject to, or as a result of the transactions contemplated by this Agreement will be subject to, the requirements of any Environmental Laws which require notice, disclosure, cleanup or approval prior to transfer of the shares or the business of the Company or any of its Subsidiaries or which will impose Liens on any such asset or property; (ix) Section 3.26 of the Disclosure Schedule lists all property presently leased, owned or operated by the Company or any of its Subsidiaries and identifies all such property (and the area within that property) that has been used by the Company or any of its Subsidiaries for the storage or disposal of Chemical Substances; (x) Section 3.26 of the Disclosure Schedule lists all of the Persons that the Company currently engages to dispose of Chemical Substances originating from the Company or any of its Subsidiaries, or their assets, properties or business; (xi) Section 3.26 of the Disclosure Schedule sets forth a list of all underground storage tanks owned or operated by the Company or any of its Subsidiaries, and no such tank is leaking or has leaked at any time in the past; and (xii) Section 3.26 of the Disclosure Schedule lists all written environmental audits, inspections, assessments, investigations or similar reports in the possession of the Company or any of its Subsidiaries or of which the Sellers or the Company have Knowledge relating to the assets, properties, or business of the Company or any of its Subsidiaries or the compliance of the same with applicable Environmental Laws and Safety Laws. (b) For purposes of this ss. 3.26 only, all references to the "Company" are intended to include any and all other entities to which the Company or any of its Subsidiaries may be considered a successor for purposes of liability under applicable Environmental Laws. The representations and warranties in this ss. 3.26 are the only representations and warranties with respect to Environmental Laws or Environmental Liabilities and Costs, or Safety Laws or Safety Liabilities and Costs notwithstanding any other language in this Agreement of general applicability. 3.27. Affiliated Transactions. Neither the Company nor any of its Subsidiaries is a party to or bound by any Contractual Obligation with any of the Sellers or any of its other Affiliates or any member of their family and none of the Sellers, directors or officers of the Company or any of its Affiliates or members of their family owns or otherwise has any rights -32- to or interests in any asset, tangible or intangible, which is used in or necessary for the business of the Company or any of its Subsidiaries as it is currently conducted. All transactions between the Company and its Subsidiaries (on the one hand) and Affiliates of the Company other than its Subsidiaries (on the other hand) have been on an arms'-length basis and have not resulted in any understatement or overstatement of the revenues, expenses, cash flows, profits, assets or liabilities of the Company or any of its Subsidiaries compared to those which would have been obtained had all such transactions been with third parties which were not Affiliates of the Company. 3.28. Government Contracts. Neither the Company nor any of its Subsidiaries has been or is a party to any material Contractual Obligation with any federal, state or local government agency. 3.29. Distributors, Customers, Suppliers. Section 3.29 of the Disclosure Schedule sets forth a complete and accurate list of (i) the top ten (in dollar volume) distributors for the Products of the Company or any of its Subsidiaries indicating the specific Product, existing Contractual Obligation, if any, with each such distributor and the volume of Products distributed, (ii) the ten largest customers (by dollar volume) of the Company and its Subsidiaries during the Most Recent Fiscal Year, indicating the existing Contractual Obligation with each such customer by Product, and (iii) the top ten (in dollar volume) suppliers of materials or services to the Company and its Subsidiaries, including, without limitation, manufacturing sub-contractors, indicating the Contractual Obligation for continued supply from such Person. 3.30. No Illegal Payments, Etc. None of the Sellers or the Company or any of its Subsidiaries nor, to the Knowledge of the Sellers, any of their directors, officers, consultants, employees, agents or other Affiliates has (a) directly or indirectly given or agreed to give any illegal gift, contribution, payment or similar benefit to any supplier, customer, governmental official or employee or other Person who was, is or may be in a position to help or hinder the Company or any of its Subsidiaries (or assist in connection with any actual or proposed transaction) or made or agreed to make any illegal contribution, or reimbursed any illegal political gift or contribution made by any other Person, to any candidate for federal, state, local or foreign public office (i) which might subject any of the Company or its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or proceeding or (ii) the non-continuation of which has had or might have a Material Adverse Effect or (b) established or maintained any unrecorded fund or asset or made any intentionally false entries on any books or records for any purpose. 3.31. Books and Records. The books and all corporate (including minute books and stock record books) and financial records of the Company and each of its Subsidiaries are complete and correct in all material respects and have been maintained in accordance in all material respects with applicable Laws as in effect from time to time to the date hereof. -33- 3.32. Disclosure. The representations and warranties contained in this ss. 3 (including the Disclosure Schedule and any other schedules and exhibits required to be delivered by Sellers to Buyer pursuant to this Agreement) do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this ss. 3 in light of the circumstances in which they were made not misleading. The information with respect to customers, aircrafts and products set forth in ss. 3.32(a) of the Disclosure Schedules does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such information in light of the circumstances in which they were made not misleading. 3.33. Investment Intent; Related Matters, Including Securities Law Matters. (a) Each Seller is acquiring the shares of B/E Common Stock to be acquired by such Seller hereunder as a result of the Merger for such Seller's own account, for investment, and not with a view to, or for sale in connection with, any distribution thereof within the meaning of the Securities Act, in a manner which is or would be in violation of any applicable Law as the same is now in effect, including, without limitation, the Securities Act. (b) Such Seller understands and agrees that the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger will not be registered or qualified under the Securities Act or state "blue-sky" or other securities Laws and therefore cannot be resold unless such resale is registered under the Securities Act and applicable state Laws or unless an exemption from such registration requirement is available. (c) Such Seller is able to bear the economic risk of holding the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger for an indefinite period of time and is experienced and has such Knowledge and experience in financial and business matters that such Seller is capable of evaluating the risks and merits of acquiring the shares of B/E Common Stock. Such Seller acknowledges that the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger will bear a legend to the effect that transfers are restricted unless (i) the transfer is exempt from the registration requirements under the Securities Act and the Buyer receives an opinion of counsel satisfactory to the Buyer to that effect or (ii) the transfer is made pursuant to an effective registration statement under the Securities Act. (d) Such Seller understands that, except as provided in ss. 5.5, the Buyer is under no obligation to effect a registration of any shares of B/E Common Stock under the Securities Act. -34- (e) Such Seller has been provided access to such information and documents regarding the Buyer as such Seller has requested and has been afforded an opportunity to ask questions of and receive answers from representatives of the Buyer concerning the terms and conditions of this Agreement and the business, assets and condition, financial and otherwise, of the Buyer. (f) Such Seller is an "accredited investor" within the definition set forth in Rule 501(a) of the Securities Act with respect to the shares of B/E Common Stock to be acquired by such Seller pursuant to the Merger. 4. Representations and Warranties of the Buyer and Acquisition. The Buyer and Acquisition represent and warrant to the Sellers that the statements contained in this ss. 4 are correct and complete as of the date of this Agreement. 4.1. Organization of the Buyer. Each of Buyer and Acquisition is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware and New York, respectively. 4.2. Authorization of Transaction. Each of Buyer and Acquisition has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its respective obligations hereunder. All corporate and other actions or proceedings to be taken by or on the part of Buyer or Acquisition to authorize and permit the execution and delivery by Buyer and Acquisition of this Agreement and the respective instruments required to be executed and delivered by Buyer and Acquisition pursuant hereto, the performance by Buyer and Acquisition of their respective obligations hereunder, and the consummation by Buyer and Acquisition of the transactions contemplated herein, have been duly and properly taken. This Agreement has been duly executed and delivered by each of Buyer and Acquisition and constitutes the valid and legally binding obligation of the Buyer and Acquisition, enforceable in accordance with its terms and conditions, except to the extent that enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors' rights generally. 4.3. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate any Law or other restriction of any government, governmental agency, or court to which the Buyer or Acquisition is subject or any provision of their respective charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contractual Obligation to which the Buyer or Acquisition is a party or by which it is bound or to which any of their assets are subject. Neither the Buyer nor Acquisition needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions -35- contemplated by this Agreement, except for the filing of the Certificate of Merger with the Secretary of State of the State of New York and listing of the B/E Shares on the NASDAQ National Market. 4.4. Brokers' Fees. Neither Buyer nor Acquisition has any Liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Sellers could become liable or obligated. 4.5. Investment Intent. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of ss. 2(11) of the Securities Act. 4.6. Status of B/E Common Stock. When issued to the Sellers pursuant to the Merger, the shares of B/E Common Stock to be so issued will be duly authorized, validly issued, fully paid and nonassessable. 4.7. Information Concerning Buyer. Each of the Buyer's Registration Statement on Form S-4 as filed with the SEC on March 9, 1998, the Buyer's Annual Report on Form 10-K for its fiscal year ended February 28, 1998, as amended (the "10-K"), the Buyer's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998 (the "10-Q"), and the Buyer's Registration Statement on From S-3 filed with the SEC on July 30, 1998 (the "S-3"), each as filed with the SEC, copies of which have been furnished to the Sellers, as of its date did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading; and since the date of the filing of the S-3 there has been no material adverse change in the business, assets, operations or condition, financial or otherwise, of the Buyer and its Subsidiaries, taken as a whole that have not been disclosed in this Agreement or other publicly available documents concerning the Buyer filed since the date on which the S-3 was filed. 4.8. Capitalization of Acquisition. The authorized capital stock of Acquisition consists of 3,000 shares of common stock, $.01 par value per share ("Acquisition Common Stock"). Each holder of the Acquisition Common Stock is entitled to one vote per share of Acquisition Common Stock owned by such holder. As of the date hereof, there are issued and outstanding 1,000 shares of Acquisition Common Stock, all of which is held of record and beneficially by the Buyer. 5. Covenants. The Parties agree as follows: 5.1. Access to Records after Closing. For a period of five years after the Closing Date, the Sellers and their representatives shall have reasonable access to all of the books and records of the Company and its Subsidiaries to the extent that such access may reasonably be required by the Sellers in connection with matters relating to or affected by the operations of the Company and its Subsidiaries prior to the Closing Date. Such access shall be afforded by -36- Buyer upon receipt of reasonable advance notice and during normal business hours. Sellers shall be solely responsible for any costs or expenses incurred by them pursuant to this ss. 5.1. If Buyer shall desire to dispose of any of such books and records prior to the expiration of such five-year period, Buyer shall, prior to such disposition, give the Sellers a reasonable opportunity, at Sellers' expense, to segregate and remove such books and records as Sellers may select. 5.2. Escrow of Shares Pending Resolution of Certain Pre-Closing Matters. Upon consummation of the Merger, Buyer shall deliver to The Bank of New York, as escrow agent (the "Escrow Agent"), a certificate for and in the name of each Seller representing 5% of the aggregate number of B/E Shares issued in the Merger to such Seller rounded to the nearest whole share. The Escrowed Shares shall be held and either released to the Sellers or surrendered to the Buyer according to the provisions of this ss. 5.2 and the Escrow Agreement. The Escrowed Shares of each Seller shall be applied to indemnify and hold harmless the Buyer and its Affiliates against and in respect of any and all Losses specified in ss. 9.2 for which the Buyer and its Affiliates are entitled to indemnification pursuant to the provisions of ss. 9, the amount of such indemnification to be determined as provided in ss. 9. With respect to claims for Losses indemnifiable by the Sellers pursuant to ss. 9.2 made prior to the Release Date, Buyer agrees to apply the Escrowed Shares (or any remaining portion hereof) to the satisfaction of such claims prior to proceeding against any other assets of the Sellers; provided, however, that, subject to the provisions of ss. 9.2, Buyer's recourse against Sellers shall not be limited by the existence or amount of the escrow provided hereunder. Each Seller shall be entitled to vote such Escrowed Shares as are, from time to time, held for such Seller's account as Escrowed Shares provided that any dividend or distribution thereon, including without limitation, dividends or distributions in the form of capital stock of the Buyer or otherwise falling within the definition of "Escrowed Shares" hereunder, shall be delivered to the Escrow Agent and held as part of the Escrowed Shares. (a) Term of Escrow. Except as provided in ss. 5.2(b) and the Escrow Agreement, the Escrowed Shares shall be released from escrow on the earlier of (i) the date twenty (20) days following the date on which the Buyer's independent auditors shall deliver their signed report on their audit of the Buyer's financial statements for the fiscal year ending February 27, 1999, or (ii) the date one year from the Closing Date (such earlier date being hereinafter sometimes referred to as the "Release Date"). (b) Sale of Shares. Subject to the last sentence of ss. 5.3, each Seller shall be entitled to sell such Escrowed Shares as are, from time to time, held for such Seller's account as Escrowed Shares. Upon any such sale, the proceeds therefrom shall be delivered to the Escrow Agent and held together with any remaining Escrowed Shares in accordance with the provisions of this ss. 5.2. Reference in this Agreement and in the Escrow Agreement to "Escrowed Shares" shall include the proceeds of any sale of any Escrowed Shares. -37- 5.3. Pooling of Interests Accounting Treatment. The Company and the Sellers acknowledge that the Buyer intends to account for the Merger and the consummation of the transactions contemplated hereby as a "pooling of interests" under generally accepted accounting principles and principles applied by the SEC, all as from time to time in effect. The Company and each Seller acknowledge, represent, warrant and agree that (a) the Company is not and has never been a division or more than 50% owned Subsidiary of any corporation nor been part of an acquisition which was later rescinded, (b) neither the Company nor such Seller has taken, within the previous two years, any action (i) to change the equity interest of the voting common stock of the Company (or amended the terms of any securities of the Company or of any Contractual Obligation relating thereto) in contemplation of the transactions contemplated by this Agreement, including, without limitation, any additional issuance, exchange or retirement of any securities of the Company, (ii) to permit the Company to reacquire any shares of its voting common stock or (iii) to permit the Company or any Subsidiary of the Company to dispose of a significant portion of its assets in contemplation of the transactions contemplated by this Agreement, (c) none of the Sellers has entered into any agreement that would restrict any such Person's voting rights with respect to the B/E Shares to be issued pursuant to the Merger in accordance with ss. 2.4, (d) the ratio of the interest in the Company of each holder of Company Common Stock to each other holder of Company Common Stock will not be changed by the consummation of the transactions contemplated by this Agreement and (e) neither the Company nor any Seller has at any time since January 1, 1996 acquired any shares of B/E Common Stock. In addition, and notwithstanding the provisions of ss. 5.5, each Seller agrees that such Seller will not sell or otherwise dispose of any of the B/E Shares to be received by such Seller, or in any other way reduce such Seller's risk relative to such B/E Shares, prior to the date on which the Buyer files with the SEC or makes publicly available financial results covering at least 30 days of post-merger combined operations, and that the certificates evidencing the B/E Shares shall bear a legend setting forth the foregoing restriction in the manner required by the corporate Laws of the State of Delaware. 5.4. Plan of Reorganization and other Tax Matters. (a) This Agreement shall constitute a "plan of reorganization" for purposes of ss. 368 of the Code. (b) Neither any of the Sellers nor the Company nor the Buyer shall, nor shall any of them cause or permit any of their Affiliates to, take any actions or make any omissions that will, or could reasonably be expected to, adversely affect the status of the Merger as a reorganization within the meaning of ss. 368 of the Code. Each Seller hereby waives (and releases the Company, the Buyer, Acquisition and their respective Affiliates from) any claims or Liabilities relating to or arising from, any and all Taxes imposed upon such Seller or any of its Affiliates as a result of any action or inaction on -38- the part of any Seller before or after the Merger (or any action or inaction of the Company or any of its Subsidiaries prior to the Merger) that causes the Merger not to constitute a reorganization which is tax-free under ss. 368 of the Code. Each Seller hereby acknowledges that it has consulted with the Sellers' Representative and the Sellers' tax adviser, Ernst & Young, LLP, concerning the tax consequences of the Merger and, except for the covenant in the first sentence of this ss. 5.4(b), neither the Buyer nor the Company is making any representation nor advising any of the Sellers of the Tax consequences of any transaction contemplated by this Agreement. (c) The parties hereto shall, and shall cause the Company to cooperate with the other parties (including providing reasonable access to employees and books and records) and to provide such necessary information as any other party hereto may reasonably request in connection with the preparation of such party's Tax Returns, or to respond to or contest any audit, prosecute any claim for refund or credit or otherwise satisfy any legal requirement relating to Taxes and the Company. Any such information shall be kept confidential except as may otherwise be necessary in connection with filing any such Tax Return, responding to or contesting any audit, prosecuting any such claim or otherwise satisfying such legal requirement. (d) The Sellers shall have right to represent the interests of the Company and any Subsidiary in any Tax audit or administrative or court proceeding relating to any Taxes of the Company or any Subsidiary for any Tax periods ending on or prior to the Effective Date, provided that none of the Sellers, the Company or any of their Affiliates shall compromise or settle any Tax claim or consent or agree to any Tax liability relating to the Company or any Subsidiary for any period ending on or prior to the Effective Date without Buyer's consent (which consent shall not be unreasonably withheld or delayed), to the extent that such compromise, settlement, consent or agreement may affect the liability of Buyer, the Company or any Subsidiary, or any of their Affiliates, for Taxes for any period (or portion thereof) ending after the Effective Date. The Buyer shall have the right to represent the interests of the Company and any Subsidiary in any Tax audit or administrative or court proceeding relating to any Taxes of the Company or any Subsidiary for any period ending after the Effective Date, provided that none of the Buyer, the Company or any Subsidiary, or any of their Affiliates, shall compromise or settle any Tax claim or consent or agree to any Tax liability relating the Company or any Subsidiary for any period ending after the Effective Date without the Sellers' Representatives' consent (which consent shall not be unreasonably withheld or delayed), to the extent that such compromise, settlement, consent or agreement may affect the liability of the Sellers, the Company or any Subsidiary, or any of their Affiliates, for Taxes for any period (or portion thereof) ending on or prior to the Effective Date. Each of the Buyer and the Sellers shall promptly notify the other party in writing upon receipt of notice of any pending or threatened Tax -39- audit or assessment relating to the income, properties or operations of the Company or any Subsidiary for which the other party could be liable. (e) Subject to ss. 9, the Sellers shall pay or reimburse the Buyer for any Taxes (including any Taxes imposed under section 1374 of the Code) of the Company or any of its Subsidiaries or for which the Company or any of its Subsidiaries may be liable, for all periods ending on or prior to the Closing Date to the extent such Taxes are not reflected in the reserve for Tax liabilities (excluding any reserves for deferred Taxes). (f) The Sellers shall prepare, or cause to be prepared, and, subject to Buyer's prior review and approval (which shall not be unreasonably withheld or delayed) timely file or cause to be filed all Tax Returns of the Company and any Subsidiary that relate to Tax Periods ending on or before the Effective Date. 5.5. Registration Rights. (a) General. (i) Initial Registration. On or prior to the Closing Date, the Buyer shall file (and shall use its best efforts to cause to become effective as soon as practicable thereafter) a registration statement on Form S-3 under the Securities Act, covering the Registrable Securities, which registration statement shall be kept in effect in the manner and for the period specified in ss. 5.5(c)(ii). As used herein, the term "Registrable Securities" shall mean (i) the B/E Shares at any time outstanding and that are owned by any of the Sellers, (ii) any shares of common stock or other securities issued as (or issuable upon the conversion or exercise of any warrant, right, class of common stock or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Buyer generally for, or in replacement by the Buyer generally of, such B/E Shares, and (iii) any securities issued in exchange for such B/E Shares in any merger or reorganization of the Buyer; provided, however, that once issued, such B/E Shares and other securities shall cease to be Registrable Securities when (x) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (y) they shall have been sold pursuant to Rule 144 or shall no longer be subject to restriction on resale due to the termination of the holding period requirements (as in effect from time to time) of Rule 144, or (z) they shall have ceased to be outstanding. (ii) Piggyback Registration Rights. Whenever the Buyer proposes to register any of its Common Stock for its own or others' accounts under the Securities Act for a public offering (each a "Public Offering"), the Buyer shall furnish each Seller -40- prompt notice of its intent to do so. Upon the request of any Seller given by written notice to the Buyer in accordance with ss. 10.7 within ten (10) business days after the giving of such notice, the Buyer will use its best efforts to cause to be included in such registration all of the Registrable Securities which the Sellers request to be included in the Public Offering. Notwithstanding the foregoing provisions of this clause (ii): (x) if the Buyer is advised in writing by any managing underwriter of the securities being offered pursuant to any Public Offering that, in its opinion, the number of securities for accounts other than the Company's to be included in such Public Offering exceeds the number which can be sold in such Public Offering without adversely affecting such Public Offering, the Buyer may reduce pro rata (based upon the number of Registrable Securities requested to be included by the Sellers exercising such "piggyback" rights and in the same proportion that the number of securities offered for the accounts of others other than the Sellers is reduced in such Public Offering) the number of Registrable Securities offered for the accounts of such Seller to a number of Registrable Securities deemed satisfactory by such managing underwriter and (y) no holder of Registrable Securities shall have any right of participation or otherwise with respect to any Public Offering on Form S-4 or Form S-8 or any similar form then in effect. (iii) Notwithstanding the foregoing provisions of this ss. 5.5(a): (A) The Buyer may postpone or interrupt taking action with respect to any registration statement referred to above or may require, on ten business days' prior written notice to the Sellers' Representatives, that the Sellers cease making sales under an effective registration statement, (1) in the case of a registration statement filed pursuant to ss. 5.5(a)(i), for a reasonable period of time, (not exceeding sixty (60) days) at any time during the ninety (90) days after the date on which the Buyer files with the SEC or makes publicly available financial results covering at least 30 days of post-merger combined operations of the Buyer and the Company, and (2) in the case of any registration statement filed pursuant to ss. 5.5(a), for two reasonable time periods no less than 30 days apart (not exceeding two sixty (60) day periods (each, a "Blackout Period")) at any time after the expiration of the ninety (90) days referred to in clause (1) above (which ninety (90) day period shall be extended by the actual number of days that the Sellers are required to cease making sales pursuant to clause (1) above) in each case, if, in the good faith opinion of the Buyer, effecting the registration or allowing such sales would materially adversely affect a public offering, material financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Buyer to make public disclosure of information the public disclosure of which could reasonably be expected to -41- have a material adverse effect upon the Buyer; provided, however, that Buyer may elect to terminate or withdraw the registration statement during either of the Blackout Periods provided for in clause (2) above and provided further that if Buyer so elects to terminate or withdraw such registration statement, Buyer agrees to file, and to use best efforts to cause to become effective, a new registration statement for the Registrable Securities prior to the expiration of such Blackout Period; (B) Each Seller will, in connection with any underwritten offering of the Buyer's securities (provided that such Seller is then participating in such underwriting), at the request of the underwriter, agree not to effect any public sale or distribution of the Buyer's securities held by such Seller during the period beginning seven days prior to and ending 60 days after the effectiveness of the registration statement for such offering, except as part of such underwritten offering; and (C) In the event that the Buyer proposes to make a Public Offering with respect to which the Sellers will have rights under ss. 5.5(a)(ii), the Sellers shall have the right to provide the underwriters with a notice (which notice shall be provided to the underwriters no later than three days after the receipt from such underwriters of request with respect thereto) indicating the number of Registrable Securities and a minimum price per share (the "Minimum Price") at which the Sellers will sell such Registrable Securities in such Public Offering and if the Sellers provide such notice to the Underwriters and such Minimum Price is met or exceeded the Sellers shall include such number of Registrable Securities (subject to the restrictions set forth in ss. 5.5(a)(ii)(x)) in such Public Offering. (iv) Notwithstanding any provision of this ss. 5.5, Sellers acknowledge and agree that any sale by them of Registrable Securities is subject to the limitations of the last sentence of ss. 5.3. (b) Expenses. The Buyer shall pay all expenses incident to the Buyer's performance of or compliance with its obligations under this ss. 5.5 to effect the registration of Registrable Securities required hereunder, including, without limitation, all registration, filing, securities exchange listing and NASDAQ fees, all registration, filing, qualification and other fees and expenses of complying with federal, state and other securities or blue sky Laws, all word processing, duplicating and printing expenses, messenger, shipping, telephone and delivery expenses, the fees and disbursement of counsel for the Buyer and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, and fees and expenses of other Persons -42- retained by the Buyer in connection with the registration of the Registrable Securities but excluding any legal fees and expenses of counsel retained by the holders of the Registrable Securities being registered, and further excluding any underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities, which discounts, commissions and taxes in respect of Registrable Securities shall be payable by the holders thereof (in the case of an underwritten offering and the underwriter's fees, expenses, discounts or commissions, pro rata among such holders in proportion to the number of Registrable Securities being sold by them). (c) Further Obligations. Without limiting the foregoing, the Buyer will: (i) prepare, and file with the SEC, the registration statement on Form S-3 to effect such registration (including such audited financial statements as may be required by the Securities Act) and use its best efforts to cause such registration statements to become effective in the time frame outlined in ss. 5.5(a). (ii) prepare, and file with the SEC, such amendments and supplements to the registration statement referred to above and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply in all material respects with the requirements of the Securities Act with respect to the disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (i) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (ii) with respect to any registration statement filed pursuant to ss. 5.5(a)(i), the date one year from the Closing Date; and, in the event that any Registrable Securities remain unsold at the end of any such period, the Buyer may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status; (iii) prior to filing any registration statement hereunder or any amendment or supplement thereto, the Buyer shall provide the Sellers' Representative with a copy of such registration statement, amendment or supplement and shall obtain the consent of the Sellers' Representative, which consent shall not be unreasonably withheld or delayed, to the inclusion of any information to be included in such registration statement, amendment or supplement for which Sellers have indemnification obligations pursuant to ss. 5.5(d)(ii); provided that if Sellers' Representative fails to notify Buyer that it objects to any such reference within five business days after receipt by Sellers of such copy to any such information, Sellers shall be deemed for all purposes to have consented thereto; -43- (iv) promptly notify in writing each holder of Registrable Securities and the underwriter or underwriters, if any: (v) upon discovery that, or upon the happening of any event as a result of which, the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; (w) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (x) of any written request by the SEC or any other regulatory body or other body having jurisdiction over the securities for amendments or supplements to such registration statement or prospectus or for supplemental information; (y) of the notification to the Buyer by the SEC of its initiation of any proceeding with respect to the issuance by the SEC of, or of the issuance by the SEC of, any stop order suspending the effectiveness of such registration statement; and (z) of the receipt by the Buyer of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky Laws of any jurisdiction; (v) furnish to each holder of Registrable Securities included in the registration statement such number of conformed copies of the registration statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any prospectus supplement) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such holder's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of such holder's Registrable Securities; (vi) use best efforts to register or qualify all Registrable Securities included in the registration statement under such other securities or blue sky Laws of such jurisdictions as each holder thereof shall reasonably request which request is made within ten (10) days following the original filing of the registration statement and to keep such registration or qualification in effect for so long as the registration -44- statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that the Buyer shall not for any such purpose be required (a) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (vi) be obligated to be so qualified, (b) to consent to general service of process in any such jurisdiction or (c) to subject itself to taxation in any such jurisdiction by reason of such registration or qualification; (vii) use its best efforts to list all Registrable Securities covered by the Registration Statement on each securities exchange and inter-dealer quotations system on which similar securities of the Buyer are then listed; and (viii) use its best efforts to obtain withdrawal of any order suspending the effectiveness of a registration statement, or the lifting any suspension of qualification (or exemption from qualification) of the offer and sale of any of the Registration Securities in any jurisdiction. With a view to making available to the Sellers the benefits of Rule 144 promulgated under the Securities Act and any successor rule or regulation ("Rule 144"), the Buyer will (i) make and keep public information available as those terms are understood and defined in Rule 144, (ii) furnish to any Seller forthwith upon request (A) a statement by the Company as to its compliance with the reporting requirements of Rule 144 and (B) a copy of the most recent annual or quarterly report of the Company. The Buyer may require each Person whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish the Buyer and any underwriters with such information and affidavits regarding such holder and the distribution of such securities as the Buyer and such underwriters may from time to time reasonably request in writing and to otherwise cooperate in connection with such registration. At any time during the effectiveness of the registration statement covering Registrable Securities offered by a holder, if such holder becomes aware of any change materially affecting the accuracy of the information contained in such registration statement or the prospectus (as then amended or supplemented) relating to such holder, such holder will promptly notify the Buyer of such change. Upon receipt of any notice from the Buyer of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, each holder of Registrable -45- Securities will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement until such holder receives copies of a supplemented or amended prospectus from the Buyer and, if so directed by the Buyer, shall deliver to the Buyer (at the Buyer's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event the Buyer shall give any such notice (or in the event that the Buyer exercises its right under ss. 5.5(a)(iv) to require cessation of sales under an effective registration statement), the period referred to in paragraph (ii) of this ss. 5.5(c) shall be extended by a number of days equal to the number of days during the period from the giving of such notice from the Buyer to stop trading to the date when the copies of the supplemented or amended prospectus are sent to holders whose Registrable Securities are included in such registration statement (or, in the case of a cessation of trading under ss. 5.5(a)(iv) a number of days equal to the period of time the Buyer so causes cessation of trading under such registration statement). In the event that the SEC issues a stop order suspending the effectiveness of any registration statement filed under this ss. 5.5, the period referred to in paragraph (ii) of this ss. 5.5(c) shall also be extended by a number of days equal to the number of days during which such stop order is in effect. (d) Indemnification. (i) The Buyer shall, to the full extent permitted by law, indemnify and hold harmless each seller of Registrable Securities included in any registration statement filed pursuant to this ss. 5.5, its directors, officers, and partners, and each other Person, if any, who controls any such seller within the meaning of the Securities Act, against any Losses to which such seller or any such director, officer, partner or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or claims, actions, suits, proceedings, arbitration or investigations in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in such registration statement, any preliminary prospectus, final prospectus or prospectus supplement contained therein or filed with the SEC, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading; provided, that the Buyer shall not be liable in any such case to the extent that any such Loss (or any claim, action, suit, proceeding, arbitration or investigation in respect thereof) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such registration statement, preliminary prospectus, final prospectus, amendment or supplement in reliance upon and in conformity with information furnished in writing to the Buyer for inclusion in such registration statement by such Seller. Such indemnity shall -46- remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, partner or controlling Person, and shall survive the transfer of such securities by such seller. (ii) Each Person whose Registrable Securities are included or are to be included in any registration statement filed pursuant to this ss. 5.5, as a condition to including such holder's Registrable Securities in each registration statement, shall to the full extent permitted by law, indemnify and hold harmless the Buyer, its directors and officers, and each other Person, if any, who controls the Buyer within the meaning of the Securities Act, against any Losses to which the Buyer or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or claims, actions, suits, proceedings, arbitrations or investigations in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or prospectus supplement contained therein or filed with the SEC, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, if such untrue statement or omission was made in reliance upon and in conformity with information furnished in writing to the Buyer for inclusion in such registration statement by such Seller. Notwithstanding any contrary provision of ss. 9.2, the indemnification obligation of the Sellers under this ss. 5.5(d) shall in no way be limited to (and the Buyer shall not be constrained to seek in response to any failure to provide indemnity pursuant to this ss. 5.5(d)) recourse against Escrowed Shares. The foregoing indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Buyer or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. Such holders shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors and each other Person, if any, who controls any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to the Buyer. (iii) Promptly after receipt by any party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraph (i) or (ii) of this ss. 5.5(d), such party shall, if a claim in respect thereof is to be made against another party pursuant to such paragraphs, give written notice to the latter of the commencement of such action, provided that any failure of any Person to give notice as provided herein shall not relieve any other Person of its obligations under the preceding paragraph of this ss. 5.5(d), except to the extent that such other Person is actually prejudiced by such failure. In case any such action is brought, -47- the party obligated to indemnify pursuant to the foregoing provisions of this ss. 5.5(d) shall be entitled to participate in and, unless, in the reasonable judgment of any indemnified party, a conflict of interest between such indemnified party and any indemnifying party exists with respect to such claim, to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that the indemnified party may participate in such defense at the indemnified party's expense. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to each indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld. (iv) If the indemnity and reimbursement obligation provided for in any paragraph of this ss. 5.5(d) is unavailable or insufficient to hold harmless a party entitled to indemnification hereunder in respect of any Losses (or claims, actions, suits, proceedings, arbitrations or investigations with respect thereto) for which indemnification is provided therein, the party obligated to indemnify hereunder shall contribute to the amount paid or payable by the indemnified party as a result of such Losses (or claims, actions, suits, proceedings, arbitration or investigations) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. Notwithstanding anything herein to the contrary, no participating holder of Registrable Securities shall be required to contribute any amount in excess of the amount by which the net proceeds of the offering (before deducting expenses, if any) received by such participating holder exceeds the -48- amount of any damages that such participating holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of ss. 11(f) of the Securities Act) shall be entitled to contribution from any Person not guilty of such fraudulent misrepresentation. 5.6. Compliance With New York Law. Buyer hereby agrees that it shall, to the extent that any non-compliance would subject any Seller to any Liability therefor, comply in all respects with Section 630 of New York Business Corporation Law, with respect to liability of shareholders for wages due to laborers, servants or employees. 6. Deliveries at Closing. 6.1. Deliveries by Sellers. The Sellers shall deliver to the Buyer and Acquisition at the Closing, the following documents and instruments: (a) Certificate of Merger. The Certificate of Merger; (b) Escrow Agreement. An Escrow Agreement substantially in the form of Exhibit A hereto; (c) Consulting Agreement. A Consulting Agreement substantially in the form of Exhibit D hereto between the Buyer and Michael Tenzyk shall be duly executed and in full force and effect; (d) Severance and Noncompetition Agreement. A Severance and Noncompetition Agreement substantially in the form of Exhibit E hereto between the Buyer and Michael Tenzyk shall be duly executed and in full force and effect; (e) Opinion. An opinion of counsel to the Company and the Sellers dated as of the Closing Date and addressed to the Buyer and Acquisition in form and substance as set forth in Exhibit F attached hereto; (f) Resignations. Resignations, dated as of the Closing Date, of each officer and director of the Company and of any of the Company's Subsidiaries; (g) Pooling Treatment. A letter, in form and substance satisfactory to the Buyer, from Ernst & Young, LLP to the effect that such transactions may be accounted for by the Buyer as a pooling of interests; and -49- (h) Certificates. Such other certificates and documents as Buyer has reasonably requested, including, without limitation, all of the shares of the Company Common Stock delivered pursuant to the Merger in accordance with ss.2 of this Agreement. 6.2. Deliveries of the Buyer. The Buyer shall deliver to the Sellers at the Closing, the following documents and instruments: (a) Opinion. An opinion of counsel to the Buyer and Acquisition dated as of the Closing Date and addressed to the Sellers in form and substance as set forth in Exhibit G attached hereto; and (b) Certificates. Such other certificates and documents as Sellers have reasonably requested, including, without limitation, certificates representing the B/E Shares to be issued pursuant to the Merger in accordance with ss. 2 of this Agreement. 7. Confidentiality. Each of the Parties will treat and hold as confidential all of the Confidential Information relating to the other Parties or to the Company or any of its Subsidiaries or their assets, properties or business, will refrain from using or disclosing to any Person any such Confidential Information (except to their respective counsel, accountants and representatives in connection with this Agreement), and will deliver promptly to the Party who provided the Confidential Information (or, at the request and option of that Party, destroy) all tangible embodiments (and all copies) of such Confidential Information which are in his, her or its possession. In the event that any of the Parties is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Party will notify the Party who originally disclosed such Confidential Information (the "Original Disclosing Party") promptly of the request or requirement so that the Original Disclosing Party may seek an appropriate protective order or waive compliance with the provisions of this ss. 7. If, in the absence of a protective order or the receipt of a waiver hereunder, any of the Parties is, on the advice of counsel, compelled to disclose any Confidential Information of another Party to any tribunal that such Party may disclose the Confidential Information to the tribunal; provided, however, that such Party shall use its best efforts to obtain, at the request and expense of the Original Disclosing Party, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Original Disclosing Party shall designate. Each of the Sellers also hereby covenants and agrees that on and after the Closing, such Seller shall maintain the confidentiality of any Confidential Information relating to the assets, properties or business of the Company and any of its Subsidiaries. The Buyer shall have no further obligation under this ss. 7 after the Closing. 8. Noncompetition. (a) Each Seller agrees that, in consideration of the purchase by Buyer hereunder, it shall not, on or prior to the date which is three (3) years after the Closing Date, -50- directly or indirectly, run, own, manage, operate, control, be employed by, provide consulting services to, be an officer or director of, participate in, lend his, her or its name to, invest in or be connected in any manner with the management, ownership, operation or control of any business, venture or activity which competes with the business (including parts and accessories therefor) being conducted at the Closing Date by the Company or any of its Subsidiaries or relating to Products performing functions similar to those of the Products; provided, however, no Seller shall be considered to be in default of this ss. 8 solely by virtue of holding for portfolio purposes as a passive investor not more than five percent (5%) of the issued and outstanding equity securities of a corporation, if equity securities of the same class and type of such corporation or quoted on a stock exchange or an over-the-counter market within the United States. (b) Each of the Sellers further agrees that for a period of five (5) years after the Closing Date such Seller will not directly or indirectly, without the prior written consent of Buyer, recruit, offer employment, employ, engage as a consultant, lure or entice away or in any other manner persuade or attempt to persuade any person who is an employee of the Company, any of the Company's Subsidiaries, the Buyer or any Subsidiary, group, or division of Buyer or any Affiliate thereof leave such employment unless such person has been terminated by the Buyer or an Affiliate of Buyer. 9. Indemnification. 9.1. Survival of Representations and Warranties. All of the representations and warranties of the Sellers (except for those contained in ss.ss. 3.1 (first sentence only, relating to the organization and existence of the Company), 3.2 (Capitalization and Ownership of the Company), 3.3 (Authorization of Transaction), 3.5 (Brokers Fees), 3.7 (Subsidiaries, except for the first and third sentences thereof), 3.14 (Taxes), 3.26 (Environment, Health and Safety) and 3.33 (Investment Intent; Related Matters, Including Securities Law Matters)) contained herein (it being understood that the second sentence of ss.5.3 is considered a representation and warranty by the Sellers and the Company) or in any document certificate or other instrument required to be delivered hereunder shall survive the Closing and continue in full force and effect until 30 days after the Buyer has filed its Annual Report on Form 10-K for the fiscal year ending in February, 2000 (the "Survival Period"). The representations and warranties of Sellers contained in ss.ss. 3.1, 3.2, 3.3, 3.7 and ss. 3.26 shall survive the Closing and those contained in ss.ss. 3.1 (first sentence only), 3.2 , 3.3 and 3.7 (except for the first and third sentences thereof) shall continue in full force and effect for a period of five years thereafter and those contained in ss. 3.26 shall continue in full force and effect for a period of three years thereafter. The representations and warranties of Sellers contained in ss.ss. 3.5, 3.14 and 3.33 shall survive the Closing and shall continue in full force and effect without limit as to time (subject to any applicable statutes of limitations and any extensions or waivers thereof). The termination of any such representation and warranty, however, shall not affect any claim for breaches of representations or warranties if written notice thereof is given to the breaching -51- party or parties prior to such termination date. All of the representations and warranties of the Buyer contained in ss. 4 shall survive the Closing and shall continue in full force and effect until three years after the Closing Date. All covenants and indemnities of any Party in this Agreement or in any document or certificate delivered hereunder shall, unless otherwise specifically provided therein, remain in full force and effect forever. 9.2. Indemnity by Sellers. Each Seller hereby agrees severally (and not jointly, or jointly and severally) to indemnify, defend and hold harmless Buyer, Acquisition and the Company and each of their directors, officers and Affiliates (individually a "Buyer Indemnitee" and collectively the "Buyer Indemnitees") against and in respect of all Liabilities, obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings, damages, dues, assessments, Taxes, losses, fines, penalties, expenses, fees, costs, amounts paid in settlement (including reasonable attorneys' and expert witness fees and disbursements in connection with investigating, defending or settling any action or threatened action), arising out of any claim, damages, complaint, demand, cause of action, audit, investigation, hearing, action, suit or other proceeding asserted or initiated or otherwise existing in respect of any matter (each a "Loss" and collectively, the "Losses") that results from (a) the inaccuracy or breach of any representation or warranty made by such Seller herein or from any misrepresentation in or omission from any schedule, document, certificate or other instrument required to be furnished by Sellers hereunder, provided that for purposes of this clause (a) breaches of all representations and warranties shall be determined as follows (i) with respect to any individual item of Loss or related items of Loss, if such item or items exceed $25,000 (the "Individual Threshold"), then all Losses (without regard to time) that result from, arise out of or relate to the circumstances, events, facts or occurrences surrounding such individual item or related items of Loss or Losses of a similar nature in excess of $10,000 (the "Individual Deductible") shall count toward the Aggregate Deductible and the Aggregate Threshold, (ii) if the aggregate dollar amount of Losses which would otherwise be indemnifiable pursuant to this clause (a) exceeds $300,000 (the "Aggregate Threshold"), in which case the Sellers will be liable for all Losses under this clause (a) in excess of $200,000 (the "Aggregate Deductible"), and (iii) the foregoing limitations shall not apply to any Losses resulting from representations set forth in ss. 3 which were fraudulently made or any breach or inaccuracy of the representations and warranties contained in ss.ss. 3.1 (first sentence only), 3.2, 3.3, 3.5, 3.7 (except for the first and third sentences thereof), or 3.33 and (b) nonfulfillment of any agreement or covenant of such Seller contained herein or in any agreement or instrument required to be entered into in connection herewith; provided, however, that Sellers' liability under this clause (b) in respect of Losses resulting from non-fulfillment of the agreement and covenant contained in ss. 5.4(e) shall be subject to the Individual Threshold, Individual Deductible, Aggregate Threshold and Aggregate Deductible set forth above; provided, further, that Sellers shall not be liable for a breach of the covenant in the last sentence of ss. 5.3 and any Losses thereunder arising from any action taken by any Seller with respect to the B/E Shares to which the Buyer specifically consents in writing. Sellers' liability under clause (a) of the immediately preceding sentence in respect of Losses shall not exceed in the aggregate $1,500,000, provided that the foregoing -52- limitation shall not apply to any Losses resulting from representations set forth in ss. 3 which were fraudulently made or any breach or inaccuracy of the representations and warranties contained in ss.ss. 3.1 (first sentence only), 3.2, 3.3, 3.5, 3.7 (except for the first and third sentences thereof), 3.14, 3.26 or 3.33. Sellers' liability under clause (a) of this paragraph in respect of Losses resulting from breach or inaccuracy of the representations and warranties contained in ss. 3.14 and under clause (b) in respect of Losses resulting from non-fulfillment of the agreement and covenant contained in ss. 5.4(e) shall not exceed $5,000,000. Sellers' liability under clause (a) of this paragraph in respect of Losses resulting from breach or inaccuracy of the representations and warranties contained in ss. 3.26 shall not exceed $3,000,000. Sellers' liability under clause (b) of this paragraph in respect of Losses resulting from nonfulfillment of the agreement and covenant of the Sellers in the last sentence of ss. 5.3 shall not exceed the Aggregate Merger Consideration. The amounts payable by the Sellers pursuant to this ss. 9.2 shall be (i) net of any Tax benefit actually realized by the Buyer (on a with or without basis) and increased by any increased Tax cost incurred by the Buyer as a result of the Sellers' indemnification payment and (ii) net of any insurance proceeds (reduced by any applicable increases in premiums) if and when actually received by Buyer (it being understood that Buyer shall use commercially reasonable efforts to obtain recovery from an insurer with which Buyer has insurance covering such Loss, provided that nothing contained herein shall limit Buyer's ability to simultaneously pursue its right to indemnification hereunder). Buyer shall provide Sellers written notice for any claim made in respect of the indemnification provided in this ss. 9.2, whether or not arising out of a claim by a third party. 9.3. Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and hold harmless Sellers and their respective directors, officers and Affiliates (individually a "Seller Indemnitee" and collectively the "Seller Indemnitees") against and in respect of all Losses that result from the inaccuracy or breach of any representation or warranty made by Buyer or Acquisition herein, any misrepresentation in or omission from any schedule, document, certificate or other instrument required to be furnished by Buyer or Acquisition hereunder or from any breach or nonfulfillment of any agreement or covenant of Buyer or Acquisition contained any agreement or instrument required to be entered into in connection herewith. Sellers shall provide Buyer written notice for any claim made in respect of the indemnification provided in this ss. 9.3, whether or not arising out of a claim by a third party. 9.4. Exclusive Remedy. This Agreement shall provide the sole and exclusive remedy for any and all Losses sustained or incurred by any Buyer Indemnitee or Seller Indemnitee or their respective successors and assigns other than for fraud and equitable actions with respect to ss.ss. 7, 8 and 10.15. The parties recognize that there may be a duty to mitigate damages with respect to Losses under applicable Law. -53- 9.5. Matters Involving Third Parties. (a) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this ss. 9, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (b) Subject to ss. 5.4(d), the Indemnifying Party or Parties and the Indemnified Party will have the right to jointly control the defense against the Third Party Claim if the Third Party Claim involves only money damages and does not seek an injunction or other non-monetary relief; provided, however, that if in the good faith judgment of the Indemnified Party the Third Party Claim is likely to involve potential Losses of $5 million or greater, the Indemnified Party shall have the right to determine any matters as to which the parties are unable to agree with respect to the defense of the Third Party Claim; provided, further, that neither the Indemnified Party nor the Indemnifying Party or Parties will consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim that would give rise to Liability for or otherwise affect the other party without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed and in the event that no response to any such request for consent to judgment or settlement is received within five business days after receipt by such other party of the notice with respect thereto, such party shall be deemed for all purposes to have consented thereto. In connection with such joint defense of any Third Party Claim pursuant to ss. 9.5(a), the Indemnifying Party or Parties and the Indemnified Party agree that they shall regularly consult with each other and cooperate with each other in the defense, compromise or settlement of such Third Party Claim and shall make available to each other and their counsel its books, records and employees whose assistance, testimony or presence is necessary to assist in evaluating and defending any such action, suit or proceeding. With respect to Third Party Claims with respect to which the parties shall jointly control the defense, the Sellers' Litigation Representative is hereby appointed the sole and exclusive representative in connection with the defense of such Third Party Claim and any indemnification obligations of the Sellers with respect thereto. (c) In the event that the Third Party Claim involves a claim for injunctive or other equitable relief, the Indemnified Party may retain its own counsel and defend against the Third Party Claim in any manner it may deem appropriate and the Indemnified Party need not consult with any Indemnifying Party in connection therewith; provided, however, that the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim that would give rise to a -54- Liability for or otherwise affect the Indemnifying Party or Parties without the prior written consent of the Indemnifying Party or Parties, which consent shall not be unreasonably withheld or delayed and in the event that no response to any such request for consent to judgment or settlement is received within five business days after receipt by such other party of the notice with respect thereto, the Indemnifying Party or Parties shall be deemed for all purposes to have consented thereto. The Indemnifying Party or Parties will reimburse the Indemnified Party promptly upon admission or determination of the Indemnified Party's claim for indemnification for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses), and the Indemnifying Parties will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this ss. 9. 9.6. Other Indemnification Provisions. Each of the Sellers hereby agrees that he or it will not make any claim for indemnification against any of the Buyer, the Company or any of their Subsidiaries and other Affiliates solely by reason of the fact that he or it was a director, officer, employee, or agent of the Company or was serving at the request of any such entity as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, Losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Buyer or the Company against such Seller (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable Law, or otherwise). 10. Miscellaneous. 10.1. Press Releases and Public Announcements. Neither the Sellers nor the Company nor any of their Affiliates or representatives shall issue any press release or make any public announcement relating to the subject matter of this Agreement or the transactions contemplated hereby without the prior written consent of the Buyer. 10.2. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. 10.3. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. -55- 10.4. Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party. 10.5. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 10.6. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 10.7. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed to have been received (i) upon confirmation of facsimile, (ii) one business day following the date sent when sent by overnight delivery and (iii) five business days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid at the following address: If to the Sellers: Michael J. Tenzyk, as Sellers' Representative for Michael J. Tenzyk and Judith D. Tenzyk, and as the Sellers' Litigation Representative for each of the Sellers 12 Broadview Avenue Bellport, NY 11713 William Brown, as Sellers' Representative for Trustees U/A William Brown dated 1/7/92 and Trustees U/A Gertrude Brown dated 1/7/92 21 Cathay Road East Rockaway, NY 11518 Louis J. Francisco, as Sellers' Representative for Louis J. Francisco and Elise M. Francisco 108 S. Carll Avenue Babylon, NY 11702 -56- Copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, NY 1004 Facsimile: (212) 858-1500 Attn: Kenneth E. Adelsberg, Esq. If to the Buyer or Acquisition: BE Aerospace, Inc. 1400 Corporate Center Way Wellington, FL 33414 Facsimile: (561) 791-3966 Attn: Thomas P. McCaffrey or Edmund J. Moriarity, Esq. With a copy to: Ropes & Gray One International Place Boston, MA 02110 Facsimile: (212) 951-7050 Attn: Winthrop G. Minot, Esq. Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. 10.8. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the domestic substantive Laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the domestic substantive laws of any jurisdiction other than the State of New York. Subject to ss. 10.15 the Parties hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of New York sitting in New York County (including its Appellate Division), and any other appellate court in the State of New York for the purposes of all legal proceedings arising out of or relating to this Agreement -57- or the transactions contemplated hereby. The Parties irrevocably waive, to the fullest extent permitted by applicable law, any objection which it my now or hereafter have to the laying the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Notwithstanding the foregoing, any dispute relating to the provisions of ss. 10.15 shall be governed by the American Arbitration Act as then in effect. 10.9. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 10.10. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 10.11. Expenses. Each of the Buyer and the Sellers will bear his or its own costs and expenses (including legal and accounting fees and expenses). Sellers hereby covenant and agree that the expenses of the Company incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, bonuses to management and fees and expenses of counsel and advisers) shall not exceed $2,226,346. 10.12. Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. -58- 10.13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 10.14. Specific Performance. Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of ss.ss. 7, 8 and 10.15 of this Agreement and to enforce specifically those sections of this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity. 10.15. Arbitration. (a) Generally. Except solely as set forth in ss. 10.14 and ss. 10.15(c), each dispute, difference, controversy or claim arising in connection with or related or incidental to, or question occurring under, this Agreement or the subject matter hereof shall be finally settled under the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") by an arbitral tribunal composed of three arbitrators, at least one of whom shall be an attorney experienced in corporate transactions, appointed by agreement of the Parties in accordance with said Rules. In the event the Parties fail to agree upon a panel of arbitrators from the first list of potential arbitrators proposed by the AAA, the AAA will submit a second list in accordance with said Rules. In the event the Parties shall have failed to agree upon a full panel of arbitrators from said second list, any remaining arbitrators to be selected shall be appointed by the AAA in accordance with said Rules. If, at the time of the arbitration, the Parties agree in writing to submit the dispute to a single arbitrator, said single arbitrator shall be appointed by agreement of the parties in accordance with the foregoing procedure, or, failing such agreement, by the AAA in accordance with said Rules. The foregoing arbitration proceedings may be commenced by any Party by notice to all other Parties. (b) Place of Arbitration. The venue of such arbitration shall be New York, New York, or any other place mutually agreed to by Buyer and Sellers. (c) Recourse to Courts. Subject to ss. 10.14, the Parties hereby exclude any right of appeal to any court on the merits of the dispute. The provisions of this ss. 10.15 may be enforced in any court having jurisdiction over the award or any of the Parties or any of their respective assets, and judgment on the award (including without limitation equitable remedies) granted in any arbitration hereunder may be entered in any such court. Nothing contained in this ss. 10.15 shall prevent any Party from seeking interim -59- measures of protection in the form of pre-award attachment of assets or preliminary or temporary equitable relief. (d) Decision of Arbitral Tribunal. In the event of a dispute between the Parties hereunder, each Party shall present an offer of settlement which shall address all issues in dispute such that adoption of such offer of settlement would conclusively settle all items then in dispute. The arbitral tribunal shall be limited in its decision to choosing between the offers of settlement presented to it. The decision of the arbitral tribunal shall be final and binding on the Parties and non-appealable. The Party whose offer of settlement is not chosen by the arbitral tribunal shall pay all of the expenses of the arbitration, which, in the event the Sellers are held responsible for any such expenses prior to the Release Date, shall be subject to satisfaction by application of the Escrowed Shares pursuant to the provisions of ss. 5.2 and the Escrow Agreement. 10.16. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE SELLERS, THE BUYER, ACQUISITION AND THE COMPANY HEREBY WAIVE, AND COVENANT THAT HE OR IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR PASSED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. -60- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. BE AEROSPACE, INC. By: ------------------------------ Title: --------------------------- BE AEROSPACE ACQUISITION CORP. By: ------------------------------ Title: --------------------------- AEROSPACE LIGHTING CORPORATION By: ------------------------------ Title: --------------------------- --------------------------------- Louis J. Francisco --------------------------------- Elise M. Francisco --------------------------------- Michael J. Tenzyk --------------------------------- Judith D. Tenzyk TRUSTEES U/A WILLIAM BROWN dated 1/7/92 --------------------------------- William Brown, as Trustee TRUSTEES U/A GERTRUDE BROWN, U/A dated 1/7/92 --------------------------------- Gertrude Brown, as Trustee --------------------------------- Michael J. Tenzyk, as Sellers' Representative for Michael J. Tenzyk and Judith D. Tenzyk and as the Sellers' Litigation Representative -62- ---------------------------------- Louis J. Francisco, as Sellers' Representative for Louis J. Francisco and Elsie M. Francisco ---------------------------------- William Brown, as Sellers' Representative for Trustees U/A William Brown dated 1/7/92 and Trustees' U/A Gertrude Brown, dated 1/7/92 -63- -----END PRIVACY-ENHANCED MESSAGE-----