-----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, U6wjjSUdxxnggJRymroPhp+2SooAtWzmIBlEiqjs66AYXM9u9vJGg/AWOIjTZJjG E6MDcBkEtZKe2VAaZl4SHQ== 0000950123-98-002405.txt : 19980311 0000950123-98-002405.hdr.sgml : 19980311 ACCESSION NUMBER: 0000950123-98-002405 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19980310 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-4 SEC ACT: SEC FILE NUMBER: 333-47649 FILM NUMBER: 98560895 BUSINESS ADDRESS: STREET 1: 1400 CORPORATE CTR WY CITY: WELLINGTON STATE: FL ZIP: 33414 BUSINESS PHONE: 4077915000 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-4 1 BE AEROSPACE, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998 REGISTRATION STATEMENT NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ BE AEROSPACE, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3728 06-1209796 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 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) AMIN J. KHOURY CHAIRMAN OF THE BOARD BE AEROSPACE, INC. 1400 CORPORATE WAY WELLINGTON FLORIDA 33414 (561) 791-5000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) ------------------------ WITH COPIES TO: ROHAN S. WEERASINGHE SHEARMAN & STERLING 599 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 (212) 848-4000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, 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, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [ ]
============================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ 8% Series B Senior Subordinated Notes due 2008.................. $250,000,000 100% $250,000,000 $73,750 ==============================================================================================================================
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 THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 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 , 1998 OFFER TO EXCHANGE ALL OUTSTANDING 8% SENIOR [LOGO] SUBORDINATED NOTES DUE 2008 ($250,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING) FOR 8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008 OF BE AEROSPACE, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1998, UNLESS EXTENDED BE Aerospace, Inc., a Delaware corporation ("B/E" or the "Company"), hereby offers (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its 8% Series B Senior Subordinated Notes due March 1, 2008, (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined herein) of which this Prospectus constitutes a part, for each $1,000 principal amount of the outstanding 8% Senior Subordinated Notes due March 1, 2008 (the "Old Notes") of the Company of which $250,000,000 aggregate principal amount is outstanding. The New Notes and the Old Notes are collectively referred to herein as the "Notes." The Company will accept for exchange any and all Old Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange Offer expires, which will be , 1998, unless the Exchange Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date, unless previously accepted for payment. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to certain conditions which may be waived by the Company and to the terms and provisions of the Registration Rights Agreement (as defined herein). See "The Exchange Offer." Old Notes may be tendered only in denominations of $1,000 and integral multiples thereof. The Company has agreed to pay the expenses of the Exchange Offer. The New Notes will be obligations of the Company entitled to the benefits of the Indenture (as defined herein) relating to the Old Notes. The form and terms of the New Notes are identical in all material respects to the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act. Following the completion of the Exchange Offer, none of the Notes will be entitled to the benefits of the Registration Rights Agreement (as defined herein) relating to contingent increases in the interest rates provided for pursuant thereto. See "The Exchange Offer." SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------------ 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. 3 The New Notes will bear interest from February 13, 1998. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from February 13, 1998 to the date of the issuance of the New Notes. Interest on the New Notes is payable semiannually on March 1 and September 1 of each year, commencing September 1, 1998, accruing from February 13, 1998 at a rate of 8% per annum. The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2003 at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to March 1, 2001, the Company may redeem up to 35% of the aggregate principal amount of the Notes originally issued with the net proceeds of one or more Equity Offerings (as defined herein), at 108% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of the Notes originally issued remains outstanding after such redemption. Upon the occurrence of a Change of Control (as defined herein), each holder of the New Notes shall have the option to require the Company to make an offer to repurchase such holder's Notes at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption. The Company used approximately $111.9 million of the net proceeds from the offering of the Old Notes (the "Offering") to acquire approximately $101.8 million aggregate principal amount (plus accrued and unpaid interest) of the Company's outstanding 9 3/4% Senior Notes due 2003 (the "9 3/4% Notes") tendered pursuant to the Company's tender offer for all outstanding 9 3/4% Notes, which commenced on January 28, 1998 and expired at 12:00 midnight, New York City time, on February 25, 1998 (the "Tender Offer"), and to pay a consent fee in connection with the Tender Offer to holders of the 9 3/4% Notes who consented to the adoption of certain amendments to the indenture pursuant to which the 9 3/4% Notes were issued. The Company intends to use approximately $24.4 million of the net proceeds of the Offering to redeem the remaining $23.2 million aggregate principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes that were not tendered in the Tender Offer on March 16, 1998 at a redemption price equal to 104.875% of the principal amount of such 9 3/4% Notes (the "Redemption"). The balance of the net proceeds from the Offering will be used for general corporate purposes including potential strategic acquisitions. The Company expects to incur an estimated $9.2 million extraordinary charge for unamortized debt issuance costs, tender and redemption premiums and fees and expenses in connection with the Tender Offer and the Redemption. The New Notes are unsecured senior subordinated obligations of B/E and will be subordinated in right of payment to all existing and future Senior Indebtedness (as defined herein) of B/E, including indebtedness under its Bank Credit Facility (as defined herein). The New Notes will rank pari passu with the Company's 9 7/8% Notes (as defined herein). In addition, the New Notes will be effectively subordinated to the obligations of B/E's subsidiaries. As of November 29, 1997, after giving pro forma effect to the Offering and the application of the net proceeds therefrom, the aggregate outstanding amount of Senior Indebtedness of B/E would have been approximately $7.2 million, the aggregate outstanding amount of the 9 7/8% Notes would have been $100 million and the aggregate outstanding amount of indebtedness of B/E's subsidiaries would have been approximately $7.2 million. The ability of the Company to incur additional Indebtedness in the future is limited by the provisions of the Indenture relating to the Notes. See "Description of New Notes -- Certain Covenants -- Limitation on Indebtedness." Old Notes initially purchased by qualified institutional buyers, as defined pursuant to Rule 144A under the Securities Act ("Qualified Institutional Buyers"), were initially represented by four global Notes in registered form, registered in the name of a nominee of The Depository Trust Company ("DTC"), as depository. The New Notes exchanged for Old Notes represented by the global Notes will be represented by four global New Notes in registered form, registered in the name of the nominee of DTC, unless the beneficial holders thereof request otherwise. The global New Note will be exchangeable for New Notes in registered form, in denomination of $1,000 and integral multiples thereof. See "Description of the New Notes -- Book-Entry Delivery and Form." 2 4 Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) a broker-dealer who purchased such Old Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the New Notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes. Holders of Old Notes wishing to accept the Exchange Offer must represent to the Company that such conditions have been met. In the event that the Company's belief is inaccurate, holders of New Notes who transfer New Notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration thereunder may incur liability under the Securities Act. The Company does not assume or indemnify holders against such liability, although the Company does not believe any such liability should exist. Each broker-dealer that receives New Notes in exchange for Old Notes held for its own account, as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by such broker-dealer in connection with resales of New Notes received in exchange for Old Notes. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus and any amendment or supplement to this Prospectus available to any such broker-dealer for use in connection with any such resale. See "Plan of Distribution." The Company believes that no registered holder of the Old Notes is an affiliate (as such term is defined in Rule 405 under the Securities Act) of the Company. The Company will not receive any proceeds from the Exchange Offer, and no underwriter is being utilized in connection with the Exchange Offer. Upon completion of the Exchange Offer, Old Notes which have not been exchanged for New Notes will remain outstanding. See "Risk Factors -- Consequences of Failure to Exchange." THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. Prior to the Exchange Offer, there has been no public market for the Old Notes or New Notes. If a market for the New Notes should develop, the New Notes could trade at a discount from their principal amount. The Company does not intend to list the New Notes on a national securities exchange or to apply for quotation of the New Notes through the National Association of Securities Dealers Automated Quotation System. There can be no assurance that an active public market for the New Notes will develop. The Company has been advised by Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated, the initial purchasers (the "Initial Purchasers") of the Old Notes, that, following completion of the Exchange Offer, they intend to make a market in the New Notes; however, such entities are under no obligation to do so and any market activities with respect to the New Notes may be discontinued at any time. 3 5 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files periodic reports, proxy statements and other information with the Commission. Reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Suite 1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can also be obtained at prescribed rates by writing to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. Such information may also be accessed electronically by means of the Commission's web page on the Internet at http://www.sec.gov, which contains reports, proxy statements and other information regarding registrants, including the Company, that file electronically with the Commission. This Prospectus constitutes a part of a registration statement (the "Registration Statement") filed by the Company with the Commission under the Securities Act. As permitted by the rules and regulations of the Commission, this Prospectus does not contain all of the information contained in the Registration Statement and the exhibits and schedules thereto and reference is hereby made to the Registration Statement and the exhibits and schedules thereto for further information with respect to the Company and the securities offered hereby. Statements contained herein concerning the provisions of any documents filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. The Indenture (as defined herein) provides that the Company will furnish copies of the periodic reports required to be filed with the Commission under the Exchange Act to the holders of the Notes. If the Company is not subject to the periodic reporting and informational requirements of the Exchange Act, it will, to the extent such filings are accepted by the Commission, and whether or not the Company has a class of securities registered under the Exchange Act, file with the Commission, and provide the Trustee and the holders of the Notes within 15 days after such filings with, annual reports containing the information required to be contained in Form 10-K promulgated under the Exchange Act, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act and from time to time such other information as is required to be contained in Form 8-K promulgated under the Exchange Act. If filing such reports with the Commission is not accepted by the Commission or prohibited by the Exchange Act, the Company will also provide copies of such reports, at its cost, to prospective purchasers of the Notes promptly upon written request. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates by reference into this Prospectus the following documents or information filed with the Commission: (a) the Company's Annual Report on Form 10-K for the fiscal year ended February 22, 1997 filed May 9, 1997 (the "Form 10-K"); (b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 29, 1997 filed December 23, 1997 (the "November 10-Q"); (c) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 30, 1997 filed October 7, 1997 (the "August 10-Q"); (d) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1997 filed June 30, 1997 (the "May 10-Q"); and (e) all documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended (the "Exchange Act") subsequent to the date of the Registration 4 6 Statement of which this Prospectus is part and prior to the effectiveness thereof or subsequent to the date of this Prospectus and prior to the termination of the offering made hereby. Any statement contained herein or in any documents incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Prospectus to the extent that a subsequent statement contained herein or in any subsequently filed document which also is or is 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 this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM THOMAS P. MCCAFFREY, CHIEF FINANCIAL OFFICER OF THE COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT 1400 CORPORATE CENTER WAY, WELLINGTON, FLORIDA 33414, TELEPHONE NUMBER (561) 791-5000. The Indenture (as defined herein) provides that the Company will furnish copies of the periodic reports required to be filed with the Commission under the Exchange Act to the holders of the Notes. If the Company is not subject to the periodic reporting and informational requirements of the Exchange Act, it will, to the extent such filings are accepted by the Commission, and whether or not the Company has a class of securities registered under the Exchange Act, file with the Commission, and provide the Trustee and the holders of the Notes within 15 days after such filings with, annual reports containing the information required to be contained in Form 10-K promulgated under the Exchange Act, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act and from time to time such other information as is required to be contained in Form 8-K promulgated under the Exchange Act. If filing such reports with the Commission is not accepted by the Commission or prohibited by the Exchange Act, the Company will also provide copies of such reports, at its cost, to prospective purchasers of the Notes promptly upon written request. 5 7 SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the related notes, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the "Company" or "B/E" refers to BE Aerospace, Inc., a Delaware corporation. References herein to a fiscal year end relate to a year ending on the last Saturday in February (for example, fiscal 1997 refers to the Company's fiscal year ended February 22, 1997). Market share information presented herein does not include markets in the former Soviet Union and will vary, sometimes significantly, from year to year. Investors should carefully consider the information set forth under the heading "Risk Factors." THE COMPANY B/E is the world's largest manufacturer of commercial aircraft cabin interior products, serving virtually all major airlines with a broad line of products, including aircraft seats, food and beverage preparation and storage equipment, galley structures and in-flight entertainment systems. In addition, B/E provides upgrade, maintenance and repair services for the products which it manufactures as well as for those supplied by other manufacturers. Management believes that the Company has achieved leading global market positions in each of its major product categories. B/E is the largest manufacturer of airline seats in the world, offering an extensive line of first class, business class, tourist class and commuter seats. The Company is also the world's largest manufacturer of galley equipment for both narrow- and wide-body aircraft, including a wide selection of coffee and beverage makers, water boilers, ovens, liquid containers, refrigeration equipment and galley structures. In addition, the Company is the leading manufacturer of passenger entertainment and service systems, including passenger control systems and individual passenger in-flight entertainment systems. The Company believes that in-flight entertainment systems, including the emerging live broadcast television market for domestic narrow-body aircraft, will be one of the fastest growing and among the largest product categories in the commercial aircraft cabin interior products industry. As of November 29, 1997, B/E's backlog was approximately $560 million and, during the nine months ended November 29, 1997, the Company had revenues of $362.7 million and EBITDA of $64.1 million, an increase of 17.7% and 38.2%, respectively, over the nine months ended November 30, 1996. The Company's common stock is listed on the Nasdaq National Market, and based on the closing price of $29.50 per share on March 6, 1998, the Company had a total equity market capitalization of approximately $670 million. COMPETITIVE STRENGTHS The Company believes that it has a strong competitive position attributable to a number of factors, including the following: - Leading Market Share and Significant Installed Base. Management believes that the Company has achieved leading global market positions in each of its major product categories, with worldwide market shares, based upon industry sources, of approximately 50% in aircraft seats, 90% in coffee makers, 90% in refrigeration equipment and 50% in ovens, based on dollar sales for the nine months ended November 29, 1997, and 37% in individual passenger in-flight entertainment systems, determined on the basis of installed base as of November 29, 1997. The Company believes these market shares provide it with significant competitive advantages in serving its customers, including economies of scale and the ability to commit greater product development, global product support and marketing resources. Furthermore, because of economies of scale, in part attributable to its large market shares and its approximate $3.3 billion installed base of cabin interior equipment (valued at replacement prices as of November 29, 1997), the Company believes it is among the lowest cost producers in the cabin interior products industry. The Company also believes that its large installed base provides B/E with a significant advantage over competitors in obtaining orders for retrofit and refurbishment programs, principally because airlines tend to purchase equipment from the original supplier. In 6 8 addition, because of the need for compatible spare parts at airline maintenance depots and the desire of airlines to maximize fleet commonality, a single vendor is typically used for all aircraft of the same type operated by a particular airline. - Broadest Product Line in the Industry. Management believes the Company offers the broadest and the most technologically advanced line of products for the cabin interiors of commercial aircraft. With an established reputation for quality, service and product innovation, the Company enjoys broad recognition among the world's commercial airlines. The Company maintains a constant dialogue with a wide array of existing and potential customers, enabling it to become aware of emerging industry trends and needs and thereby play a leading role in product development. The Company has continued to expand its product line, believing that the airline industry increasingly will seek an integrated approach to the development, testing and sourcing of the aircraft's cabin interior. - Technological Leadership/New Product Development. Management believes that the Company is a technological leader in its industry, with the largest R&D organization in the industry comprised of approximately 500 engineers. The Company believes that its R&D effort and its on-site engineers at both the airlines and airframe manufacturers enable B/E to consistently introduce innovative products and thereby gain early entrant advantages and substantial market shares. Examples of such product development include: the introduction of several premium and main cabin class seats, which the Company believes provide greater comfort and are lighter in weight as a result of their ergonomic design and pre-engineered individual passenger comfort features; the Company's family of in-flight entertainment systems, which it believes to be superior to existing operational systems in terms of performance, reliability, weight, heat generation and flexibility to adapt to changing technology; a cappuccino/espresso maker; a quick chill wine cooling system; and a constant-pressure, steam cooking oven, which the Company believes substantially improves the appearance, aroma and taste of airline food. - Proven Track Record of Integration. The Company has demonstrated the ability to make strategic acquisitions and successfully integrate such acquired businesses by identifying opportunities to consolidate engineering, manufacturing and marketing activities, as well as rationalizing product lines. The Company has purchased nine businesses over the last nine years, for an aggregate purchase price of approximately $290 million. Since 1989, the Company has integrated each of its acquisitions by reducing the number of operating facilities acquired from 20 to 9 and consolidating personnel at the acquired businesses, resulting in headcount reductions of approximately 1,300 employees. GROWTH OPPORTUNITIES B/E believes that it is benefiting from three major growth trends occurring in the commercial aircraft cabin interior products industry: - Increase in Refurbishment and Upgrade Orders. B/E's substantial installed base provides significant ongoing revenues from replacements, upgrades, repairs and spare parts. Approximately 60% of B/E's revenues for the nine months ended November 29, 1997 were derived from refurbishment and upgrade orders. In the late 1980s and early 1990s, the airline industry suffered a significant downturn, which resulted in a deferral of cabin interior maintenance expenditures. Since early 1994, the airlines have experienced a turnaround in operating results, leading the domestic airline industry to record operating earnings during calendar years 1995 through 1997. Deterioration of cabin interior product functionality and aesthetics occurred within the commercial airline fleets during the industry downturn because of maintenance deferrals. Since the turnaround began, the airlines have experienced greater utilization resulting from higher load factors, which has encouraged airlines to increase spending on refurbishments and upgrades. The Company believes that it is well positioned to benefit over the next several years as a result of the airlines' dramatically improved financial condition and liquidity and the need to refurbish and upgrade cabin interiors. A significant portion of the Company's recent growth in backlog, revenues and operating earnings has been from refurbishment and upgrade programs, and the Company is currently experiencing a high level of new order quote activity related to such programs. 7 9 - Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft. Airlines have recently been purchasing a significant number of new aircraft in part due to current high load factors and the projected growth in worldwide air travel. According to the Current Market Outlook published by the Boeing Commercial Airplane Group in 1997 (the "Boeing Report"), worldwide air travel is projected to increase by 75% by calendar 2006 and the worldwide fleet of commercial passenger aircraft is projected to expand from approximately 10,300 at the end of 1996 to approximately 15,300 by the end of 2006 and to more than 21,200 by 2016. Related growth in aircraft interior product shipments associated with new aircraft deliveries began during calendar 1996. In 1997, Boeing shipped 375 aircraft versus 218 in 1996. In addition Boeing has stated plans to ship 550 aircraft in each of calendar years 1998 and 1999. The Company generally receives orders related to new aircraft deliveries approximately six months before the delivery date. Furthermore, according to the July 1997 Airline Monitor, the percentage of new Boeing aircraft deliveries projected to be wide-body aircraft for 1997 through 2001 is 39% as compared to 33% for the five year period ended December 31, 1996. This shift toward wide-body aircraft is significant to the Company since these aircraft require as much as seven times the dollar value of cabin interior products as narrow-body aircraft, including substantially more seats, galley equipment and in-flight entertainment products. - Emergence of Individual Passenger In-flight Entertainment Systems as a Major New Product Category. Airlines increasingly are demanding individual passenger in-flight entertainment systems as a method to attract and retain customers, as the availability of such service affects passengers' decisions on airline selection. These systems also provide the airlines with the opportunity to generate increased revenues, without raising ticket prices, by charging passengers for the services used. In June 1997, the Company announced a joint venture with Harris Corporation to develop and deliver live broadcast television (LiveTV(TM)) to domestic narrow-body commercial aircraft. The Company expects that in-flight entertainment systems, including the new technology designed to deliver live broadcast television on domestic narrow-body aircraft, will be one of the fastest growing and among the largest product categories in the commercial aircraft cabin interior products industry. - The Company has developed a number of individual in-flight entertainment systems that are designed to meet the varying technological and price specifications of the airlines. The Company's two current systems are (i) the B/E 2000, with an installed base of approximately 28,000 units, which is a system that provides non-interactive video programming and (ii) the B/E 2000M, with an installed base of approximately 6,000 units, which offers similar functionality to the B/E 2000 but can be upgraded to the Company's Multimedia Digital Distribution System ("MDDS") product. The MDDS product, which is in its final development stage, is a fully interactive entertainment system with the capacity to provide movies on demand, telecommunications, gaming and other services. The Company has completed the initial development and testing of the MDDS product and anticipates delivery of the first MDDS product to its launch customer, Japan Airlines ("JAL"), in 1998. The Company also anticipates completing the engineering necessary to enable installation of the MDDS as a line fit (standard) option on Boeing aircraft in 1998. As of November 29, 1997 B/E had an in-flight entertainment systems backlog of approximately $139 million. BUSINESS STRATEGY The Company's business strategy is to maintain its leadership position and best serve its airline customers by (i) offering the broadest and most integrated product line in the industry for both new product sales and follow-on products and services; (ii) pursuing a worldwide marketing approach focused by airline and encompassing the Company's entire product line; (iii) remaining the technological leader, as well as significantly growing its installed base of products, in the developing in-flight individual passenger entertainment market; (iv) enhancing its position in the growing upgrade, maintenance, inspection and repair services market; and (v) pursuing selective strategic acquisitions in the commercial aircraft cabin interior products industry. 8 10 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER The Exchange Offer relates to the exchange of up to $250 million aggregate principal amount of Old Notes for an equal aggregate principal amount of New Notes. The New Notes will be obligations of the Company entitled to the benefits of the Indenture relating to the Old Notes. The form and terms of the New Notes are identical in all material respects to the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act, and therefore are not entitled to the benefits of the registration rights (the "Registration Rights") granted under the registration rights agreement dated February 13, 1998 among the Company and the Initial Purchasers (the "Registration Rights Agreement") relating to the contingent increases in the interest rates provided for pursuant thereto. The Exchange Offer......... $1,000 principal amount of New Notes will be issued in exchange for each $1,000 principal amount of Old Notes validly tendered pursuant to the Exchange Offer. As of the date hereof, $250 million in aggregate principal amount of Old Notes are outstanding. The Company will issue the New Notes to tendering holders of Old Notes on or promptly after the Expiration Date. Resale of the New Notes.... Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, including "Exxon Capital Holdings Corporation" (available May 13, 1988), "Morgan Stanley & Co. Incorporated" (available June 5, 1991), "Mary Kay Cosmetics, Inc." (available June 5, 1991) and "Warnaco, Inc." (available October 11, 1991), the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) a broker-dealer who purchased such Old Notes directly from the Company for resale pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an "affiliate" of the Company within the meaning of the Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the New Notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes. In the event that the Company's belief is inaccurate, holders of New Notes who transfer New Notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration thereunder may incur liability under the Securities Act. The Company does not assume or indemnify holders against such liability, although the Company does not believe that any such liability should exist. Each broker-dealer that receives New Notes in exchange for Old Notes held for its own account, as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by such broker-dealer in connection with resales of New Notes received in exchange for Old Notes. The Company has agreed that, for a period of 180 days after the date of this Prospectus, it will make this Prospectus and any amendment or supplement to this Prospectus available to any such broker-dealer for use in connection with any such resales. See "Plan 9 11 of Distribution." The Company believes that no registered holder of the Old Notes is an affiliate (as such term is defined in Rule 405 of the Securities Act) of the Company. The Exchange Offer is not being made to, nor will the Company accept surrenders for exchange from, holders of Old Notes in any jurisdiction in which this Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Expiration of Exchange Offer...................... 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer -- Expiration Date; Extension; Amendments." Accrued Interest on the New Notes and the Old Notes.................... The New Notes will bear interest from February 13, 1998. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on such Old Notes accrued from February 13, 1998 to the date of the issuance of the New Notes. Consequently, holders who exchange their Old Notes for New Notes will receive the same interest payment on September 1, 1998 (the first interest payment date with respect to the Old Notes and the New Notes) that they would have received had they not accepted the Exchange Offer. See "The Exchange Offer -- Interest on the New Notes." Termination of the Exchange Offer.................... The Company may terminate the Exchange Offer if it determines that its ability to proceed with the Exchange Offer could be materially impaired due to any legal or governmental action, new law, statute, rule or regulation or any interpretation of the staff of the Commission of any existing law, statute, rule or regulation. The Company does not expect any of the foregoing conditions to occur, although there can be no assurance that such conditions will not occur. Holders of Old Notes will have certain rights against the Company under the Registration Rights Agreement should the Company fail to consummate the Exchange Offer. See "The Exchange Offer -- Termination." Procedures for Tendering Old Notes.................. Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Old Notes to be exchanged and any other required documentation to United States Trust Company of New York, as Exchange Agent, at the address set forth herein and therein or effect a tender of Old Notes pursuant to the procedures for book-entry transfer as provided for herein. See "The Exchange Offer -- Procedures for Tendering." By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, (ii) neither the holder nor any such other person 10 12 has an arrangement or understanding with any person to participate in the distribution of such New Notes and (iii) neither the holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. Special Procedures for Beneficial Holders......... Any beneficial holder whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on its behalf. If such beneficial holder wishes to tender on his own behalf, such beneficial holder must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." Guaranteed Deliver Procedures................. Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes (or who cannot complete the procedure for book-entry transfer on a timely basis) and a properly completed Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date may tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures." Withdrawal Rights.......... Tenders of Old Notes may be withdraw at any time prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date, unless previously accepted for exchange. See "The Exchange Offer -- Withdrawal of Tenders." Acceptance of Old Notes and Delivery of New Notes.... Subject to certain conditions (as summarized above in "Termination of the Exchange Offer" and described more fully under the "The Exchange Offer -- Termination"), the Company will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- General." Certain Tax Consideration.............. The exchange pursuant to the Exchange Offer will generally not be a taxable event for federal income tax purposes. See "The Exchange Offer -- Certain Income Tax Consequences." Exchange Agent............. United States Trust Company of New York, the Trustee under the Indenture, is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. The address of the Exchange Agent is: United States Trust Company of New York, 114 West 47th Street, New York, NY 10036, Attention: Margaret Ciesmelewski. For information with respect to the Exchange Offer, the telephone number for the Exchange Agent is (800) 548-6565 and the facsimile number for the Exchange Agent is (212) 420-6152. Use of Proceeds............ There will be no cash proceeds payable to the Company from the issuance of the New Notes pursuant to the Exchange Offer. The 11 13 proceeds to the Company from the sale of the Old Notes were approximately $241.8 million, net of the Initial Purchasers' discount and certain fees and expenses relating to the offering of the Old Notes. The Company used approximately $111.9 million of such net proceeds to acquire the Company's outstanding 9 3/4% Senior Notes (including accrued and unpaid interest) tendered pursuant to the Tender Offer and to pay a consent fee to holders of 9 3/4% Notes who consented to certain amendments to the indenture pursuant to which the 9 3/4% Notes were issued, in connection with the Tender Offer. The Company intends to use an additional $24.4 million of such net proceeds to redeem the remaining $23.2 million aggregate principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes that were not tendered in the Tender Offer on March 16, 1998 in the Redemption. The balance of the net proceeds from the Offering will be used for general corporate purposes including potential strategic acquisitions. See "Use of Proceeds." 12 14 SUMMARY DESCRIPTION OF THE NEW NOTES Notes Offered.............. $250 million principal amount of 8% Senior Subordinated Notes due 2008. Maturity Date.............. March 1, 2008. Interest Payment Dates..... March 1 and September 1 of each year, commencing September 1, 1998. Optional Redemption........ The Notes are redeemable at the option of the Company, in whole or in part, on or after March 1, 2003 at the redemption prices set forth herein, together with accrued and unpaid interest to the date of redemption. In addition, at any time on or prior to March 1, 2001, the Company may redeem up to 35% of the aggregate principal amount of the Notes originally issued with the net proceeds of one or more Equity Offerings at 108% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of the Notes originally issued remains outstanding after such redemption. See "Description of the New Notes -- Optional Redemption." Mandatory Redemption....... None. Change of Control.......... Upon the occurrence of a Change of Control, each holder of the Notes shall have the option to require the Company to repurchase such holder Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of redemption, pursuant to a Change of Control offer to be made by the Company. See "Description of the New Notes -- Certain Definitions" for the definition of a Change of Control. Ranking.................... The Notes will be unsecured senior subordinated obligations of the Company and will be subordinated to all existing and future Senior Indebtedness of the Company, including indebtedness under the Bank Credit Facility. The Notes will rank pari passu with the Company's 9 7/8% Senior Subordinated Notes due 2006 (the "9 7/8% Notes"). As of November 29, 1997, after giving pro forma effect to the Offering and the application of the net proceeds therefrom, the aggregate outstanding principal amount of Senior Indebtedness of the Company would have been approximately $7.2 million. As of November 29, 1997, after giving pro forma effect to the Offering and the application of the net proceeds therefrom, the aggregate outstanding amount of the 9 7/8% Notes would have been $100 million. In addition, the Notes will be effectively subordinated to the obligations of the Company's subsidiaries. As of November 29, 1997, after giving pro forma effect to the Offering and the application of the net proceeds therefrom, the Company's subsidiaries would have had approximately $7.2 million of indebtedness outstanding. Subject to certain limitations, the Company and its Restricted Subsidiaries may incur additional indebtedness in the future. See "Risk Factors -- Adverse Consequences of Financial Leverage," "Description of the New Notes -- Subordination -- Limitation on Indebtedness, and -- Limitation on Other Senior Subordinated Indebtedness." Certain Covenants.......... The Indenture contains certain covenants, including without limitation, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on other senior subordinated indebtedness; (iii) limitation on restricted payments; (iv) limitation on issuances and 13 15 sales of restricted subsidiary stock; (v) limitation on transactions with affiliates; (vi) limitation on liens securing pari passu or subordinated indebtedness; (vii) limitation on disposition of proceeds of asset sales; (viii) limitation on guarantees of indebtedness by restricted subsidiaries; (ix) limitation on dividends and other payment restrictions affecting restricted subsidiaries; and (x) restrictions on mergers and certain transfers of assets. See "Description of the New Notes -- Certain Covenants." Registration Rights........ In connection with the sale of the Old Notes, the Company agreed in the Registration Rights Agreement to use its best efforts to (i) file within 30 days, and cause to become effective within 90 days, of the date of the original issues of the Old Notes, a registration statement (the "Registration Statement") of which this Prospectus is a part with respect to a registered offer to exchange the Old Notes for the New Notes with terms identical in all material respects to the Old Notes and (ii) cause the Exchange Offer to be consummated within 120 days of the original issue of the Old Notes. In the event that any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 120 days following the date of the original issue of the Old Notes, or if any holder of the Old Notes (other than the Initial Purchasers) is not eligible to participate in the Exchange Offer, or upon the request of any Initial Purchaser under certain circumstances, the Company will use its best efforts to cause to become effective by the 120th day after the original issue of the Old Notes a shelf registration statement pursuant to the Securities Act with respect to the resale of the Old Notes (the "Shelf Registration Statement") and to keep the Shelf Registration Statement effective until three years after the effective date thereof (or until one year after such effective date if such Shelf Registration Statement is filed at the request of the Initial Purchasers under certain circumstances). In the event that either (i) the Registration Statement is not filed with the Commission on or prior to the 30th calendar day following the date of original issue of the Old Notes, (ii) the Registration Statement is not declared effective on or prior to the 90th calendar day following the date of original issue of the Old Notes or (iii) the Exchange Offer is not consummated or a Shelf Registration Statement with respect to the Old Notes is not declared effective on or prior to the 120th calendar day following the date of original issue of the Old Notes, the interest rate borne by the Old Notes shall be increased by one-half of one percent per annum following such 30-day period in the case of clause (i) above, following such 90-day period in the case of clause (ii) above, or following such 120-day period in the case of clause (iii) above. The aggregate amount of such increase from the original interest rate pursuant to these provisions will in no event exceed one-half of one percent per annum. Upon (x) the filing of the registration statement for the Exchange Offer after the 30-day period described in clause (i) above, (y) the effectiveness of the Registration Statement after the 90-day period described in clause (ii) above, or (z) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement as 14 16 the case may be, after the 120-day period described in clause (iii) above, the interest rate borne by the Old Notes from the date of such filing, effectiveness or the day before the date of consummation, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with such requirements. See "Exchange Offer." Common Stock Listing....... The Company's common stock is listed on the Nasdaq National Market (Symbol: BEAV) and, based on the closing price of $29.50 per share on March 6, 1998, the Company had a total equity market capitalization of approximately $670 million. Risk Factors............... See "Risk Factors" for a discussion of certain factors which should be considered by prospective investors in evaluating an investment in the New Notes. 15 17 SUMMARY FINANCIAL DATA The financial data as of and for the fiscal years ended February 22, 1997, February 24, 1996, and February 25, 1995, except backlog and pro forma information, have been derived from financial statements which have been audited by B/E's independent auditors. The financial data as of and for the nine months ended November 29, 1997 and November 30, 1996 have been derived from financial statements which are unaudited, but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for such periods. Operating results for the nine months ended November 29, 1997 and November 30, 1996 are not necessarily indicative of results that may be expected for a full year. The following financial information is qualified by reference to, and should be read in conjunction with, B/E's financial statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
FISCAL YEARS ENDED NINE MONTHS ENDED ----------------------------------------------------- ------------------------------ FEB. 25, 1995 FEB. 24, 1996(a) FEB. 22, 1997(a) NOV. 30, 1996 NOV. 29, 1997 ------------- ---------------- ---------------- ------------- ------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS: Net sales....................... $229,347 $ 232,582 $412,379 $308,151 $362,687 Cost of sales................... 154,863 160,031 270,557 204,655 230,825 -------- --------- -------- -------- -------- Gross profit.................... 74,484 72,551 141,822 103,496 131,862 Operating expenses: Selling, general and administrative.............. 31,787 42,000 51,734 37,619 43,017 Research, development and engineering................. 12,860 58,327(b) 37,083 27,759 34,988 Amortization expenses......... 9,954 9,499 10,607 8,021 8,195 Other expenses................ 23,736(c) 4,170(c) -- -- -- -------- --------- -------- -------- -------- Operating earnings (loss)....... (3,853) (41,445) 42,398 30,097 45,662 Interest expense, net........... 15,019 18,636 27,167 21,845 16,899 -------- --------- -------- -------- -------- Earnings (loss) before income taxes (benefit) and cumulative effect of accounting change... (18,872) (60,081) 15,231 8,252 28,763 Income taxes (benefit).......... (6,806) -- 1,522 825 4,311 -------- --------- -------- -------- -------- Earnings (loss) before cumulative effect of accounting change............. (12,066) (60,081) 13,709 7,427 24,452 Cumulative effect of accounting change........................ -- (23,332)(b) -- -- -- -------- --------- -------- -------- -------- Net earnings (loss)............. $(12,066) $ (83,413) $ 13,709 $ 7,427 $ 24,452 ======== ========= ======== ======== ======== OTHER DATA: Gross margin.................... 32.5% 31.2% 34.4% 33.6% 36.4% EBITDA(d)....................... $ 36,029 $ (18,840) $ 66,545 $ 46,422 $ 64,144 Depreciation and amortization... 16,146 18,435 24,147 16,325 18,482 Capital expenditures............ 12,172 13,656 14,471 8,675 21,099 Ratio of earnings to fixed charges(e).............. NM(f) NM(f) 1.6x 1.4x 2.7x Ratio of EBITDA to interest expense, net.................. 2.4x NM 2.4x 2.1x 3.8x Ratio of EBITDA to pro forma interest expense(g)........... -- -- -- -- 2.8x Backlog, at period end.......... $221,000(h) $ 340,000(h) $415,000(h) $420,000(h) $560,000
NOVEMBER 29, 1997 -------------------------- CONSOLIDATED BALANCE SHEET DATA ACTUAL AS ADJUSTED(i) (END OF PERIOD): -------- -------------- Working capital............................................. $153,282 $263,532 Total assets................................................ 546,711 662,976 Long-term debt.............................................. 225,339 349,789 Stockholders' equity........................................ 200,200 190,964
(footnotes on following page) 16 18 (footnotes to table) (a) On January 24, 1996, the Company acquired all of the stock of Burns Aerospace Corporation ("Burns"), an industry leader in commercial aircraft seating. The acquisition of Burns was accounted for as a purchase, and the results of Burns are included in B/E's historical financial data from the date of acquisition. (b) In fiscal 1996, the Company changed its method of accounting relating to the capitalization of pre-contract engineering costs that were previously included as a component of inventories and amortized to earnings as the product was shipped. Effective February 26, 1995, such costs have been charged to research and development and expensed as incurred and, as a result, periods prior to fiscal 1996 are not comparable. In connection with such change in accounting, the Company recorded a charge to earnings of $23.3 million. See Note 2 of Notes to the Consolidated Financial Statements. (c) In fiscal 1996, in conjunction with the Company's rationalization of its seating business and as a result of the Burns acquisition, the Company recorded a charge to earnings of $4.2 million related to costs associated with the integration and consolidation of the Company's European seating operations. In fiscal 1995, the Company charged to earnings $23.7 million of expenses primarily related to intangible assets and inventories associated with the Company's earlier generations of passenger entertainment systems. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (d) EBITDA represents net earnings before deducting extraordinary items, income tax expenses, interest expense, net, other expenses and depreciation and amortization expense. EBITDA is not a measurement in accordance with GAAP and is presented to facilitate a further analysis of B/E's financial condition. These data are not intended to be a substitute for net income (loss) or operating cash flow as a measure of B/E's profitability. (e) For purposes of computing this ratio, earnings consist of earnings before extraordinary items, income taxes and fixed charges. Fixed charges consist of interest expense, capitalized interest and amortization of deferred debt issuance costs. (f) Earnings were insufficient to cover fixed charges by approximately $18.0 million and $59.7 million for the fiscal years ended February 25, 1995 and February 24, 1996, respectively. (g) The ratio of EBITDA to pro forma interest expense is computed on a pro forma basis giving effect to the Offering and use of proceeds therefrom as if the Offering had occurred as of February 23, 1997. The ratio of EBITDA to pro forma interest expense, net, would have been 3.5x had interest earned on any unused net proceeds of the Offering been taken into account. See "Capitalization." (h) As adjusted on a similar basis to exclude certain backlog which was debooked in August 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Bookings and Backlog Information." (i) As adjusted to reflect the application of the net proceeds from the Offering to acquire the 9 3/4% Notes pursuant to the Tender Offer and the Redemption, assuming 100% of the 9 3/4% Notes are tendered or redeemed, and related costs associated with the issuance of the Notes and an estimated $9.2 million extraordinary charge for unamortized debt issuance costs, tender and redemption premiums and fees and expenses. 17 19 RISK FACTORS In addition to the other information in this Prospectus, prospective investors should consider carefully the following factors in evaluating the Company and its business before purchasing the Notes offered hereby. ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE As of November 29, 1997, after giving pro forma effect to the Offering and the application of the net proceeds therefrom, the Company would have had approximately $357.0 million aggregate amount of indebtedness outstanding, representing 65.2% of total capitalization. See "Use of Proceeds" and "Capitalization." The degree of the Company's leverage could have important consequences to purchasers of the Notes, 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 Indenture, the indenture governing the 9 7/8% Notes, and the Company's bank credit facilities. 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, the indenture governing the 9 7/8% Notes and the Indenture 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, 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 indenture governing the 9 7/8% Notes and the Indenture, could result in an event of default under the Company's bank credit facilities, or such 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. See "Description of Certain Indebtedness." SUBORDINATION OF THE NOTES; ASSETS ENCUMBRANCES; CHANGE OF CONTROL OFFER The Notes will be subordinated in right of payment in full to all existing and future Senior Indebtedness of the Company, which includes all indebtedness under the Bank Credit Facility. As of November 29, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom, the aggregate amount of Senior Indebtedness of the Company would have been approximately $7.2 million. In addition, upon consummation of the Offering, approximately $120 million was available under the Bank Credit Facility which, if borrowed, would be included as Senior Indebtedness. Further, the Notes will be effectively subordinated to indebtedness of the Company's subsidiaries. As of November 29, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom, the aggregate amount of indebtedness of the Company's subsidiaries would have been approximately $7.2 million. See "Description of Certain Indebtedness." In the event of the liquidation, dissolution, reorganization or any similar proceeding regarding the Company, the assets of the Company will be available to pay obligations on the Notes only after Senior Indebtedness of the Company has been paid in full, and there may not be sufficient assets remaining to pay amounts due on all or any of the Notes. In addition, the Company may not pay principal of, premium, if any, 18 20 or interest on the Notes or purchase, redeem or otherwise retire the Notes, if any principal, premium, if any, or interest on any Designated Senior Indebtedness (as defined) is not paid when due (whether at final maturity, upon scheduled installment, acceleration or otherwise) unless such default has been cured or waived or such Designated Senior Indebtedness has been repaid in full. In addition, under certain circumstances, if any non-payment default exists with respect to Designated Senior Indebtedness, the Company may not make any payments on the Notes for a specified period of time, unless such default is cured or waived or such Designated Senior Indebtedness has been repaid in full. See "Description of the New Notes -- Subordination." In addition to being subordinated to all existing and future Senior Indebtedness of the Company, the Notes will not be secured by any of the Company's assets. The obligations of the Company under the Bank Credit Facility are secured by substantially all the Company's assets. If the Company becomes insolvent or is liquidated, or if payment under the Bank Credit Facility is accelerated, the lenders under the Bank Credit Facility would be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to such agreement. Accordingly, such lenders will have a prior claim with respect to such assets. See "Description of Certain Indebtedness." Upon a Change of Control (as defined), the Company is required to offer to purchase all outstanding Notes. The ability of the Company to purchase the Notes upon a Change of Control is restricted by the terms of the indenture governing the 9 7/8% Notes and the terms of the Bank Credit Facility. The Company, in such circumstance, may be required immediately to repay the outstanding principal of, and pay any accrued interest on, the loans made under the Bank Credit Facility and the 9 7/8% Notes and pay any other amounts owed by the Company thereunder. In the case of any such offer to purchase the outstanding Notes, there can be no assurance that the Company would be able to repay amounts outstanding under the Bank Credit Facility and the 9 7/8% Notes or obtain necessary consents thereunder in order to consummate such purchase. In addition, upon a Change of Control, the Company will be required to offer to purchase all of the 9 7/8% Notes. Any requirement to offer to purchase outstanding Notes may result in the Company having to refinance the indebtedness outstanding under these agreements. There can be no assurance that the Company would be able to refinance such indebtedness or, if such refinancing were to occur, that such refinancing would be on terms favorable to the Company. See "Description of the New Notes" and "Description of Certain Indebtedness." DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY The Company's customers are the world's commercial airlines. As a result, the Company's business is directly dependent upon the conditions in the 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 delaying purchases of new aircraft. This led to a significant contraction in the commercial aircraft cabin interior products industry, and a decline in the Company's business and profitability. The airline industry has now experienced five consecutive years of profitability including record profitability in each of the last three calendar years. This financial turnaround has, in part, been driven by record load factors, rising fare prices and declining fuel costs. The airlines have substantially restored their balance sheets through cash generated from operations and debt and equity placements. As a result, the levels of airline spending on refurbishment and new aircraft purchases have expanded. However, due to the volatility of the airline industry there can be no assurance that the current profitability of the airline industry will continue or that the airlines will maintain or increase expenditures on cabin interior products for refurbishments or new aircraft. In addition, the airline industry is undergoing a process of consolidation and significantly increased competition. Such consolidation could result in a reduction in future aircraft orders as overlapping routes are eliminated and airlines seek greater 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. 19 21 Recently, turbulence in the financial and currency markets of many Pacific Rim countries has led to uncertainty with respect to the economic outlook for these countries. Of the Company's $560 million of backlog at November 29, 1997, the Company had $69 million with Asian carriers deliverable in fiscal 1999 and a further $74 million deliverable in subsequent fiscal years. Of such Asian carrier backlog, approximately $48 million was with JAL, Singapore Airlines and Cathay Pacific. Although not all Asian 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 for the Company's cabin interior products 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 being 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. MDDS is not yet in commercial production. The future success of the Company may depend, to a significant extent, on its ability to manufacture successfully and deliver, on a timely basis, in-flight entertainment products and to have the 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. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Bookings and Backlog Information" and "Business -- Products and Services." 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 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 having its products 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 ("MAS") and Rockwell Collins, each of which has significantly greater technological capabilities and financial and marketing resources than the Company. See "Business -- Competition." REGULATION The Federal Aviation Administration (the "FAA") prescribes standards and licensing requirements for aircraft components, including virtually all commercial airline 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. See "Business -- Government Regulation." 20 22 ABSENCE OF A PUBLIC MARKET FOR THE NOTES The Notes are new securities for which there currently is no trading market and there can be no assurance as to the liquidity of any market for the Notes that may develop, the ability of holders of the Notes to sell their Notes, or the prices at which holders of the Notes would be able to sell their Notes. If such markets were to exist, the Notes could trade at prices higher or lower than their initial purchase prices depending on many factors, including prevailing interest rates, the Company's operating results and the market for similar securities. Although the Initial Purchasers have informed the Company that they currently intend to make a market in the Notes and, if issued, the Exchange Notes, the Initial Purchasers are not obligated to do so, and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes and, if issued, the Exchange Notes. The Notes are eligible for trading in the Private offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Notes on any securities exchange or for quotation on the National Association of Securities Dealers Automated Quotation System. CONSEQUENCES OF FAILURE TO EXCHANGE Untendered Old Notes that are not exchanged for New Notes pursuant to the Exchange Offer will remain restricted securities. Old Notes will continue to be subject to the following restrictions on transfer: (i) Old Notes may be resold only if registered pursuant to the Securities Act, if an exemption from registration is available thereunder, or if neither such registration nor such exemption is required by law, (ii) Old Notes shall bear a legend restricting transfer in the absence of registration or an exemption therefrom and (iii) a holder of Old Notes who desires to sell or otherwise dispose of all or any part of its Old Notes under an exemption from registration under the Securities Act, if requested by the Company, must deliver to the Company an opinion of independent counsel experienced in Securities Act matters, reasonably satisfactory in form and substance to the Company, that such exemption is available. 21 23 THE COMPANY The Company is the world's largest supplier of commercial aircraft cabin interior products, serving virtually all major airlines with a broad line of products, including aircraft seats, galley products and structures and in-flight entertainment systems. B/E's executive offices are located at 1400 Corporate Center Way, Wellington, Florida 33414, and its telephone number is (561) 791-5000. USE OF PROCEEDS The net proceeds to the Company from the sale of the Old Notes were approximately $241.8 million, net of Initial Purchasers' discount and certain fees and expenses relating to the Offering. The Company used approximately $111.9 million of the net proceeds from the Offering to acquire approximately $101.8 million aggregate principal amount (plus accrued and unpaid interest) of the 9 3/4% Notes tendered pursuant to the Tender Offer and to pay a consent fee in connection with the Tender Offer to holders of the 9 3/4% Notes who consented to the adoption of certain amendments to the indenture pursuant to which the 9 3/4% Notes were issued. The Company intends to use an additional $24.4 million of the net proceeds of the Offering to redeem the remaining $23.2 million aggregate principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes that were not tendered in the Tender Offer on March 16, 1998 in the Redemption. The 9 3/4% Notes bear interest at the rate of 9 3/4% and mature on March 1, 2003. The remainder of the net proceeds will be used for general corporate purposes, including working capital requirements to support increased sales, and possible investments in strategic acquisitions. Pending application as described above, the net proceeds of the Offering will be invested in short-term, fixed income investments. The Company expects to incur an estimated $9.2 million extraordinary charge for unamortized debt issuance costs, tender and redemption premiums and fees and expenses in connection with the Tender Offer and the Redemption. THE EXCHANGE OFFER GENERAL In connection with the sale of the Old Notes, the purchasers thereof became entitled to the benefits of certain registration rights. Pursuant to the Registration Rights Agreement, the Company agreed to (i) file within 30 days, and cause to become effective within 90 days of the date of original issue of the Old Notes, the Registration Statement of which this Prospectus is a part with respect to the exchange of the Old Notes for the New Notes and (ii) cause the Exchange Offer to be consummated within 120 days of the original issue of the Old Notes. The New Notes have terms identical in all material respects to the terms of the Old Notes. However, in the event that any changes in law or applicable interpretation of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 120 days following the date of the original issue of the Old Notes, or if any holder of the Old Notes (other than the Initial Purchasers) is not eligible to participate in the Exchange Offer, or upon the request of any Initial Purchaser under certain circumstances, the Company has agreed to use its best efforts to cause to become effective the 120th day after the original issue of the Old Notes, a Shelf Registration Statement with respect to the resale of the Old Notes and to keep the Shelf Registration Statement effective until three years after the effective date thereof (or until one year after such effective date if such Shelf Registration Statement is filed at the request of the Initial Purchasers under certain circumstances). The Company also had agreed that in the event that either (i) the Registration Statement is not filed with the Commission on or prior to the 30th calendar day following the date of the original issue of the Old Notes or (ii) the Registration Statement is not declared effective on or prior to the 90th calendar day following the date of the original issue of the Old Notes or (iii) the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective on or prior to the 120th calendar day following the original issue of the Old Notes, the interest rate borne by the Old Notes shall be increased by one-half of one percent per annum after such 30-day period in the case of clause (i) above after such 90-day period in the case of clause (ii) above or after such 120-day period in the case of clause (iii) above. The aggregate amount of such increase from the original interest rate pursuant to those provisions will in no event exceed one-half of one percent per annum. Upon (x) the effectiveness of the Registration Statement after the 90-day period in clause (ii) above or 22 24 (y) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 120-day period outlined in clause (iii) above, the interest rate borne by the Old Notes from the date of such filing or effectiveness or the day before the date of consummation, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with such requirements. In the event the Exchange Offer is consummated, the Company will not be required to file a Shelf Registration Statement relating to any outstanding Old Notes other than those held by persons not eligible to participate in the Exchange Offer, and the interest rate on such Old Notes will remain at its initial level of 8%. The Exchange Offer shall be deemed to have been consummated upon the earlier to occur of (i) the Company having exchanged New Notes for all outstanding Old Notes (other than Old Notes held by persons not eligible to participate in the Exchange Offer) pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer, New Notes for all Old Notes that have been tendered and not withdrawn on the Expiration Date. Upon consummation, holders of Old Notes seeking liquidity in their investment would have to rely on exemptions to registration requirements under the securities laws, including the Securities Act. See "Risk Factors -- Consequences of Failure to Exchange." Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, the Company will accept all Old Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer in denominations of $1,000 and integral multiples thereof. Based on no-action letters issued by the staff of the Commission to third parties, the Company believes that the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) a broker-dealer who purchased such Old Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that the holder is acquiring the New Notes in its ordinary course of business and is not participating, and has no arrangements or understanding with any person to participate, in the distribution of the New Notes. Holders of Old Notes wishing to accept the Exchange Offer must represent to the Company that such conditions have been met. Each broker-dealer that receives New Notes in exchange for Old Notes held for its own account, as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Prospectus, as it may be amended or supplemented from time to time, may be used by such broker-dealer in connection with resales of New Notes received in exchange for Old Notes. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus and any amendment or supplement to this Prospectus available to any such broker-dealer for use in connection with any such resale. See "Plan of Distribution." As of the date of this Prospectus, $250 million aggregate principal amount of the Old Notes is outstanding. In connection with the issuance of the Old Notes, the Company arranged for the Old Notes initially purchased by Qualified Institutional Buyers to be issued and transferable in book-entry form through the facilities of DTC, acting as depositary. The New Notes will also be issuable and transferable in book-entry form through DTC. This Prospectus, together with the accompanying Letter of Transmittal, is being sent to all registered holders as of , 1998 (the "Record Date"). The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. See "-- Exchange Agent." The 23 25 Exchange Agent will act as agent for the tendering holders of Old Notes for the purpose of receiving New Notes from the Company and delivering New Notes to such holders. If any tendered Old Notes are not accepted for exchange because of an invalid tender or the occurrence of certain other events set forth herein, certificates for any such unaccepted Old Notes will be returned, without expenses, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders of Old Notes who tender in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "-- Fees and Expenses." EXPIRATION DATES; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean , 1998 unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date to which the Exchange Offer is extended. In order to extend the Expiration Date, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the record holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that the Company is extending the Exchange Offer for a specified period of time. The Company reserves the right (i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to refuse to accept Old Notes not previously accepted, if any of the conditions set forth herein under "-- Termination" shall have occurred and shall not have been waived by the Company (if permitted to be waived by the Company), by giving oral or written notice of such delay, extension or termination to the Exchange Agent, and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to be advantageous to the holders of the Old Notes. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the holders of the Old Notes of such amendment. Without limiting the manner by which the Company may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones New Service. INTEREST ON THE NEW NOTES The New Notes will bear interest from February 13, 1998, payable semiannually on March 1 and September 1 of each year commencing on September 1, 1998, at the rate of 8% per annum. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from February 13, 1998 until the date of the issuance of the New Notes. Consequently, holders who exchange their Old Notes for New Notes will receive the same interest payment on September 1, 1998 (the first interest payment date with respect to the Old Notes and the New Notes) that they would have received had they not accepted the Exchange Offer. PROCEDURE FOR TENDERING To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes (unless such tender is being effected pursuant to the procedure for book-entry transfer described below) and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. 24 26 Any financial institution that is a participant in DTC's Book-Entry Transfer Facility system may make book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account in accordance with DTC's procedure for such transfer. Although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received or confirmed by the Exchange Agent at its addresses set forth herein under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The tender by a holder of Old Notes will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. Delivery of all documents must be made to the Exchange Agent at its address set forth herein. Holders may also requests that their respective brokers, dealers, commercial banks, trust companies or nominees effect such tender for such holders. The method of delivery of Old Notes and the Letters of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the holders. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Old Notes should be sent to the Company. Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. The term "holder" with respect to the Exchange Offer means any person in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder, or any person whose Old Notes are held of record by DTC who desires to deliver such Old Notes by book-entry transfer at DTC. Any beneficial holder whose Old Notes are registered in the name of his broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. If such beneficial holder wishes to tender on his own behalf, such beneficial holder must, prior to completing and executing the Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office of correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If the Letter of Transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by appropriate bond powers which authorize such person to tender the Old Notes on behalf of the registered holder, in either case signed as the name of the registered holder or holders appears on the Old Notes. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. All the questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered Old Notes will be determined by the Company in its sole discretion, which 25 27 determinations will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not validly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right to waive any irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering holder of such Old Notes unless otherwise provided in the Letter of Transmittal, as soon as practicable flowing the Expiration Date. In addition, the Company reserves the right in its sole discretion to (a) purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date, or, as set forth under "Termination," to terminate the Exchange Offer and (b) to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the Exchange Offer. By tendering, each holder of Old Notes will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, that neither the Holder nor any other person has an arrangement or understanding with any person to participate in the distribution of the New Notes and that neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act. GUARANTEED DELIVERY PROCEDURE Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, or (ii) who cannot deliver their Old Notes, the Letter of Transmittal, or any other required documents to the Exchange Agent prior to the Expiration Date, or if such Holder cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Old Notes, the certificate number or numbers of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby, and guaranteeing that, [within five business days after the Expiration Date], the Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing the Old Notes to be tendered in proper form for transfer and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly completed and executed Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing all tendered Old Notes in proper form for transfer (or confirmation of a book-entry transfer into the Exchange Agent's account at DTC of Old Notes delivered electronically) and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five business days after the Expiration Date. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date, unless previously accepted for exchange. 26 28 To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date and prior to acceptance for exchange thereof by the Company. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfers sufficient to permit the Trustee with respect to the Old Notes to register the transfer of such Old Notes into the name of the Depositor withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) for such withdrawal notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly tendered. Any Old Notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be tendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the Expiration Date. TERMINATION Notwithstanding any other term of the Exchange Offer, the Company will not be required to accept for exchange, or exchange New Notes for, any Old Notes not therefore accepted for exchange, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Old Notes if: (i) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer, which, in the Company's judgment, might materially impair the Company's ability to proceed with the Exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted or enacted, or any existing law, statute rule or regulation is interpreted by the staff of the Commission or court of competent jurisdiction in a manner, which, in the Company's judgment, might materially impair the Company's ability to proceed with the Exchange Offer. If the Company determines that it may terminate the Exchange Offer, as set forth above, the Company may (i) refuse to accept any Old Notes and return any Old Notes that have been tendered to the holders thereof, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the Expiration of the Exchange Offer, subject to the rights of such holders of tendered Old Notes to withdraw their tendered Old Notes, or (iii) waive such termination event with respect to the Exchange Offer and accept all properly tendered Old Notes that have not been withdrawn. If such waiver constitutes a material change in the Exchange Offer, the Company will disclose such change by means of a supplement to this Prospectus that will be distributed to each registered holder of Old Notes, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders of the Old Notes, if the Exchange Offer would otherwise expire during such period. EXCHANGE AGENT United States Trust Company of New York, the Trustee under the Indenture, has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Mail or Hand Delivery: United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: Corporate Trust Services Facsimile Transmission: (212) 420-6152 Confirm by Telephone: (800) 548-6565 27 29 FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by the Company. The principal solicitation for tenders pursuant to the Exchange Offer is being made by mail. Additional solicitations may be made by officers and regular employees of the Company and its affiliates in person, by telegraph or telephone. The Company will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in connection therewith. The Company may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus, Letters of Transmittal and related documents to the beneficial owners of the Old Notes and in handling or forwarding tenders for exchange. The expenses to be incurred in connection with the Exchange Offer, including fees and expenses of the Exchange Agent and Trustee and accounting and legal fees, will be paid by the Company. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. FEDERAL INCOME TAX CONSEQUENCES The following discussion summarizing the federal income tax consequences of the Exchange Offer reflects the opinion of Shearman & Sterling, counsel to the Company, as to material federal income tax consequences expected to result from the Exchange Offer. An opinion of counsel is not binding on the Internal Revenue Service ("IRS") or the courts, and there can be no assurances that the IRS will not take, and that a court would not sustain, a position to the contrary to that described below. Moreover, the following discussion does not constitute comprehensive tax advice to any particular Holder of Old Notes. The summary is based on the current provisions of the Internal Revenue Code of 1986, as amended, and applicable Treasure regulations, judicial authority and administrative pronouncements. The tax consequences described below could be modified by future changes in the relevant law, which could have retroactive effect. Each Holder of Old Notes should consult its own tax advisor as to these and any other federal income tax consequences of the Exchange Offer as well as any tax consequences to it under foreign, state, local or other law. In the opinion of Shearman & Sterling, exchanges of Old Notes for New Notes pursuant to the Exchange Offer will be treated as a modification of the Old Notes that does not constitute a material change in their terms, and the Company intends to treat the exchanges in that manner. Therefore an exchanging Holder, will not recognize any gain or loss, in respect of an exchange of an Old Note for a New Note, and such Holder's basis and holding period in the New Note will be the same as such Holder's basis and holding period in the Old Note. The Exchange Offer will result in no federal income tax consequences to a non-exchanging Holder. 28 30 CAPITALIZATION The following table sets forth the capitalization of the Company as of November 29, 1997 and as adjusted to give effect to the sale of the Notes after deducting discounts, commissions and other offering expenses, and the application of the net proceeds of the Offering as described in "Use of Proceeds." The table should be read in conjunction with the financial statements, including notes thereto, included elsewhere in the Prospectus.
AS OF NOVEMBER 29, 1997 -------------------------- ACTUAL As Adjusted(a) -------- -------------- (UNAUDITED) (DOLLARS IN THOUSANDS) Short-term debt, including current maturities of long-term debt...................................................... $ 7,222 $ 7,222 Long-term debt, excluding current maturities: 9 3/4% Senior Notes due 2003.............................. 124,925 -- 9 7/8 Senior Subordinated Notes due 2006.................. 100,000 100,000 8% Senior Subordinated Notes due 2008..................... -- 249,375 Other..................................................... 414 414 -------- -------- Total long-term debt.............................. 225,339 349,789 Stockholders' equity Preferred Stock, $.01 par value, 1,000,000 shares authorized; no shares issued and outstanding........... -- -- Common Stock, $.01 par value, 50,000,000 shares authorized; 22,792,892 shares issued and outstanding... 228 228 Additional paid-in capital................................ 238,578 238,578 Accumulated deficit....................................... (37,834) (47,070)(b) Currency translation adjustment........................... (772) (772) -------- -------- Total stockholders' equity............................. 200,200 190,964 -------- -------- Total capitalization.............................. $432,761 $547,975 ======== ========
- --------------- (a) Adjusted to reflect the sale the Notes. The Company used approximately $111.9 million of the net proceeds from the Offering to acquire approximately $101.8 million aggregate principal amount (plus accrued and unpaid interest) of the Company's outstanding 9 3/4% Notes tendered pursuant to the Tender Offer, and to pay a consent fee in connection with the Tender Offer to holders of the 9 3/4% Notes who consented to the adoption of certain amendments to the indenture pursuant to which the 9 3/4% Notes were issued. The Company intends to use approximately $24.4 million of the net proceeds of the Offering to redeem the remaining $23.2 million aggregate principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes that were not tendered in the Tender Offer on March 16, 1998 in the Redemption. Following the Offering, the Company would have available under its Bank Credit Facility approximately $120 million for subsequent borrowings. (b) Reflects the effect of an estimated $9.2 million extraordinary charge for unamortized debt issuance costs, tender and redemption premiums and fees and expenses in connection with the Tender Offer and the Redemption. 29 31 SELECTED FINANCIAL DATA On February 28, 1992, B/E acquired from the Pullman Company certain assets and liabilities of PTC Aerospace, Inc. ("PTC") and Aircraft Products Company ("APC") and changed its fiscal year-end to the last Saturday in February. On April 2, 1992, B/E acquired the stock of Flight Equipment Engineering Limited ("FEEL"). During fiscal 1994, B/E completed the following acquisitions: (a) on April 29, 1993, B/E acquired all of the stock of Royal Inventum, B.V. ("Inventum"); (b) on August 23, 1993, B/E acquired all of the stock of Nordskog Industries ("Nordskog"); (c) on August 26, 1993, B/E acquired all of the stock of Acurex Corporation ("Acurex"); and (d) on October 13, 1993, B/E acquired substantially all of the assets of Philips Airvision ("Airvision"). On January 24, 1996, the Company acquired all of the stock of Burns Aerospace Corporation ("Burns"), an industry leader in commercial aircraft seating. The financial data as of and for the fiscal years ended February 22, 1997, February 24, 1996, February 25, 1995, February 26, 1994 and February 27, 1993, have been derived from financial statements which have been audited by B/E's independent auditors. The financial data as of and for the nine months ended November 29, 1997 and November 30, 1996 have been derived from financial statements which are unaudited, but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for such periods. Operating results for the nine months ended November 29, 1997 and November 30, 1996 are not necessarily indicative of results that may be expected for a full year. The following financial information is qualified by reference to, and should be read in conjunction with, B/E's financial statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
FISCAL YEAR ENDED NINE MONTHS ENDED ------------------------------------------------------- ------------------- FEB. 27, FEB. 26, FEB. 25, FEB. 24, FEB. 22, NOV. 30, NOV. 29, 1993 1994 1995 1996(A) 1997(A) 1996 1997 -------- -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENTS OF OPERATIONS DATA: Net sales............................... $198,019 $203,364 $229,347 $232,582 $412,379 $308,151 $362,687 Cost of sales........................... 137,690 136,307 154,863 160,031 270,557 204,655 230,825 -------- -------- -------- -------- -------- -------- -------- Gross profit............................ 60,329 67,057 74,484 72,551 141,822 103,496 131,862 Operating expenses: Selling, general and administrative... 21,698 28,164 31,787 42,000 51,734 37,619 43,017 Research, development and engineering......................... 11,299 9,876 12,860 58,327(b) 37,083 27,759 34,988 Amortization expense.................. 4,551 7,599 9,954 9,499 10,607 8,021 8,195 Other expenses........................ -- -- 23,736(c) 4,170(c) -- -- -- -------- -------- -------- -------- -------- -------- -------- Operating earnings (loss)............... 22,781 21,418 (3,853) (41,445) 42,398 30,097 45,662 Interest expense, net................... 3,955 12,581 15,019 18,636 27,167 21,845 16,899 -------- -------- -------- -------- -------- -------- -------- Earnings (loss) before income taxes (benefit), extraordinary item and cumulative effect of accounting change................................ 18,826 8,837 (18,872) (60,081) 15,231 8,252 28,763 Income taxes (benefit).................. 6,676 3,481 (6,806) -- 1,522 825 4,311 -------- -------- -------- -------- -------- -------- -------- Earnings (loss) before extraordinary item and cumulative effect of accounting change..................... 12,150 5,356 (12,066) (60,081) 13,709 7,427 24,452 Extraordinary item, net of tax effect... (522)(d) -- -- -- -- -- -- Cumulative effect of accounting change................................ -- -- -- (23,332)(b) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss)..................... $ 11,628 $ 5,356 $(12,066) $(83,413) $ 13,709 $ 7,427 $ 24,452 ======== ======== ======== ======== ======== ======== ======== EARNINGS (LOSS) PER COMMON SHARE: Earnings (loss) before cumulative effect of accounting change.................. $ 1.03 $ 0.35 $ (0.75) $ (3.71) $ 0.72 $ 0.42 $ 1.04 Extraordinary item, net of tax effect... (0.05)(d) -- -- -- -- -- -- Cumulative effect of accounting change................................ -- -- -- (1.44)(b) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss)..................... $ 0.98 $ 0.35 $ (0.75) $ (5.15) $ 0.72 $ 0.42 $ 1.04 ======== ======== ======== ======== ======== ======== ======== Common and common equivalent shares..... 11,847 15,438 16,021 16,185 19,107 17,786 23,414
(continued on following page) 30 32
FISCAL YEARS ENDED NINE MONTHS ENDED --------------------------------------------------- ----------------------------- FEB. 25, 1995 FEB. 24, 1996(A) FEB. 22, 1997(A) NOV. 30, 1996 NOV. 29, 1997 ------------- ---------------- ---------------- ------------- ------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OTHER DATA: Gross margin.............................. 32.5% 31.2% 34.4% 33.6% 36.4% EBITDA(e)................................. $ 36,029 $(18,840) $ 66,545 $ 46,422 $ 64,144 Depreciation and amortization............. 16,146 18,435 24,147 16,325 18,482 Capital expenditures...................... 12,172 13,656 14,471 8,675 21,099 Ratio of earnings to fixed charges(f)..... NM(g) NM(g) 1.6x 1.4x 2.7x Ratio of EBITDA to interest expense, net..................................... 2.4x NM 2.4x 2.1x 3.8x Ratio of EBITDA to pro forma interest expense(h).............................. -- -- -- -- 2.8x Backlog, at period end.................... $221,000(i) $340,000(i) $415,000(i) $420,000(i) $560,000
NOVEMBER 29, 1997 -------------------------- ACTUAL AS ADJUSTED(J) -------- -------------- CONSOLIDATED BALANCE SHEET DATA (END OF PERIOD): Working capital........................... $153,282 $263,532 Total assets.............................. 546,711 662,976 Long-term debt............................ 225,339 349,789 Stockholders' equity...................... 200,200 190,964
- --------------- (a) On January 24, 1996, the Company acquired all of the stock of Burns, an industry leader in commercial aircraft seating. The acquisition of Burns was accounted for as a purchase, and the results of Burns are included in B/E's historical financial data from the date of acquisition. (b) In fiscal 1996, the Company changed its method of accounting relating to the capitalization of precontract engineering costs that were previously included as a component of inventories and amortized to earnings as the product was shipped. Effective February 26, 1995, such costs have been charged to research and development and expensed as incurred and, as a result, periods prior to fiscal 1996 are not comparable. In connection with such change in accounting, the Company recorded a charge to earnings of $23.3 million. See Note 2 of Notes to the Consolidated Financial Statements. (c) In fiscal 1996, in conjunction with the Company's rationalization of its seating business and as a result of the Burns acquisition, the Company recorded a charge to earnings of $4.2 million related to costs associated with the integration and consolidation of the Company's European seating operations. In fiscal 1995, the Company charged to earnings $23.7 million of expenses primarily related to intangible assets and inventories associated with the Company's earlier generations of passenger entertainment systems. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (d) As a result of the sale of 9 3/4% Notes in 1993, the Company wrote off the unamortized portion of certain debt issuance costs related to its prior credit agreement. (e) EBITDA represents net earnings before deducting extraordinary items, income tax expenses, interest expense, net, other expenses and depreciation and amortization expense. EBITDA is not a measurement in accordance with GAAP and is presented to facilitate a further analysis of B/E's financial condition. These data are not intended to be a substitute for net income (loss) or operating cash flow as a measure of B/E's profitability. (f) For purposes of computing this ratio, earnings consist of earnings before extraordinary items, income taxes and fixed charges. Fixed charges consist of interest expense, capitalized interest and amortization of deferred debt issuance costs. (g) Earnings were insufficient to cover fixed charges by approximately $18.0 million and $59.7 million for the fiscal years ended February 25, 1995 and February 24, 1996, respectively. (h) The ratio of EBITDA to pro forma interest expense is computed on a pro forma basis giving effect to the Offering and use of proceeds therefrom as if the Offering had occurred as of February 23, 1997. The ratio of EBITDA to pro forma interest expense, net, would have been 3.5x had interest earned on any unused net proceeds of the Offering been taken into account. See "Capitalization." (i) As adjusted on a similar basis to exclude certain backlog which was debooked in August 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Bookings and Backlog Information." (j) As adjusted to reflect the application of the net proceeds from the Offering to acquire the 9 3/4% Notes pursuant to the Tender Offer and the Redemption, assuming 100% of the 9 3/4% Notes are tendered or redeemed, and related costs associated with the issuance of the Notes and an estimated $9.2 million extraordinary charge for unamortized debt issuance costs, tender and redemption premiums and fees and expenses. 31 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) INTRODUCTION B/E has become the world's leading manufacturer of commercial aircraft interior products through the strategic acquisitions of seating, in-flight passenger entertainment and services systems and galley products businesses. B/E's products include an extensive line of first class, business class, tourist class and commuter seats, a broad range of galley products including coffee and beverage makers, ovens, liquid containers, refrigeration equipment and galley structures, as well as a broad line of in-flight entertainment products including both non-interactive and interactive entertainment systems, as well as passenger control service systems. B/E markets and sells its products to its customers, the airlines, through an integrated worldwide approach, focused by airline and encompassing B/E's entire product line. B/E's revenues are generally derived from two primary sources: refurbishment or upgrade programs for the airlines' existing worldwide fleets, and new aircraft deliveries. B/E believes its large installed base of products, estimated to be approximately $3.3 billion as of November 29, 1997 (valued at replacement prices), gives it a significant advantage over competitors in obtaining orders for refurbishment programs, principally due to the tendency of the airlines to purchase equipment for such programs from the original supplier. With the exception of spare parts sales, B/E's revenues are generated from programs initiated by the airlines which may vary significantly from year to year in terms of size, mix of products and length of delivery. As a result, B/E's revenues and margins may fluctuate from period to period based upon the size and timing of the program and the type of products sold. Historically, B/E experienced certain trends in its two revenue drivers: as the airlines took deliveries of large numbers of new aircraft, refurbishment programs as a percentage of revenues declined and, similarly, when new aircraft deliveries declined, refurbishment programs tended to increase in number and size. During the most recent airline industry recession, which ended in 1994, the airlines significantly depleted their cash reserves and incurred record losses. In an effort to improve their liquidity, the airlines conserved cash by reducing or deferring cabin interior refurbishment and upgrade programs and purchases of new aircraft. As a result, in contrast with historical experience, B/E experienced declines in the number of both new orders and refurbishments. Since early 1994, the airlines have experienced a significant turnaround in operating results, with the domestic airline industry achieving record operating earnings during calendar years 1995 through 1997. Consequently, during fiscal 1997 and the nine months ended November 29, 1997, B/E has experienced significant growth in backlog of seating and galley products, and, during the nine months ended November 29, 1997 has experienced significant growth in revenues and operating earnings. This growth is a reflection of the airlines' need to begin refurbishing worn fleets and their ability to do so as a result of the strengthening of the airlines' balance sheets. B/E has substantially expanded the size, scope and nature of its business as a result of a number of acquisitions. During the fiscal year ended February 26, 1994, B/E completed the following acquisitions: (a) on April 29, 1993, the Company acquired, through a Dutch holding company, all of the capital stock of Inventum, a supplier of galley inserts including ovens, beverage makers and water boilers to airlines located primarily in Europe and the Pacific Rim; (b) on August 23, 1993, the Company acquired all of the capital stock of Nordskog, an industry pioneer in galley structures and inserts; (c) on August 26, 1993, the Company acquired all of the capital stock of Acurex, the leading worldwide supplier of commercial aircraft refrigeration products; and (d) on October 13, 1993, the Company acquired substantially all of the assets and certain of the liabilities of Airvision, a manufacturer of in-flight entertainment equipment. On January 24, 1996, the Company acquired all of the stock of Burns, an industry leader in commercial aircraft seating. While the Company will continue to be susceptible to industry-wide conditions, management believes that the Company's significantly more diversified product line and revenue base achieved through acquisitions has reduced its exposure to demand fluctuations in any one product area. 32 34 The Burns acquisition has had a significant impact on B/E's results of operations. Burns, with calendar 1995 revenues of $99,800, was one of the three leading North American suppliers of commercial aircraft passenger seats and had a base of airline customers that was largely complementary to that of B/E. B/E's and Burns' approximate share of the worldwide seating products market at the time of acquisition were 30% and 20%, respectively, based on fiscal 1995 unit sales. By consolidating engineering, marketing, administration and manufacturing operations of the two companies, B/E has been able to reduce fixed costs, thereby enhancing its low-cost position. Over the last two fiscal years, the Company's gross margins have improved substantially, increasing from 31.2% in fiscal 1996 to 34.4% in fiscal 1997 and to 36.4% for the nine months ended November 29, 1997. The primary reasons for the improvement in gross margins include: (a) shift in product mix in all divisions toward higher margin products; (b) higher unit volumes; and (c) a company-wide re-engineering program which has resulted in higher employee productivity and better manufacturing efficiency. B/E's business strategy is to maintain its market leadership position through various initiatives, including new product development. In fiscal 1997, research, development and engineering expenses totaled $37,083 or 9% of net sales, primarily consisting of costs related to the development of the MDDS, with the balance attributable to its seating and galley products businesses. During the nine months ended November 29, 1997, primarily as a result of the substantial completion of the engineering associated with the development of the MDDS and related Boeing line fit expenditures, such expenses were $34,988, or 10% of net sales. The Company has two subsidiaries that are "Unrestricted Subsidiaries" as defined under the Indenture, one of which holds the Company's in-flight entertainment business and the other of which is a start-up company that holds assets unrelated to the Company's core business. Under the terms of the Indenture, Unrestricted Subsidiaries are not restricted by the terms of the covenants. These two subsidiaries had net assets of approximately $18,000 as of November 29, 1997. In January 1998, the Company resolved a long-running dispute with the U.S. Government over export sales between 1992 and 1995 to Iran, which will result in a charge of approximately $4,000 in its current quarter, which ends February 28, 1998. See "Business -- Legal Proceedings." RESULTS OF OPERATIONS -- NINE MONTHS ENDED NOVEMBER 29, 1997 COMPARED TO THE NINE MONTHS ENDED NOVEMBER 30, 1996 Sales for the nine months ended November 29, 1997 were $362,687, or 18% higher than sales of $308,151 for the comparable period in the prior year and reflected a 26% increase in product sales, offset by a $14,790 decline in service revenues. The increase in sales is attributable to substantially higher unit volume shipments of all the Company's products. Gross profit was $131,862 (36.4% of sales) for the nine months ended November 29, 1997 and was $28,366 or 27.4% greater than the comparable period in the prior year of $103,496, which represented 33.6% of sales. The increase in gross profit, while primarily the result of the higher sales volume, was also positively impacted by the improved gross margin. At November 29, 1997 the Company's backlog was approximately $560,000, up 33% from backlog of $420,000 at November 30, 1996. Backlog at both dates have been adjusted on a similar basis to exclude backlog debooked in August 1997. See "-- Bookings and Backlog Information." Selling, general and administrative and other expenses were $43,017 or 11.9% of sales for the nine months ended November 29, 1997. This was $5,398 higher than selling, general and administrative expenses for the comparable period in the prior year of $37,619, or 12.2% of sales, and is primarily due to the higher level of sales and quotation activity as well as a higher level of customer service, product support and information technology activities. Research, development and engineering expenses were $34,988, or 9.6% of sales, for the nine months ended November 29, 1997. For the comparable period in the prior year, research and development expense was $27,759 or 9.0% of sales. 33 35 Amortization expense of $8,195 for the nine months ended November 29, 1997 was $174 more than the amount recorded in the comparable period for fiscal 1996. Net interest expense was $16,899 for the nine months ended November 29, 1997, or $4,946 less than the net interest expense of $21,845 recorded for the comparable period in the prior year, and is due to the decrease in the Company's long-term debt. The increase in gross profit offset by somewhat higher operating expenses and lower interest expense in the current year resulted in earnings before income taxes of $28,763, an increase of $20,511 over the comparable period in the prior year. Income taxes for the nine months ended November 29, 1997 were $4,311, or 15% of earnings before income taxes as compared to $825 or 10% of earnings before income taxes in the prior year. Net earnings were $24,452, or $1.04 per share for the nine months ended November 29, 1997 as compared to $7,427 or $.42 per share for the comparable period in the prior year. RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 22, 1997 COMPARED TO YEAR ENDED FEBRUARY 24, 1996 Sales for the year ended February 22, 1997 were $412,379, or 77% higher than sales of $232,582 for the comparable period in the prior year. The increase in sales is attributable to substantially higher volume shipments of all the Company's products and services as a result of improving industry conditions. Of the $179,797 increase in sales for the year, $103,800 was due to increased seating and services revenues directly related to the acquisition of Burns. Excluding the effect of the Burns acquisition, sales increased 33% year over year. At February 22, 1997, the Company's backlog was approximately $570,000, up from $450,000 at February 24, 1996. New order bookings in the year ended February 22, 1997 of $532,000 were $305,000 greater than new order bookings of $227,000 for the comparable period in the prior year. Management estimates that approximately 44% of its backlog is deliverable during fiscal 1998. See "-- Bookings and Backlog Information." Gross profit was $141,822, or 34.4% of sales, for the year ended February 22, 1997 and was $69,271 higher than gross profit for the comparable period in the prior year of $72,551, which represented 31.2% of sales. The increase in gross profit is primarily the result of the higher sales volumes and the mix of products and services sold. Selling, general and administrative expenses were $51,734, or 12.5% of sales, for the year ended February 22, 1997. This was $9,734 higher than selling, general and administrative expenses for the comparable period in the prior year of $42,000, or 18.1% of sales, principally due to the substantial increases in revenues and the acquisition of Burns. Research, development and engineering expenses were $37,083, or 9.0% of sales, for the year ended February 22, 1997. For the comparable period in the prior year, research and development expense was $58,327, or 25.1% of sales. The decrease in expenses during the current year is the result of a decrease in the level of activity associated with the MDDS interactive entertainment system, offset somewhat by an increase in product development activity in the Seating Products Group. Amortization expense for the year ended February 22, 1997 of $10,607 was $1,108 more than the amount recorded in fiscal 1996 as a result of the Burns acquisition. Net interest expense was $27,167 for the year ended February 22, 1997, or $8,531 higher than the net interest expense of $18,636 recorded for the comparable period in the prior year, and is due to the increase in the Company's long-term debt outstanding throughout most of fiscal 1997 as a result of the 9 7/8% Notes issued at the time of the Burns acquisition. Earnings before income taxes of $15,231 for the year ended February 22, 1997 were $75,312 more than the loss before income taxes of $60,081 in the prior year. 34 36 Income taxes for the year ended February 22, 1997 were $1,522, or 10% of earnings before income taxes, as compared to no tax provision in fiscal 1996. Net earnings were $13,709, or $.72 per share, for the year ended February 22, 1997 as compared to a net loss of ($83,413) or ($5.15) per share for the comparable period in the prior year, which included the cumulative effect of an accounting change of $23,332. RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 24, 1996 COMPARED TO YEAR ENDED FEBRUARY 25, 1995 Sales for the year ended February 24, 1996 were $232,582 or 1% greater than sales of $229,347 in the prior year. This increase in sales is primarily related to the inclusion of results of operations of Burns, which was acquired during the fourth quarter of fiscal 1996. Offsetting this increase in revenues was the negative impact of a ten-week strike at Boeing, which ended December 14, 1995. At February 24, 1996, the Company's backlog stood at approximately $450,000, up from $331,000 at February 25, 1995. The increase in backlog is attributable to the acquisition of Burns, along with solid growth from orders placed by the airlines. During the year ended February 24, 1996, and for the first time in over two years, the airlines placed orders for the Company's seating and galley products in excess of its shipment levels, resulting in an increase in its seating and galley products backlog. See "-- Bookings and Backlog Information." Gross profit was $72,551 or 31.2% of sales for the year ended February 24, 1996 and was $1,933 less than gross profit for the prior year of $74,484 which represented 32.5% of sales. The decrease in gross profit during the year ended February 24, 1996 is primarily the result of the mix of products sold. Selling, general and administrative expenses were $42,000 (18.1% of sales) for the year ended February 24, 1996. This was $10,213 higher than the comparable period in the prior year of $31,787 (13.9% of sales), principally due to costs associated with the Burns acquisition and related organizational changes brought about by this acquisition, higher promotional and selling costs associated with B/E's participation in annual industry trade shows, and higher medical benefits and legal costs during fiscal 1996. Effective as of the beginning of fiscal 1996 the Company changed its method of accounting for pre-contract engineering expenditures associated with customer orders. These expenditures, which previously were carried in inventory for amortization over future deliveries, are now expensed as incurred. As a result of this change in accounting method, research, development and engineering for the year ended February 24, 1996 increased by $45,467 to $58,327, as compared to $12,860 in the prior year. Amortization expense for the year ended February 24, 1996 of $9,499 was $455 less than the amount recorded in the prior year and is due to the lower level of intangible assets being amortized during fiscal 1996. Other expenses were $4,170 for the year ended February 24, 1996 and relate to costs associated with the integration and consolidation of the Company's European seating business. Other expenses for the fiscal year ended February 25, 1995 consisted of a charge of $23,736 related primarily to intangible assets and inventories associated with B/E's earlier generations of passenger entertainment systems. Interest expense, net was $18,636 for the year ended February 24, 1996 or $3,617 higher than the prior year. This increase is the result of an increase in the amount of the Company's long-term debt outstanding, as well as higher interest rates. No income tax benefit was provided for the year ended February 24, 1996 as compared to a tax benefit of $6,806 (36%) for the prior year. The Company recorded the cumulative effect of an accounting change of $23,332 during the year ended February 24, 1996. Such amount represents the total amount of capitalized pre-contract engineering costs which were included in inventories as of February 25, 1995. The net loss for fiscal 1996 was ($83,413) or ($5.15) per share as compared to a net loss of ($12,066) or ($.75) per share in the prior year. 35 37 BOOKINGS AND BACKLOG INFORMATION On September 15, 1997, British Airways ("BA") notified the Company of its decision not to conduct a flight trial of B/E's MDDS interactive video system. As a result, the Company believes that BA will ultimately select a competitor's system for their in-flight entertainment equipment needs. As a result of BA's decision not to move forward with the interactive program, as of August 1997, the Company debooked approximately $155,000 of backlog related to the MDDS program. At November 1997, the Company's backlog, after debooking the BA backlog, stood at approximately $560,000, which represents a year-to-year increase of approximately $140,000 or 33% versus the Company's backlog at the end of its fiscal 1997 third quarter, as similarly adjusted to exclude the amount then attributable to the BA MDDS backlog. Although the Company has debooked the BA backlog, the Company is continuing to complete the initial development and testing of the MDDS product and anticipates delivery of the first MDDS product to its launch customer, JAL, in 1998. See "Business -- Products and Services." LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements consist primarily of working capital needs and scheduled payments of interest on its indebtedness. B/E's primary requirements for working capital have been directly related to increased accounts receivable and inventory levels as a result of revenue growth. B/E's working capital was $153,282 as of November 29, 1997, compared to $122,174 as of February 22, 1997. At November 29, 1997, the Company's cash and cash equivalents were $58,221 as compared to $44,149 at February 22, 1997. Cash provided from operating activities during the nine months ended November 29, 1997 was $27,792 and cash used in operating activities in the nine months ended November 30, 1996 was $10,147. The primary source of cash during the nine months ended November 29, 1997 was net earnings of $24,452, non-cash charges for depreciation and amortization of $18,482 and increases in accounts payable of $13,638 offset by a use of cash of $25,671 related to increases in inventories and receivables and $4,360 related to net decreases in other assets and liabilities. In May 1997, the Company amended its existing credit facilities with The Chase Manhattan Bank by increasing the aggregate principal amount that may be borrowed thereunder to $125,000 (the "Bank Credit Facility"). The Bank Credit Facility consists of a $25,000 Reducing Revolver and a $100,000 Revolving Facility. The amount of the Reducing Revolver will be reduced automatically by 12.5% on August 26, 2000 and on each of the seven succeeding quarterly anniversaries of such date. The Reducing Revolver is collateralized by all of the issued and outstanding capital stock of a wholly owned subsidiary and has a five-year maturity. The Revolving Facility is collateralized by all of the Company's accounts receivable, all of its inventory and substantially all of its other personal property and has a five-year maturity. The Bank Credit Facility contains customary affirmative covenants, negative covenants and conditions of borrowing. At November 29, 1997 indebtedness under the Bank Credit Facility were letters of credit amounting to approximately $4,572. The Company has approximately $120,000 available for subsequent borrowings under the Bank Credit Facility. Long-term debt consists of the 9 3/4% Notes and the 9 7/8% Notes which are due March 1, 2003 and February 1, 2006, respectively. The Company completed the Tender Offer for all outstanding 9 3/4% Notes on February 25, 1998. The Company intends to redeem the remaining outstanding 9 3/4% Notes that were not tendered in the Tender Offer on March 16, 1998 at a redemption price of 104.875% of the principal amount. Purchase of the 9 3/4% Notes pursuant to the Tender Offer and the Redemption will be funded with a portion of the proceeds from the Offering. The Company estimates that it will take a $9,200 extraordinary charge for unamortized debt issue costs, tender and redemption premiums and fees and expenses related to the repurchase of the 9 3/4% Notes. The Company's capital expenditures were $21,099, and $8,675 during the nine months ended November 29, 1997, and November 30, 1996, respectively. The increase in capital expenditures was primarily attributable to (i) the development of a new management information system to replace the Company's existing systems, many of which were inherited in acquisitions, and (ii) expenditures for plant modernization. 36 38 The management information system is expected to be installed over the next 18 months and will be year 2000 compliant. The Company anticipates ongoing capital expenditures of approximately $25,000 per year for the next several years to be in line with expanded growth in business. The Company believes that cash flow from operations, proceeds from the sale of the Notes offered hereby and availability under the Bank Credit Facility will provide adequate funds for its working capital needs, planned capital expenditures and debt service obligations through the term of the Bank Credit Facility. The Company believes that it will be able to refinance the Bank Credit Facility prior to its termination, although there can be no assurance that it will be able to do so. The Company's ability to fund its operations and make planned capital expenditures, to make scheduled payments and to refinance its indebtedness depends on its future operating performance and cash flow, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond its control. INDUSTRY CONDITIONS The Company's customers are the world's commercial airlines. As a result, the Company's business is directly dependent upon the conditions in the commercial airline industry. In the late 1980s and early 1990s the world airline industry suffered a severe downturn which resulted in record losses and several air carriers seeking protection under bankruptcy laws. As a consequence, during such period, airlines sought to conserve cash by reducing or deferring scheduled cabin interior refurbishment and upgrade programs and delaying purchases of new aircraft. This led to a significant contraction in the commercial aircraft cabin interior products industry, and a decline in the Company's business and profitability. The airline industry has now experienced five consecutive years of profitability including record profitability in each of the last three calendar years. This financial turnaround has, in part, been driven by record load factors, rising fare prices and declining fuel costs. The airlines have substantially restored their balance sheets through cash generated from operations and debt and equity placements. As a result, the levels of airline spending on refurbishment and new aircraft purchases have expanded. However, due to the volatility of the airline industry there can be no assurance that the current profitability of the airline industry will continue or that the airlines will maintain or increase expenditures on cabin interior products for refurbishments or new aircraft. In addition, the airline industry is undergoing a process of consolidation and significantly increased competition. Such consolidation could result in a reduction in future aircraft orders as overlapping routes are eliminated and airlines seek greater economics through higher aircraft utilization. Increased airline competition may also result in airlines seeking to reduce costs by producing greater price competition from airline cabin interior products manufacturers, thereby adversely affecting the Company's margins. Recently, turbulence in the financial and currency markets of many Pacific Rim Countries has led to uncertainty with respect to the economic outlook for these countries. Of the Company's $560,000 of backlog at November 29, 1997, the Company had $69,000 with Asian carriers deliverable in fiscal 1999 and a further $74,000 deliverable in subsequent fiscal years. Of such existing Asian carrier backlog, approximately $48,000 is with JAL, Singapore Airlines and Cathay Pacific. Although not all Asian 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 for the Company's cabin interior products may be adversely affected. The foregoing statements include forward-looking statements which involve risks and uncertainties. The Company's actual experience may differ materially from that discussed above. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors," as well as future events that have the effect of reducing the Company's operating income and available cash balances, such as unexpected operating losses or delays in the integration of the Company's seating business, the delivery of the MDDS interactive video system, new or expected refurbishments, or cash expenditures related to possible future acquisitions. 37 39 BUSINESS INTRODUCTION B/E is the world's largest manufacturer of commercial aircraft cabin interior products, serving virtually all major airlines with a broad line of products, including aircraft seats, food and beverage preparation and storage equipment, galley structures and in-flight entertainment systems. In addition, B/E provides upgrade, maintenance and repair services for the products which it manufactures as well as for those supplied by other manufacturers. Management believes that the Company has achieved leading global market positions in each of its major product categories. B/E is the largest manufacturer of airline seats in the world, offering an extensive line of first class, business class, tourist class and commuter seats. The Company is also the world's largest manufacturer of galley equipment for both narrow- and wide-body aircraft, including a wide selection of coffee and beverage makers, water boilers, ovens, liquid containers, refrigeration equipment and galley structures. In addition, the Company is the leading manufacturer of passenger entertainment and service systems, including passenger control systems and individual passenger in-flight entertainment systems. The Company believes that individual passenger in-flight entertainment systems will be one of the fastest growing and among the largest product categories in the commercial aircraft cabin interior products industry. INDUSTRY OVERVIEW The commercial aircraft cabin interior products industry encompasses a broad range of products and services, including not only aircraft seating products, passenger entertainment and service systems, and food and beverage preparation and storage systems, but also lavatories, lighting systems, evacuation equipment and overhead bins. Management estimates that the industry had annual sales in excess of $1.5 billion dollars during fiscal 1997. Historically, revenues in the cabin interior products industry have been derived from five sources: (i) retrofit programs in which airlines purchase new components to overhaul completely the interiors of aircraft already in service; (ii) refurbishment programs in which airlines purchase components and services to improve the appearance and functionality of certain cabin interior equipment; (iii) new installation programs in which airlines purchase new equipment to outfit a newly delivered aircraft; (iv) spare parts; and (v) equipment to upgrade the functionality or appearance of the aircraft interior. The retrofit and refurbishment cycles for commercial aircraft cabin interior products differ by product category. Aircraft seating typically has a refurbishment cycle of one to two years and a retrofit cycle of seven to eight years, although during the industry downturn, these periods tended to be extended. See "-- Recent Industry Conditions." Galley structures and products are periodically upgraded or repaired, and require a continual flow of spare parts, but may be retrofitted only once or twice during the life of the aircraft. The various product categories currently manufactured by the Company include: - AIRCRAFT SEATS. This is the largest single product category in the industry and includes first class, business class, tourist class and commuter seats. Management estimates that the aggregate size of the worldwide aircraft seat market (including spare parts) during fiscal 1998 was in excess of $530 million. Approximately ten companies worldwide, including the Company, supply aircraft seats, although the Company (which has an approximately 50% market share) and two other competitors share approximately 90% of the market. - PASSENGER ENTERTAINMENT AND SERVICE SYSTEMS ("PESS"). This product category includes individual seat video systems, overhead video projection systems, audio distribution systems, passenger control units ("PCUs") and related wiring and harness assemblies and sophisticated interactive telecommunications and entertainment systems. Management estimates that the aggregate size of the worldwide PESS market was approximately $300 million during fiscal 1998. Industry sources expect the PESS market to increase substantially in the near term as individual passenger entertainment systems become standard in-flight entertainment equipment in first, business and tourist classes on wide-body 38 40 and, with the further development of live broadcast television on many narrow-body, aircraft. PESS products are currently supplied by approximately five companies worldwide. The Company has a market share of approximately 37% in individual passenger in-flight entertainment systems, determined on the basis of installed units as of November 29, 1997. - GALLEY PRODUCTS. This product category includes complete galley systems for both narrow- and wide-body aircraft, including a wide selection of coffee and beverage makers, water boilers, ovens, liquid containers, air chillers, wine coolers and other refrigeration equipment and other galley components. Management estimates that the aggregate size of the worldwide galley equipment market during fiscal 1998 was in excess of $360 million. The majority of the Company's sales of galley products have been associated with deliveries of new aircraft to the airlines (particularly galley structures and refrigeration equipment). While there are approximately 20 companies worldwide who supply galley equipment to the airline industry, the Company is the only manufacturer with a complete line of galley equipment. The Company operates in the commercial aircraft cabin interior products segment of the commercial airlines supplier industry. Revenues for similar classes of products or services within this business segment for the nine months ended November 1997 and 1996, and for the three most recent fiscal years are presented below (in millions):
NINE MONTHS ENDED NOVEMBER FISCAL YEAR ------------ -------------------- 1997 1996 1997 1996 1995 ---- ---- ---- ---- ---- Seating products.............................. $197 $165 $217 $ 97 $100 Galley products............................... 96 75 101 79 81 Passenger entertainment and service systems... 48 32 52 33 34 Services...................................... 22 36 42 23 14 ---- ---- ---- ---- ---- Total revenues...................... $363 $308 $412 $232 $229 ==== ==== ==== ==== ====
RECENT INDUSTRY CONDITIONS The Company's principal customers are the world's commercial airlines. The airlines, particularly the U.S. carriers, incurred record losses during the three-year period ended December 31, 1993. The losses incurred during the downturn seriously impaired airline balance sheets and negatively influenced airline purchasing decisions with respect to both new aircraft and refurbishment programs. The domestic airlines in large part returned to profitable operations during calendar year 1994, and have achieved record operating earnings during calendar years 1995 through 1997, and have substantially restored their balance sheets since then through cash generated from operations and debt and equity placements. This improvement in the airlines' profitability and liquidity has, in turn, led to an increase in refurbishment and retrofit programs, which coupled with spares revenues generated approximately 60% of the Company's revenues for the nine months ended November 1997. Further, throughout calendar 1997, the aircraft manufacturers began experiencing a significant increase in new aircraft orders. Among those factors expected to affect the cabin interior products industry are the following: - Large Existing Installed Base. According to the Boeing Report, the world commercial passenger aircraft fleet, as of the end of 1996, consisted of 10,300 aircraft, including 3,000 aircraft with fewer than 120 seats, 4,511 aircraft with between 120 and 240 seats and 2,760 aircraft with more than 240 seats. Based on such fleet numbers, management estimates that the total worldwide installed base of commercial aircraft cabin interior products, valued at replacement prices, was approximately $9.5 billion at the end of 1997. This existing installed base will generate continued retrofit, refurbishment and spare parts revenue, particularly in light of the deterioration of existing interior cabin functionality and aesthetics resulting from the airlines' deferral of refurbishment programs in recent years. - Expanding Worldwide Fleet. Worldwide air traffic has grown in every year since 1946 (except in 1990) and, according to the Boeing Report, is projected to grow at a compounded average rate of 39 41 approximately five percent per year through 2016, increasing annual revenue passenger miles from approximately 1.7 trillion in 1996 to approximately 4.4 trillion by 2016. Airlines have recently been purchasing a significant number of new aircraft due in part to the current high load factors and the projected growth in worldwide air travel. According to the Boeing Report, the worldwide fleet of commercial passenger aircraft is projected to expand from approximately 10,300 at the end of 1996 to approximately 21,200 by the end of 2016. Related growth in aircraft interior product shipments associated with new aircraft deliveries began during calendar 1996. In 1997, Boeing shipped 375 aircraft versus 218 in 1996. In addition, Boeing has stated plans to ship 550 aircraft in each of calendar years 1998 and 1999. The Company generally receives orders related to new deliveries approximately six months before an aircraft is delivered. According to Airbus Industrie Global Market Forecast published in March 1997 (the "Airbus Industrie Report"), the worldwide installed seat base, which management considers to be a good indicator for potential growth in the aircraft cabin interior products industry, is expected to increase from approximately 1.7 million passenger seats at the end of 1996 to approximately 4.0 million passenger seats at the end of 2016. The expanding worldwide fleet will generate additional revenues from new installation programs, and the increase in the size of the installed base will generate additional and continual retrofit, refurbishment and spare parts revenue. - Wide-body Aircraft Orders. Orders for wide-body, long-haul aircraft constitute an increasing share of total new airframe orders. According to the July 1997 Airline Monitor, the percentage of Boeing aircraft deliveries projected to be wide-body aircraft for 1997 through 2001 is 39%, as compared to 33% for the three-year period ended December 31, 1995. Wide-body aircraft currently carry up to three times the number of seats as narrow-body aircraft, and because of multiple classes of service, including large first class and business class configurations, the Company's average revenue per seat on wide-body aircraft is also higher. Aircraft crews on wide-body aircraft may make and serve between 300 and 900 meals and may brew and serve more than 2,000 cups of coffee on a single flight. As a result, wide-body aircraft may require as much as seven times the dollar value of cabin interior products as narrow-body aircraft, as well as products which are technically more sophisticated and typically more expensive. Further, individual passenger in-flight entertainment systems are installed principally on wide-body aircraft. Airlines are increasingly demanding such systems for long-haul flights to attract and retain customers, especially as the quality of in-flight entertainment has become a differentiating factor in passengers' airline selection decisions. Such systems also provide the airlines with the opportunity to increase revenues per passenger mile, without raising ticket prices, by charging individually for services used. For these reasons, management believes that in the future, interactive in-flight entertainment systems will be installed on essentially all wide-body aircraft and, with the further development of live broadcast in-flight television, many narrow-body planes. - New Product Development. The commercial aircraft cabin interior products industry is engaged in intensive development and marketing efforts for a number of new products, including convertible seats, interactive individual passenger entertainment systems, live broadcast television for narrow-body domestic aircraft, advanced telecommunications equipment and new galley equipment. Interactive video technology provides a passenger with a wide range of computer capabilities, which are designed to accept information generated by the passenger and communicate such information to the cabin crew for assisting passengers and crew with food service selection, the purchase of duty-free goods, information in connection with the arrival time, connecting flights, gate and other passenger information, as well as facilitate effective on-board inventory control and provide individual entertainment. Live TV(TM), a new product line being developed by a joint venture between the Company and Harris Corporation, will provide live broadcast television via satellite to narrow-body aircraft allowing passengers the capability to view up to 48 different channels of television service. New cabin interior products will generate new installation and retrofit revenues as well as service revenues from equipment maintenance, inspection and repair. - Growing Upgrade, Maintenance, Inspection and Repair Service Markets. Historically the airlines have relied on their airframe and engine mechanics to repair or replace cabin interior products that have become damaged or otherwise non-functional. As cabin interior product configurations have become 40 42 increasingly sophisticated and the airline industry increasingly competitive, the airlines have begun to outsource such services in order to increase productivity and reduce costs and overhead. Outsourced services include product upgrades (such as the installation of a telecommunications module or individual passenger entertainment unit in an aircraft seat not originally designed to accommodate such equipment), cabin interior product maintenance and inspection, as well as other repair services. COMPETITIVE STRENGTHS The Company believes that it has a strong competitive position attributable to a number of factors including the following: - Leading Market Share and Significant Installed Base. Management believes that the Company has achieved leading global market positions in each of its major product categories, with market shares, based upon industry sources, of approximately 50% in aircraft seats, 90% in coffee makers, 90% in refrigeration equipment and 50% in ovens, based on dollar sales for the nine months ended November 29, 1997, and 37% in individual passenger in-flight entertainment systems, determined on the basis of installed base as of November 29, 1997. The Company believes these market shares provide it with significant competitive advantages in serving its customers, including economies of scale and the ability to commit greater product development, global product support and marketing resources. Furthermore, because of economies of scale, in part attributable to its large market shares and its approximate $3.3 billion installed base of cabin interior equipment (valued at replacement prices as of November 29, 1997), the Company believes it is among the lowest cost producers in the cabin interior products industry. The Company also believes that its large installed base provides B/E with a significant advantage over competitors in obtaining orders for retrofit and refurbishment programs, principally because airlines tend to purchase equipment from the original supplier. In addition, because of the need for compatible spare parts at airline maintenance depots and the desire of airlines to maximize fleet commonality, a single vendor is typically used for all aircraft of the same type operated by a particular airline. - Broadest Product Line in the Industry. Management believes the Company offers the broadest and the most technologically advanced line of products for the cabin interiors of commercial aircraft. With an established reputation for quality, service and product innovation, the Company enjoys broad recognition among the world's commercial airlines. The Company maintains a constant dialogue with a wide array of existing and potential customers, enabling it to become aware of emerging industry trends and needs and thereby play a leading role in product development. The Company has continued to expand its product line, believing that the airline industry increasingly will seek an integrated approach to the development, testing and sourcing of the aircraft's cabin interior. - Technological Leadership/New Product Development. Management believes that the Company is a technological leader in its industry, with the largest R&D organization in the industry currently comprised of approximately 500 engineers. The Company believes that its R&D effort and its on-site engineers at both the airlines and airframe manufacturers enable B/E to consistently introduce innovative products and thereby gain early entrant advantages and substantial market shares. Examples of such product development include: the introduction of several premium and main cabin class seats, which the Company believes provide greater comfort and are lighter in weight as a result of their ergonomic design and pre-engineered individual passenger comfort features; the Company's family of in-flight entertainment systems, which it believes to be superior to existing operational systems in terms of performance, reliability, weight, heat generation and flexibility to adapt to changing technology; a cappuccino/espresso maker; a quick chill wine cooling system; and a constant-pressure, steam cooking oven, which the Company believes substantially improves the appearance, aroma and taste of airline food. - Proven Track Record of Integration. The Company has demonstrated the ability to make strategic acquisitions and successfully integrate such acquired businesses by identifying opportunities to consolidate engineering, manufacturing and marketing activities, as well as rationalizing product lines. The Company has purchased nine businesses over the last nine years, for an aggregate purchase price of approximately $290 million. Since 1989, the Company has integrated each of its acquisitions by reducing 41 43 the number of operating facilities acquired from 20 to nine and consolidating personnel at the acquired businesses, resulting in headcount reductions of approximately 1,300 employees. GROWTH OPPORTUNITIES B/E believes that it is benefiting from three major growth trends occurring in the commercial aircraft cabin interior products industry: - Increase in Refurbishment and Upgrade Orders. B/E's substantial installed base provides significant ongoing revenues from replacements, upgrades, repairs and spare parts. Approximately 60% of B/E's revenues for the nine months ended November 29, 1997 were derived from refurbishment and upgrade orders. In the late 1980s and early 1990s, the airline industry suffered a significant downturn, which resulted in a deferral of cabin interior maintenance expenditures. Since early 1994, the airlines have experienced a turnaround in operating results, leading the domestic airline industry to record operating earnings during calendar years 1995 through 1997. Deterioration of cabin interior product functionality and aesthetics occurred within the commercial airline fleets during the industry downturn because of maintenance deferrals. Since the turnaround began, the airlines have experienced greater utilization resulting from higher load factors, which has encouraged airlines to increase spending on refurbishments and upgrades. The Company believes that it is well positioned to benefit over the next several years as a result of the airlines' dramatically improved financial condition and liquidity and the need to refurbish and upgrade cabin interiors. A significant portion of the Company's recent growth in backlog, revenues and operating earnings has been from refurbishment and upgrade programs, and the Company is currently experiencing a high level of new order quote activity related to such programs. - Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft. Airlines have recently been purchasing a significant number of new aircraft in part due to current high load factors and the projected growth in worldwide air travel. According to the Current Market Outlook published by the Boeing Commercial Airplane Group in 1997 (the "Boeing Report"), worldwide air travel is projected to increase by 75% by calendar 2006 and the worldwide fleet of commercial passenger aircraft is projected to expand from approximately 10,300 at the end of 1996 to approximately 15,300 by the end of 2006 and to more than 21,200 by 2016. Related growth in aircraft interior product shipments associated with new aircraft deliveries began during calendar 1996. In 1997, Boeing shipped 375 aircraft versus 218 in 1996. In addition Boeing has stated plans to ship 550 aircraft in each of calendar years 1998 and 1999. The Company generally receives orders related to new aircraft deliveries approximately six months before the delivery date. Furthermore, according to the July 1997 Airline Monitor, the percentage of new Boeing aircraft deliveries projected to be wide-body aircraft for 1997 through 2001 is 39% as compared to 33% for the five year period ended December 31, 1996. This shift toward wide-body aircraft is significant to the Company since these aircraft require as much as seven times the dollar value of cabin interior products as narrow-body aircraft, including substantially more seats, galley equipment and in-flight entertainment products. - Emergence of Individual Passenger In-flight Entertainment Systems as a Major New Product Category. Airlines increasingly are demanding individual passenger in-flight entertainment systems as a method to attract and retain customers, as the availability of such service affects passengers' decisions on airline selection. These systems also provide the airlines with the opportunity to generate increased revenues, without raising ticket prices, by charging passengers for the services used. In June 1997, the Company announced a joint venture with Harris Corporation to develop and deliver live broadcast television (LiveTV(TM)) to domestic narrow-body commercial aircraft. The Company expects that in-flight entertainment systems, including the new technology designed to deliver live broadcast television on domestic narrow-body aircraft, will be one of the fastest growing and among the largest product categories in the commercial aircraft cabin interior products industry. The Company has developed a number of individual in-flight entertainment systems that are designed to meet the varying technological and price specifications of the airlines. The Company's two current systems are (i) the B/E 2000, with an installed base of approximately 28,000 units, which is a 42 44 system that provides non-interactive video programming and (ii) the B/E 2000M, with an installed base of approximately 6,000 units, which offers similar functionality to the B/E 2000 but can be upgraded to the Company's Multimedia Digital Distribution System ("MDDS") product. The MDDS product, which is in its final development stage, is a fully interactive entertainment system with the capacity to provide movies on demand, telecommunications, gaming and other services. The Company has completed the initial development and testing of the MDDS product and anticipates delivery of the first MDDS product to its launch customer, Japan Airlines ("JAL"), in 1998. The Company also anticipates completing the engineering necessary to enable installation of the MDDS as a line fit option on Boeing aircraft in 1998. As of November 29, 1997 B/E had an in-flight entertainment systems backlog of approximately $139 million. BUSINESS STRATEGY The Company's business strategy is to maintain its leadership position and best serve its airline customers by (i) offering the broadest and most integrated product line in the industry for both new product sales and follow-on products and services; (ii) pursuing a worldwide marketing approach focused by airline and encompassing the Company's entire product line; (iii) remaining the technological leader, as well as significantly growing its installed base of products, in the developing in-flight individual passenger entertainment market; (iv) enhancing its position in the growing upgrade, maintenance, inspection and repair services market; and (v) pursuing selective strategic acquisitions in the commercial aircraft cabin interior products industry. PRODUCTS AND SERVICES Seating Products The Company is the world's leading manufacturer of aircraft seats, offering a wide selection of first class, business class, tourist class and commuter seats. A typical seat manufactured and sold by the Company includes the seat frame, cushions, armrests and tray table, together with a variety of optional features such as in-flight entertainment systems, oxygen masks and telephones. Management estimates that the Company has an aggregate installed base as of November 29, 1997 of aircraft seats, valued at replacement prices, of approximately $1.8 billion comprised of more than 900,000 seats. - Tourist Class. The Company is the leading worldwide manufacturer of tourist class seats. B/E has designed tourist class seats which incorporate features not previously utilized in that class, such as top-mounted passenger control units, footrests and improved oxygen systems. - First and Business Classes. First class and business class seats are generally larger, heavier and more complicated in design, and are substantially more expensive than tourist class aircraft seats. The Company's first class seats and certain of its business class seats are equipped with articulating bottom cushion suspension systems, sophisticated hydraulic leg-rests, lumbar massage devices, adjustable thigh support cushions, reading lights, adjustable head and neck supports and large tables. - Convertible Seats. The Company has developed two types of seats which can be converted from tourist class triple-row seats to business class double-row seats with minimal conversion complexity. Convertible seats allow airline customers to optimize the ratio of business class to tourist class seats for a given aircraft configuration. - Commuter Seats. The Company is the leading manufacturer of commuter seats in both the U.S. and worldwide markets. The Company's Silhouette(TM) Composite commuter seats are similar to commercial jet seats in comfort and performance but are lightweight and require minimal maintenance. - Spares. Aircraft seats are exposed to significant stress in the course of normal passenger activity, and certain seat parts are particularly susceptible to damage from continued use. As a result, a significant market exists for spare parts. 43 45 Passenger Entertainment and Service Systems Management estimates that the Company has the largest installed base of PESS products in the world, which, valued at replacement prices, is approximately $340 million. The Company has the leading share of the market for PCUs and related wiring and harness assemblies, and has developed products aimed at other portions of the PESS market, including individual seat video systems, advanced multiplexer and hard-wired distribution systems and other products. The Company believes that it is a market leader in individual passenger in-flight entertainment systems and that this product category will be the fastest growing, and among the largest, product categories in the commercial aircraft cabin interior products industry in the future. - Individual Passenger Entertainment. The Company has developed a number of in-flight entertainment systems that are designed to meet the technological and price specifications of the airlines: B/E 2000. The B/E 2000, introduced in 1991, is one of the Company's first-generation individual inflight video systems and offers centralized electronic distribution of a limited range of programming. Since its introduction, the Company has installed approximately 28,000 units of the B/E 2000 and earlier generation individual passenger video systems with 10 airlines. MDDS Family. The Company has developed a family of next-generation, individual passenger in-flight entertainment products, which includes the 2000M and the MDDS: B/E 2000M -- The B/E 2000M is an in-flight entertainment system that offers similar functionality to the 2000 but can be upgraded to the Company's fully interactive MDDS. Since its introduction in 1994, the Company has installed approximately 6,000 units. MDDS -- B/E's MDDS is being developed as a state-of-the-art, fully interactive individual passenger in-flight entertainment system which has the capacity to offer numerous movies on demand, telecommunications, gaming, Nintendo(TM), Sega(TM) and PC-based games, in-flight shopping and, in the future, live television, among other services. The Company has completed the initial development and testing of the MDDS product and anticipates delivery of the first MDDS product to its launch customer, JAL, in 1998. The Company also anticipates completing the engineering necessary to enable installation of the MDDS as a line fit option on Boeing aircraft in 1998. As of November 29, 1997, B/E had entered into agreements to supply individual passenger entertainment systems to a number of airlines, including United Airlines, JAL, Asiana Airlines, Air France and KLM, and had an in-flight entertainment systems backlog of approximately $139 million. - LiveTV(TM). In June 1997, the Company announced a joint venture with Harris Corporation to develop and market a system which will allow airline passengers to receive in-flight, live broadcast television aboard narrow-body commercial aircraft at each individual passenger seat. The Company will control a 51 percent voting interest in the joint venture. Under the joint venture agreement, B/E will provide its individual-seat video distribution system as its part of the overall LiveTV(TM) reception system, while Harris Corporation will provide the specialized aircraft antenna and receiver system to enable in-the-air reception. The Company expects to be in a position to commence deliveries to a launch customer for LiveTV(TM) in 1998. - PCUs, Wiring and Harness Assemblies. The Company's PCU product line is the broadest in the industry, including over 300 different designs which are functionally similar but differ widely due to the style preferences and technical requirements of the various airlines. Wiring and harness assemblies (which stabilize installed wiring) are sold as a package with PCUs and vary as widely as PCU types. - Distribution Systems. The Company has manufactured hard-wired audio (since 1963) and video distribution systems (since 1992) and is currently the principal supplier of such systems to the airline industry. The Company also offers frequency division multiplex distribution systems which deliver substantially improved audio performance compared to competitors' multiplex systems. 44 46 Galley Equipment and Structures The Company is the world's largest manufacturer of galley equipment for both narrow and wide-body aircraft, offering a wide selection of galley structures, coffee and beverage makers, water boilers, ovens, liquid containers, refrigeration equipment and other galley components. Management estimates that the Company has an aggregate installed base of galley equipment and structures, valued at replacement prices, of approximately $1.1 billion. - Coffee Makers. The Company is the leading manufacturer of aircraft coffee makers, with the Company's equipment currently installed in virtually every type of aircraft for almost every major airline. The Company manufactures a broad line of coffee makers, coffee warmers and water boilers including the Flash Brew Coffee Maker, with the capability to brew 54 ounces of coffee in one minute, a Combi(TM) unit which will both brew coffee and boil water for tea while utilizing 25% less electrical power than traditional 5,000 watt water boilers, and a recently introduced cappuccino/espresso maker. - Ovens. The Company is the leading supplier of a broad line of specialized ovens, including high-heat efficiency ovens, high-heat convection ovens, and warming ovens. The Company's newest offering, the DS-2000 Steam Oven, represents a new method of preparing food in-flight by maintaining constant temperature and moisture in the food. It addresses the airlines' need to provide a wider range of foods than can be prepared by convection ovens. - Refrigeration Equipment. The Company is the worldwide industry leader in the design, manufacture, and supply of commercial aircraft refrigeration equipment. The Company recently introduced a self-contained wine and beverage chiller, the first unit specifically designed to rapidly chill wine and beverages on board an aircraft. - Galley Structures. Galley structures are generally custom designed to accommodate the unique product specifications and features required by a particular carrier. Galley structures require intensive design and engineering work and are among the most sophisticated and expensive of the aircraft's cabin interior products. The Company provides a variety of galley structures, closets and class dividers, emphasizing sophisticated and higher value-added galleys for wide-body aircraft. Services and Specialty Products The Company is an active participant in the growing service and custom products markets. Management believes that the Company's broad and integrated product line and close relationships with its airline and leasing customers position the Company to become a leading service provider in this market. Most participants in this market are small, and management believes that the Company is the only major product manufacturer in the industry currently participating in this market. - Services. The Company provides a comprehensive compliment of services for cabin interior products on board aircraft either between flights or on an overnight basis, or at one of more of seven service centers in the worldwide service network. The spectrum of services includes systems check and components repair, parts inventory and management, refurbishment of seating products, on board surveys regarding status and product installations, as well as data support functions such as loading and updating of in-flight systems entertainment software, direct satellite broadcast systems support and systems integration. - Specialty Products. The Company manufacturers several specialty products for the commercial airline industry including flight attendant seats, observer seats, and custom products in the passenger seating area. The Company maintains a staff of engineers to design and certify various modules and kits to accommodate individual passenger video and telecommunications modules in seat backs and center consoles which were originally not designed for such applications. The Company believes it is able to provide products for unique applications more rapidly than original manufacturers. 45 47 RESEARCH, DEVELOPMENT AND ENGINEERING The Company works closely with commercial airlines to improve existing products and identify customers' emerging needs. B/E's expenditures in research, development and engineering totaled $35.0 million, $27.8 million, $37.1 million, $58.3 million, and $12.9 million for the nine months ended November 29, 1997 and November 30, 1996 and the fiscal years ended February 22, 1997, February 24, 1996, and February 25, 1995, respectively. The increase in expenses during the current period is the result of the substantial completion of the Boeing Line Fit certification activities for MDDS and ongoing product development activity in the seating and galley products groups. B/E employs approximately 500 professionals in the engineering and product development areas. The Company believes that it has the largest engineering organization in the cabin interior products industry, with not only software, electronic, electrical and mechanical design skills but also substantial expertise in materials composition and custom cabin interior layout design. MARKETING AND CUSTOMERS The Company markets and sells its products directly to virtually all of the world's major airlines. B/E has a sales and marketing organization of 107 persons, along with 15 independent sales representatives. B/E sales to non-US airlines were $164.1 million, $152.6 million, $203.4 million, $124.5 million, and $114.5 million for the nine months ended November 29, 1997 and November 30, 1996 and the fiscal years ended February 22, 1997, February 24, 1996, and February 25, 1995, respectively, or approximately 45%, 49%, 49%, 54%, 50%, respectively, of net sales during such periods. Airlines select manufacturers of cabin interior products primarily on the basis of custom design capabilities, product quality and performance, on time delivery, after-sales service and price. B/E believes that its large installed base, its timely responsiveness in connection with the custom design, manufacture, delivery and after-sales service of its products and its broad product line and stringent customer and regulatory requirements all present barriers to entry for potential new competitors in the cabin interior products market. The Company believes that its integrated worldwide marketing approach, focused by airline and encompassing the Company's entire product line, is preferred by airlines. Led by a B/E senior executive, teams representing each product line serve designated airlines which together accounted for approximately 60% of the purchases of products manufactured by B/E during fiscal 1997. These airline customer teams have developed customer specific strategies to meet each airline's product and service needs. The Company also staffs "on-site" customer engineers at major airlines and airframe manufacturers to represent its entire product line and work closely with the customers to develop specifications for each successive generation of products required by the airlines. These engineers help customers integrate the wide range of cabin interior products and assist in obtaining the applicable regulatory certification for each particular product or cabin configuration. Through its on-site customer engineers, the Company expects to be able to more efficiently design and integrate products which address the requirements of its customers. The Company provides program management services, integrating all on-board cabin interior equipment and systems, including installation and FAA certification, allowing airlines to substantially reduce costs. The Company believes that it is one of the only suppliers in the commercial aircraft cabin interior products industry with the size, resources, breadth of product line and global product support capability to operate in this manner. At the beginning of fiscal 1998, the Company initiated a program management discipline under which a program manager is assigned for each significant contract. The program manager is responsible for all aspects of the specific contract, including management of change orders and negotiation of the related non-recurring engineering charges, monitoring the progress of the contract through its scheduled delivery dates, and overall profitability associated with the contract. The Company believes that it and its customers derive substantial benefit from its program management approach, including better on-time delivery and higher service levels. The Company also believes its program management approach results in better customer satisfaction and higher profitability over the life of the contract. During the nine month period ended November 29, 1997, one customer accounted for approximately 17% of the Company's total revenues, and no other customer accounted for more than 10% of such revenues. 46 48 Because of differing schedules of various airlines for purchases of new aircraft and for retrofit and refurbishment of existing aircraft, the portion of the Company's revenues attributable to particular airlines varies from year to year. BACKLOG Management estimates that B/E's backlog at November 29, 1997 was approximately $560 million, approximately 49% of which management believes to be deliverable over the next 12 months, compared with a backlog of $420 million on November 30, 1996 (as similarly adjusted for the debooking of the British Airways MDDS program in August 1997). CUSTOMER SERVICE The Company believes that it provides the highest level of customer service and product support available in the commercial aircraft cabin interior products industry and that such service is a critical factor in the Company's success. The key elements of such service include (i) rapid response to requests for engineering designs, proposal requests and technical specifications; (ii) flexibility with respect to customized features; (iii) on-time delivery; (iv) immediate availability of spare parts for a broad range of products; and (v) prompt attention to customer problems, including onsite customer training. Customer service is particularly important to airlines due to the high cost to the airlines of late delivery, malfunctions and other problems. WARRANTY AND PRODUCT LIABILITY The Company warrants its products, or specific components thereof, for periods ranging from one to ten years, depending upon product type and component. The Company generally establishes reserves for product warranty expense on the basis of the ratio of warranty costs incurred by the product over the warranty period to sales of the product over the warranty period. Actual warranty costs reduce the warranty reserve as they are incurred. Management periodically reviews the adequacy of accrued product warranty reserves; and revisions of such reserves are recognized in the period in which such revisions are determined. The Company also carries product liability insurance. The Company believes that its insurance is generally sufficient to cover product liability claims. COMPETITION The commercial aircraft cabin interior products market is relatively fragmented with a number of competitors in each of the individual product categories. Due to the global nature of the commercial airline industry, competition in product categories comes from both U.S. and foreign manufacturers. However, as aircraft cabin interiors have become increasingly sophisticated and technically complex, airlines have demanded higher levels of engineering support and customer service than many smaller cabin interior products suppliers can provide. At the same time, airlines have recognized that cabin interior product suppliers must be able to integrate a wide range of products, including sophisticated electronic components, particularly in wide- body aircraft. Management believes that these increasing demands of airlines upon their suppliers will result in a number of suppliers leaving the cabin interior products industry and a consolidation of those suppliers which remain. The Company has participated in this consolidation through strategic acquisitions and internal growth and intends to continue to participate in the consolidation. The Company's principal competitors for seating products include Group Zodiac S.A., Keiper Recaro GmbH, and a number of other producers in the European community and Japan. The Company's principal competitors for PESS products are MAS and Rockwell Collins. The Company's primary competitors for galley products are JAMCO Limited and Britax, PLC. MANUFACTURING AND RAW MATERIALS The Company's manufacturing operations consist of both the in-house manufacturing of component parts and sub-assemblies and the assembly of Company specified and designed component parts which are 47 49 purchased from outside vendors. The Company maintains state-of-the-art facilities, and management has an on-going strategic manufacturing improvement plan utilizing focused factories and cellular production technologies. Management expects that continuous improvement from implementation of this plan for each of its product lines will occur over the next several years and should lower production costs, cycle times and inventory requirements and at the same time improve product quality and customer response. GOVERNMENT REGULATION The FAA prescribes standards and licensing requirements for aircraft components, and licenses component repair stations within the United States. Comparable agencies regulate such matters in other countries. The Company holds several FAA component certificates and performs component repairs at a number of its US facilities under FAA repair station licenses. The Company also holds an approval issued by the UK Civil Aviation Authority to design, manufacture, inspect and test aircraft seating products in Leighton Buzzard, England and in Kilkeel, Northern Ireland and the necessary approvals to design, manufacture, inspect, test and repair its galley products in Nieuwegein, The Netherlands and to inspect, test and repair products at its six service centers throughout the world. In March 1992, the FAA adopted Technical Standard Order C127 which requires that all seats on certain new generation commercial aircraft installed after such date be certified to meet a number of new safety requirements, including an ability to withstand a 16G force. Management understands that the FAA plans to adopt in the near future additional regulations which will require that within the next five years all seats, including those on existing older commercial aircraft which are subject to the FAA's jurisdiction, will have to comply with similar seat safety requirements. At November 29, 1997, the Company had developed eleven different seat models which meet these new seat safety regulations. PATENTS B/E currently holds 43 United States patents and 14 international patents, covering a variety of products. However, the Company believes that the termination, expiration or infringement of one or more of such patents would not have a material adverse effect on the Company. EMPLOYEES As of November 29, 1997, B/E had approximately 3,481 employees. Approximately 72% of these employees are engaged in manufacturing, 14% in engineering, research and development, and 14% in sales, marketing, product support and general administration. Approximately 19% of the employees are represented by a union. On April 25, 1997, the Company completed negotiations with its only domestic union which represents 12% of the Company's employees. This contract, which covers a period of three years, was ratified by the members of the union on April 26, 1997. B/E considers its employee relations to be good. PROPERTY As of November 29, 1997, B/E had 15 principal facilities, comprising an aggregate of approximately 1,088,100 square feet of space. The following table describes the principal facilities and indicates the location, function, approximate size and ownership status of each:
FACILITY SIZE LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP -------- --------------------- ---------- --------- CORPORATE Wellington, Florida.................... Corporate headquarters, finance, 17,700 Owned marketing sales Longwood, Florida...................... Administration 1,300 Leased SEATING PRODUCTS Litchfield, Connecticut................ Manufacturing, service and warehousing 147,700 Owned
48 50
FACILITY SIZE LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP -------- --------------------- ---------- --------- Winston-Salem, North Carolina.......... Seating products group headquarters, 264,800 Owned research and development, finance, marketing, sales and manufacturing Leighton Buzzard, England.............. Manufacturing, service, research and 114,000 Owned(a) development, sales support, finance and warehousing Kilkeel, Northern Ireland.............. Manufacturing, sales support and 38,500 Owned warehousing GALLEY PRODUCTS: Anaheim, California.................... Manufacturing, service, research and 57,100 Leased development, sales support, finance and warehousing Delray Beach, Florida.................. Manufacturing, service, research and 52,000 Owned development, sales support, finance and warehousing; galley products group headquarters Jacksonville, Florida.................. Manufacturing, service, engineering, 75,000 Owned and warehousing Nieuwegein, The Netherlands............ Manufacturing, service, research and 39,000 Leased development, sales support, finance and warehousing PESS PRODUCTS: Irvine, California..................... Manufacturing, service, research and 106,700 Leased development, sales support, finance and warehousing; In-flight entertainment group headquarters SERVICES: Orange, California..................... Upgrade, maintenance, inspection and 106,300 Leased repair, finance, sales support and warehousing; service group headquarters Burnsville, Minnesota.................. Upgrade, maintenance, inspection and 7,200 Leased repair Woodville, Washington.................. Upgrade, maintenance, inspection and 26,800 Leased repair Chesham, England....................... Upgrade, maintenance, inspection and 34,000 Owned(a) repair
- --------------- (a) B/E's owned properties in England are mortgaged to Barclays Bank PLC to collateralize credit facilities of FEEL in aggregate amounts of up to approximately (pound sterling)5.0 million. The Company believes that its facilities are suitable for their present intended purposes and adequate for the Company's present and anticipated level of operations. As a result of recent conditions in the airline industry as described in "-- Industry Overview" and "-- Recent Industry Conditions," B/E's facilities have been substantially underutilized for the past several years. The Company believes that its ongoing facility integration program, together with anticipated continued growth in airline profitability, should result in significant improvement in the degree of utilization in the Company's facilities. LEGAL PROCEEDINGS The Company is not a party to litigation or other legal proceedings which the Company believes could reasonably be expected to have a material adverse effect on the Company's business, financial condition and results of operations. In January 1998, the Company resolved a long-running dispute with the U.S. Government over export sales between 1992 and 1995 to Iran Air. The dispute centered on shipments of aircraft seats and related spare parts for five civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and arranged for them to be installed by a contractor in France. At the time, Iran was not the subject of a U.S. trade embargo. In 49 51 connection with its sale of seats to Iran Air, B/E applied for and was granted a validated export license by the U.S. Department of Commerce (the "DOC"). The dispute with the U.S. Government centered on whether seats were delivered to Iran Air before the formal license was issued by the DOC, some seven months after B/E first applied for the license. This action resolved all disputes between B/E Aerospace and the Department of Justice as well as the DOC's Bureau of Export Enforcement. As part of the settlement, B/E plead guilty to a violation of the International Economic Emergency Powers Act and was placed on probation for a three-year period. In addition, B/E entered into a consent order with the DOC under which the DOC has agreed to suspend the imposition of a three-year export denial order on PTC Aerospace, a member of B/E's U.S. Seating Products Group, provided no further violations of the export laws occur. The Company will record a charge of approximately $4 million in its fourth quarter of fiscal 1998, which ends February 28, 1998, related to fines, civil penalties and associated legal fees arising from the settlement. 50 52 MANAGEMENT The following table sets forth information regarding the directors and executive officers of the Company. Officers of the Company are elected annually by the Board of Directors.
NAME AGE POSITION ---- --- -------- Amin J. Khoury............................ 58 Chairman of the Board Robert J. Khoury.......................... 55 Vice Chairman of the Board and Chief Executive Officer and Director Paul E. Fulchino.......................... 51 President, Chief Operating Officer and Director Marco C. Lanza............................ 41 Executive Vice President, Marketing and Product Development Thomas P. McCaffrey....................... 43 Corporate Senior Vice President of Administration, Chief Financial Officer and Assistant Secretary E. Ernest Schwartz........................ 61 Corporate Senior Vice President, Development and Planning Edmund J. Moriarty........................ 54 Corporate Vice President -- Law, General Counsel and Secretary Jeffrey P. Holtzman....................... 42 Vice President, Treasurer and Assistant Secretary Sam G. Ayoub.............................. 55 Group Vice President and General Manager, Services Group G. Bernard Jewell......................... 56 Group Vice President and General Manager, Seating Products Group Roman G. Ptakowski........................ 49 Group Vice President and General Manager, Galley Products Group Jim C. Cowart............................. 45 Director** Richard G. Hamermesh...................... 49 Director* Brian H. Rowe............................. 65 Director** Hansjoerg Wyss............................ 61 Director*
- --------------- * Member, Audit Committee. ** Member, Stock Option and Compensation Committee. The Company's Restated Certificate of Incorporation provides that the Board of Directors is classified into three classes, as nearly as equal in number as possible, so that each director (after a transitional period) will serve for three years, with one class of directors being elected each year. The Board is currently comprised of three Class I Directors (Brian H. Rowe, Jim C. Cowart and Paul E. Fulchino), two Class II Directors (Robert J. Khoury and Hansjoerg Wyss) and two Class III Directors (Amin J. Khoury and Richard G. Hamermesh). The terms of the Class I, Class II and Class III Directors expire upon the election and qualification of successor directors at annual meetings of stockholders held following the end of fiscal years 1998, 1996 and 1997, respectively. The executive officers of the Company are elected annually by the Board of Directors following the annual meeting of stockholders and serve at the discretion of the Board of Directors. Amin J. Khoury has been Chairman of the Board of the Company since July 1987 and was Chief Executive Officer until April 1, 1996. Since 1986, Mr. Khoury has also been the Managing Director of The K.A.D. Companies, Inc., an investment, venture capital and consulting firm. Mr. Khoury is currently the Chairman of the Board of Directors of Applied Extrusion Technologies, Inc., a manufacturer of oriented polypropylene films used in consumer products labeling and packaging applications, and a member of the Board of Directors of Brooks Automation, Inc., the leading manufacturer in the U.S. of vacuum central wafer handling systems for semiconductor manufacturing. Mr. Khoury is employed by the Company pursuant to an Employment Agreement extending through December 31, 2001. Mr. Khoury is the brother of Robert J. Khoury. 51 53 Robert J. Khoury has been a Director of the Company since July 1987. Mr. Khoury was elected Vice Chairman and Chief Executive Officer effective April 1, 1996; from July 1987 until that date, Mr. Khoury served as the Company's President and Chief Operating Officer. From 1986 to 1987, Mr. Khoury was Vice President of The K.A.D. Companies, Inc. The Company has entered into an Employment Agreement with Mr. Khoury extending through February 28, 2001. Mr. Khoury is the brother of Amin J. Khoury. Paul E. Fulchino was elected a Director and President and Chief Operating Officer of the Company effective April 1, 1996. From 1990 to 1996, Mr. Fulchino served as President and Vice Chairman of Mercer Management Consulting, Inc. ("Mercer"), a general management consulting firm with over 1,100 employees. In addition to his management responsibilities as President of Mercer, Mr. Fulchino also had responsibility for advising clients throughout the world, particularly with respect to the transportation industry, including a number of major airlines. The Company has entered into an Employment Agreement with Mr. Fulchino extending through March 31, 1999. Marco C. Lanza has been the Executive Vice President, Marketing and Product Development since January 1994. From March 1992 through January 1994, Mr. Lanza was Vice President and General Manager of the In-flight Entertainment Group of the Company. From 1987 through February 1992, Mr. Lanza was Vice President, Marketing and Product Development of the Company. The Company has entered into an Employment Agreement with Mr. Lanza extending through December 31, 1999. Thomas P. McCaffrey has been Corporate Senior Vice President of Administration, Chief Financial Officer and Assistant Secretary since May 1993. From August 1989 through May 1993, Mr. McCaffrey was an Audit Director with Deloitte & Touche LLP, and from 1976 through 1989 served in several capacities, including Audit Partner, with Coleman & Grant. The Company has entered into an Employment Agreement with Mr. McCaffrey extending through December 31, 1999. E. Ernest Schwartz has been Corporate Senior Vice President -- Development and Planning since December 1997. From March 1997 through November 1997 was Vice President and General Manager of the Galley Products Group of the Company since March 1992. From 1986 through February 1992, Mr. Schwartz was President of Aircraft Products Company, which was acquired by the Company in 1992. Edmund J. Moriarty has been Corporate Vice President, General Counsel and Secretary since November 16, 1995. From 1991 to 1995, Mr. Moriarty served as Vice President and General Counsel to Rollins, Inc., a national service company. From 1982 through 1991, Mr. Moriarty served as Vice President and General Counsel to Old Ben Coal Company, a wholly owned coal subsidiary of The Standard Oil Company. Jeffrey P. Holtzman has been Treasurer since September 1993 and Vice President since November 1996. From June 1986 to July 1993, Mr. Holtzman served in several capacities at FPL Group, Inc., including Assistant Treasurer and Manager of Financial Planning. Mr. Holtzman previously worked for Mellon Bank, Gulf Oil and Arthur Young & Company. Sam G. Ayoub has been Vice President and General Manager of the Company's Services Group since May 1996 and from November 1994 through April 1996, was Executive Vice President-Services. From 1984 to 1994 Mr. Ayoub served in several capacities with AAR Corp. including Corporate Vice President Marketing and President-Technical Services Division. Prior to that Mr. Ayoub was with United Airlines for 20 years with his last position being General Manager of their Cargo Division. G. Bernard Jewell has been Vice President and General Manager of the Company's Seating Products Group since March 1996. From February 1994 through February 1996, Mr. Jewell was Group Vice President, Services Group of the Company. From April 1992 through January 1994, Mr. Jewell was Group Vice President, Marketing and Product Development of the Company. From 1988 to 1992, Mr. Jewell was President of Burns Aerospace Corporation, a manufacturer of commercial aircraft cabin interior products. Roman G. Ptakowski has been the Vice President and General Manager of the Galley Products Group since December 1997. From September 1995 through December 1997, Mr. Ptakowski was Vice President, Sales and Marketing of the Galley Products Group of the Company. From January 1995 through August 1995, Mr. Ptakowski served as Senior Vice President, Marketing for Farrel Corporation. Prior to that he was 52 54 with the ABB Power T&D Company Inc. and Westinghouse Electric Corp. for 25 years with his last position being General Manager of their Protective Relay Division. Jim C. Cowart has been a Director of the Company since November 1989. Since January 1993, Mr. Cowart has been the Chairman of the Board of Directors and Chief Executive Officer of Aurora Electronics, Inc. Since January 1992, Mr. Cowart has also been a Director of EOS Capital, Inc., a private capital firm retained by the Company for strategic planning, competitive analysis, financial relations and other services. From 1987 until 1991, Mr. Cowart was a general partner of Capital Resource Partners, a private capital investment manager. From 1982 to 1987, Mr. Cowart was a Senior Vice President of Investment Banking at Shearson Lehman Brothers and was the President of Shearson Venture Capital, Inc. Richard G. Hamermesh has been a Director of the Company since July 1987. Since August 1987, Dr. Hamermesh has been the Managing Partner of the Center for Executive Development, an independent executive education consulting company, and, from December 1986 to August 1987, Dr. Hamermesh was an independent consultant. Prior to such time, Dr. Hamermesh was on the faculty at the Harvard Business School. Dr. Hamermesh is also a Director of Applied Extrusion Technologies, Inc. Brian H. Rowe has been a Director of the Company since July 1995. Mr. Rowe is currently Chairman Emeritus of GE Aircraft Engines, a principal business unit of the General Electric Company, where he also served as Chairman from September 1993 through January 1995 and as President from 1979 through 1993. From March 1994 to November 1995, Mr. Rowe served as a Director of Astrostructures Hamble Limited, a manufacturer of military and civil aircraft components. Since March 1995, Mr. Rowe has also been a Director of Atlas Air Inc., an air cargo carrier. Since January 1980 Mr. Rowe has been a Director of Fifth Third Bank, an Ohio banking corporation. Since October 1995, Mr. Rowe has been a Director of Cincinnati Bell Inc., a communications services company. Since December 1996, Mr. Rowe has also been a Director of Stewart & Stevenson Services, Inc., a custom packager of engine systems, and Textron Inc., a manufacturer of mechanical devices for aircraft and other applications. Since January 1996, Mr. Rowe has served as Executive Vice Chairman of American Regional Aircraft Industries, Inc. Hansjoerg Wyss has been a Director of the Company since October 1989. Since 1977, Mr. Wyss has been a Director and the Chairman and Chief Executive Officer of Synthes (U.S.A.) and Synthes (Canada), Ltd., manufacturers and distributors of orthopedic implants and instruments. 53 55 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table and notes thereto set forth certain information with respect to the beneficial ownership of the Company's Common Stock as of January 31, 1998 by (i) each person who is known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock of the Company; (ii) each of the chief executive officer and the four other most highly paid executive officers of the Company in fiscal 1997 (collectively, the "Named Executive Officers") and each director of the Company; and (iii) all Named Executive Officers and directors of the Company as a group. Except as otherwise indicated, each of the stockholders named below has sole voting and investment power with respect to the shares of Common Stock beneficially owned:
COMMON STOCK BENEFICIALLY OWNED ------------------------ NUMBER PERCENT OF OF OUTSTANDING NAME SHARES SHARES(A) ---- --------- ----------- Fidelity Management & Research.............................. 3,145,900 13.8% 82 Devonshire Street Boston, MA 02109 AIM Management Group, Inc. ................................. 1,318,200 5.8 11 Greenway Plaza, Suite 1919 Houston, TX 77046 Hansjorg Wyss*.............................................. 147,359(b) ** Amin J. Khoury+*............................................ 110,000(c) ** Paul E. Fulchino+*.......................................... 106,783(d) ** Thomas P. McCaffrey+........................................ 73,496(e) ** Jim C. Cowart*.............................................. 69,250(f) ** Robert J. Khoury+*.......................................... 61,555(g) ** E. Ernest Schwartz+......................................... 35,000(h) ** Brian H. Rowe*.............................................. 22,500(i) ** Richard G. Hamermesh*....................................... 18,600(j) ** All Directors and Named Executive Officers as a group (15 persons).................................................. 970,667(k) 4.1%
- --------------- + Named Executive Officer * Director of the Company ** Less than 1 percent (a) The number of shares of Common Stock deemed outstanding includes: (i) 22,846,399 shares of Common Stock outstanding as of January 31, 1998; and (ii) shares of Common Stock subject to outstanding stock options which are exercisable by the named individual or group in the next sixty days (commencing January 31, 1998). (b) Includes 6,250 shares issuable upon the exercise of stock options exercisable in the next sixty days. Excludes options to purchase 11,250 shares of Common Stock which are not exercisable in the next sixty days. (c) Represents shares issuable upon the exercise of stock options exercisable in the next sixty days. Excludes options to purchase 180,000 shares of Common Stock which are not exercisable in the next sixty days. (d) Includes 105,000 shares issuable upon the exercise of stock options exercisable in the next sixty days and shares owned through the Company 401(k) plan. Excludes options to purchase 165,000 shares of Common Stock which are not exercisable in the next sixty days. (e) Includes 67,500 shares issuable upon the exercise of stock options exercisable in the next sixty days and shares owned through the Company 401(k) plan. Excludes options to purchase 97,500 shares of Common Stock which are not exercisable in the next sixty days. 54 56 (f) Includes 20,000 shares acquired by a profit sharing plan in which Mr. Cowart has a fifty percent interest and 46,250 shares issuable upon the exercise of stock options exercisable in the next sixty days. Excludes options to purchase 13,750 shares of Common Stock which are not exercisable in the next sixty days. (g) Includes 60,000 shares issuable upon the exercise of stock options exercisable in the next sixty days and shares owned through the Company 401(k) plan. Excludes options to purchase 130,000 shares of Common Stock which are not exercisable in the next sixty days. (h) Includes 35,000 shares issuable upon the exercise of stock options exercisable in the next sixty days. Excludes options to purchase 50,000 shares of Common Stock which are not exercisable in the next sixty days. (i) Includes 22,500 shares issuable upon the exercise of stock options exercisable in the next sixty days. Excludes options to purchase 27,500 shares of Common Stock which are not exercisable in the next sixty days. (j) Includes 2,000 shares held in trusts for the benefit of Mr. Hamermesh's two children, of which trust Mr. Hamermesh and his wife are trustees and in which shares Mr. Hamermesh disclaims all beneficial interest. Also includes 10,000 shares issuable upon the exercise of stock options exercisable in the next sixty days. Excludes options to purchase 11,250 shares of Common Stock which are not exercisable in the next sixty days. (k) Includes 749,250 shares issuable upon the exercise of stock options in the next sixty days. Excludes options to purchase 887,500 shares of Common Stock which are not exercisable in the next sixty days. 55 57 DESCRIPTION OF CERTAIN INDEBTEDNESS The Company currently has existing bank credit facilities that aggregate $125 million. The Bank Credit Facility consists of a $25 million Reducing Revolver and a $100 million Revolving Facility. The amount of the Reducing Revolver will be reduced automatically by 12.5% on August 26, 2000 and on each of the seven succeeding quarterly anniversaries of such date. The Reducing Revolver is collateralized by all of the issued and outstanding capital stock of a wholly owned subsidiary and has a five-year maturity. The Revolving Facility is collateralized by all of the Company's accounts receivable, all of its inventory and substantially all of its other personal property and has a five-year maturity. The Bank Credit Facility contains customary affirmative covenants, negative covenants and conditions of borrowing. At November 29, 1997 indebtedness under the Bank Credit Facility were letters of credit amounting to approximately $4.6 million. The Company has approximately $120.4 million available for subsequent borrowings under the Bank Credit Facility. The Company also has outstanding approximately $23.2 million of 9 3/4% Notes, which are senior unsecured obligations of the Company ranking equally with future senior unsecured obligations of the Company. Interest on the 9 3/4% Notes is payable semiannually in arrears on March 1 and September 1 of each year. The 9 3/4% Notes are redeemable at the option of the Company, in whole or in part, on or after March 1, 1998 at predetermined redemption prices, together with accrued and unpaid interest to the date of redemption. In addition, upon a Change of Control, the Company is obligated to make an offer to purchase all outstanding 9 3/4% Notes at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. Similarly, upon the sale or disposition of certain assets, the Company may be obligated to make offers to purchase the 9 3/4% Notes with a portion of the cash proceeds from such sale or disposition at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest to date of purchase. The Company intends to redeem the 9 3/4% Notes that continue to remain outstanding after completion of the Tender Offer on March 16, 1998 in the Redemption. Purchase of the 9 3/4% Notes pursuant to the Tender Offer and the Redemption, or will be, funded with a portion of the proceeds from the sale of the Old Notes in the Offering. The Company estimates that it will take a $9.2 million extraordinary charge for unamortized debt issue costs, tender and redemption premiums and fees and expenses related to the repurchase of the 9 3/4% Notes. See "Use of Proceeds." The Company also has outstanding the $100 million of 9 7/8% Notes which are unsecured senior subordinated obligations of the Company and are subordinated in all senior indebtedness of the Company and mature on February 1, 2006. Interest on the 9 7/8% Notes is payable semiannually in arrears February 1 and August 1 of each year. The 9 7/8% Notes are redeemable at the option of the Company, in whole or in part, at any time after February 1, 2001 at predetermined redemption prices together with accrued and unpaid interest through the date of redemption. Upon a change of control (as defined), each holder of the 9 7/8% Notes may require the Company to repurchase such holder's 9 7/8% Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of such purchase. The 9 7/8% Notes contain certain restrictive covenants, all of which were met by the Company as of February 22, 1997, including limitations on future indebtedness, restricted payments, transactions with affiliates, liens, dividends, mergers and transfers of assets. FEEL, a subsidiary of the Company, has a revolving line of credit agreement aggregating approximately $8.4 million (the "FEEL Credit Agreement"). The FEEL Credit Agreement is collateralized by substantially all of the assets of FEEL. Aggregate borrowings outstanding under the FEEL Credit Agreement were approximately $7.2 million as of November 29, 1997. The Company has guaranteed a portion of the indebtedness outstanding under the FEEL Credit Agreement. Inventum, another subsidiary of the Company, has a revolving line of credit agreement for approximately $1 million (the "Inventum Credit Agreement"). The Inventum Credit Agreement is collateralized by substantially all of the assets of Inventum. There were no borrowings outstanding under the Inventum Credit Agreement as of November 29, 1997. 56 58 DESCRIPTION OF THE NEW NOTES The Old Notes were issued under an indenture dated as of February 13, 1998 (the "Indenture") between the Company, as issuer, and United States Trust Company of New York, as trustee (the "Trustee"), a copy of the form of which will be made available upon request. Upon the issuance of the New Notes, the Indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and qualified in its entirety by, reference to the provisions of the Indenture, including the definitions of certain terms contained therein and those terms made part of the Indenture by reference to the Trust Indenture Act. GENERAL The New Notes will be unsecured, senior subordinated obligations of the Company limited to $250,000,000 aggregate principal amount. The New Notes will be issued solely in exchange for an equal principal amount of Old Notes pursuant to the Exchange Offer. The form and terms of the New Notes will be identical in all material respects to the form and terms of the Old Notes except that: (i) the New Notes will have been registered under the Securities Act and (ii) the Registration Rights and contingent interest reset provisions applicable to the Old Notes are not applicable to the New Notes. The New Notes will be issued only in registered form without coupons, in denominations of $1,000 and integral multiples thereof. (Section 302) Principal of, premium, if any, and interest on the Notes will be payable, and the Notes will be transferable (subject to compliance with transfer restrictions imposed by applicable securities laws for so long as the Notes are not registered for resale under the Securities Act), at the corporate trust office or agency of the Trustee in The City of New York maintained for such purposes at 114 West 47th Street. (Sections 301 and 305) In addition, interest may be paid, at the option of the Company, by check mailed to the Person entitled thereto as shown on the Note Register. (Section 309) No service charge will be made for any transfer, exchange or redemption of Notes, except in certain circumstances for any tax or other governmental charge that may be imposed in connection therewith. (Section 305) MATURITY, INTEREST AND PRINCIPAL PAYMENTS The Notes will mature on March 1, 2008. Except as otherwise described below, each Note will bear interest at the applicable rate set forth on the cover page hereof from February 13, 1998 or from the most recent interest payment date to which interest has been paid, payable in cash semiannually in arrears on March 1 and September 1 of each year, commencing September 1, 1998, to the Person in whose name the Note (or any predecessor Note) is registered in the Note Register at the close of business on the February 15 or August 15 next preceding such interest payment date. As discussed under "Exchange Offer," pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the holders of the Old Notes, at the Company's cost, either (i) to effect a registered Exchange Offer under the Securities Act to exchange the Old Notes for Exchange Notes, which will have terms identical in all material respects to the Old Notes (except that the Exchange Notes will not contain terms with respect to transfer restrictions) or (ii) in the event that any changes in law or applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 120 days following the date of the original issue of the Old Notes, or if any holder of the Old Notes (other than the Initial Purchasers) is not eligible to participate in the Exchange Offer, or upon the request of any Initial Purchaser in certain circumstances, to register the Old Notes for resale under the Securities Act through a shelf registration statement (the "Shelf Registration Statement"). In the event that either (a) the Registration Statement is not filed with the Commission on or prior to the 30th calendar day following the date of original issue of the Old Notes, (b) the Registration Statement has not been declared effective on or prior to the 90th calendar day following the date of original issue of the Old Notes or (c) the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective on or prior to the 120th calendar day following the date of original issue of the Old Notes, the interest rate borne by the Old Notes shall be increased by one-half of one percent per annum following such 30-day period in the case of (a) above, following such 90-day period in the case of 57 59 clause (b) above or following such 120-day period in the case of clause (c) above. The aggregate amount of such increase from the original interest rate pursuant to these provisions will in no event exceed one-half of one percent per annum. Upon (x) the filing of the Registration Statement after the 30-day period described in clause (a) above, (y) the effectiveness of the Registration Statement after the 90-day period described in clause (b) above or (z) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 120-day period described in clause (c) above, the interest rate borne by the Notes from the date of such filing, effectiveness or consummation, as the case may be, will be reduced to the original interest if the Company is otherwise in compliance with this paragraph. See "Exchange Offer." Notes that remain outstanding after the consummation of the Exchange Offer and New Notes issued in connection with the Exchange Offer will be treated as a single class of securities under the Indenture. SUBORDINATION The payment of the principal of, premium, if any, interest on and all other amounts owing in respect of, the Notes will be subordinated, as set forth in the Indenture, in right of payment to the prior payment in full in cash or cash equivalents of all Senior Indebtedness; provided, however, that the Notes shall rank equal with, or prior to, all existing and future unsecured indebtedness of the Company that is subordinated to any Senior Indebtedness. (Section 1301) In the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relating to the Company or to its creditors, as such, or its assets, or any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or any assignment for the benefit of creditors or any other marshalling of assets or liabilities of the Company (except in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties and assets substantially as an entirety upon the terms and conditions described under "Merger, Consolidation and Sale of Assets, etc." below), the holders of Senior Indebtedness will first be entitled to receive payment in full in cash or cash equivalents of all amounts due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the holders of the Notes will be entitled to receive any payment or distribution of any kind or character (other than any payment or distribution in the form of equity securities or subordinated securities of the Company or any successor obligor provided for by a plan of reorganization or readjustment that, in the case of any such subordinated securities, are subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding to at least the same extent as the Notes are so subordinated (such equity securities or subordinated securities hereinafter being "Permitted Junior Securities")) on account of principal of (or premium, if any) or interest on the Notes; and any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than a payment or distribution in the form of Permitted Junior Securities) by set-off or otherwise, to which the holders or the Trustee would be entitled but for the provisions of the Indenture shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness to the extent necessary to make payment in full in cash or cash equivalents of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. (Section 1302) No payment (other than any payments made pursuant to the provisions described under "-- Defeasance or Covenant Defeasance of Indenture" from monies or U.S. Government Obligations previously deposited with the Trustee) or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities), may be made by or on behalf of the Company on account of principal of (or premium, if any) or interest on the Notes or on account of the purchase, redemption or other acquisition of Notes upon the occurrence of any default in payment of Designated Senior Indebtedness (a "Payment Default") until such Payment Default shall have been cured or waived in writing or shall have ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full in cash or cash equivalents. (Section 1303(a)) 58 60 No payment (other than any payments made pursuant to the provisions described under "-- Defeasance or Covenant Defeasance of Indenture" from monies or U.S. Government Obligations previously deposited with the Trustee) or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities), may be made by or on behalf of the Company on account of principal (or premium, if any) or interest on the Notes or on account of the purchase, redemption or other acquisition of Notes for the period specified below (a "Payment Blockage Period") upon the occurrence of any default or event of default with respect to any Designated Senior Indebtedness other than any Payment Default pursuant to which the maturity thereof may be accelerated (a "Non-payment Default") and after the receipt by the Trustee of written notice thereof from the Agent Bank or any other representative of a holder of Designated Senior Indebtedness. (Section 1303(b)) The Payment Blockage Period will commence upon the date of receipt by the Trustee of written notice from the Agent Bank or such other representative of the Designated Senior Indebtedness in respect of which the Non-payment Default exists and shall end on the earliest of (i) 179 days thereafter (provided any Designated Senior Indebtedness as to which notice was given shall not theretofore have been accelerated), (ii) the date on which such Non-payment Default is cured, waived or ceased to exist or such Designated Senior Indebtedness is discharged or paid in full in cash or cash equivalents or (iii) such Payment Blockage Period shall have been terminated by written notice to the Company or the Trustee from the Agent Bank or such other representative initiating such Payment Blockage Period, after which the Company will resume making any and all required payments in respect of the Notes, including any missed payments. In any event, not more than one Payment Blockage Period may be commenced during any period of 365 consecutive days. No event of default with respect to Designated Senior Indebtedness that existed or was continuing on the date of the commencement of any Payment Blockage Period will be, or can be made, the basis for the commencement of a subsequent Payment Blockage Period, unless such default has been cured or waived for a period of not less than 90 consecutive days subsequent to the commencement of such initial Payment Blockage Period (it being acknowledged that any breach of any financial covenant for a period commencing after the date of commencement of such Payment Blockage Period which would give rise to a Non-payment Default pursuant to any provision under which a Non-payment Default previously existed or was continuing shall constitute a new Non-payment Default for this purpose). Failure by the Company to make any required payment in respect of the Notes when due or within any applicable grace period, whether or not occurring during a Payment Blockage Period, would result in an Event of Default and, thereafter, holders of the Notes would have the right to accelerate the maturity thereof. See "-- Events of Default." By reason of such subordination, in the event of liquidation, receivership, reorganization or insolvency of the Company, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the holders of the Notes, and assets which would otherwise be available to pay obligations in respect of the Notes will be available only after all Senior Indebtedness has been paid in full in cash or cash equivalents, at which time there may not be sufficient assets remaining to pay any amounts due on any or all of the Notes. "Senior Indebtedness" means the principal of, premium, if any, and interest on (including interest accruing after the filing of a petition by or against the Company under any bankruptcy laws) and all other amounts due on or in connection with any Indebtedness of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of (and premium, if any, on) and interest (including interest accruing after the occurrence of an event of default or after the filing of a petition by or against the Company under any bankruptcy law) on all Indebtedness, and all other amounts and obligations of every nature of the Company, from time to time owed under, the Bank Credit Agreement and the Senior Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Notes and the 9 7/8% Notes, (ii) Indebtedness of the Company that is expressly subordinated in right of payment to any Indebtedness of the Company, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) that portion of any 59 61 Indebtedness of the Company that at the time of incurrence is incurred in violation of any covenant of the Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company, (vi) trade accounts payable owed or owing by the Company, (vii) Indebtedness of the Company to any Subsidiary or any other Affiliate of the Company, (viii) Redeemable Capital Stock of the Company and (ix) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 ecourse to the Company or any Subsidiary. "Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Agreement and the Senior Notes and (ii) following the full repayment of indebtedness under the Bank Credit Agreement and the termination of the commitments thereunder, any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding of at least $17 million and is specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. SINKING FUND The Notes will not be entitled to the benefit of any sinking fund. REDEMPTION OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2003, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period beginning on March 1 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 2003...................................................... 104.00% 2004...................................................... 102.00% 2005 and thereafter....................................... 100.00%
In addition, at any time or from time to time, on or prior to March 1, 2001, the Company may, at its option, redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price equal to 108% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued under the Indenture on the Issuance Date remains outstanding immediately after the occurrence of such redemption; provided further such redemption occurs within 60 days of the date of closing of each such Equity Offering. The Trustee shall select the Notes to be purchased in the manner described under "-- Selection and Notice." As described below, (a) upon the occurrence of a Change of Control, the Company is obligated to make an offer to purchase all outstanding Notes at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase and (b) upon certain sales or other dispositions of assets, the Company may be obligated to make offers to purchase Notes with a portion of the Net Cash Proceeds of such sales or other dispositions at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. See "Certain Covenants -- Change of Control" and "-- Limitation on Disposition of Proceeds of Asset Sales." (Section 1101) SELECTION AND NOTICE. In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Note of a principal amount of $1,000 or less shall be redeemed in part. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the 60 62 original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption and accepted for payment. (Sections 1104, 1105, 1107 and 1108) CERTAIN COVENANTS The Indenture will contain, among others, the covenants described below. LIMITATION ON INDEBTEDNESS. (a) The Indenture will provide that the Company will not create, incur, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness, unless (x) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness, taken as one period (and after giving pro forma effect to: (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) notwithstanding clause (d) of the definition of Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period, reflecting, in the case of such an acquisition, any amount attributable to 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 Commission, as if such elimination of operating expense or the realization of such cost reduction were achieved at the beginning of such four-quarter period), would have been at least equal to 2.0 to 1 and (y) if such Indebtedness is Subordinated Indebtedness, such Indebtedness shall have an Average Life longer than the Average Life of the Notes and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Notes. (b) The Company will not permit any Restricted Subsidiary to incur any Indebtedness (including any Acquired Indebtedness), other than Permitted Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness, taken as one period (and after giving pro forma effect to the matters referred to in clauses (i), (ii) and (iii) in the parenthetical in paragraph (a) of the "Limitation on Indebtedness" covenant), would have been at least equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the Notes in compliance with clause (i) of paragraph (b) and clauses (i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on Guarantees of Indebtedness by Restricted Subsidiaries" covenant. (Section 1010) LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture will provide that the Company will not, and will not permit any Restricted Subsidiary to, incur, create, assume, guarantee or in any other manner become directly or indirectly liable with respect to or responsible for, or permit to remain outstanding, any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Notes pursuant to subordination provisions substantially similar to those contained in the Indenture. (Section 1019) LIMITATION ON RESTRICTED PAYMENTS. (a) The Indenture will provide that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take the following actions: (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Capital Stock or in options, warrants or other rights to purchase such Capital Stock, but excluding dividends or distributions payable in Redeemable Capital Stock or in options, warrants or other rights to purchase Redeemable Capital Stock), 61 63 (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled principal payment, scheduled sinking fund payment or maturity, any Subordinated Indebtedness, (iv) make any Investment (other than any Permitted Investment) in any Person, or (v) incur any guarantee of Indebtedness of any Affiliate, including any Unrestricted Subsidiary (other than with respect to (a) guarantees of Indebtedness of any wholly owned Restricted Subsidiary by the Company or (b) guarantees of Indebtedness of the Company by any Restricted Subsidiary), (such payments or other actions described in (but not excluded from) clauses (i) through (v) are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing, (2) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness" covenant, and (3) the aggregate amount of all Restricted Payments declared or made after the date of the 9 7/8% Notes Indenture shall not exceed the sum of (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day after the date of the 9 7/8% Notes Indenture and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net cash proceeds received after the date of the 9 7/8% Notes Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Capital Stock of the Company (other than Redeemable Capital Stock) or warrants, options or rights to purchase such shares of Capital Stock of the Company, plus (C) the aggregate net cash proceeds received after the date of the 9 7/8% Notes Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities that have been converted into or exchanged for Capital Stock of the Company (other than Redeemable Capital Stock) to the extent such debt securities were originally sold for cash, together with the aggregate cash received by the Company at the time of such conversion or exchange, plus (D) to the extent not otherwise included in the Company's Consolidated Adjusted Net Income, the net reduction in Investments in Unrestricted Subsidiaries resulting from the payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or a Restricted Subsidiary after the date of the 9 7/8% Notes Indenture from any Unrestricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as provided in the definition of Investment), not to exceed in the case of any Unrestricted Subsidiary the total amount of Investments (other than Permitted Investments), after the date of the 9 7/8% Notes Indenture in such Unrestricted Subsidiary by the Company and its Restricted Subsidiaries, plus (E) $10 million. (b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default shall have occurred and be continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of paragraph (a) above; (ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of the Company; (iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for or out of the net 62 64 cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of the Company; (iv) the repurchase of any Subordinated Indebtedness of the Company at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control pursuant to a provision similar to the "Change of Control" covenant; provided that prior to such repurchase the Company has made the Change of Control Offer as provided in such covenant with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; (v) the purchase, redemption or other acquisition or retirement for value of Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence (other than to a Restricted Subsidiary) of, Indebtedness of the Company so long as (A) the principal amount of such new Indebtedness does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, acquired or retired, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Subordinated Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) such new Indebtedness is subordinated to the Notes to the same extent as the Notes are subordinated to Senior Indebtedness and (C) such new Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Notes; and (vi) the purchase, redemption or other acquisition or retirement for value of shares of Common Stock of the Company issued pursuant to non-qualified options granted under stock option plans of the Company, in order to pay withholding taxes due as a result of income recognized upon the exercise of such options; provided that (1) the Company is required, by the terms of such plans, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $2 million during any fiscal year of the Company. The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) (provided that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce the amount that would otherwise be available under clause (3) of paragraph (a) when declared, but not also when subsequently paid pursuant to such clause (i)) and the actions described in clause (v) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) and shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a). (c) In computing Consolidated Adjusted Net Income of the Company under clause (3)(A) of paragraph (a) above, (1) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the requirements of the Indenture, such Restricted Payment shall be deemed to have been made in compliance with the Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. (Section 1011) 63 65 LIMITATION ON ISSUANCES AND SALES OF RESTRICTED SUBSIDIARY STOCK. The Indenture will provide that the Company (i) will not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly-owned Restricted Subsidiary) and (ii) will not permit any Person (other than the Company or a wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this covenant shall not prohibit (1) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of the Indenture, (2) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law or (3) the issuance and sale of Capital Stock by a Restricted Subsidiary, or the ownership by any Person of any Capital Stock of a Restricted Subsidiary, if, in each case, the Company has made, or is making, an Investment in such Restricted Subsidiary pursuant to clause (v) of the definition of "Permitted Investment." (Section 1012) LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture will provide that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company or any beneficial owner of 5% or more of any class of the Company's Capital Stock at any time outstanding ("Interested Persons"), unless (i) such transaction is among the Company and wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms that are no less favorable to the Company, or such Restricted Subsidiary, as the case may be, than those which could have been obtained in an arm's length transaction with third parties who are not Interested Persons, (B) with respect to any transaction involving aggregate consideration equal to or greater than $2 million, the Company has delivered an Officers' Certificate to the Trustee certifying that such transaction complies with clause (ii)(A) above, and (C) with respect to any transaction involving aggregate consideration equal to or greater than $5 million, such transaction has been approved by the Board of Directors (including a majority of the Disinterested Directors); provided, however, that this covenant will not restrict the Company from paying reasonable and customary regular compensation and fees to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary. (Section 1013) LIMITATION ON LIENS SECURING PARI PASSU INDEBTEDNESS OR SUBORDINATED INDEBTEDNESS. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or indebtedness of any Restricted Subsidiary, whether owned at the date of the Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Company, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Subordinated Indebtedness of the Company, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. (b) The Company will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is pari passu or subordinate in right of payment to the Guarantee of such Subsidiary, on or with respect to any of such Restricted Subsidiary's properties or assets, including any shares of stock or Indebtedness of any Subsidiary of such Restricted Subsidiary, whether owned at the date of the Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu in right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. (Section 1014) CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to purchase all of the then outstanding Notes (a "Change of Control Offer"), and shall purchase, on a business day (the "Change of Control Purchase Date") not more than 70 nor less than 60 days 64 66 following the Change of Control, all of the then outstanding Notes validly tendered pursuant to such Change in Control Offer, at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. The Change of Control Offer is required to remain open for at least 20 Business Days and until the close of business on the Change of Control Purchase Date. In order to effect such Change of Control Offer, the Company shall, not later than the 30th day after the Change of Control, mail to each Noteholder and the Banks notice of the Change of Control Offer, which notice shall govern the terms of the Change of Control Offer and shall state, among other things, the procedures that Noteholders must follow to accept the Change of Control Offer. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change of Control Purchase Price for all of the Notes that might be delivered by Noteholders seeking to accept the Change of Control Offer. The Bank Credit Agreement prohibits the purchase of the Notes by the Company prior to full repayment of indebtedness under the Bank Credit Agreement and the termination of the commitments thereunder and, upon a Change of Control, all amounts outstanding under the Bank Credit Agreement may become due and payable. In addition, under the terms of the indenture governing the Senior Notes, the repurchase of the Notes by the Company would constitute a restricted payment that may be prohibited at the time of a Change of Control. There can be no assurance that in the event of a Change of Control the Company will be able to obtain the necessary consents from the lenders under the Bank Credit Agreement, or, if necessary, from the holders of the Senior Notes, to consummate a Change of Control Offer. The failure of the Company to make or consummate the Change of Control Offer or pay the Change of Control Purchase Price when due would result in an Event of Default and would give the Trustee and the holders of the Notes the rights described under "-- Events of Default." One of the events which constitutes a Change of Control under the Indenture is the disposition of "all or substantially all" of the Company's assets. This term has not been interpreted under New York law (which is the governing law of the Indenture) to represent a specific quantitative test. As a consequence, in the event holders of the Notes elect to require the Company to purchase the Notes and the Company elects to contest such election, there can be no assurance as to how a court interpreting New York law would interpret the phrase. The existence of a holder's right to require the Company to purchase such holder's Notes upon a Change of Control may deter a third party from acquiring the Company in a transaction which constitutes a Change of Control. The definition of "Change of Control" in the Indenture is limited in scope. The provisions of the Indenture may not afford holders of Notes the right to require the Company to purchase such Notes in the event of a highly leveraged transaction or certain transactions with the Company's management or its affiliates, including a reorganization, restructuring, merger or similar transaction involving the Company (including, in certain circumstances, an acquisition of the Company by management or its affiliates) that may adversely affect holders of the Notes, if such transaction is not a transaction defined as a Change of Control. See "-- Certain Definitions" for the definition of "Change of Control." The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that a Change of Control occurs and the Company is required to purchase Notes as described above. (Section 1015) LIMITATION ON DISPOSITION OF PROCEEDS OF ASSET SALES. (a) The Indenture will provide that the Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not less than the Fair Market Value of the assets sold (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash Equivalents; provided that the Company and its Restricted Subsidiaries may engage in Asset Sales for consideration not in the form of cash or Cash Equivalents in amounts in excess of that permitted in this clause (ii), so long as (x) such excess consideration is in the form 65 67 of Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully Traded Common Stock received by the Company and its Restricted Subsidiaries (measured as of the date of receipt) from all Asset Sales in reliance on this proviso since the date of the Indenture that has not been converted into cash or Cash Equivalents does not exceed $10 million and (z) any Fully Traded Common stock that is converted into cash or Cash Equivalents shall be applied as provided in paragraphs (b) and (c) of this "Limitation on Disposition of Proceeds of Asset Sales" covenant. (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after such Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or enter into a legally binding agreement to invest) in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Closing Date or in businesses reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, then the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clauses (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph (b) constitutes "Excess Proceeds." (c) When the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall, within 15 business days, make an offer to purchase (an "Excess Proceeds Offer") from all holders of Notes, on a pro rata basis, in accordance with the procedures set forth below, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds. The offer price as to each Note shall be payable in cash in an amount equal to 100% of the principal amount of such Note plus accrued and unpaid interest, if any, to the date such Excess Proceeds Offer is consummated. To the extent that the aggregate principal amount of Notes tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset to zero. (Section 1016) LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. (a) The Indenture will provide that the Company will not permit any Restricted Subsidiary to guarantee the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Guarantee of payment of the Notes by such Restricted Subsidiary except that (A) if the Notes are subordinated in right of payment to such Indebtedness, the Guarantee under the supplemental indenture shall be subordinated to such Restricted Subsidiary's guarantee with respect to such Indebtedness substantially to the same extent as the Notes are subordinated to such Indebtedness under the Indenture and (B) if such Indebtedness is by its express terms subordinated in right of payment to the Notes, any such guarantee of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Restricted Subsidiary's Guarantee with respect to the Notes substantially to the same extent as such Indebtedness is subordinated to the Notes; (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; (iii) such Restricted Subsidiary shall appoint CT Corporation in New York City as its agent for the service of process: and (iv) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that (A) such appointment of CT Corporation is valid, (B) such Guarantee of the Notes has been duly executed and authorized and (C) such Guarantee of the Notes constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thetcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that this paragraph (a) shall not be applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the time such Person became a 66 68 Restricted Subsidiary of the Company and (y) was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary of the Company. (b) Notwithstanding the foregoing and the other provisions of the Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture) or (ii) the release or discharge of the Guarantee which resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such Guarantee. (Section 1017) LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Indenture will provide that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary of the Company, (e) make loans or advances to the Company or any other Restricted Subsidiary of the Company, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary of the Company or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any Restricted Subsidiary of the Company, (iii) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary of the Company in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (iv) any agreement in existence on the Closing Date (to the extent of any encumbrances or restrictions in existence thereunder on the Closing Date) and (v) any agreement providing for the incurrence of Indebtedness of Restricted Subsidiaries pursuant to either clause (x) of paragraph (b) of the "Limitation of Indebtedness" covenant or clause (vii) of the definition of Permitted Subsidiary Indebtedness; provided that any Restricted Subsidiary that becomes subject to any such encumbrances or restrictions pursuant to this clause (v) shall Guarantee the Notes in compliance with the provisions of clause (i) of paragraph (b) and clauses (i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on Guarantees of Indebtedness by Restricted Subsidiaries" covenant. (Section 1018) REPORTS. The Indenture will require that the Company file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15 of the Exchange Act. The Company will also be required (a) to file with the Trustee, and provide to each holder of Notes, without cost to such holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective holder of Notes promptly upon written request. (Section 1009) MERGER, CONSOLIDATION AND SALE OF ASSETS, ETC. The Company will not, in any transaction or series of transactions, merge or consolidate with or into, or sell, assign, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any Person or Persons, and the Company will not permit any Restricted Subsidiary to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or 67 69 Persons, unless at the time and after giving effect thereto (i) either (A) if the transaction or transactions is a merger or consolidation, the Company shall be the surviving Person of such merger or consolidation, or (B) the Person formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or to which the properties and assets of the Company or such Restricted Subsidiary, as the case may be, substantially as an entirety, are sold, assigned, transferred, leased or otherwise disposed of (any such surviving Person or transferee Person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture, and, in each case, the Indenture shall remain in full force and effect; (ii) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred the Company or the Surviving Entity, as the case may be, after giving effect to such transaction or series of transactions on a pro forma basis, could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness" covenant; and (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Consolidated Net Worth of the Company or the Surviving Entity, as the case may be, is at least equal to the Consolidated Net Worth of the Company immediately before such transaction or series of transactions. (Section 801) In connection with any consolidation, merger, transfer, lease or other disposition contemplated hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in the form and substance reasonably satisfactory to the Trustee, an Officers' Certificate stating that such consolidation, merger, transfer, lease or other disposition and the supplemental indenture in respect thereto comply with the requirements under the Indenture and an Opinion of Counsel stating that the requirements of clause (i) of the preceding paragraph have been complied with. Upon any consolidation or merger or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company in accordance with the immediately preceding paragraphs in which the Company is not the continuing obligor under the Indenture, the Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor had been named as the Company therein. When a successor assumes all the obligations of its predecessor under the Indenture or the Notes, the predecessor shall be released from those obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal and interest on the Notes. EVENTS OF DEFAULT The following will be "Events of Default" under the Indenture: (i) default in the payment of the principal of or premium, if any, when due and payable, on any of the Notes; or (ii) default in the payment of an installment of interest on any of the Notes, when due and payable, for 30 days; or (iii) default in the performance or breach of the provisions of the "Merger, Consolidation and Sale of Assets" section of the Indenture, the failure to make or consummate a Change of Control Offer in accordance with the provisions of the "Change of Control" covenant or the failure to make or consummate an Excess Proceeds Offer in accordance with the provisions of the "Limitation on Disposition of Proceeds of Asset Sales" covenant; or (iv) the Company or any Guarantor shall fail to perform or observe any other term, covenant or agreement contained in the Notes, any Guarantee or the Indenture (other than a default specified in (i), (ii) or (iii) above) for a period of 30 days after written notice of such failure requiring the Company 68 70 to remedy the same shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Notes then outstanding; or (v) default or defaults under one or more mortgages, bonds, debentures or other evidences of Indebtedness under which the Company or any Significant Subsidiary then has outstanding Indebtedness in excess of $5 million, individually or in the aggregate, and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness; or (vi) one or more final judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $5 million, either individually or in the aggregate, shall be entered against the Company or any of its Significant Subsidiaries or any of their respective properties and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect: or (vii) (A) any holder of at least $5 million in aggregate principal amount of secured Indebtedness of the Company or of any Significant Subsidiary as to which a default has occurred and is continuing shall commence judicial proceedings (which proceedings shall remain unstayed for 5 Business Days) to foreclose upon assets of the Company or any Significant Subsidiary having an aggregate Fair Market Value, individually or in the aggregate, in excess of $5 million or shall have exercised any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure or (B) any action described in the foregoing clause (A) shall result in any court of competent jurisdiction issuing any order for the seizure of such assets; or (viii) any Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with the Indenture) and such condition shall have continued for a period of 30 days after written notice of such failure requiring the Guarantor and the Company to remedy the same shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Notes then outstanding; or (ix) the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to the Company or any Significant Subsidiary. (Section 501) If an Event of Default (other than as specified in clause (ix) above) shall occur and be continuing, the Trustee, by notice to the Company, or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice to the Trustee and the Company, may declare the principal of, premium, if any, and accrued interest on all of the outstanding Notes due and payable immediately, upon which declaration all amounts payable in respect of the Notes shall be immediately due and payable, provided, however, that, for so long as the Bank Credit Agreement is in effect, such declaration shall not become effective until the earlier of (i) five Business Days following delivery of notice to the Agent Bank of the intention to accelerate the Notes or (ii) the acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of Default specified in clause (ix) above occurs and is continuing, then the principal of, premium, if any, and accrued interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Notes. (Section 502) After a declaration of acceleration under the Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration if (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, and (iv) to the extent that payment of such interest is lawful, interest 69 71 upon overdue interest at the rate borne by the Notes which has become due otherwise than by such declaration of acceleration; (b) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (c) all Events of Default, other than the nonpayment of principal of, premium, if any, and interest on the Notes that has become due solely by such declaration of acceleration, have been cured or waived. (Section 502) Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities because an Event of Default shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Securities, and no other Event of Default has occurred during such 30-day period which has not been cured or waived during such period. (Section 502) The holders of not less than a majority in aggregate principal amount of the outstanding Notes may on behalf of the holders of all the Notes waive any past defaults under the Indenture, except a default in the payment of the principal of, premium, if any, or interest on any Note, or in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each Note outstanding. (Section 513) No holder of any of the Notes has any right to institute any proceeding with respect to the Indenture or any remedy thereunder, unless the holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Notes and the Indenture, the Trustee has failed to institute such proceeding within 15 days after receipt of such notice and the Trustee, within such 15-day period, has not received directions inconsistent with such written request by holders of a majority in aggregate principal amount of the outstanding Notes. Such limitations do not apply, however, to a suit instituted by a holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on such Note on or after the respective due dates expressed in such Note. (Section 507) During the existence of an Event of Default, the Trustee is required to exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing, the Trustee under the Indenture is not under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Noteholders unless such holders shall have offered to the Trustee reasonable security or indemnity. Subject to certain provisions concerning the rights of the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee under the Indenture. (Sections 512 and 602) If a Default or an Event of Default occurs and is continuing and is known to the Trustee, the Trustee shall mail to each holder of the Notes notice of the Default or Event of Default within 5 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of, premium, if any, or interest on any Notes, the Trustee may withhold the notice to the holders of such Notes if a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of the Noteholders. (Section 601) The Company is required to furnish to the Trustee annual and quarterly statements as to the performance by the Company and the Guarantors of their respective obligations under the Indenture and as to any default in such performance. The Company is also required to notify the Trustee within ten days of any Default. 70 72 DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE The Company may, at its option and at any time, terminate the obligations of the Company and the Guarantors with respect to the outstanding Notes ("defeasance"). Such defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for (i) the rights of holders of outstanding Notes to receive payment in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (ii) the Company's obligations to issue temporary Notes, register the transfer or exchange of any Notes, replace mutilated. destroyed, lost or stolen Notes and maintain an office or agency for payments in respect of the Notes, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to terminate the obligations of the Company and any Guarantor with respect to certain covenants that are set forth in the Indenture, some of which are described under "Certain Covenants" above, and any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Notes ("covenant defeasance"). The Company is permitted to exercise defeasance or covenant defeasance only with the consent of the Banks. (Sections 1202 and 1203) In order to exercise either defeasance or covenant defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in United States dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes to redemption or maturity; (ii) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax laws); (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit; (iv) such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest with respect to any securities of the Company or any Guarantor; (v) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (vi) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (vii) the Company shall have delivered to the Trustee an Officers' Certificate and an Osfactory to the Trustee, which, taken together, state that all conditions precedent under the Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with. (Section 1204) SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee, which, taken together, state that all 71 73 conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. (Section 401) AMENDMENTS AND WAIVERS From time to time, the Company and the Trustee may, without the consent of the Noteholders, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, qualifying, or maintaining the qualification of, the Indenture under the Trust Indenture Act of 1939, or making any change that does not adversely affect the rights of any Noteholder; provided, however, that the Company has delivered to the Trustee an Opinion of Counsel stating that such change does not adversely affect the rights of any Noteholder. Other amendments and modifications of the Indenture or the Notes may be made by the Company and the Trustee with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding Notes; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, (i) reduce the principal amount of, extend the fixed maturity of or alter the redemption provisions of, the Notes, (ii) change the currency in which any Notes or any premium or the interest thereon is payable, (iii) reduce the percentage in principal amount of outstanding Notes that must consent to an amendment, supplement or waiver or consent to take any action under the Indenture or the Notes, (iv) modify the "Limitation on Other Senior Subordinated Indebtedness" covenant or any of the provisions in the Indenture relating to the subordination of the Notes in a manner adverse to the holders; (v) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes, (vi) waive a default in payment with respect to the Notes, (vii) alter the Company's obligation to purchase the Notes in accordance with the Indenture or waive any default in the performance thereof, (viii) reduce or change the rate or time for payment of interest on the Notes, or (ix) release any Guarantor from any of its obligations under its Guarantee or the Indenture other than in accordance with the terms of the Indenture. (Sections 901 and 902) The ability of the Company to amend the Indenture will be restricted by the terms of the Bank Credit Agreement. THE TRUSTEE The Indenture provides that, except during the continuance of an Event of Default, the Trustee thereunder will perform only such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise under the circumstances in the conduct of such Person's own affairs. (Section 602) The Indenture and provisions of the Trust Indenture Act of 1939, as amended, incorporated by reference therein contain limitations on the rights of the Trustee thereunder, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest (as defined) it must eliminate such conflict or resign. GOVERNING LAW The Indenture and the Notes will be governed by the laws of the State of New York, without regard to the principles of conflicts of law. CERTAIN DEFINITIONS "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an Asset Acquisition from such Person or (b) existing at the time such Person becomes a subsidiary of any other Person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such Person becoming such a subsidiary). 72 74 "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and, in the case of the Company and its Restricted Subsidiaries, also means AET and The K.A.D. Companies, Inc. "Asset Acquisition" means (a) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person shall become a Restricted Subsidiary or any Restricted Subsidiary shall be merged with or into the Company or any Restricted Subsidiary or (b) the acquisition by the Company or any Restricted Subsidiary of the assets of any Person which constitute all or substantially all of the assets of such Person or any division or line of business of such Person. "Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition to any Person other than the Company or a wholly owned Restricted Subsidiary, in one or a series of related transactions, of (a) any Capital Stock of any Restricted Subsidiary held by the Company or any Restricted Subsidiary; (b) all or substantially all of the properties and assets of any division or line of business of the Company or any Restricted Subsidiary; or (c) any other properties or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets (i) that is governed by the provisions of the Indenture governing "Merger, Consolidation and Sale of Assets," (ii) to an Unrestricted Subsidiary, if permitted under the "Limitation on Restricted Payments" covenant or (iii) having a Fair Market Value of less than $250,000. "Average Life" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of each such principal payment by (b) the sum of all such principal payments. "Bank Credit Agreement" means the Credit Agreement dated as of October 29, 1993, amended and restated as of May 29, 1997, as further amended on November 19, 1997, between the Company and the Banks as in effect on the date hereof and as such Agreement may be amended, restated, supplemented, replaced, refinanced, substituted or otherwise modified from time to time. "Banks" means the banks and other financial institutions from time to time that are lenders under the Bank Credit Agreement. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of 180 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; and (iii) commercial paper with a maturity of 180 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) 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 73 75 to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total Voting Stock of the Company; (b) the Company consolidates with, or merges with or into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of the Company is converted into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of the surviving or transferee corporation or (2) cash, securities and other property in an amount which could be paid by the Company as a Restricted Payment under the Indenture and (ii) immediately after such transaction no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is 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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total Voting Stock of the surviving or transferee corporation; (c) during any consecutive two-year 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 such Board of Directors or whose nomination for 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 (d) any final order, judgment or decree of a court of competent jurisdiction shall be entered against the Company decreeing the dissolution or liquidation of the Company. "Closing Date" means the date of the closing of the offering of the Notes. "Commission" means the Securities and Exchange Commission. "Common Stock" means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) of, such Person's common stock, whether outstanding at the Closing Date or issued after the Closing Date, and includes, without limitation, all series and classes of such common stock. "Consolidated Adjusted Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (a) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions, (c) the net income (or net loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Restricted Subsidiaries in cash by such other Person during such period, (d) net income (or net loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that net income is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders and (f) income resulting from transfers of assets received by the Company or any Restricted Subsidiary from an Unrestricted Subsidiary. "Consolidated Fixed Charge Coverage Ratio" of any Person means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash Charges, in each case, for such period, of such Person and its subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (b) the sum of such Consolidated Interest Expense for such period; provided that (i) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness computed on a pro forma 74 76 basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period, (ii) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period, and (iii) notwithstanding clauses (i) and (ii) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements. If such Person or any of its subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the above clause shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or such subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all accrued interest, (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP and (iii) the aggregate dividends paid or accrued on Preferred Stock of such Person or its Subsidiaries, to the extent such Preferred Stock is owned by Persons other than such Person and its Subsidiaries. "Consolidated Net Tangible Assets" of any Person means, as of any date, (a) all amounts that would be shown on the latest consolidated balance sheet of such Person and its Subsidiaries prepared in accordance with GAAP, at the date of determination less (b) the amount thereof constituting goodwill and other intangible assets as calculated in accordance with GAAP. "Consolidated Net Worth" means, with respect to any Person at any date, the consolidated stockholders' equity of such Person less the amount of such stockholders' equity attributable to Redeemable Capital Stock or treasury stock of such Person and its Subsidiaries, as determined in accordance with GAAP. "Consolidated Non-cash Charges" means, with respect to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under the Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Eligible Inventories" as of any date means the consolidated inventories of the Company and its Restricted Subsidiaries (net of any reserve) on the basis of the method of accounting (either last in/first out or first in/first out) used by the Company in the preparation of its financial statements included in the latest Form 10-K filed by the Company under the Securities Act, as shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries, all in accordance with GAAP. 75 77 "Eligible Receivables" as of any date means the consolidated accounts receivables (net of any reserve) of the Company and its Restricted Subsidiaries that are not more than 60 days past their due date and that were entered into on normal payment terms as shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries, all in accordance with GAAP. "Equity Offering" means any public or private sale of common stock of the Company, other than (i) any public offerings with respect to the Company's Common Stock registered on Form S-8 or Form S-4 and (ii) any private placement occurring in connection with or after the occurrence of a Change of Control when the Company's Common Stock is eligible for delisting from a national securities exchange or automated quotation dealer system on which such Common Stock was trading or quoted prior to such Change of Control. "Event of Default" has the meaning set forth under "Events of Default" herein. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction. "FEEL" means Flight Equipment and Engineering Limited, an English corporation. "Fully Traded Common Stock" means Common Stock issued by any corporation if (A) such Common Stock is listed on either The New York Stock Exchange, The American Stock Exchange, The London Stock Exchange or the Nasdaq National Market; provided that such Common Stock is freely tradeable under the Securities Act (or, in the case of The London Stock Exchange, any applicable law, rule or regulation) upon issuance; and (B) such Common Stock does not constitute more than 15% of the issued and outstanding Common Stock of such corporation held by Persons other than 10% holders of such Common Stock and Affiliates and insiders of such corporation. "GAAP" means generally accepted accounting principles, consistently applied, that are set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States of America, which are applicable as of the Closing Date. "Guarantee" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of nonperformance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "Guarantee" means any guarantee of any Indebtedness of the Company incurred by any Restricted Subsidiary pursuant to (1) paragraph (a) of the "Limitation on Guarantees of Indebtedness by Restricted Subsidiaries" covenant, (2) clause (v) of the "Limitation on Dividends and other Payment Restrictions Affecting Restricted Subsidiaries" covenant, (3) clause (y) of paragraph (b) of the "Limitation on Indebtedness" covenant, or (4) clause (ii) of the definition of Permitted Investment. When used as a verb, "Guarantee" shall have a corresponding meaning. "Guarantor" means any Restricted Subsidiary which incurs a Guarantee. "Indebtedness" means, with respect to any Person, without duplication, (a) all liabilities of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit, bankers' acceptance or other similar credit transaction and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (b) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, if, and 76 78 to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (c) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (d) all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred to in the preceding clauses of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Inh obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured), (f) all guarantees by such Person of Indebtedness referred to in this definition, (g) all Redeemable Capital Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends, (h) all obligations of such Person under or in respect of currency exchange contracts and Interest Rate Protection Obligations and (i) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of such Person of the types referred to in clauses (a) through (h) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "Interest Rate Protection Obligations" means the obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. In addition, the Fair Market Value of the net assets of any Restricted Subsidiary of the Company at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. A Person shall be deemed to own subject to a Lien any property which such Person 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. "Maturity" means, with respect to any Note, the date on which any principal of such Note or an installment of interest becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses 77 79 (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP consistently applied against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee. "Pari Passu Indebtedness" means Indebtedness of the Company which is pari passu with the Notes. "Permitted Indebtedness" means any of the following: (i) Indebtedness of the Company in an aggregate principal amount at any one time outstanding not to exceed the greater of (i) $200 million and (ii) the sum of 80% of the aggregate amount of Eligible Receivables and 50% of the aggregate amount of Eligible Inventory, measured as of the most recent fiscal quarter preceding the time such Indebtedness is incurred; (ii) Indebtedness of the Company under the Notes; (iii) Indebtedness of the Company outstanding on the date of the Indenture (other than Indebtedness incurred pursuant to clause (i) of this definition); (iv) obligations of the Company pursuant to Interest Rate Protection Obligations, which obligations do not exceed the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations and obligations under currency exchange contracts entered into in the ordinary course of business; (v) Indebtedness of the Company to any wholly owned Restricted Subsidiaries; (vi) Indebtedness of the Company consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries; (vii) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company of any Indebtedness of the Company incurred pursuant to the "Limitation on Indebtedness" covenant or clauses (ii) and (iii) of this definition, including any successive refinancings by the Company, so long as (A) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Notes at least to the same extent as the Indebtedness being refinanced and (C) such new Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity later than the final Stated Maturity of the Notes; and (viii) Indebtedness in an aggregate principal amount not in excess of $30 million at any one time outstanding, less the amount of Permitted Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the definition thereof. "Permitted Investments" means any of the following: (i) Investments in Cash Equivalents; (ii) Investments in the Company or wholly owned Restricted Subsidiaries; (iii) Investments in an amount not to exceed $15 million at any one time outstanding; (iv) Investments by the Company or any Restricted 78 80 Subsidiary of the Company in another Person, if as a result of such Investment (A) such other Person becomes a wholly owned Restricted Subsidiary or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a wholly-owned Restricted Subsidiary; or (v) Investments from the date of the Indenture in a Restricted Subsidiary that is less than wholly owned in an aggregate amount measured at the time of Investment (less payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary, to the extent not included in clause (D) of the last paragraph of Subsection (a) of the "Limitation on Restricted Payments" covenant) not to exceed 5% of Consolidated Net Tangible Assets of the Company. In connection with any assets or property contributed or transferred to any Person as an Investment, such property and assets shall be equal to the Fair Market Value (as determined by the Company's Board of Directors) at the time of Investment. "Permitted Liens" means the following types of Liens: (a) Liens on any property or assets of a Restricted Subsidiary granted in favor of the Company or any Restricted Subsidiary; (b) Liens securing the Notes; (c) Liens securing the Guarantees; (d) Liens securing Acquired Indebtedness created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that any such Lien does not extend to any property or assets of the Company or any Restricted Subsidiary other than the assets acquired in connection with the incurrence of such Acquired Indebtedness; and (e) any extension, renewal or replacement, in whole or in part, of any Lien described in the foregoing clauses (a) through (d); provided that any such extension, renewal or replacement shall be no more restrictive in any material respect that the Lien so extended, renewed or replaced and shall not extend to any additional property or assets. "Permitted Subsidiary Indebtedness" means any of the following: (i) Indebtedness of any Restricted Subsidiary outstanding on the date of the Indenture; (ii) obligations of any Restricted Subsidiary pursuant to Interest Rate Protection Obligations, which obligations do not exceed the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations; (iii) Indebtedness of any Restricted Subsidiary to any wholly owned Restricted Subsidiary of the Company or to the Company; (iv) Indebtedness of any Restricted Subsidiary consisting of guaranties, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries; (v) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by any Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary incurred pursuant to clause (i) of this definition, including any successive refinancings by such Restricted Subsidiary, so long as any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by such Restricted Subsidiary as necessary to accomplish such refinancing, plus the amount of expenses of such Restricted Subsidiary incurred in connection with such refinancing and such new Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity later than the final Stated Maturity of the Notes; 79 81 (vi) Indebtedness (as defined in clauses (e) and (f) of the definition of Indebtedness) to the Noteholders incurred pursuant to provisions of the Indenture; (vii) Indebtedness in an amount not to exceed $30 million at any one time outstanding, less the amount of Permitted Indebtedness then outstanding pursuant to clause (viii) of the definition thereof; and (viii) Guarantees of Indebtedness of the Company permitted under the "Limitation on Guarantees of Indebtedness by Restricted Subsidiaries" covenant. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Closing Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "Redeemable Capital Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc. and its successors. "Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company issued under the Senior Notes Indenture. "Significant Subsidiary" of the Company means any Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the Securities Act, and in any event shall include any Guarantor. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company which is expressly subordinated in right of payment to the Notes. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) other Person (other than a corporation), including, without limitation, a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions). Unless specifically provided to the contrary herein, Unrestricted Subsidiaries shall not be included in the definition of Subsidiaries for any purpose of the Indenture (other than for the purposes of the definition of "Unrestricted Subsidiary" herein). "Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an 80 82 Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any property of the Company or any other Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so designated; provided that either (x) the Subsidiary to be designated has total assets of $1,000 or less at the time of its designation or (y) immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness" covenant. The Board of Directors may designate any Unrestricted Subsidiary to be a Subsidiary; provided that immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness" covenant. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). "Wholly Owned" with respect to any Subsidiary, means any Subsidiary of any Person of which at least 99% of the outstanding Capital Stock is owned by such Person or another wholly owned Subsidiary of such Person. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Subsidiary. "9 7/8% Notes" means the Company's 9 7/8% Senior Subordinated Notes due 2006. BOOK-ENTRY DELIVERY AND FORM The certificates representing the Notes will be issued in fully registered form, without coupons. Except as described in the next paragraph, the Notes will be deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and registered in the name of Cede & Co., as DTC's nominee in the form of a global Note certificate (the "Global Certificate") or will remain in the custody of the Trustee pursuant to a FAST Balance Certificate Agreement between DTC and the Trustee. Notes originally purchased by or transferred to (i) except as described below, persons outside the United States pursuant to sales in accordance with Regulation S under the Securities Act or (ii) any other Persons who are not QIBs (collectively, "Non-Global Purchasers") will be issued in registered form without coupons (the "Certificated Notes"). Upon the transfer to a QIB of Certificated Notes initially issued to a Non-Global Purchaser, such Certificated Notes will be exchanged for an interest in the Global Certificate or in the Notes in the custody of the Trustee representing the principal amount of notes being transferred. Notes originally purchased by persons outside the United States pursuant to sales in accordance with Regulations S under the Securities Act will be represented upon issuance by a temporary global Note certificate (the "Temporary Certificate") which will not be exchangeable for Certificated Notes until the expiration of the "40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S under the Securities Act. The Temporary Certificate will be registered in the name of, and held by, a temporary certificate holder until the expiration of such 40-day period, at which time the Temporary Certificate will be delivered to the Trustee in exchange for Certificated Notes registered in the names requested by such temporary certificate holder. In addition, until the expiration of such 40-day period, transfers of interest in the Temporary Certificate can only be effected through such temporary certificate holder in accordance with the requirements set forth in "Notice to Investors." 81 83 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resales. In addition, the Company agreed that it would not for a period of 120 days from February 6, 1998, the date of the Offering Memorandum distributed in connection with the sale of the Old Notes, directly or indirectly offer, sell, grant any options to purchase or otherwise dispose of any debt securities other than in connection with this Exchange Offer. The Company will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. LEGAL MATTERS Certain legal matters with respect to the legality of the issuance of the New Notes being offered hereby will be passed upon for the Company by Shearman & Sterling, New York, New York. EXPERTS The financial statements of BE Aerospace, Inc. as of February 22, 1997 and February 24, 1996 and for each of the three fiscal years in the period ended February 22, 1997 (which includes an explanatory paragraph relating to the Company's change in its method of accounting for engineering expenditures), included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing elsewhere herein and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 82 84 BE AEROSPACE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996 (Unaudited) Consolidated Balance Sheet, November 29, 1997............. F-2 Consolidated Statements of Earnings for the Nine Months Ended November 29, 1997 and November 30, 1996 (Unaudited)............................................ F-3 Consolidated Statements of Cash Flows for the Nine Months Ended November 29, 1997 and November 30, 1996 (Unaudited)............................................ F-4 Notes to Consolidated Financial Statements for the Nine Months Ended November 29, 1997 and November 30, 1996 (Unaudited)............................................ F-5 FISCAL YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 Independent Auditors' Report.............................. F-7 Consolidated Balance Sheets, February 22, 1997 and February 24, 1996...................................... F-8 Consolidated Statements of Operations for the Years Ended February 22, 1997, February 24, 1996 and February 25, 1995................................................... F-9 Consolidated Statements of Stockholders' Equity for the Years Ended February 22, 1997, February 24, 1996, and February 25, 1995...................................... F-10 Consolidated Statements of Cash Flows for the Years Ended February 22, 1997, February 24, 1996 and February 25, 1995................................................... F-11 Notes to Consolidated Financial Statements for the Years Ended February 22, 1997, February 24, 1996, and February 25, 1995...................................... F-12
F-1 85 BE AEROSPACE, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
NOVEMBER 29, FEBRUARY 22, 1997 1997 ------------ ------------ ASSETS Current Assets: Cash and cash equivalents................................. $ 58,221 $ 44,149 Receivables -- trade, less allowance for doubtful accounts of $2,696 (November 29, 1997) and $4,864 (February 22, 1997).................................................. 79,970 73,489 Inventories, net.......................................... 113,869 92,900 Other current assets...................................... 6,935 2,781 -------- -------- Total current assets................................... 258,995 213,319 -------- -------- Property and Equipment, net................................. 98,753 87,888 Intangibles and Other Assets, net........................... 188,963 189,882 -------- -------- $546,711 $491,089 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable.......................................... $ 55,913 $ 42,889 Accrued expenses.......................................... 42,578 43,837 Current portion of long-term debt......................... 7,222 4,419 -------- -------- Total current liabilities.............................. 105,713 91,145 -------- -------- Long-Term Debt.............................................. 225,339 225,402 Deferred Income Taxes....................................... 1,310 1,667 Other Liabilities........................................... 14,149 7,114 Stockholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding...................... Common stock, $.01 par value; 50,000,000 shares authorized; 22,792,892 (November 29, 1997) 21,893,392 (February 22, 1997) issued and outstanding............. 228 219 Additional paid-in capital................................ 238,578 228,710 Accumulated deficit....................................... (37,834) (62,286) Cumulative foreign exchange translation adjustment........ (772) (882) -------- -------- Total stockholders' equity............................. 200,200 165,761 -------- -------- $546,711 $491,089 ======== ========
F-2 86 BE AEROSPACE, INC. CONSOLIDATED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED ---------------------------- NOVEMBER 29, NOVEMBER 30, 1997 1996 ------------ ------------ Net Sales................................................... $362,687 $308,151 Cost of Sales............................................... 230,825 204,655 -------- -------- Gross Profit................................................ 131,862 103,496 Operating Expenses: Selling, general and administrative....................... 43,017 37,619 Research, development and engineering..................... 34,988 27,759 Amortization expense...................................... 8,195 8,021 -------- -------- Total operating expenses............................... 86,200 73,399 -------- -------- Operating Earnings.......................................... 45,662 30,097 Interest Expense, net....................................... 16,899 21,845 -------- -------- Earnings Before Income Taxes................................ 28,763 8,252 Income Taxes................................................ 4,311 825 -------- -------- Net Earnings................................................ $ 24,452 $ 7,427 ======== ======== Earnings Per Common Share: Net Earnings Per Common Share............................. $ 1.04 $ 0.42 ======== ======== Common and Common Equivalent Shares....................... 23,414 17,786 ======== ========
F-3 87 BE AEROSPACE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED ---------------------------- NOVEMBER 29, NOVEMBER 30, 1997 1996 ------------ ------------ Cash Flows from Operating Activities: Net earnings.............................................. $ 24,452 $ 7,427 Adjustments to reconcile net earnings to net cash flows provided by (used in) operating activities: Depreciation and amortization.......................... 18,482 16,325 Deferred income taxes.................................. (413) 637 Non cash employee benefit plan contributions........... 1,251 783 Changes in operating assets and liabilities: Accounts receivable.................................. (5,886) (15,193) Inventories.......................................... (19,785) (15,106) Other current assets................................. (4,168) 3,266 Accounts payable..................................... 13,638 1,370 Other liabilities.................................... 221 (9,683) -------- -------- Net cash flows provided by (used in) operating activities...................................... 27,792 (10,174) -------- -------- Cash Flows from Investing Activities: Capital expenditures...................................... (21,099) (8,675) Change in intangibles and other assets -- net............. (3,836) (2,177) -------- -------- Net cash flows used in investing activities....... (24,935) (10,852) -------- -------- Cash Flows from Financing Activities: Net borrowings under revolving lines of credit............ 2,518 7,903 Proceeds from issuances of stock.......................... 8,647 11,229 -------- -------- Net cash flows provided by financing activities... 11,165 19,132 -------- -------- Effect of exchange rate changes on cash flows............... 50 188 -------- -------- Net increase (decrease) in cash and cash equivalents........ 14,072 (1,706) Cash and cash equivalents, beginning of period.............. 44,149 15,376 -------- -------- Cash and cash equivalents, end of period.................... $ 58,221 $ 13,670 ======== ======== Supplemental disclosures of cash flow information: Cash paid during period for interest...................... $ 17,716 $ 20,935 Cash paid during period for income taxes, net............. $ 1,871 $ 1,183
F-4 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION: The information set forth in these consolidated financial statements as of November 29, 1997 and for the nine months ended November 29, 1997 and November 30, 1996 is unaudited and may be subject to normal year-end adjustments. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of B/E Aerospace, Inc. (the "Company" or "B/E") for the periods indicated. Results of operations for the interim periods ended November 29, 1997 are not necessarily indicative of the results of operations for the full fiscal year. For further information, including information with regard to conditions in the airline industry and their possible impact on the Company, please refer to the Company's annual report on Form 10-K for the fiscal year ended February 22, 1997. The accompanying consolidated financial statements consolidate all of the Company's subsidiaries. All significant intercompany transactions have been eliminated. Certain amounts in the prior year's Consolidated Financial Statements have been reclassified to conform to the current fiscal year's presentation. Certain information normally included in footnote disclosures to the annual financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. NOTE 2. EARNINGS PER SHARE In February 1997, the FASB issued SFAS No. 128, Earnings Per Share which is effective for financial statements issued for periods ending after December 15, 1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per share. Earnings per share, as reported and as would be reportable under SFAS No. 128 for the nine months ended November 29, 1997 and November 30, 1996 are as follows:
AS REPORTED NINE MONTHS ENDED ---------------------------- NOVEMBER 29, NOVEMBER 30, 1997 1996 ------------ ------------ Primary earnings per share............... $1.04 $.42
PRO FORMA NINE MONTHS ENDED ---------------------------- NOVEMBER 29, NOVEMBER 30, 1997 1996 ------------ ------------ Basic earnings per share................. $1.10 $.44 Diluted earnings per share............... $1.04 $.41
NOTE 3. NEW ACCOUNTING PRONOUNCEMENTS Comprehensive Income -- During 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which established standards for the reporting and displaying of comprehensive income. Comprehensive income is defined as all changes in a Company's net assets except changes resulting from transactions with shareholders. It differs from net income in that certain items currently recorded to equity would be a part of comprehensive income. Comprehensive income must be reported in a financial statement with the cumulative total presented as a component of equity. This statement will be adopted by the Company in its fiscal 1999 quarterly financial statements. Segment Information -- In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information," which will be effective for the Company beginning March 1, 1998. SFAS No. 131 redefines how F-5 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996 -- (CONTINUED) (UNAUDITED) operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company believes the segment information required to be disclosed under SFAS No. 131 will be more comprehensive than previously provided, including expanded disclosure of income statement and balance sheet items. The Company has not yet completed its analysis of which operating segments it will report on. NOTE 4. LONG-TERM DEBT In May 1997, the Company amended its existing credit facilities with The Chase Manhattan Bank by increasing the aggregate principal amount that may be borrowed thereunder to $125,000 (the "Bank Credit Facility"). The Bank Credit Facility consists of a $25,000 Reducing Revolver and a $100,000 Revolving Facility. The amount of the Reducing Revolver will be reduced automatically by 12.5% on August 26, 2000 and on each of the seven succeeding quarterly anniversaries of such date. The Reducing Revolver is collateralized by all of the issued and outstanding capital stock of a wholly owned subsidiary and has a five-year maturity. The Revolving Facility is collateralized by all of the Company's accounts receivable, all of its inventory and substantially all of its other personal property and has a five-year maturity. The Bank Credit Facility contains customary affirmative covenants, negative covenants and conditions of borrowing. At November 29, 1997 indebtedness under the Bank Credit Facility were letters of credit amounting to approximately $4,572. The Company has approximately $120,428 available for subsequent borrowings under its Bank Credit Facility. NOTE 5. SUBSEQUENT EVENTS In January 1998, the Company resolved a long-running dispute with the U.S. Government over export sales between 1992 and 1995 to Iran Air. The dispute centered on shipments of aircraft seats and related spare parts for five civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and arranged for them to be installed by a contractor in France. At the time, Iran was not the subject of a U.S. trade embargo. In connection with its sale of seats to Iran Air, B/E applied for and was granted a validated export license by the U.S. Department of Commerce (the "DOC"). The dispute with the U.S. Government centered on whether seats were delivered to Iran Air before the formal license was issued by the DOC, some seven months after B/E first applied for the license. This action resolved all disputes between B/E Aerospace and the Department of Justice as well as the DOC's Bureau of Export Enforcement. As part of the settlement, B/E plead guilty to a violation of the International Economic Emergency Powers Act and entered into a consent order with the DOC under which the DOC has agreed to suspend the imposition of a three-year export denial order on PTC Aerospace, a member of B/E's U.S. Seating Products Group, provided no further violations of the export laws occur. The Company will record a charge of approximately $4 million in its fourth quarter of fiscal 1998, which ends February 28, 1998, related to fines, civil penalties and associated legal fees arising from the settlement. F-6 90 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders B/E Aerospace, Inc. Wellington, Florida We have audited the accompanying consolidated balance sheets of B/E Aerospace, Inc. and subsidiaries as of February 22, 1997 and February 24, 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended February 22, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of B/E Aerospace, Inc. and subsidiaries as of February 22, 1997 and February 24, 1996 and the results of their operations and their cash flows for each of the three years in the period ended February 22, 1997, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, in the year ended February 24, 1996, the Company changed its method of accounting for engineering expenditures. DELOITTE & TOUCHE LLP Costa Mesa, California April 10, 1997 F-7 91 CONSOLIDATED BALANCE SHEETS, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1997 1996 -------- -------- ASSETS Current Assets: Cash and cash equivalents................................. $ 44,149 $ 15,376 Accounts receivable -- trade, less allowance for doubtful accounts of $4,864 (1997) and $4,973 (1996)............ 73,489 54,242 Inventories, net.......................................... 92,900 72,569 Other current assets...................................... 2,781 7,621 -------- -------- Total current assets................................... 213,319 149,808 -------- -------- Property and Equipment, net................................. 87,888 86,357 Intangibles and Other Assets, net........................... 189,882 197,421 -------- -------- $491,089 $433,586 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable.......................................... $ 42,889 $ 45,102 Accrued liabilities....................................... 43,837 56,400 Current portion of long-term debt and borrowings.......... 4,419 6,482 -------- -------- Total current liabilities.............................. 91,145 107,984 -------- -------- Long-term debt.............................................. 225,402 273,192 Deferred income taxes....................................... 1,667 1,257 Other liabilities........................................... 7,114 6,996 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding Common stock, $.01 par value; 30,000,000 shares authorized; 21,893,392 (1997) and 16,392,994 (1996) shares issued and outstanding.......................... 219 164 Additional paid-in capital................................ 228,710 121,366 Accumulated deficit....................................... (62,286) (75,995) Cumulative foreign exchange translation adjustment........ (882) (1,378) -------- -------- Total stockholders' equity............................. 165,761 44,157 -------- -------- $491,089 $433,586 ======== ========
See notes to consolidated financial statements. F-8 92 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996, AND FEBRUARY 25, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED -------------------------------------------- FEBRUARY 22, FEBRUARY 24, FEBRUARY 25, 1997 1996 1995 ------------ ------------ ------------ Net sales............................................. $412,379 $232,582 $229,347 Cost of sales......................................... 270,557 160,031 154,863 -------- -------- -------- Gross profit.......................................... 141,822 72,551 74,484 Operating expenses: Selling, general and administrative................. 51,734 42,000 31,787 Research, development and engineering............... 37,083 58,327 12,860 Amortization of intangible assets................... 10,607 9,499 9,954 Other expenses...................................... -- 4,170 23,736 -------- -------- -------- Total operating expenses......................... 99,424 113,996 78,337 -------- -------- -------- Operating earnings (loss)............................. 42,398 (41,445) (3,853) Interest expense, net................................. 27,167 18,636 15,019 -------- -------- -------- Earnings (loss) before income taxes (benefit) and cumulative effect of change in accounting principle................... 15,231 (60,081) (18,872) Income taxes (benefit)................................ 1,522 -- (6,806) -------- -------- -------- Earnings (loss) before cumulative effect of change in accounting principle............ 13,709 (60,081) (12,066) Cumulative effect of change in accounting principle................................ -- (23,332) -- -------- -------- -------- Net earnings (loss)................................... $ 13,709 $(83,413) $(12,066) ======== ======== ======== Earnings (loss) per common share: Earnings (loss) before cumulative effect of change in accounting principle................ $ .72 $ (3.71) $ (0.75) Cumulative effect of change in accounting principle............................. -- (1.44) -- -------- -------- -------- Net earnings (loss)................................. $ .72 $ (5.15) $ (0.75) ======== ======== ========
See notes to consolidated financial statements. F-9 93 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 (IN THOUSANDS)
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL --------------- PAID-IN EARNINGS TRANSLATION STOCKHOLDERS' SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY ------ ------ ---------- --------- ----------- ------------- Balance, February 26, 1994........... 15,985 $159 $118,357 $ 19,484 $(4,007) $133,993 Sale of stock under employee stock purchase plan................... 15 -- 132 -- -- 132 Employee benefit plan matching contribution.................... 96 1 720 -- -- 721 Net loss........................... -- -- -- (12,066) -- (12,066) Foreign currency translation adjustment...................... -- -- -- -- 2,551 2,551 ------ ---- -------- -------- ------- -------- Balance, February 25, 1995........... 16,096 160 119,209 7,418 (1,456) 125,331 Sale of stock under employee stock purchase plan................... 74 1 403 -- -- 404 Exercise of stock options.......... 121 2 896 -- -- 898 Employee benefit plan matching contribution.................... 102 1 858 -- -- 859 Net loss........................... -- -- -- (83,413) -- (83,413) Foreign currency translation adjustment...................... -- -- -- -- 78 78 ------ ---- -------- -------- ------- -------- Balance, February 24, 1996........... 16,393 164 121,366 (75,995) (1,378) 44,157 Sale of stock under employee stock purchase plan................... 58 482 -- -- 482 Exercise of stock options.......... 1,362 14 11,650 -- -- 11,664 Employee benefit plan matching contribution.................... 75 1 1,316 -- -- 1,317 Sale of common stock under public offering, net of expenses....... 4,005 40 93,896 -- -- 93,936 Net earnings....................... -- -- -- 13,709 -- 13,709 Foreign currency translation adjustment...................... -- -- -- -- 496 496 ------ ---- -------- -------- ------- -------- Balance, February 22, 1997........... 21,893 $219 $228,710 $(62,286) $ (882) $165,761 ====== ==== ======== ======== ======= ========
See notes to consolidated financial statements. F-10 94 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 (DOLLARS IN THOUSANDS)
1997 1996 1995 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss).................................... $ 13,709 $(83,413) $(12,066) Adjustments to reconcile net earnings (loss) to net cash flows (used in) provided by operating activities: Cumulative effect of accounting change.............. -- 23,332 -- Depreciation and amortization....................... 24,147 18,435 16,146 Change in intangible assets......................... -- -- 8,588 Deferred income taxes............................... 410 (3,453) (6,764) Non cash employee benefit plan contributions........ 1,317 859 721 Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable............................... (19,366) 6,068 6,226 Inventories....................................... (19,536) (11,929) (16,863) Other current assets.............................. 5,059 (638) (585) Accounts payable.................................. (4,767) 3,008 7,295 Other liabilities................................. (11,564) 13,169 (642) -------- -------- -------- Net cash flows (used in) provided by operating activities................................... (10,591) (34,562) 2,056 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for purchase of property and equipment........ (14,471) (13,656) (12,172) Change in other assets................................. (1,331) (5,914) (8,610) Acquisitions........................................... -- (42,500) -------- -------- -------- Net cash flows used in investing activities.... (15,802) (62,070) (20,782) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving lines of credit.............................................. (38,882) 2,000 9,080 Proceeds from issuance of stock, net of expenses....... 106,082 1,302 132 Principal payments on long-term debt................... (11,968) (942) Proceeds from long-term debt........................... -- 101,252 3,873 -------- -------- -------- Net cash flows provided by financing activities................................... 55,232 103,612 13,085 -------- -------- -------- Effect of exchange rate changes on cash flows.......... (66) 77 222 -------- -------- -------- Net increase (decrease) in cash and cash equivalents... 28,773 7,057 (5,419) Cash and cash equivalents, beginning of year........... 15,376 8,319 13,738 -------- -------- -------- Cash and cash equivalents, end of year................. $ 44,149 $ 15,376 $ 8,319 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid (received) during year for: Interest............................................... $ 26,097 $ 16,967 $ 16,664 Income taxes -- net.................................... 1,209 (3,292) (1,096) SCHEDULE OF NON-CASH TRANSACTIONS: Liabilities assumed and accrued acquisition costs incurred in connection with the acquisitions (See Note 3)............................................. -- 27,532 -- Liabilities incurred in connection with purchase of land and buildings.................................. -- -- 4,000
See notes to consolidated financial statements. F-11 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation -- B/E Aerospace, Inc. (the "Company") operates in a single business segment and designs, manufactures, sells and services a broad line of commercial aircraft cabin interior products consisting of a broad range of aircraft seating products, passenger entertainment and service systems, and galley products, including structures as well as all food and beverage storage and preparation equipment. The Company's customers are the world's commercial airlines. As a result, the Company's business is directly dependent upon the conditions in the commercial airline industry. Consolidation -- The accompanying financial statements consolidate the accounts of B/E Aerospace, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes -- In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, the Company provides deferred income taxes for temporary differences between amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Warranty Costs -- Estimated costs related to product warranties are accrued at the time products are sold. Revenue Recognition -- Sales of assembled products, equipment or services are recorded on the date of shipment or, if required, upon acceptance by the customer. The Company sells its products primarily to airlines worldwide, including occasional sales collateralized by letters of credit. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Actual losses have been within management's expectations. Cash Equivalents -- The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Intangible Assets -- The Company accounts for the impairment and disposition of long-lived assets in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed. In accordance with SFAS No. 121, long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. The Company annually evaluates the carrying value of the intangible assets versus the cash benefit expected to be realized and adjusts for any impairment of value. As discussed in Note 15, the Company introduced a new product to the in-flight entertainment industry, causing the industry in general to re-evaluate its product offerings and, in the process, impairing the value of certain assets, including certain earlier Company technology. Accordingly, intangible assets related to these product offerings were written down to their estimated realizable value during the year ended February 25, 1995. Research and Development -- Research and development expenditures are expensed as incurred. Stock-Based Compensation -- In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 123, Accounting for Stock-Based Compensation, which became effective for the Company beginning during fiscal 1997. SFAS No. 123 requires extended disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based F-12 96 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply Accounting Principles Board (APB) Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company continues to apply APB Opinion No. 25 to its stock-based compensation awards to employees and discloses the required pro forma effect on net income and earnings per share. See Note 12. Earnings (Loss) per Common Share -- Earnings (loss) per common share amounts are computed using the weighted average number of common and common equivalent (where not anti-dilutive) shares outstanding during each period. The number of weighted average shares of common stock outstanding amounted to 19,107,000, 16,185,000, and 16,021,000 for the years ended February 22, 1997, February 24, 1996 and February 25, 1995, respectively. In February 1997, the FASB issued SFAS No. 128, Earnings per Share which is effective for financial statements issued for period ending after December 15, 1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per share. The amount reported as net income per common and common equivalent share for the year ended February 22, 1997 would not be materially different than that which would have been reported for basic and diluted earnings per share in accordance with SFAS No. 128. Foreign Currency Translation -- In accordance with the provisions of SFAS No. 52, Foreign Currency Translation, the assets and liabilities located outside the United States are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Income and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized currently in income, and those resulting from translation of financial statements are accumulated as a separate component of stockholders' equity. Reclassifications -- Certain items in prior years' financial statements have been reclassified to conform with the presentation used in the year ended February 22, 1997. 2. ACCOUNTING CHANGE In fiscal 1996, the Company undertook a comprehensive review of the engineering capitalization policies followed by its competitors and others in its industry peer group. The results of this study and an evaluation of the Company's policy led the Company to conclude that it should adopt the accounting method that it believes is followed by most of its competitors and certain members of its industry peer group. Previously, the Company had capitalized precontract engineering costs as a component of inventories, which were then amortized to earnings as the product was shipped. The Company now expenses such costs as they are incurred. While the accounting policy for precontract engineering expenditures previously followed by the Company was in accordance with generally accepted accounting principles, the changed policy is preferable. The effect of this change in accounting for periods through February 25, 1995 was a charge of $23,332 ($1.44 per share); the effect of expensing engineering costs for the year ended February 24, 1996 was a charge of $42,114 ($2.60). The following table summarizes the pro forma net earnings (loss) and per share amounts for each period presented. Primarily as a result of this accounting change, inventories decreased by $65,446 as of February 24, 1996. F-13 97 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) Pro forma amounts assuming the change in application of accounting principle applied retroactively (unaudited):
YEAR ENDED ---------------------------- FEBRUARY 24, FEBRUARY 25, 1996 1995 ------------ ------------ Net loss.................................... $(60,081) $(35,398) Net loss per share.......................... $ (3.71) $ (2.20)
3. ACQUISITIONS On January 24, 1996, the Company acquired all of the outstanding capital stock of Burns Aerospace Corporation, which designs, manufactures, sells and services aircraft seating products to commercial airlines worldwide. The aggregate acquisition cost of $70,032 includes the payment of $42,500 to the seller, the assumption of approximately $27,532 of liabilities, including related acquisition costs, and certain liabilities arising from the acquisition. Funds for the acquisition were obtained from proceeds of the long-term debt issuance described in Note 8. The aggregate purchase price for the Burns acquisition has been allocated to the net assets acquired based on appraisals and management's estimates as follows: Receivables................................................ $11,396 Inventories................................................ 12,624 Other current assets....................................... 806 Property and equipment..................................... 21,695 Intangible and other assets................................ 23,511 ------- $70,032 =======
The following table presents unaudited proforma operating results for the fiscal years ended February 1996 and 1995, respectively, as if the acquisition had occurred on February 27, 1994:
1996 1995 -------- -------- Net sales.............................................. $327,073 $322,841 Net loss............................................... $(88,113) $(15,061) Net loss per share..................................... $ (5.44) $ (.94)
4. INVENTORIES Inventories are stated at the lower of cost or market, cost is determined using the weighted average cost method. Finished goods and work in process inventories include material, labor and manufacturing overhead costs. Inventories consist of the following:
1997 1996 ------- ------- Raw materials.................................... $45,947 $28,252 Work-in-process.................................. 41,399 39,045 Finished goods................................... 7,929 5,272 Less customer advances........................... (2,375) -- ------- ------- $92,900 $72,569 ======= =======
F-14 98 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) 5. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, and depreciated and amortized generally on the straight-line method over their estimated useful lives of two to thirty years (term of lease as to leasehold improvements). Property and equipment consist of the following:
YEARS 1997 1996 ----- -------- -------- Land, buildings and improvements.............. 10-30 $ 42,966 $ 39,979 Machinery..................................... 3-13 45,444 46,374 Tooling....................................... 3-10 17,179 14,819 Furniture and equipment....................... 2-10 18,327 12,758 -------- -------- 123,916 113,930 Less accumulated depreciation and amortization........................... (36,028) (27,573) -------- -------- $ 87,888 $ 86,357 ======== ========
6. INTANGIBLES AND OTHER ASSETS Intangibles and other assets consist of the following:
STRAIGHT-LINE AMORTIZATION PERIOD (YEARS) 1997 1996 -------------- -------- -------- Covenants not-to-compete................ 14 $ 10,198 $ 10,198 Product technology, production plans and drawings.............................. 7-20 59,484 60,201 Replacement parts annuity............... 20 29,778 29,416 Product approvals and technical manuals............................... 20 18,331 18,529 Goodwill................................ 30 78,913 77,256 Debt issue costs........................ 10 13,431 12,592 Trademarks and patents.................. 20 10,820 10,470 Other................................... 14,271 11,761 -------- -------- 235,226 230,423 Less accumulated amortization...... (45,344) (33,002) -------- -------- $189,882 $197,421 ======== ========
7. ACCRUED LIABILITIES Accrued liabilities consist of the following:
1997 1996 ------- ------- Accrued product warranties....................... $ 5,231 $ 3,455 Accrued salaries, vacation and related benefits....................................... 12,868 10,479 Accrued acquisition expenses..................... 5,488 11,105 Accrued interest................................. 6,585 7,449 Customer advances................................ -- 5,940 Accrued income taxes............................. 6,563 7,315 Other accrued liabilities........................ 7,102 10,657 ------- ------- $43,837 $56,400 ======= =======
F-15 99 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) 8. LONG-TERM DEBT AND BORROWINGS Long-term debt consists of the following:
1997 1996 -------- -------- Senior notes................................... $124,411 $124,313 Senior subordinated notes...................... 100,000 100,000 Revolving lines of credit...................... 4,419 42,967 Term loan...................................... -- 11,968 Other long-term debt........................... 991 696 -------- -------- 229,821 279,674 Less current portion of long-term debt.... (4,419) (6,482) -------- -------- $225,402 $273,192 ======== ========
In January 1996, the Company amended its existing credit facilities by increasing the aggregate principal amount that may be borrowed thereunder to $100,000 (the "Bank Credit Facility"). The Bank Credit Facility consists of a $25,000 Reducing Revolver and a $75,000 Revolving Facility. The amount of the Reducing Revolver will be reduced automatically by 12.5% on April 19, 1999 and on each of the seven succeeding quarterly anniversaries of such date. The Reducing Revolver is collateralized by all of the issued and outstanding capital stock of a wholly owned subsidiary and has a five-year maturity, with the commitments of the lenders thereunder reducing during such five-year period. The Revolving Facility is collateralized by all of the Company's accounts receivable, all of its inventory and substantially all of its other personal property and has a five-year maturity. The Bank Credit Facility contains customary affirmative covenants, negative covenants and conditions of borrowing, all of which were met by the Company as of February 22, 1997. Borrowings under the Bank Credit Facility currently bear interest at LIBOR plus 1.75% or prime (as defined) plus .5%. The interest to be charged on the Bank Credit Facility can increase or decrease based upon specified operating performance criteria set forth in the Bank Credit Facility Agreement. Amounts may be borrowed or repaid in $1,000 increments. At February 22, 1997, approximately $5,100 of letters of credit were outstanding, reducing the aggregate Bank Credit Facility availability to approximately $94,900. On January 24, 1996, the Company sold $100,000 of 9 7/8% Senior Subordinated Notes (the "Senior Subordinated Notes"). The proceeds from the Senior Subordinated Notes were utilized to acquire Burns and refinance the Company's then outstanding Bank credit facilities. The Senior Subordinated Notes are unsecured senior subordinated obligations of the Company and are subordinated to all senior indebtedness of the Company and mature on February 1, 2006. Interest on the Senior Subordinated Notes is payable semi-annually in arrears on February 1 and August 1 of each year. The Senior Subordinated Notes are redeemable at the option of the Company, in whole or in part, at any time after February 1, 2001 at predetermined redemption prices together with accrued and unpaid interest through the date of redemption. Upon a change of control (as defined), each holder of the Senior Subordinated Notes may require the Company to repurchase such holder's Senior Subordinated Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of such purchase. The Senior Subordinated Notes contain certain restrictive covenants, all of which were met by the Company as of February 22, 1997, including limitations on future indebtedness, restricted payments, transactions with affiliates, liens, dividends, mergers and transfers of assets. On February 24, 1993, the Company sold $125,000 of 9 3/4% Senior Notes (the "Senior Notes"), which were priced to yield 9 7/8%. The Company received the proceeds from the Senior Notes on March 3, 1993 and utilized $32,545 thereof to repay the outstanding balance of the Company's then outstanding bank obligations. The Senior Notes are senior unsecured obligations of the Company, ranking equally with any future senior F-16 100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) obligations of the Company and mature on March 1, 2003. Interest on the Senior Notes is payable semi-annually in arrears on March 1 and September 1 of each year. The Senior Notes are redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 1998 at predetermined redemption prices, together with accrued and unpaid interest through the date of redemption. Upon a change of control (as defined), each holder of the Senior Notes may require the Company to repurchase such holder's Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of such purchase. The Senior Notes contain certain restrictive covenants, all of which were met by the Company as of February 22, 1997, including limitations on future indebtedness, restricted payments, transactions with affiliates, liens, dividends, mergers and transfers of assets. Terms of the Senior Notes provide that, among other things, the payment of cash dividends on common stock is limited to a cumulative amount that equals 50% of the Company's consolidated adjusted net earnings since the date of the Senior Notes' issuance, plus the sum of $10,000 and other equity adjustments (as defined therein). The payment of cash dividends may only be made if the Company is not in default under the terms of the Senior Notes. The Bank Credit Facility also contains restrictions on the cumulative amount of dividends that may be paid. As of February 22, 1997, approximately $3,400 of dividends could have been declared by the Company. The Company has a U.K. revolving line of credit agreement for approximately $4,800 (the FEEL Credit Agreement). The FEEL Credit Agreement is collateralized by substantially all of the assets of FEEL. Borrowings may be made under the line of credit, provided FEEL is in compliance with certain covenants, all of which were met as of February 22, 1997. Aggregate borrowings outstanding under the FEEL Credit Agreement were approximately $4,419 as of February 22, 1997. Such borrowings will be repaid in pounds sterling. The Company also has a Netherlands revolving line of credit agreement for approximately $1,000 (the Inventum Credit Agreement). The Inventum Credit Agreement is collateralized by substantially all of the assets of Inventum. Borrowings may be made under the line of credit, provided Inventum is in compliance with certain covenants, all of which were met by Inventum as of February 22, 1997. There were no borrowings outstanding under the Inventum Credit Agreement as of February 22, 1997. Maturities of long-term debt are as follows: Fiscal year ending February: 1998.................................................. $ 4,419 1999.................................................. 177 2000.................................................. 138 2001.................................................. 315 2002.................................................. -- Thereafter.............................................. 224,772 -------- $229,821 ========
Interest expense amounted to $28,369, $18,788 and $17,225 for the years ended February 22, 1997, February 24, 1996 and February 25, 1995, respectively. F-17 101 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) 9. INCOME TAXES Income tax expense (benefit) consists of the following:
1997 1996 1995 ------ ------- ------- Current: Federal.............................. $ -- $ 1,972 $ (786) State................................ -- 818 105 Foreign.............................. 1,112 663 639 ------ ------- ------- 1,112 3,453 (42) ------ ------- ------- Deferred: Federal.............................. -- (2,635) (5,146) State................................ -- (818) (904) Foreign.............................. 410 -- (714) ------ ------- ------- 410... (3,453) (6,764) ------ ------- ------- $1,522 $ -- $(6,806) ====== ======= =======
The difference between income tax expense (benefit) and the amount computed by applying the statutory U.S. federal income tax rate (35%) to the pretax earnings before change in accounting principle consists of the following:
1997 1996 1995 ------- -------- ------- Statutory U.S. federal income tax expense (benefit).......................................... $ 5,331 $(21,028) $(6,605) Operating loss (with) without tax benefit............ (6,164) 14,569 -- Foreign tax rate differential........................ 1,267 3,324 -- Goodwill amortization................................ 566 558 708 Other, net........................................... 522 2,577 (909) ------- -------- ------- $ 1,522 $ -- $(6,806) ======= ======== =======
F-18 102 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) The tax effects of temporary differences and carryforwards that give rise to the Company's deferred income tax assets and liabilities consist of the following:
1997 1996 -------- -------- Engineering costs........................................... $ -- $ 22,182 Inventory reserves.......................................... 3,145 5,164 Acquisition reserves........................................ (1,740) 991 Inventory costs capitalized for tax purposes................ 1,236 815 Bad debt reserves........................................... 948 658 Warranty reserve............................................ 1,452 -- Other....................................................... 2,840 1,611 -------- -------- Net current deferred income tax assets...................... 7,881 31,421 Intangible assets........................................... (13,565) (14,701) Depreciation................................................ (2,074) (1,556) Net operating loss carryforward............................. 26,309 9,254 Research credit carryforward................................ 2,941 600 Other....................................................... -- 1,137 -------- -------- Net noncurrent deferred income tax asset (liabilities)...... 13,611 (5,266) Valuation allowance......................................... (23,159) (27,412) -------- -------- Net deferred tax liabilities................................ $ (1,667) $ (1,257) ======== ========
Due to uncertainty surrounding the realization of the benefits of its net deferred tax asset, the Company has established a valuation allowance of $23,159 against its otherwise recognizable net deferred tax asset. As of February 22, 1997, the Company had approximately $63,022 of federal operating loss carryforwards which expire at various dates through 2011, federal research credit carryforwards of $2,941 which expire at various dates through 2011, and alternative minimum tax credit carryforwards of $658 which have no expiration date. Approximately $6,000 of the Company's net operating loss carryforward related to non-qualified stock options will be credited to paid-in-capital rather than income tax expense. The Company has not provided for any residual U.S. income taxes on the approximately $3,651 of earnings from its foreign subsidiaries because such earnings are intended to be indefinitely reinvested. Such residual U.S. income taxes, if provided for, would be immaterial. The Internal Revenue Service completed its examination of the Company's federal tax returns for the years ended February 26, 1994 and February 27, 1993. The resolution of the examination did not have a material adverse effect on the Company's results of operations or its financial condition. The Company's federal tax returns for the years ended February 24, 1996 and February 25, 1995 are currently under examination by the Internal Revenue Service. Management believes that the resolution of this examination will not have a material adverse effect on the Company's results of operations or its financial condition. 10. COMMITMENTS AND CONTINGENCIES Leases -- The Company leases certain of its office, manufacturing and service facilities under operating leases which expire at various times through August 2003. Rent expense for fiscal 1997, 1996 and 1995 was F-19 103 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) approximately $7,021, $2,943 and $2,276, respectively. Future payments under leases with terms currently greater than one year are as follows: Year ending February: 1998....................................................... $ 6,075 1999....................................................... 4,239 2000....................................................... 3,058 2001....................................................... 2,306 2002....................................................... 1,462 Thereafter................................................. 702 ------- $17,842 =======
Contingencies -- B/E has been advised that the U.S. Attorney's Office for the District of Connecticut, in conjunction with the Department of Commerce and the U.S. Customs Service, is conducting a grand jury investigation focused on possible noncompliance by B/E with certain statutory and regulatory provisions relating to export licensing and controls. The investigation relates primarily to the sale of passenger seats and related spare parts for civilian commercial passenger aircraft to Iran Air from 1992 through mid-1995. B/E has been advised that it is a target of the investigation. An employee of a foreign based subsidiary of B/E has been charged with offenses relating to the investigation. The investigation is continuing, while the Company intends to defend itself vigorously, the ultimate outcome of the investigation cannot presently be determined. An adverse outcome could have a material adverse effect upon the operations and/or financial condition of the Company. The Company is also a defendant in various other legal actions arising in the normal course of business, the outcome of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect to the Company's financial statements. Employment Agreements -- The Company has employment and compensation agreements with two key officers of the Company. One of the agreements provides for an officer to earn a minimum of $450 adjusted annually for changes in the consumer price index (as defined) per year through 2002, as well as a deferred compensation benefit equal to the aggregate annual compensation earned through termination and payable thereafter. Such deferred compensation will be payable in equal monthly installments over the same number of years it was earned. The other agreement provides for an officer to receive annual minimum compensation of $450, and an incentive bonus not to exceed 100% of the officer's then-current salary through 2001. In addition, if the officer terminates his employment after April 28, 1996, the Company is obligated to pay the officer annually, as deferred compensation, an amount equal to 100% of the officer's annual salary (as defined) for a period of ten years from the date of termination. Such deferred compensation has been accrued at the present value of the obligation at February 22, 1997. The Company has other employment agreements with certain key members of management that provide for aggregate minimum annual base compensation of $1,825 expiring on various dates through 1999. Supply Agreement -- The Company has entered into a supply agreement with Applied Extrusion Technologies, Inc. ("AET"), a related party by way of common management. Under this agreement, the Company has agreed to purchase its requirements for certain component parts through March 1998 at a price that results in a 33 1/3% gross margin to AET. The Company's purchases under this contract for the years ended February 22, 1997, February 24, 1996, and February 25, 1995, were $1,642, $1,301 and $984, respectively. F-20 104 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) 11. EMPLOYEE RETIREMENT PLAN In August 1988, the Company established a non-qualified contributory profit-sharing plan. Effective August 1, 1989, this plan was amended to incorporate a 401(k) Plan which permits the Company to match a portion of employee contributions. Commencing in 1995, the Company's 401(k) Plan was amended to permit the Company's matching contribution to be made in common stock of the Company. The Company recognized expenses of $1,317, $859 and $721 related to this plan for the years ended February 22, 1997, February 24, 1996 and February 25, 1995, respectively. 12. STOCKHOLDERS' EQUITY On December 18, 1996, the Company issued approximately 4,005,000 shares of common stock to the public at a price of $25.00 per share. The net proceeds of the offering were $93,936. The Company used approximately $57,600 of the net proceeds to repay outstanding balances under various credit facilities. Had this sale and the corresponding repayment of the credit facilities taken place on February 26, 1995, earnings per common and common equivalent shares would have been $.87 and $(4.24), respectively, for the years ended February 22, 1997 and February 24, 1996. As required by APB 15, the supplemental earnings (loss) per common share data give effect to: (I) the assumed issuance of 2,566,559 shares of Common Stock by the Company which would be necessary to generate proceeds (using an assumed share price of $25), net of estimated offering costs, sufficient to repay $57.6 million of indebtedness; and (ii) the elimination of interest expense related to such borrowings for each period, net of tax. The supplemental data do not give effect to the issuance of an additional 1,433,441 shares of Common Stock sold by the Company. Stock Option Plans -- The Company has various stock option plans, including the 1989 Stock Option Plan, the 1991 Directors Stock Option Plan, the 1992 Share Option Scheme and the 1996 Stock Option Plan (collectively the Option Plans), under which shares of the Company's common stock may be granted to key employees and directors of the Company. The Option Plans provide for granting key employees options to purchase the Company's common stock. Options are granted at the discretion of the compensation and stock option committee of the Board of Directors. Options granted generally vest at the rate of 25% per year from the date of grant and are exercisable to the extent vested and the option term cannot exceed ten years. The following table sets forth options granted, canceled, forfeited and outstanding:
FEBRUARY 22, 1997 FEBRUARY 24, 1996 FEBRUARY 25, 1995 -------------------------- ------------------------ ------------------------ OPTION PRICE OPTION PRICE OPTION PRICE OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE ---------- ------------- --------- ------------ --------- ------------ Outstanding beginning of period.......... 2,720,350 $ 0.81-$13.00 2,871,287 $0.81-$13.00 2,493,162 $0.81-$13.00 Options granted...... 1,313,500 $10.25-$24.94 731,925 $7.37-$10.37 484,500 $7.44-$ 8.75 Options exercised.... (1,361,925) $ 0.81-$16.13 (139,750) $0.81-$ 8.75 (375) $0.81 Options forfeited.... (224,500) $ 7.38-$16.13 (743,112) $7.00-$13.00 (106,000) $8.25-$11.75 ---------- --------- --------- Outstanding, end of period............. 2,447,425 $ 0.81-$24.93 2,720,350 $0.81-$13.00 2,871,287 $0.81-$13.00 ========== ========= ========= Exercisable at end of year............... 1,374,927 $ 0.81-$24.93 2,223,225 $0.81-$13.00 694,737 $0.81-$13.00 ========== ========= =========
F-21 105 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) At February 22, 1997 options were available for grant under each of the Company's option plans.
OPTIONS OUTSTANDING AT FEBRUARY 22, 1997 - -------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE OPTIONS RANGE OF OPTIONS WEIGHTED AVERAGE REMAINING EXERCISABLE AT WEIGHTED AVERAGE EXERCISE PRICE OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE FEBRUARY 22, 1997 EXERCISE PRICE - -------------- ----------- ---------------- ---------------- ----------------- ---------------- (YEARS) $ .81-$ 8.50 641,625 $ 7.84 6.51 513,000 $ 7.75 $ 8.63-$ 8.75 637,750 $ 8.72 5.87 566,500 $ 8.74 $ 8.88-$16.13 373,050 $12.05 8.65 101,675 $12.19 $19.00-$24.94 795,000 $20.06 9.68 193,752 $19.94
The estimated fair value of options granted during 1997 was $16.60 per share. The estimated fair value of options granted during 1996 was $7.69 per share. The Company applies APB Opinion No. 25 and related Interpretations in accounting for its stock option and purchase plans. Accordingly, no compensation cost has been recognized for its stock option plans and its stock purchase plan other than that described above. Had compensation cost for the Company's stock option plans and its stock purchase plans been determined consistent with SFAS No. 123, the Company's net earnings (loss) and net earnings (loss) per share for the year ended February 22, 1997 and February 24, 1996 would have been reduced to the pro forma amounts indicated in the following table:
1997 1996 ------- -------- Net earnings (loss) -- as reported.................... $13,709 $(83,413) Net earnings (loss) -- pro forma...................... $10,709 $(84,932) Net earnings (loss) per share -- as reported.......... $ .72 $ (5.15) Net earnings (loss) per share -- pro forma............ $ .56 $ (5.24) Weighted average and pro forma weighted average common shares.............................................. 19,107 16,185
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for options granted in 1997 and 1996; risk-free interest rates of 6.4%; expected dividend yields of 0.0%; expected lives of 4 years; and expected volatility of 43%. The impact of outstanding non-vested stock options granted prior to fiscal 1996 has been excluded from the pro forma calculation; accordingly, the 1997 and 1996 pro forma adjustments are not indicative of future period pro forma adjustments, when the calculation will apply to all applicable stock options. 13. EMPLOYEE STOCK PURCHASE PLAN The Company has established a qualified Employee Stock Purchase Plan, the terms of which allow for qualified employees (as defined) to participate in the purchase of designated shares of the Company's common stock at a price equal to the lower of 85% of the closing price at the beginning or end of each semi- annual stock purchase period. The Company issued 58,490 and 73,544 shares of stock during fiscal 1997 and 1996 pursuant to this plan at an average price per share of $9.70 and $5.50, respectively. 14. EXPORT SALES AND MAJOR CUSTOMERS Export sales from the United States to customers in foreign countries amounted to approximately $153,423 $61,717, and $61,645 in fiscal 1997, 1996, and 1995, respectively. Total sales to all customers in foreign countries amounted to approximately $203,388, $124,469 and $114,511 in fiscal 1997, 1996 and 1995, F-22 106 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) respectively. Total sales to Europe amounted to 29%, 18% and 22% in fiscal 1997, 1996 and 1995, respectively. Total sales to Asia amounted to 16%, 20% and 19% in fiscal 1997, 1996 and 1995, respectively. Major customers (i.e., customers representing more than 10% of total sales) change from year to year depending on the level of refurbishment activity and/or the level of new aircraft purchases by such customers. There were no major customers in fiscal 1997, 1996 or 1995. 15. OTHER EXPENSES Other expenses for the year ended February 24, 1996 relate to costs associated with the integration and consolidation of the Company's European seating business. Other expenses for the year ended February 25, 1995 consisted of a charge related primarily to intangible assets ($10,835) and inventories ($11,216) associated with the Company's passenger entertainment systems. The introduction of the Company's MDDS interactive video system, which the Company expects to become the industry's standard for in-flight passenger and service entertainment, has captured the dominant market share with contract awards from the major airlines totaling more than $150,000 during the year ended February 24, 1996. The MDDS system also has recently caused major carriers to convert programs for earlier products to the Company's MDDS system and has caused two of the Company's principal competitors to offer to develop systems for the airlines similar to the Company's MDDS system. These events have caused the in-flight entertainment industry to re-evaluate its product offerings and, in the process, have impaired the value of certain of its assets. As a result, the Company has written down certain of its assets, including certain customer-specific inventories and other assets. 16. FOREIGN OPERATIONS Geographic Area -- The Company operated principally in two geographic areas, the United States and Europe during the years ended February 22, 1997, February 24, 1996 and February 25, 1995. There were no significant transfers between geographic areas during the period. Identifiable assets are those assets of the Company that are identified with the operations in each geographic area. The following table presents net sales and operating income for the years ended February 22, 1997, February 24, 1996, and February 25, 1995 and identifiable assets as of February 22, 1997, February 24, 1996 and February 25, 1995 by geographic area.
1997 1996 1995 -------- -------- -------- NET SALES: United States............................ $312,497 $169,830 $170,542 Europe................................... 99,882 62,752 58,805 -------- -------- -------- Total:................................ $412,379 $232,582 $229,347 ======== ======== ======== OPERATING INCOME: United States............................ $ 33,834 $(35,822) $ (9,457) Europe................................... 8,564 (5,623) 5,604 -------- -------- -------- Total:................................ $ 42,398 $(41,445) $ (3,853) ======== ======== ======== IDENTIFIABLE ASSETS: United States............................ $380,273 $332,832 $279,402 Europe................................... 110,816 100,754 100,552 -------- -------- -------- Total:................................ $491,089 $433,586 $379,954 ======== ======== ========
F-23 107 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995 -- (CONTINUED) 17. FAIR VALUE INFORMATION The following disclosure of the estimated fair value of financial instruments at February 22, 1997 and February 24, 1996 is made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts of cash and cash equivalents, accounts receivable -- trade, and accounts payable are a reasonable estimate of their fair values. At February 22, 1997, the Company's Senior Notes have a carrying value of $124,411 and fair value of 131,250, while the Company's Senior Subordinated Notes have a carrying value of $100,000 and fair value of $104,500. The carrying amounts of other long-term debts approximates fair value because the obligations either bear interest at floating rates or compare favorably with fixed rate obligations that would be available to the Company. The fair value information presented herein is based on pertinent information available to management as of February 22, 1997. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively re-valued for purposes of these consolidated financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 18. SELECTED QUARTERLY DATA (UNAUDITED) Summarized quarterly financial data for fiscal 1997 is as follows:
FISCAL YEAR ENDED FEBRUARY 22, 1997 ------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- -------- -------- -------- Sales............................................ $97,302 $103,026 $107,823 $104,228 Gross profit..................................... 32,547 34,439 36,510 38,326 Net earnings..................................... 1,433 1,863 4,131 6,282 Net earnings per share........................... 0.08 0.11 0.23 0.29
Summarized quarterly financial data for fiscal 1996 is as follows:
FISCAL YEAR ENDED FEBRUARY 24, 1996 -------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- Sales........................................... $ 55,594 $ 57,451 $ 55,188 $ 63,349 Gross profit.................................... 18,442 18,719 17,726 17,664 Net (loss) before cumulative effect of accounting change............................. (9,682) (7,514) (14,021) (28,864) Cumulative effect of accounting change.......... (23,332) -- -- -- Net loss........................................ (33,014) (7,514) (14,021) (28,864) Net loss per share: Before cumulative effect of accounting change... $ (0.60) $ (0.45) $ (0.74) $ (1.92) Cumulative effect of accounting change.......... (1.44) -- -- -- -------- -------- -------- -------- Net loss per share.............................. $ (2.04) $ (0.45) $ (0.74) $ (1.92) ======== ======== ======== ========
F-24 108 ====================================================== NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM IN CONNECTION WITH THE OFFERING COVERED BY THIS OFFERING MEMORANDUM. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS OFFERING MEMORANDUM OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information.................. 4 Incorporation of Certain Documents By Reference............................ 4 Summary................................ 6 Risk Factors........................... 18 The Company............................ 22 Use of Proceeds........................ 22 The Exchange Offer..................... 22 Capitalization......................... 29 Selected Financial Data................ 30 Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 32 Business............................... 38 Management............................. 51 Security Ownership of Certain Beneficial Owners and Management..... 54 Description of Certain Indebtedness.... 56 Description of the New Notes........... 57 Plan of Distribution................... 82 Experts................................ 82 Independent Auditors................... 82 Index to Consolidated Financial Statements........................... F-1
====================================================== ====================================================== $250,000,000 EXCHANGE OFFER BE AEROSPACE, INC. [LOGO] 8% SENIOR SUBORDINATED NOTES DUE 2008 ------------------------ PROSPECTUS ----------------------- , 1998 ====================================================== 109 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law ("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 amounts 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 not 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. The directors and officers of the Company are covered under directors' and officers' liability insurance policies maintained by the Company. II-1 110 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits are filed herewith or to be filed by amendment:
PAGE NUMBER IS SEQUENTIAL NUMBERING SYSTEM WHERE EXHIBITS MAY BE LOCATED ------------------------- 1.1 Purchase Agreement dated January 6, 1998 by and among the Registrant, Merrill Lynch & Co., BT Alex. Brown, Chase Securities Inc., Credit Suisse First Boston and Morgan Stanley Dean Witter 4.1 Indenture dated February 13, 1998 for Registrant's issue of 8% Senior Subordinated Notes due 2008 between the Registrant and United States Trust Company of New York, as trustee 4.2 Second Supplemental Indenture to Indenture dated March 3, 1993 for the Registrant's issue of 9 3/4% Senior Notes due 2003 as supplemented on January 6, 1996, between the Registrant and United States Trust Company of New York, as trustee 4.3 Form of Note for the Registrant's 8% Senior Subordinated Notes (included in Exhibit 4.1) 5.1 Opinion of Shearman & Sterling (to be filed by amendment) 8.1 Opinion re: tax matters (to be filed by amendment) 10.1 Third Amended and Restated Credit Agreement (the "Third Amended and Restated Credit Agreement") dated as of October 29, 1993, as amended and restated as of May 29, 1997, among the Registrant, the banks named therein and The Chase Manhattan Bank, N.A. as agent 10.2 Amendment No. 1 dated November 19, 1997 to the Third Amended and Restated Credit Agreement 10.3 Amendment No. 2 dated January 28, 1998 to the Third Amended and Restated Credit Agreement 23.1 Consent of Deloitte & Touche 23.2 Consent of Shearman & Sterling (included in Exhibit 5.1) (to be filed by amendment) 24 Power of Attorney (included on signature page) 25 Statement of Eligibility of United States Trust Company of New York, Trustee (to be filed by amendment)
The following exhibits previously have been filed with the Commission under the Securities Act of 1933 and/or the Securities Exchange Act of 1934 and are incorporated by reference herein, (i) the Registrant's Registration Statement on Form S-1, as amended (No. 33-33689), filed with the Commission on March 7, 1990 (referred to below as "33-33689"); (ii) the Registrant's Registration Statement on Form S-1, as amended (No. 33-43147), filed with the Commission on October 3, 1991 (referred to below as "33-43147"); (iii) the Registrant's Registration Statement on Form S-1, as amended (No. 33-54146), filed with the Commission on November 3, 1992 (referred to below as "33-54146"); (iv) the Registrant's Registration Statement on Form S-3, as amended (No. 33-57798) filed with the Commission on February 2, 1993 (referred to below as "33-57798"); (v) the Registrant's Registration Statement on Form S-2 (No. 33-66490) filed with the Commission on July 23, 1993 (referred to below as "33-66490"); (vi) the Registrant's Registration Statement on Form S-8 (No. 33-48119), filed with the Commission on May 26, 1992 (referred to below as "33-48119"); (vii) the Registrant's Registration Statement on Form S-8 (No. 33-72194), filed with the Commission on November 29, 1993 (referred to below as "33-72194"); (viii) the Registrant's Registration Statement on Form S-8 (No. 33-82894), filed with the Commission on August 16, 1994 (referred to below as "33-82894"); (ix) the Registrant's Registration Statement on Form S-4 (No. 333-00433, filed with the Commission on January 26, 1996 (referred to below as "33-00433"); (x) the II-2 111 Registrant's Current Report on Form 8-K dated March 5, 1992, filed with the Commission on March 6, 1992 (referred to below as "March 8-K"); (xi) the Registrant's Current Report on Form 8-K dated April 16, 1992, filed with the Commission on April 17, 1992 (referred to below as "April 8-K"); (xii) the Registrant's Current Report on Form 8-K dated August 23, 1993, filed with the Commission on September 7, 1994 (referred to below as "August 8-K"); (xiii) the Registrant's Current Report on Form 8-K dated December 14, 1995 filed with the Commission on December 28, 1995 (referred to below as "December 8-K"); (xiv) the Registrant's Current Report on Form 8-K dated March 26, 1996, filed with the Commission on April 5, 1996 (referred to below as "March 1996 8-K"); (xv) the Registrant's Report on Form 10-K for the seven-month transition period ended February 29, 1992, filed with the Commission on May 27, 1992 (referred to below as "1992 10-K"); (xvi) the Registrant's Report on Form 10-K, as amended, for the fiscal year ended February 27, 1993, filed with the Commission on May 13, 1993 (referred to below as "1993 10-K"); (xvii) the Registrant's Report on Form 10-K, as amended, for the fiscal year ended February 26, 1994, filed with the Commission on May 23, 1994 (referred to below as "1994 10-K"); and (xviii) the Registrant's Report on Form 10-K for the fiscal year ended February 25, 1995 filed with the Commission on May 16, 1995 (referred to below as the "1995 10-K").
EXHIBIT NUMBER AND FILING REFERENCE FROM WHICH EXHIBITS ARE INCORPORATED BY REFERENCE ------------------------- Exhibit 2. Plan of acquisition, reorganization, arrangement, liquidation or succession 2.1 Agreement of Purchase and Sale dated January 15, 2 March 8-K 1992 among The Pullman Company, PTC Aerospace, Inc., Aircraft Products Company and the Registrant 2.2 Flight Equipment and Engineering Limited ("FEEL") 2.1 April 8-K Stock Purchase Agreement among FEEL Holdings Limited, Dr. Ling Kal K'ung, Mr. John Frederick Branham ("Mr. Branham"), Mr. John Tcheng and the Registrant dated April 2, 1992 2.3 Asset Purchase Agreement among JFB Engineering 2.2 April 8-K Company Limited, Mr. Branham, FEEL and the Registrant dated April 3, 1992 2.4 Agreement among Boustead Industries Limited, FEEL, 10.26 1993 10-K Boustead PLC and the Registrant relating to the sale and purchase of the entire issued share capital of Fort Hill Aircraft Holdings Limited dated February 8, 1993 2.5 Acquisition Agreement among the Registrant, 10.28 1993 10-K Inventum and B.V. Industrieele Maatschappij dated as of April 29, 1993 2.6 Acquisition Agreement dated as of July 26, 1993 2.1 August 8-K among the Registrant, Nordskog Industries, Inc., and Elinor T. Nordskog, individually and as Trustee Exhibit 3. Articles of Incorporation and By-laws 3.1 Amended and Restated Certificate of Incorporation 3.1 33-33689 3.2 Certificate of Amendment of the Restated 3 33-54146 Certificate of Incorporation 3.3 Amended and Restated By-Laws 3.2 March 8-K
II-3 112
EXHIBIT NUMBER AND FILING REFERENCE FROM WHICH EXHIBITS ARE INCORPORATED BY REFERENCE ------------------------- Exhibit 4. Instruments defining the rights of security holders, including debentures 4.4 Specimen Common Stock Certificate 4 33-33689 4.5 Form of Note for the Registrant's issue of 9 3/4% 4.1 33-57798 Senior notes 4.6 Indenture dated March 3, 1993 between U.S. Trust 4.2 33-57798 Company of New York, as trustee, and the Registrant relating to the Registrant's 9 3/4% Senior Notes 4.7 First Supplemental Indenture to Indenture dated 4.2 333-00433 March 3, 1993 for the Registrant's 9 3/4% Senior Notes 4.8 Form of Note for the Registrant's 9 7/8% Senior 4.3 333-00433 Subordinated Notes 4.9 Form of Note for the Registrant's Series B 9 7/8% 4.3 333-00433 Senior Subordinated Notes 4.10 Indenture dated January 24, 1996 between Fleet 4.1 333-00433 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 4.11 Form of Stockholders' Agreement by and among the 4.4 33-66490 Registrant, Summit Ventures II, L.P., Summit Investors II, L.P. and Wedbush Capital Partners Exhibit 10(i) Material Contracts 10.4 Supply Agreement dated as of April 17, 1990 between 10.7 33-33689 the Registrant and Applied Extrusion Technologies, Inc. 10.5 Receivables Sales Agreement dated January 24, 1996 10.1 333-00433 among the Registrant, First Trust of Illinois, N.A. and Centrally Held Eagle Receivables Program, Inc. 10.6 Escrow Agreement dated January 24, 1996 among the 10.2 333-00433 Registrant, Eagle Industrial Products Corporation and First Trust of Illinois, NA, as Escrow Agent 10.7 Acquisition Agreement dated as of December 14, 1995 1 December 8-K by and among the Registrant, Eagle Industrial Products Corporation, Eagle Industries, Inc., and Great America Management and Investment, Inc. 10.8 Flight Equipment and Engineering Limited ("FEEL") 2.1 April 8-K Stock Purchase Agreement among FEEL Holdings Limited, Dr. Ling Kai K'ung, Mr. John Frederick Branham ("Mr. Branham"), Mr. John Tcheng and the Registrant dated April 2, 1992 10.9 Agreement among Boustead Industries Limited, FEEL, 10.26 1993 10-K Boustead PLC and the Registrant relating to the sale and purchase of the entire issued share capital of Fort Hill Aircraft Holdings Limited dated February 8, 1993
II-4 113
EXHIBIT NUMBER AND FILING REFERENCE FROM WHICH EXHIBITS ARE INCORPORATED BY REFERENCE ------------------------- 10.10 Acquisition Agreement among the Registrant, 10.28 1993-K Inventum and B.V. Industrieelle Maatschappij dated as of April 29, 1993 Exhibit 10(ii) Leases 10.11 Lease dated May 15, 1992 between McDonnell Douglas 10.1 33-54146 Realty Company, as lessor, and the Registrant, as lessee, relating to the Irvine, California property 10.12 Lease dated September 1, 1992 relating to the 10.2 33-54146 Wellington, Florida property 10.13 Chesham, England Lease dated October 1, 1973 10.13(a) 1992 10-K between Drawheath Limited and The Peninsular and Oriental Steam Navigation Company (assigned in February 1985) 10.14 Kilkeel, Northern Ireland Lease dated April, 1984 10.27 1993 10-K between The Department of Economic Development and Aircraft Furnishing International Limited. 10.15 Utrecht, The Netherlands Lease dated December 15, 10.29 1993 10-K 1988 between the Pension Fund Foundation for Good Supply Commodity Boards and Inventum 10.16 Utrecht, The Netherlands Lease dated January 31, 10.30 1993 10-K 1992 between G.W. van de Grift Onroerend Goed B.V. and Inventum 10.17 Lease dated October 25, 1993 relating to the 10.32 1994 10-K property in Longwood, Florida. Exhibit 10(iii) Executive Compensation Plans and Arrangements 10.18 Amended and Restated 1989 Stock Option Plan 28.1 33-48119 10.19 Directors' 1991 Stock Option Plan 28.2 33-48119 10.20 1990 Stock Option Agreement with Richard G. 28.3 33-48119 Hamermesh 10.21 1990 Stock Option Agreement with B. Martha Cassidy 28.4 33-48119 10.22 1990 Stock Option Agreement with Jim C. Cowart 28.5 33-48119 10.23 1990 Stock Option Agreement with Petros A. 28.7 33-48119 Palanjian 10.24 1990 Stock Option Agreement with Hansjorg Wyss 28.8 33-48119 10.25 1991 Stock Option Agreement with Amin J. Khoury 28.9 33-48119 10.26 1991 Stock Option Agreement with Jim C. Cowart 28.10 33-48119 10.27 1992 Stock Option Agreement with Amin J. Khoury 28.11 33-48119 10.28 1992 Stock Option Agreement with Jim C. Cowart 28.12 33-48119 10.29 1992 Stock Option Agreement with Paul W. Marshall 28.13 33-48119 10.30 1992 Stock Option Agreement with David Lahar 28.14 33-48119 10.31 United Kingdom 1992 Employee Share Option Scheme 10.4 33-54146 10.32 1994 Employee Stock Purchase Plan 99 33-82894 10.33 Employment Agreement dated as of January 1, 1992 10.12(a) 1992 10-K between the Registrant and Amin J. Khoury
II-5 114
EXHIBIT NUMBER AND FILING REFERENCE FROM WHICH EXHIBITS ARE INCORPORATED BY REFERENCE ------------------------- 10.34 Amendment No. 2 dated as of April 1, 1996 to the A. 10.2 March 1996 8-K Khoury Agreement 10.35 Employment Agreement dated as of March 1, 1992 10.12(b) 1992 10-K between the Registrant and Robert J. Khoury 10.36 Amendment No. 2 dated as of January 1, 1996 to the 10.3 March 1996 8-K R. Khoury Agreement 10.37 Employment Agreement dated as of March 1, 1992 10.12(c) 1992 10-K between the Registrant and Marco Lanza (the "Lanza Agreement") 10.38 Amendment No. 1 dated as of January 1, 1996 to the 10.4 March 1996 8-K Lanza Agreement 10.39 Employment Agreement dated as of April 1, 1992 10.12(e) 1992 10-K between the Registrant and G. Bernard Jewell 10.40 Employment Agreement dated as of May 1, 1994 10.34 1994 10-K between the Registrant and Thomas P. McCaffrey (the "McCaffrey Agreement") 10.41 Amendment No. 1 dated as of January 1, 1996 to the 10.4 March 1996 8-K McCaffrey Agreement 10.42 Employment Agreement dated as of April 1, 1996 10.1 March 1996 8-K between the Registrant and Paul E. Fulchino 10.43 Acquisition Agreement dated December 14, 1995 among 1 December 8-K the Registrant, Eagle Industries, Inc., Eagle Industrial Products Corporation and Great American Management and Investment, Inc. Exhibit 21. Subsidiaries of the Registrant 21 1993 10-K
ITEM 22. UNDERTAKINGS. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement 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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant, pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 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 any such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether or not such indemnification is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication to such issue. II-6 115 The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-7 116 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and the Commonwealth of Massachusetts, on the 9th day of March, 1998. BE AEROSPACE, INC. By: /s/ AMIN J. KHOURY ------------------------------------ AMIN J. KHOURY CHAIRMAN OF THE BOARD Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on the 9th day of March, 1998. Each person whose signature appears below hereby authorizes Amin J. Khoury, Thomas P. McCaffrey and Robert J. Khoury and each of them, with full power of substitution, to execute in the name and on behalf of such person any amendment or any post-effective amendment to this Registration Statement and to file the same, with any exhibits thereto and other documents in connection therewith, making such changes in this Registration Statement as the Registrant deems appropriate, and appoints each of Amin J. Khoury, Thomas P. McCaffrey and Robert J. Khoury and each of them, with full power of substitution, attorney-in-fact to sign any amendment and any post-effective amendment to this Registration Statement and to file the same, with any exhibits thereto and other documents in connection therewith.
SIGNATURE TITLE --------- ----- /s/ AMIN J. KHOURY Chairman of the Board of Directors - --------------------------------------------------- AMIN J. KHOURY /s/ ROBERT J. KHOURY Vice Chairman of the Board of Directors and - --------------------------------------------------- Chief Executive Officer (principal executive ROBERT J. KHOURY officer) /s/ PAUL E. FULCHINO President, Chief Operating Officer and - --------------------------------------------------- Director PAUL E. FULCHINO /s/ THOMAS P. MCCAFFREY Corporate Vice President of Administration, - --------------------------------------------------- Chief Financial Officer and Assistant THOMAS P. MCCAFFREY Secretary, (principal financial and accounting officer) /s/ JIM C. COWART Director - --------------------------------------------------- JIM C. COWART /s/ RICHARD G. HAMERMESH Director - --------------------------------------------------- RICHARD G. HAMERMESH /s/ BRIAN H. ROWE Director - --------------------------------------------------- BRIAN H. ROWE /s/ HANSJOERG WYSS Director - --------------------------------------------------- HANSJOERG WYSS
II-8 EX-1.1 2 PURCHASE AGREEMENT DATED JANUARY 6, 1998 1 Exhibit 1.1 BE AEROSPACE, INC. (a Delaware corporation) $250,000,000 8% Senior Subordinated Notes due 2008 PURCHASE AGREEMENT February 6, 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporated c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, New York 10281-1201 Ladies and Gentlemen: BE Aerospace, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to each of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated (each an "Initial Purchaser" and together the "Initial Purchasers") $250,000,000 aggregate principal amount of its 8% Senior Subordinated Notes due 2008 (the "Securities"). The Securities are to be issued pursuant to an indenture to be dated as of February 13, 1998 (the "Indenture") between the Company and United States Trust Company of New York, as trustee (the "Trustee"). The Securities and the Indenture are more fully described in the Offering Memorandum (as hereinafter defined). Capitalized terms used herein and not otherwise defined herein have the respective meanings specified in the Offering Memorandum. The Securities will be offered and sold to you without being registered under the -1- 2 Securities Act of 1933, as amended (the "1933 Act"), in reliance on an exemption therefrom. The Company has prepared a preliminary offering memorandum, dated January 29, 1998 (such preliminary offering memorandum being hereinafter referred to as the "Preliminary Offering Memorandum"), and is preparing a final offering memorandum, dated February 6, 1998 (such final offering memorandum, in the form first furnished to the Initial Purchasers for use in connection with the offering of the Securities being hereinafter referred to as the "Offering Memorandum"), each setting forth information regarding the Company and the Securities. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities. The Company understands that you propose to make an offering of the Securities on the terms set forth in the Offering Memorandum, as soon as you deem advisable after this Agreement has been executed and delivered, (i) to persons in the United States whom you reasonably believe to be qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the 1933 Act, as such rule may be amended from time to time ("Rule 144A"), in transactions under Rule 144A and/or (ii) to non-U.S. persons outside the United States to whom you reasonably believe offers and sales of the Securities may be made in reliance upon Regulation S ("Regulation S") under the 1933 Act. The holders of Securities will be entitled to the benefits of a Registration Rights Agreement, in substantially the form attached hereto as Exhibit A with such changes as shall be agreed to by the parties hereto (the "Registration Rights Agreement"), pursuant to which the Company will file a registration statement (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") registering the Securities or the Exchange Securities referred to in the Registration Rights Agreement under the 1933 Act. On January 28, 1998, the Company commenced a tender offer (the "Tender Offer") for all outstanding 9 3/4% Senior Notes due 2003 (the "Senior Notes") and a related consent solicitation (the "Consent Solicitation") pursuant to which the Company is soliciting consents to certain amendments (the "Amendments") to the Indenture, dated as of March 3, 1993, as supplemented on January 5, 1996, between the Company and the United States Trust Company of New York, under which the Senior Notes were issued, all as more fully described in the Offer to Purchase and Consent Solicitation Statement, dated January 28, 1998, and related documentation (the "Offer to Purchase"). Upon consummation of the Tender Offer and Consent Solicitation, the Company will execute a supplemental indenture (the "Supplemental Indenture") to the Indenture, which will give effect to the Amendments. Section 1. Representations and Warranties. (a) The Company represents and warrants to and agrees with the Initial Purchasers as of the date hereof and as of the Closing Time as follows: (i) As of their respective dates and as of the Closing Time, none of the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or -2- 3 supplement thereto will include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Initial Purchasers through Merrill Lynch expressly for use in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto. (ii) Except for the Senior Notes and the Company's 9 7/8% Senior Subordinated Notes due 2006, there are no debt securities of the Company registered under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or listed on a national securities exchange or quoted in a U.S. automated inter-dealer quotation system. The Company has been advised that the Securities have been designated PORTAL securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. ("NASD"). (iii) None of the Company or any affiliate of the Company (as defined in Rule 501(b) under the 1933 Act) has directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the 1933 Act) by or for the Company that are of the same or similar class as the Securities (other than with respect to the Exchange Securities) in a manner that would require the registration of the Securities under the 1933 Act. (iv) None of the Company or any affiliate of the Company or any person acting on their behalf has (A) engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising (as those terms are used within the meaning of Regulation D); (B) solicited offers for, or offered or sold, such Securities by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the 1933 Act) or in any manner involving a public offering within the meaning of Section 4(2) of the 1933 Act; or (C) engaged in any directed selling efforts (as defined in Rule 902 of the 1933 Act) in the United States in connection with the Securities being offered and sold pursuant to Regulation S. (v) Deloitte & Touche L.L.P., which is reporting upon the audited financial statements and related notes included in the Offering Memorandum, is an independent public accountant with respect to the Company in accordance with the provisions of the 1933 Act and the rules and regulations of the Commission thereunder. (vi) The financial statements included in the Offering Memorandum present fairly (a) the financial position of the Company and its subsidiaries on a consolidated basis as of the dates indicated and (b) the results of operations and cash flows of the Company and its subsidiaries on a consolidated basis for the periods specified, subject, in the case of unaudited financial statements, to normal year-end adjustments which shall not be -3- 4 materially adverse to the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The financial statement schedules, if any, included in the Offering Memorandum present fairly the information required to be stated therein. The selected financial data included in the Offering Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the audited consolidated financial statements included in the Offering Memorandum. The pro forma and "as adjusted" financial information included in the Offering Memorandum present fairly the information shown therein and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (vii) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with corporate power and authority under such laws to own, lease and operate its properties and conduct its business as described in the Offering Memorandum; and the Company is duly qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which it owns or leases property of a nature, or transacts business of a type, that would make such qualification necessary, except to the extent that the failure to so qualify or be in good standing would not have a material adverse effect on the Company and its subsidiaries, considered as one enterprise. (viii) The Company's only subsidiaries (either direct or indirect) are: BEA Aerospace International Ltd., a company incorporated under the laws of Barbados ("BEA International"), Flight Equipment & Engineering Limited, a company incorporated under the Companies Act (United Kingdom) ("FEEL"), BE Aerospace (U.K.) Limited, a company incorporated under the Companies Act (United Kingdom) ("BEA UK"), Fort Hill Aircraft Holdings Limited, a company incorporated under the Companies Act (United Kingdom) ("Fort Hill"), AFI Holdings Limited, a company incorporated under the Companies Act (United Kingdom) ("AFI"), Aircraft Furnishing Limited, a company incorporated under the Companies Act (United Kingdom) ("AFL"), BE Aerospace (Services) Limited, a company incorporated under the Companies Act (United Kingdom), BE Aerospace (U.S.A.), Inc., a Delaware corporation ("BEA USA"), BE Aerospace (Netherlands) B.V., a company incorporated under the laws of the Netherlands ("BEA Netherlands"), Royal Inventum, B.V., a company incorporated under the laws of the Netherlands ("Royal Inventum"), BE Aerospace (Sales & Services) B.V., a company incorporated under the laws of the Netherlands, Nordskog Industries, Inc., a California corporation ("Nordskog"), Acurex Corporation, a Delaware corporation ("Acurex"), BE Aerospace (France) S.A.R.L., a company incorporated under the laws of France ("BEA France") and Burns Aerospace (France) S.A.R.L., a company incorporated under the laws of France ("Burns France") (each individually, a "Subsidiary" and collectively, the -4- 5 "Subsidiaries"). The Company has no significant subsidiaries (as defined in Rule 1.02 of the Commission's Regulation S-X), other than Acurex, FEEL and Royal Inventum. AFI, Fort Hill and Nordskog are inactive subsidiaries with no significant assets and are not engaged in any active trade or business. Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with corporate power and authority under such laws to own, lease and operate its properties and conduct its business; and each Subsidiary is duly qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which it owns or leases property of a nature, or transacts business of a type, that would make such qualification necessary, except to the extent that the failure to so qualify or be in good standing would not have a material adverse effect on the Company and its subsidiaries, considered as one enterprise. All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued or created and are fully paid and non-assessable and, other than in the case of BEA France, of which five shares are owned by Marc Leveille, a French national and director of BEA France, and five shares are owned by The K.A.D. Companies, Inc., an investment, venture capital and consulting firm owned by Amin J. Khoury, the Chief Executive Officer of the Company, are owned by the Company, directly or through one or more Subsidiaries, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind, except that (1) 65% of the issued and outstanding Ordinary Shares of FEEL are pledged to the Agent under the Amended Bank Credit Agreement, (2) 65% of the issued and outstanding capital stock of BEA Netherlands is pledged to the Agent under the Amended Bank Credit Agreement, (3) the outstanding capital stock of each of BEA USA and Acurex is pledged to the Agent under the Amended Bank Credit Agreement and (4) the outstanding capital stock of each of CNC and BEA UK is charged to Barclays Bank PLC pursuant to a debenture over the assets of FEEL dated November 19, 1992. The Company does not, directly or indirectly, own any equity or long term debt securities of any corporation, firm, partnership, joint venture or other entity, other than the stock of its Subsidiaries, a note from FEEL in the principal amount of (Dutch Gilder)69,541, a second note from FEEL in the principal amount of (Dutch Gilder)3,200,000 and a note from BEA Netherlands in the principal amount of Dfls. 49,385,000. (ix) The Company had, at the date indicated in the Offering Memorandum, a duly authorized, issued and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization". (x) All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; and none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive rights of any stockholder of the Company. There are no outstanding options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell, any shares of Common Stock of the Company, any shares of capital stock of any subsidiary, or any such warrants, -5- 6 convertible securities or obligations, except as set forth in the Offering Memorandum. (xi) This Agreement has been duly authorized, executed and delivered by the Company. (xii) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as (x) the enforceability thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors' rights generally, (y) the availability of equitable remedies may be limited by equitable principles of general applicability and (z) any rights to indemnity and contribution may be limited by federal and state securities laws and public policy considerations. (xiii) The Indenture has been duly authorized by the Company, will be substantially in the form heretofore delivered to you and, when duly executed and delivered by the Company and the Trustee, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law); and the Indenture conforms to the description thereof in the Offering Memorandum. (xiv) The Securities have been duly authorized by the Company. When executed, authenticated, issued and delivered in the manner provided for in the Indenture and sold and paid for as provided in this Agreement, the Securities will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law); and the Securities conform to the description thereof in the Offering Memorandum. (xv) The Supplemental Indenture has been duly authorized by the Company and, when executed and delivered by the Company and the Trustee named therein in accordance with the terms thereof, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without -6- 7 limitation, all laws relating to fraudulent transfers), reorganization or other similar laws affecting enforcement of creditors' rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (xvi) Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein or contemplated thereby, there has not been (A) any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, (B) any transaction entered into by the Company or any subsidiary, other than in the ordinary course of business, that is material to the Company and its subsidiaries, considered as one enterprise, or (C) any dividend or distribution of any kind declared, paid or made by the Company on its capital stock. (xvii) Neither the Company nor any Subsidiary is in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which it is a party or by which it may be bound or to which any of its properties may be subject, except for such defaults that would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise. The execution and delivery by the Company of this Agreement, the Registration Rights Agreement, the Indenture and the Supplemental Indenture, the issuance, sale and delivery of the Securities by the Company, the consummation by the Company of the transactions contemplated in this Agreement, the Offering Memorandum (including any redemption of the Senior Notes) and the Offer to Purchase (including the Tender Offer and the Consent Solicitation) and compliance by the Company with the terms of this Agreement, the Registration Rights Agreement, the Indenture and the Supplemental Indenture have been duly authorized by all necessary corporate action on the part of the Company and do not and will not result in any violation of the charter or by-laws of the Company or any Subsidiary, and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary under, (A) any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company or any Subsidiary is a party or by which they may be bound or to which any of their respective properties may be subject or (B) any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any Subsidiary or any of their respective properties. (xviii) No authorization, approval, consent or license of any government, governmental instrumentality or court, domestic or foreign (other than under the 1933 Act and the rules and regulations thereunder with respect to the Registration Rights -7- 8 Agreement and the transactions contemplated thereunder and the securities or "blue sky" laws of the various states) is required for the valid authorization, issuance, sale and delivery of the Securities, for the execution, delivery or performance by the Company of this Agreement, the Registration Rights Agreement, the Indenture and the Supplemental Indenture or for the consummation by the Company of the transactions contemplated in this Agreement, the Offering Memorandum and the Offer to Purchase (including the Tender Offer and the Consent Solicitation), except such of the foregoing as will be obtained prior to the Closing Time. (xix) Except as disclosed in the Offering Memorandum, there is no action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any of their respective officers, in their capacity as such, that could result in any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, or that could materially and adversely affect the properties or assets of the Company and its subsidiaries, considered as one enterprise, or that could adversely affect the consummation of the transactions contemplated in this Agreement, the Offering Memorandum or the Offer to Purchase (including the Tender Offer and the Consent Solicitation); the aggregate of all pending legal or governmental proceedings that are not described in the Offering Memorandum to which the Company or any Subsidiary is a party or which affect any of their respective properties, including ordinary routine litigation incidental to the business of the Company or any Subsidiary, would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise. (xx) There are no contracts or documents of a character that would be required to be described in the Offering Memorandum, if it were a prospectus filed as part of a registration statement on Form S-1 under the 1933 Act, that are not described as would be so required (other than contracts or documents described in the Company's most recent proxy statement filed with the Commission). (xxi) The Company and the Subsidiaries each has good and marketable title to all properties and assets described in the Offering Memorandum as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except such as (A) are described in the Offering Memorandum or (B) are neither material in amount nor materially significant in relation to the business of the Company and its subsidiaries, considered as one enterprise; all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any Subsidiary holds properties described in the Offering Memorandum, are in full force and effect, and neither the Company nor any Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or -8- 9 any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of such corporation to the continued possession of the leased or subleased premises under any such lease or sublease. (xxii) The Company and the Subsidiaries each owns, possesses or has obtained all material governmental licenses, permits, certificates, consents, orders, approvals and other authorizations, including, without limitation, any licenses, permits, certificates, consents, orders, approvals and other authorizations required to be obtained from the Federal Aviation Administration, necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as presently conducted, and neither the Company nor any Subsidiary has received any notice of proceedings relating to revocation or modification of any such licenses, permits, certificates, consents, orders, approvals or authorizations. (xxiii) The Company and the Subsidiaries each owns or possesses adequate patents, patent licenses, trademarks, service marks and trade names necessary to carry on its business as presently conducted, and neither the Company nor any Subsidiary has received any notice of infringement of or conflict with asserted rights of others with respect to any patents, patent licenses, trademarks, service marks or trade names that in the aggregate, if the subject of an unfavorable decision, ruling or finding, could materially adversely affect the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise. (xxiv) To the best knowledge of the Company, no labor problem exists with its employees or with the employees of any Subsidiary or is imminent that could adversely affect the Company and its subsidiaries, considered as one enterprise, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any Subsidiary's principal suppliers, contractors or customers that could be expected to materially adversely affect the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise. (xxv) Neither the Company nor any Subsidiary has taken or will take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Securities. (xxvi) Assuming (A) the accuracy of the representations and warranties of the Initial Purchasers in Section 2 hereof and (B) the due performance by the Initial Purchasers of the covenants and agreements set forth in Section 2 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers under, or in connection with the initial resale of such Securities by the Initial Purchasers in accordance with, this Agreement to register the Securities under the 1933 Act or to qualify any indenture in respect of the Securities under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). -9- 10 (xxvii) None of the Company or any affiliate (as such term is defined in Rule 501(b) of Regulation D) of the Company or any person acting on behalf thereof has engaged in any directed selling efforts (as such term is defined in Regulation S) with respect to any Securities offered and sold in reliance on Rule 903 of Regulation S, and the Company and such affiliates and such other persons acting on behalf thereof have complied with the offering restrictions requirement of Regulation S with respect to the Securities. (xxviii) The Dealer Manager Agreement, dated as of January 28, 1998, between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, has been authorized, executed and delivered by the Company, constitutes a valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (xxix) No part of the proceeds of the sale of the Securities will be used for any purpose that violates the provisions of any of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors. (xxx) All United States federal income tax returns of the Company and the Subsidiaries required by law to be filed have been filed and all United States federal income taxes which are due and payable have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The United States federal income tax returns of the Company through the period ended February 26, 1994 have been settled and no assessment in connection therewith has been made against the Company other than $210,462.41 paid in connection with the Company's February 27, 1993 and February 26, 1994 federal income tax returns. The Company and the Subsidiaries each has filed all other tax returns that are required to have been filed by it pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and the Subsidiaries, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would -10- 11 not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise. (xxxi) The Company and the Subsidiaries each maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and its subsidiaries have not made, and, to the knowledge of the Company, no employee or agent of the Company or any subsidiary has made, any payment of the Company's funds or any subsidiary's funds or received or retained any funds in violation of any applicable law, regulation or rule or that would be required to be disclosed in the Offering Memorandum. (xxxii) There are no holders of securities of the Company who have the right to require the Company to register securities held by them under the 1933 Act. (xxxiii) No material event of default exists under any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company or any Subsidiary is a party or to which the Company or any Subsidiary is subject. (xxxiv) The Company is not an "investment company," and will not be as a result of the sale of the Notes pursuant to this Agreement, an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). (xxxv) Except as disclosed in the Offering Memorandum and except as would not individually or in the aggregate have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, (A) the Company and the Subsidiaries are each in compliance with all applicable Environmental Laws, (B) the Company and the Subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened Environmental Claims against the Company or any of the Subsidiaries, and (D) there are no circumstances with respect to any property or operations of the Company or any Subsidiary that could reasonably be anticipated to form the basis of an Environmental Claim against the Company or any Subsidiary. -11- 12 For purposes of this Agreement, the following terms shall have the following meanings: "Environmental Law" means any United States (or other applicable jurisdiction's) federal, state, local or municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or any chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law. (xxxvi) The Second Amendment, dated January 28, 1998, to the Company's Third Amended and Restated Credit Agreement, amended and restated as of May 29, 1997, as further amended on November 19, 1997, has been duly authorized by the Company and, when executed and delivered by the Company and the other parties thereto in accordance with the terms thereof, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization or other similar laws affecting enforcement of creditors' rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (b) Any certificate signed by any officer of the Company or any Subsidiary and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to the Initial Purchasers as to the matters covered thereby. Section 2. Purchase, Sale and Resale of the Securities; Closing; Representations and Warranties of the Initial Purchasers. (a) On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, the Company agrees to sell to each of you, severally and not jointly, and each of you severally agrees to purchase from the Company, at a purchase price of 97.125% of the principal amount thereof, the principal amount of the Securities set forth opposite your name on Schedule I. (b) Payment of the purchase price for, and delivery of, the Securities shall be made at the offices of Fried, Frank, Harris, Shriver & Jacobson, 1 New York Plaza, New York, New York 10004, or at such other place as shall be agreed upon by the Company and you, at 9:00 A.M., New York time, on February 13, 1998 or at such other time not more than ten full business days thereafter as you and the Company shall determine (such date and time of payment and delivery being herein called the "Closing Time"). The Securities shall be in such denominations and registered in such names as you may request in writing at least two business days before the Closing Time. The Securities, which may be in temporary form, will be made available in New York City for examination and packaging by you not later than 10:00 A.M. on -12- 13 the last business day prior to the Closing Time. (c) At the Closing Time, payment shall be made to the Company in the aggregate amount of $242,812,500 in immediately available funds payable to the order of the Company against delivery of the Securities to you. (d) You have advised the Company that you propose to offer the Securities for sale, upon the terms and conditions set forth in this Agreement and in the Offering Memorandum. You hereby represent and warrant to the Company that you are a Qualified Institutional Buyer as defined in Rule 144A and an "Accredited Investor" as defined in Rule 501 of Regulation D. You agree with the Company that you (i) will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising or in any manner involving a public offering within the meaning of Section 4(2) of the 1993 Act, or, with respect to Securities sold in reliance on Regulation S, by means of any directed selling efforts (as defined in Rule 902 of Regulation S) in the United States and (ii) will solicit offers for the Securities only from, and will offer, sell or deliver the Securities, as part of its initial offering, only to (A) persons in the United States whom you reasonably believe to be Qualified Institutional Buyers or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to you that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in a transaction under Rule 144A and (B) non-U.S. persons outside the United States to whom you reasonably believe offers and sales of the Securities may be made in reliance upon Regulation S, in transactions meeting the requirements of Regulation S under the Securities Act. Section 3. Certain Covenants of the Company. The Company covenants with you as follows: (a) The Company will not at any time make any amendment or supplement to the Offering Memorandum of which you shall not have previously been advised and furnished a copy or to which you or your counsel shall reasonably object. (b) The Company will promptly deliver to you, without charge, during the period from the date hereof to the date of the completion of the distribution of the Securities by you, such number of copies of the Offering Memorandum, as it may then be amended or supplemented, or the Preliminary Offering Memorandum, as it may then be amended or supplemented, as you may reasonably request. (c) If, at any time prior to completion of the distribution of the Securities by you, any event shall occur or condition exist as a result of which it is necessary, in the opinion of your counsel or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the -13- 14 statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading or if, in the opinion of your counsel or counsel for the Company, it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, the Company, at its own expense, will promptly prepare such amendment or supplement as may be necessary so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances existing at the time it is delivered to a purchaser, be misleading or so that such Offering Memorandum as so amended or supplemented will comply with applicable law, as the case may be, and furnish you such number of copies as you may reasonably request. (d) The Company will endeavor, in cooperation with you, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions as you may designate and to maintain such qualifications in effect for a period of not less than a year from the date of the Offering Memorandum; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Securities have been qualified as above provided. The Company will also supply you with such information as is necessary for the determination of the legality of the Securities for investment under the laws of such jurisdictions as you may request. (e) Except following the effectiveness of the Registration Statement, neither the Company nor any of its affiliates (as such term is defined in Rule 501(b) of Regulation D) will solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising (within the meaning of Rule 502(C) of Regulation D) or in any manner involving a public offering within the meaning of Section 4(2) of the 1933 Act. (f) Neither the Company nor any of its affiliates (as such term is defined in Rule 501(b) of the 1933 Act) will offer, sell or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the 1933 Act) the offering of which security could be integrated with the sale of the Securities in a manner that would require the registration of any of the Securities under the 1933 Act. (g) The Company will not be or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under the 1940 Act, and will not be or become a closed-end investment company required to be registered, but not registered, thereunder. (h) During the period from the Closing Time to the earlier of (i) two years after the Closing Time or (ii) the date of effectiveness of the Registration Statement, the -14- 15 Company will not, and will not permit any of its affiliates (as such term is defined in Rule 144 under the 1933 Act) to, resell any of the Securities that have been reacquired thereby, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the 1933 Act. (i) The Company will, so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the 1933 Act, either (i) file reports and other information with the Commission under Section 13 or Section 15(d) of the 1934 Act, or (ii) in the event the Company is not subject to Section 13 or Section 15(d) of the 1934 Act, furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the 1933 Act to permit compliance with Rule 144A in connection with resale of the Securities. For a period of five years after the Closing Time, the Company will make available to you upon request copies of all such reports and information, together with such other documents, reports and information as shall be furnished by the Company to the holders of the Securities issued by it. (j) If requested by you, the Company will use its best efforts in cooperation with you to permit the Securities sold in transactions described in Section 2(d)(ii) hereof to be eligible for clearance and settlement through The Depository Trust Company. (k) Each Security will bear the following legend until such legend shall no longer be necessary or advisable because such Security is no longer subject to the restrictions on transfer described therein: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO -15- 16 RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. (l) The Company will apply the net proceeds that it receives from the offer and sale of the Securities issued by it in the manner set forth with respect to it in the Offering Memorandum under the heading "Use of Proceeds." (m) Except following the effectiveness of the Registration Statement, none of the Company, any affiliates (as such term is defined in Rule 501(b) of Regulation D) or any person acting on behalf thereof (other than you) will engage in any directed selling efforts (as such term is defined under Regulation S) in the United States with respect to the Securities, and each of the Company, such affiliate and such other person acting on behalf thereof will comply with the offering restrictions requirement of Regulation S. (n) Prior to the Closing Time, the Company will not issue any press release or other communications directly or indirectly or hold any press conference with respect to the Company, the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company, without your prior consent, which shall not be unreasonably withheld, unless in the judgment of the Company and its counsel, and after notification to you, such press release or communication is required by law. (o) For a period of 120 days from the date of the Offering Memorandum, the Company will not, without your prior written consent, directly or indirectly, offer, sell, grant any option to purchase or otherwise dispose of any debt securities of the Company (or securities convertible or exchangeable into or exercisable for debt securities of the -16- 17 Company), other than the Exchange Securities referred to in the Registration Rights Agreement. Section 4. Payment of Expenses. Whether or not any sale of the Securities is consummated, the Company will pay and bear all costs and expenses incident to the performance of its obligations under this Agreement, including (a) the preparation and printing of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto, and the cost of furnishing copies thereof to the Initial Purchasers, (b) the preparation, reproduction and distribution of the Securities, this Agreement, the Registration Rights Agreement, the Indenture and any "blue sky" or legal investment memoranda, (c) the delivery of the Securities to the Initial Purchasers, (d) the fees and disbursements of the Company's counsel and accountants, (e) the qualification of the Securities under the applicable securities laws in accordance with Section 3(d) and any filing for review of the offering with NASD, including filing fees and fees and disbursements of counsel for the Initial Purchasers in connection therewith and in connection with the preparation of any "blue sky" or legal investment memoranda, (f) any fees charged by rating agencies for rating the Securities, (g) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee, in connection with the Indenture and the Securities and (h) the cost of obtaining approval for the trading of the Securities through PORTAL. If this Agreement is terminated by the Initial Purchasers in accordance with the provisions of Section 5 or 9(a)(i), the Company shall reimburse the Initial Purchasers for all of their out-of-pocket expenses, including the fees and disbursements of counsel for the Initial Purchasers. Section 5. Conditions of Initial Purchasers' Obligations. The obligations of each Initial Purchaser to purchase and pay for the Securities that it has severally agreed to purchase hereunder are subject to the accuracy of the representations and warranties of the Company contained herein and in certificates of any officer of the Company and any Subsidiary delivered pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to the following further conditions: (a) At the Closing Time, each of you shall have received a signed opinion of each of Shearman & Sterling, counsel for the Company, and Edmund Moriarty, General Counsel of the Company, in each case dated as of the Closing Time, in substantially the form attached hereto as Exhibit B-1. Such opinion shall be to such further effect with respect to other legal matters relating to this Agreement and the sale of the Securities pursuant to this Agreement as counsel for the Initial Purchasers may reasonably request. In giving such opinion, such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon opinions of other counsel, who shall be counsel satisfactory to counsel for the Initial Purchasers, in which case the opinion shall state that they believe you are entitled to so rely. Such counsel may -17- 18 also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and the Subsidiaries and certificates of public officials; provided that such certificates have been delivered to the Initial Purchasers. (b) At the Closing Time, each of you shall have received a signed opinion of Lovell White Durrant, counsel to BEA(UK) and FEEL, dated as of Closing Time, in substantially the form attached hereto as Exhibit B-2. Such opinion shall be to such further effect with respect to other legal matters relating to this Agreement and the sale of the Securities pursuant to this Agreement as counsel for the Initial Purchasers may reasonably request. (c) At the Closing Time, each of you shall have received a signed opinion of Trenite Van Doorne, counsel to Royal Inventum, dated as of Closing Time, in substantially the form attached hereto as Exhibit B-3. Such opinion shall be to such further effect with respect to other legal matters relating to this Agreement and the sale of the Securities pursuant to this Agreement as counsel for the Initial Purchasers may reasonably request. (d) At the Closing Time, each of you shall have received the favorable opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel for the Initial Purchasers, dated as of the Closing Time, to the effect that the opinions delivered pursuant to Sections 5(a), 5(b) and 5(c) appear on their face to be appropriately responsive to the requirements of this Agreement except, specifying the same, to the extent waived by you, and with respect to the incorporation and legal existence of the Company, the Securities, this Agreement, the Indenture, the Registration Rights Agreement, the Offering Memorandum and such other related matters as you may require. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to you. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and the Subsidiaries and certificates of public officials; provided that such certificates have been delivered to the Initial Purchasers. (e) At the Closing Time, (i) the Offering Memorandum, as it may then be amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) there shall not have been, since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, (iii) no action, suit or proceeding at law or in equity shall be -18- 19 pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary that would be required to be set forth in the Offering Memorandum other than as set forth therein and no proceedings shall be pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary before or by any government, governmental instrumentality or court, domestic or foreign, that could result in any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, other than as set forth in the Offering Memorandum, (iv) the Company shall have in all material respects complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, (v) no event of default shall exist under any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company or any Subsidiary is a party or to which the Company or any Subsidiary is subject and (vi) the other representations and warranties of the Company set forth herein shall be accurate in all material respects as though expressly made at and as of the Closing Time. At the Closing Time, each of you shall have received a certificate of the Chief Executive Officer and the Chief Financial Officer of the Company, dated as of the Closing Time, to such effect. (f) At the time that this Agreement is executed by the Company, each of you shall have received from Deloitte & Touche L.L.P., independent auditors for the Company, a letter, dated such date, in form and substance satisfactory to you, confirming that they are independent public accountants with respect to the Company within the meaning of the 1933 Act and the applicable published rules and regulations thereunder, and stating in effect that: (i) in their opinion, the audited financial statements related to the Company and its consolidated subsidiaries and the related financial statement schedules included in the Offering Memorandum comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the related published rules and regulations thereunder; (ii) on the basis of procedures (but not an audit in accordance with generally accepted auditing standards) consisting of a reading of the latest available unaudited interim consolidated financial statements of the Company included in the Offering Memorandum, a reading of the minutes of all meetings of the stockholders and directors of the Company and the Audit, Stock Option and Compensation, and Pricing Committees of the Company's Board of Directors since February 22, 1997 (except for those meetings for which minutes have not yet been provided, in which case minutes for such meetings in draft form have been read) inquiries of certain officials of the Company and its subsidiaries responsible for financial and accounting matters, a review in accordance with procedures established by the American Institute of Certified Public Accountants (the "AICPA") with respect to the nine-month periods ended November 29, 1997 and -19- 20 November 30, 1996 performed at the request of the Company, and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements for the Company and its consolidated subsidiaries for the nine-month periods ended November 29, 1997 and November 30, 1996 included in the Offering Memorandum do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the related published rules and regulations or are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Offering Memorandum; (B) at December 27, 1997 and at a specified date not more than five days prior to the date of this Agreement, there was any change in the capital stock of the Company or any increase in the consolidated long-term debt of the Company and its subsidiaries, in each case as compared with amounts shown in the latest balance sheet included in the Offering Memorandum, except in each case for changes, decreases or increases that the Offering Memorandum discloses have occurred or may occur; or (C) for the period from the date of the latest financial statement included in the Offering Memorandum to a specified date prior to the date of this Agreement, there was any decrease in consolidated net sales, operating earnings, net earnings or net earnings per share of the Company and its subsidiaries, in each case as compared with the comparable period in the preceding year, except in each case for any decreases that the Offering Memorandum discloses have occurred or may occur; (iii) based on a comparison of the information included under the heading "Selected Financial Information" with the requirements of Item 301 of Regulation S-K and inquiries of certain officials of the Company who have responsibility for financial and accounting matters whether this information conforms in all material respects with the disclosure requirements of Item 301 of Regulation S-K, nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of item 301 of Regulation S-K; and (iv) in addition to the procedures referred to in clause (ii) above, they have performed other specified procedures, not constituting an audit, with respect to certain amounts, percentages, numerical data and financial information appearing in the Offering Memorandum appearing in the Offering Memorandum, -20- 21 including the Selected Financial Information, which have previously been specified by you and which shall be specified in such letter, and have compared certain of such items with, and have found such items to be in agreement with, the accounting and financial records of the Company and its subsidiaries. (g) At the Closing Time, each of you shall have received from Deloitte & Touche L.L.P. a letter, in form and substance satisfactory to you and dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(f), except that the specified date referred to shall be a date not more than five days prior to the Closing Time. (h) Subsequent to the execution and delivery of this Agreement and prior to the Closing Time, there shall not have been any downgrading in the rating accorded any of the Company's securities, including the Securities, by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the 1933 Act, nor shall such rating organization have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's securities, including the Securities. (i) At the Closing Time, counsel for the Initial Purchasers shall have been furnished with all such documents, certificates and opinions as they may reasonably request for the purpose of enabling them to pass upon the issuance and sale of the Securities as contemplated in this Agreement and the matters referred to in Section 5(d) and in order to evidence the accuracy and completeness of any of the representations, warranties or statements of the Company, the performance of any of the covenants of the Company, or the fulfillment of any of the conditions herein contained; and all proceedings taken by the Company at or prior to the Closing Time in connection with the authorization, issuance and sale of the Securities as contemplated in this Agreement shall be reasonably satisfactory in form and substance to the Initial Purchasers and to counsel for the Initial Purchasers. (j) At the Closing Time, the Registration Rights Agreement shall have been fully executed and be in full force and effect. (k) At or prior to the Closing Time, the Company shall have entered into an amendment of the Company's Third Amended and Restated Credit Agreement, amended and restated as of May 29, 1997, as further amended on November 19, 1997, in the form previously delivered to counsel for Merrill Lynch on behalf of the Initial Purchasers, to permit the consummation of the Tender Offer and Consent Solicitation on the terms described in the Offer to Purchase and the consummation of the transactions contemplated hereby. If any of the conditions specified in this Section 5 shall not have been fulfilled -21- 22 when and as required by this Agreement, this Agreement may be terminated by you on notice to the Company at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party, except as provided in Section 4. Notwithstanding any such termination, the provisions of Sections 6, 7 and 8 shall remain in effect. Section 6. Indemnification. (a) The Company agrees to indemnify and hold harmless the Initial Purchasers and each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the 1933 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of an untrue statement or alleged untrue statement of a material fact included in any preliminary offering memorandum or the Offering Memorandum (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including fees and disbursements of counsel chosen by you), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers through Merrill Lynch expressly for use in any preliminary offering memorandum or the Offering Memorandum (or any amendment or supplement thereto). The foregoing indemnity with respect to any untrue statement contained in or any omission from a preliminary offering memorandum shall not inure to the benefit of any Initial Purchaser (or any person who controls such Initial Purchaser within the meaning of Section 5 of the 1933 Act) from whom the person asserting any such loss, liability, claim, damage or expense purchased any of the Securities that are the subject thereof if the Company shall sustain the burden of proving that such person was not sent or given a copy of the Offering Memorandum (or any amendment or supplement thereto) at or prior to the written confirmation of the sale of such Securities to such person and the untrue statement contained in or the omission from such -22- 23 preliminary offering memorandum was corrected in the Offering Memorandum (or any amendment or supplement thereto). (b) Each Initial Purchaser severally (but not jointly) agrees to indemnify and hold harmless the Company, its directors, each of its officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act, against any and all loss, liability, claim, damage and expense described in the indemnity agreement in Section 6(a), as incurred, but only with respect to untrue statements or omissions made in any preliminary offering memorandum or the Offering Memorandum (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser through Merrill Lynch expressly for use in such preliminary offering memorandum or the Offering Memorandum (or any amendment or supplement thereto). (c) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request with such request prior to the date of such settlement. -23- 24 Section 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total discount received by the Initial Purchasers, bear to the aggregate initial offering price of the Securities. The relative fault of the Company on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Initial Purchasers, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section, no Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were distributed to the purchasers thereof exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue -24- 25 or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers' respective obligations to contribute pursuant to this Section are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A hereto and not joint. Section 8. Representations, Warranties and Agreements to Survive Delivery. The representations, warranties, indemnities, agreements and other statements of the Company or its officers set forth in or made pursuant to this Agreement will remain operative and in full force and effect regardless of any investigation made by or on behalf of the Company, the Initial Purchasers or any person who controls the Company or the Initial Purchasers within the meaning of Section 15 of the 1933 Act and will survive delivery of and payment for the Securities. Section 9. Termination of Agreement. (a) The Initial Purchasers may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets or any outbreak of hostilities or escalation thereof or other calamity or crisis the effect of which is such as to make it, in the Initial Purchasers' judgment, impracticable to market the Securities or enforce contracts for the sale of the Securities or (iii) if trading in any securities of the Company has been suspended by the Commission or the NASD, or if trading generally on either the American Stock Exchange or the New York Stock Exchange or in the over-the-counter market has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by such exchange or by order of the Commission, the NASD or any other governmental authority or (iv) if a banking moratorium has been declared by either federal, New York or Florida authorities. (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party, except to the extent provided in Section 4. Notwithstanding any such termination, the provisions of Sections 6, 7 and 8 shall remain in effect. -25- 26 Section 10. Default. If one or more of the Initial Purchasers shall fail at the Closing Time to purchase the Securities that it or they are obligated to purchase (the "Defaulted Securities"), the non-defaulting Initial Purchasers shall have the right, within 24 hours thereafter, to make arrangements to purchase all, but not less than all, of the Defaulted Securities upon the terms herein set forth; if, however, such non-defaulting Initial Purchasers have not completed such arrangements within such 24-hour period, then: (a) if the aggregate principal amount of Defaulted Securities does not exceed 10% of the aggregate principal amount of the Securities to be purchased, the non-defaulting Initial Purchasers shall be obligated to purchase the full amount thereof, or (b) if the aggregate principal amount of Defaulted Securities exceeds 10% of the aggregate principal amount of the Securities to be purchased, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers. No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default that does not result in a termination of this Agreement, either you or the Company shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangements. As used herein, the term "Initial Purchaser" includes any person substituted for an Initial Purchaser under this Section 10. Section 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered, mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to the Initial Purchasers at Merrill Lynch World Headquarters, North Tower, World Financial Center, New York, New York 10281, Attention: Mr. Michael F. Senft with copies to Fried, Frank, Harris, Shriver & Jacobson at 1 New York Plaza, New York, New York 10004, Attention: Valerie Ford Jacob; and notices to the Company shall be directed to it at 1400 Corporate Center Way, Wellington, Florida 33414, Attention: Mr. Amin J. Khoury, Chairman of the Board of Directors and Chief Executive Officer with copies to Shearman & Sterling at 599 Lexington Avenue, New York, New York 10022, Attention: Mr. Rohan S. Weerasinghe. Section 12. Parties. This Agreement is made solely for the benefit of the Initial Purchasers, the Company and, to the extent expressed, any person who controls the Company or any Initial Purchaser within the meaning of Section 15 of the 1933 Act, and the directors of the Company, its officers and their respective executors, administrators, successors and assigns and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser, as such purchaser, from the Initial Purchasers of the Securities. -26- 27 Section 13. Governing Law and Time. This Agreement shall be governed by the laws of the State of New York. Specified times of the day refer to New York City time. -27- 28 Section 14. Counterparts. This Agreement may be executed in one or more counterparts and when a counterpart has been executed by each party, all such counterparts taken together shall constitute one and the same agreement. ------------------------- -28- 29 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company and the Initial Purchasers in accordance with its terms. Very truly yours, BE AEROSPACE, INC. By: --------------------------------- Name: Title: Confirmed and accepted as of the date first above written: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporated By: Merrill Lynch, Pierce, Fenner & Smith Incorporated By ---------------------------------- Name: Title: -29- 30 ================================================================================ BE AEROSPACE, INC. (a Delaware corporation) $250,000,000 8% Senior Subordinated Notes due 2008 PURCHASE AGREEMENT Dated: February 6, 1998 ================================================================================ 31 SCHEDULE I Principal Amount of Securities Initial Purchasers to be Purchased ------------------ --------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................ $118,750,000 BT Alex. Brown Incorporated......................... 25,000,000 Chase Securities Inc................................ 12,500,000 Credit Suisse First Boston Corporation.............. 56,250,000 Morgan Stanley & Co. Incorporated................... 37,500,000 ------------ Total.......................................... $250,000,000 32 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT 33 EXHIBIT B-1 FORM OF OPINION OF SHEARMAN & STERLING [Shearman & Sterling Letterhead] February 13, 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporation c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, NY 10281 Ladies and Gentlemen: We are acting as counsel to BE Aerospace, Inc., a Delaware corporation (the "Company"), in connection with the sale by the Company to Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated (collectively, the "Initial Purchasers"), subject to the terms and conditions set forth in the Purchase Agreement, dated February 6, 1998 (the "Purchase Agreement"), among the Company and the Initial Purchasers, of $250,000,000 aggregate principal amount of the Company's 8% Senior Subordinated Notes due 2008 (the "Notes") issued pursuant to an Indenture, dated as of February 13, 1998 (the "Indenture"), between the Company and United States Trust Company of New York, as trustee (the "Trustee"), and further subject to the terms and conditions set forth in the Registration Rights Agreement, dated February 13, 1998 (the "Registration Rights Agreement"), among the Company and the Initial Purchasers. Unless otherwise noted, capitalized terms used but not defined herein are used as defined in the Purchase Agreement. In this capacity, we have examined copies of the Preliminary Offering Memorandum, dated January 29, 1998, and the final Offering Memorandum, dated February 6, 1998 relating to the offering of the Notes (such final Offering Memorandum being hereinafter referred to as the -1- 34 "Offering Memorandum"). We have also examined the Purchase Agreement, the Indenture, the Registration Rights Agreement, a specimen of the Note and the originals, or copies identified to our satisfaction, of such corporate records of the Company, certificates of public officials, officers of the Company and other persons, and such other documents, agreements and instruments as we have deemed necessary as a basis for the opinions hereinafter expressed. In our examinations, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. In rendering our opinion, we have relied as to factual matters, to the extent we deem proper, upon the representations and warranties of the Company contained in or made pursuant to the Purchase Agreement, the Registration Rights Agreement, certificates of officers of the Company and certificates of public officials. The opinions stated herein are limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the federal laws of the United States, and we do not express any opinion herein concerning any other laws. Based upon the foregoing, we are of the opinion that: 1. The Securities and the Indenture conform in all material respects to the respective descriptions thereof contained in the Offering Memorandum under the caption "Description of the Notes." 2. The statements made in the Offering Memorandum under the caption "Exchange Offer; Registration Rights," to the extent that they constitute matters of law or legal conclusions, have been reviewed by us and fairly present the information disclosed therein in all material respects. 3. The Purchase Agreement has been duly authorized, executed and delivered by the Company. 4. The Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 5. The Securities have been duly authorized by the Company and, when executed and authenticated in accordance with the Indenture and issued and delivered to and paid for by you pursuant to the Purchase Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as -2- 35 enforcement may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 6. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and except that rights to indemnity or contribution may be limited by applicable federal or state securities laws and public policy underlying such laws. 7. The execution and delivery by the Company of the Purchase Agreement, the Registration Rights Agreement, the Supplemental Indenture and the Indenture by the Company, the consummation by the Company of the transactions contemplated in the Purchase Agreement and the Offer to Purchase, including without limitation the execution and delivery of the Securities, and compliance by the Company with the terms of the Purchase Agreement, the Registration Rights Agreement, the Supplemental Indenture and the Indenture do not, and will not, result in any violation of, and do not, and will not conflict with, or constitute a default under, or result in the creation of or imposition of any a lien under, (i) the certificate of incorporation or by-laws of the Company or Acurex, (ii) any contract, indenture, mortgage, lease or other agreement, to which the Company or any of its significant subsidiaries is a party or by which any of them may be bound or to which it or any of its properties or assets are bound, that has been filed as an exhibit to the Company's most recent Form 10-K or which is listed on Schedule I hereto, in each case, on their face, or (iii) any existing applicable New York State, Delaware (limited to the General Corporation Law), or United States federal law, rule or regulation, or any judgment, order or decree known to such counsel of any New York State or United States federal government, governmental or regulatory instrumentality or agency or court having jurisdiction over the Company or any of its properties or assets 8. No authorization, approval, consent or license of any governmental or regulatory body, agency or instrumentality of the United States or New York State is required for the (i) valid issuance of the Securities in accordance with the provisions of the Indenture, (ii) sale of the Securities to you as contemplated by the Purchase Agreement, (iii) execution, delivery or performance by the Company of the Purchase Agreement, the Registration Rights Agreement, the Indenture or the Supplemental Indenture or (iv) consummation of the transactions contemplated by the Offer to Purchase, except such as may be required by the Securities Act of 1933, as amended (the "Securities Act"), the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and the securities or blue sky laws of the various states. -3- 36 9. The Company is not, and will not be as a result of the sale of the Notes pursuant to the Purchase Agreement, an investment company within the meaning of the Investment Company Act of 1940, as amended. 10. Assuming (i) the accuracy of the representations and warranties of the Initial Purchasers in Section 2 of the Purchase Agreement and (ii) the due performance by the Initial Purchasers of the covenants and agreements set forth in Section 2 of the Purchase Agreement, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers under, or in connection with the initial resale of such Securities by the Initial Purchasers in accordance with, the Purchase Agreement to register the Securities under the 1933 Act or to qualify any indenture in respect of the Securities under the Trust Indenture Act, it being understood that no opinion is expressed as to any subsequent resale of Notes. This opinion is being furnished to you solely for your benefit, and is not to be used, circulated, quoted or otherwise referred to for any other purpose. -4- 37 Schedule I 1. Third Amended and Restated Credit Agreement dated as of October 29, 1993, amended and restated as of May 29, 1997, as further amended on November 11, 1997 and January 28, 1998, among BE Aerospace, Inc., the Chase Manhattan Bank, as Administrative Agent and Nationsbank, N.A. (South), as Co-Agent. 2. FEEL Credit Agreement 3. Inventum Credit Agreement 4. Letter of understanding related to the joint venture between the Company and Harris Corporation 5. Consent Order regarding the settlement of the U.S. Government's investigation of export sales to Iran between 1992-5 6. Indenture, dated as of March 3, 1993, as amended, between the Company and United States Trust Company of New York -5- 38 February 13, 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporation c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, NY 10281 Ladies and Gentlemen: We are acting as counsel to BE Aerospace, Inc., a Delaware corporation (the "Company"), in connection with the sale by the Company to Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated (collectively, the "Initial Purchasers"), subject to the terms and conditions set forth in the Purchase Agreement, dated February 6, 1998 (the "Purchase Agreement"), among the Company and the Initial Purchasers, of $250,000,000 aggregate principal amount of the Company's 8% Senior Subordinated Notes due 2008 (the "Notes") issued pursuant to an Indenture, dated as of February 13, 1998 (the "Indenture"), between the Company and United States Trust Company of New York, as trustee (the "Trustee"), and further subject to the terms and conditions set forth in the Registration Rights Agreement, dated February 13, 1998 (the "Registration Rights Agreement"), among the Company and the Initial Purchasers. Unless otherwise noted, capitalized terms used but not defined herein are used as defined in the Purchase Agreement. In this capacity, we have examined copies of the Preliminary Offering Memorandum, dated January 29, 1998, and the final Offering Memorandum, dated February 6, 1998 relating to the offering of the Notes (such final Offering Memorandum being hereinafter referred to as the "Offering Memorandum"). We have also reviewed and participated in discussions concerning the preparation of the Offering Memorandum with certain officers and employees of the Company, with its counsel and its auditors, and with your representatives. The limitations inherent in the independent verification of factual matters and in the role of outside counsel are such, however, that we cannot and do not assume any responsibility for the accuracy, completeness or fairness of -6- 39 any of the statements made in the Offering Memorandum, except as set forth in paragraph 1 of our opinion addressed to you dated the date hereof. In addition, with your approval, matters governed by the laws of the United Kingdom have been passed upon by Lovell White Durrant, British counsel to the Company and matters governed by the laws of the Netherlands have been passed upon by Trenite Van Doorne, Dutch counsel to the Company, and we have assumed, without independent verification, the accuracy of their legal opinions delivered to you today pursuant to the Purchase Agreement with respect to such laws or matters governed or affected by such laws. Subject to the limitations set forth in the immediately preceding paragraph, we advise you that, on the basis of the information we gained in the course of performing the services referred to above, no facts came to our attention which gave us reason to believe that the Offering Memorandum (other than the financial statements and other financial data contained therein or omitted therefrom, as to which we have not been requested to comment), as of its date or the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This letter is being furnished to you solely for your benefit, and is not to be used, circulated, quoted or otherwise referred to for any other purpose. Very truly yours, -7- 40 FORM OF OPINION OF EDMUND MORIARTY MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporation c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, NY 10281 Ladies and Gentlemen: I am General Counsel of BE Aerospace, Inc., a Delaware corporation (the "Company"), and have advised the Company in connection with the issuance and sale by the Company of $200,000,000 aggregate principal amount of its 8% Senior Subordinated Notes due 2008 (the "Securities"). This opinion is being rendered pursuant to Section 5(a) of the Purchase Agreement dated February 6, 1998 (the "Purchase Agreement") among the Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated (collectively, the "Initial Purchasers") relating to the issuance and sale of the Securities. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. In such capacity I have examined a copy of the Offering Memorandum, dated as of February 6, 1998, related to the sale of the Securities (the "Offering Memorandum"). I have also examined the Purchase Agreement, the Indenture, dated as of February 13, 1998, between the Company and United States Trust Company of New York, the Registration Rights Agreement, dated as of February 13, 1998, between the Company and the Initial Purchasers, and the originals, or copies identified to my satisfaction, of such corporate records of the Company, certificates of public officials, officers of the Company and other persons, and such other documents, agreements and instruments as I have deemed necessary as a basis for the opinions hereinafter expressed. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity with the originals of all documents submitted to me as copies. As to any facts material to the opinions expressed herein which I did not independently establish or verify, I have relied, without investigation, and believe that I am justified in relying, upon such statements or representations of officers and other -8- 41 representatives of the Company or others. I am a member of the Bar of the State of Wisconsin. My opinions set forth below are limited to the laws of the State of Wisconsin, the General Corporation Law of the State of Delaware and the federal laws of the United States. Based upon the foregoing, I am of the opinion that: 1. Each of the Company and Acurex is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with corporate power to own or lease all assets owned or leased by it and conduct its business as described in the Offering Memorandum. The Company has authority to issue, sell and deliver the Securities, to execute and deliver the Purchase Agreement, the Registration Rights Agreement and the Indenture, and to perform its obligations thereunder. The Company is qualified to transact business, and is in good standing as a foreign corporation, in California, Connecticut, Florida, Massachusetts, New Jersey and Washington; the states of California, Connecticut, Florida, Minnesota, New Jersey and Washington being the only jurisdictions in the United States in which the Company owns or leases real property. Acurex is qualified to transact business, and is in good standing as a foreign corporation, in California and Florida; the states of California and Florida being the only jurisdictions in which Acurex owns or leases real property. 2. The authorized, issued and outstanding capital stock of the Company is as set forth in the Capitalization table in the Offering Memorandum under the caption "Actual", except for issuances or forfeitures subsequent to the date of the information provided in such table, if any, pursuant to the Company's stock option plans. The shares of the Company's common stock, $.01 par value (the "Common Stock") issued and outstanding on this date have been duly authorized and validly issued and are fully paid and nonassessable. None of the outstanding shares of Common Stock was issued in violation of any preemptive rights under the Delaware General Corporation Law or the Restated Certificate of Incorporation of the Company or, to the best of my knowledge, any preemptive rights pursuant to any contract to which the Company is a party or by which it is bound. 3. To the best of my knowledge, (i) neither the Company, Acurex nor Burns is in violation of its certificate of incorporation or by-laws or in default in the performance of any obligation, agreement or condition in any agreement or instrument known to us to which the Company, Acurex or Burns is a party or by which either of them is bound and which default could have a material adverse effect on the business or financial condition of the Company and its subsidiaries taken as a whole and (ii) neither the Company, Acurex, nor Burns is in violation of any applicable law, rule or regulation, or, to our knowledge after having made inquiry of the Company, any order, writ, injunction or decree, of any jurisdiction, court or governmental instrumentality, where such violation or default could have a material adverse effect on the business or financial condition of the Company and its subsidiaries taken as a whole. -9- 42 4. The statements made in the Offering Memorandum under the captions "Business-Legal Proceedings," to the extent that they constitute matters of law or legal conclusions or descriptions of legal proceedings, have been reviewed by me and fairly present the information disclosed therein in all material respects. 5. To the best of my knowledge, there is not pending or threatened any action, suit, proceeding, inquiry or investigation, to which the Company or any subsidiary is a party, or to which the property of the Company or any subsidiary is subject, before or brought by any court or governmental agency or body, which might reasonably be expected to result in a material adverse effect on the Company and its subsidiaries, taken as a whole, or which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in the Purchase Agreement or the performance by the Company of its obligations thereunder. I have reviewed and participated in the preparation of the Offering Memorandum with other officers or employees of the Company, with its counsel and its auditors, and with representatives of the Initial Purchasers and I advise you that, on the basis of the information I gained in the course of performing the services referred to above, no facts came to my attention which gave me reason to believe that the Offering Memorandum (other than the financial statements and other financial data contained therein or omitted therefrom, as to which we have not been requested to comment), as of its date or the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This opinion is being furnished by me as General Counsel for the Company to you solely for your benefit, and is not to be used, circulated, quoted or otherwise referred to for any other purpose. Very truly yours, Edmund J. Moriarty -10- 43 EXHIBIT B-2 FORM OF OPINION OF LOVELL WHITE DURRANT [Lovell White Durrant Letterhead] [Date] MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporation c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, NY 10281 USA Dear Sirs BE Aerospace (UK) Limited and Flight Equipment and Engineering Limited 1. We have acted as English legal advisers to BE Aerospace (UK) Limited (formerly Flight Equipment and Engineering Limited), a company registered in England and Wales under registered number 516846, the registered office of which is located at Nissen House, Grovebury Road, Leighton Buzzard, Bedfordshire ("BEA(UK)"), since its acquisition by BE Aerospace, Inc. (formerly BE Avionics, Inc.) (the "Issuer") on 2 April, 1992. We have also acted as English legal advisers to Flight Equipment and Engineering Limited, a company registered in England and Wales under registered number 1417308, the registered office of which is located at Nissen House, Grovebury Road, Leighton Buzzard, Bedfordshire ("FEEL"), since 2 April, 1992. We have been asked by the Issuer, a Delaware corporation, to provide this opinion in connection with the issue and sale by the Issuer of US$200,000,000 principal amount of 8% Senior Subordinated Notes due 2008 (the "Securities"). We have been provided with copies of: (a) an Offering Memorandum dated February 13, 1998, related to the Securities (the "Offering Memorandum"; -1- 44 (b) a draft dated __________, 1998, of an indenture to be dated as of February 13, 1998, between the Issuer and the trustee named therein (the "Indenture") which we have been advised is the final form thereof; (c) the purchase agreement dated as of February 6, 1998, between the Issuer and you relating to the issue and sale of the Securities (the "Purchase Agreement"); and (d) the registration rights agreement to be dated as of February 13, 1998, between the Issuer and you relating to the filing of a registration statement with respect to the Securities (the "Registration Rights Agreement). 2. We understand that this opinion is required by you pursuant to Section 5(b) of the Purchase Agreement. 3. For the purposes of giving this opinion, we have examined the following documents relating to each of BEA(UK) and FEEL:- (a) Statutory Books, including the Register of Members and the Minutes of board meetings and general meetings of the shareholders contained therein; (b) copies of the Memorandum and Articles of Association and Certificate of Incorporation; and (c) Certificates of good standing issued by the Registrar of Companies on _________, 1998, copies of which are annexed hereto marked "A". 4. We have carried out a search of microfiches relating to each of BEA(UK) and FEEL supplied to us by the Companies Registration Office on _________, 1998, which revealed no order or resolution to wind up either BEA(UK) or FEEL and no notice of the appointment of an administrator or receiver of either BEA(UK) or FEEL. We have also carried out a search at the Central Registry of Winding Up Petitions, London on _________, 1998, which shows no pending petition to wind up either BEA(UK) or FEEL. We have not conducted any further search, or any search in any District Registry of the High Court where winding-up and administration petitions may also be presented in certain cases, and accordingly this opinion is given on the assumption that such searches (if made) would not reveal any circumstances which would require amendment of this opinion. 5. Except for the documents listed in paragraph 3 above, we have not examined for the purposes of this opinion any contracts or other documents entered into by or affecting either BEA(UK) or FEEL or any corporate records of either BEA(UK) or FEEL. We -2- 45 have not made any other enquiries or searches concerning either BEA(UK) or FEEL (whether within this firm or otherwise), except as mentioned in paragraph 4 above. For the purposes of this opinion, we have relied as to factual matters upon certificates of officers and directors of the Issuer and of BEA(UK) and FEEL and have relied on representations made by the Issuer in the Purchase Agreement. 6. This opinion is given only with respect to English law in force at the date of this letter as applied by English Courts and is given on the basis that it will be governed by and construed in accordance with English law. No opinion is expressed or implied as to the laws of any other territory. 7. This opinion is based on the assumptions set out in the appendix to this letter, which we have taken no steps to verify independently. 8. Based upon and subject to the foregoing, and subject as stated herein and to any matters not disclosed to us, we are of the opinion that: (a) each of BEA(UK) and FEEL is duly incorporated under the Companies Act 1948 as a private company with limited liability under English law, is validly existing under English law and has the necessary corporate power under the Companies Act 1985 and 1989 and its Memorandum and Articles of Association to conduct its business and to own, lease and operate its properties as described in the Offering Memorandum at pages ____ (copies of which are annexed hereto marked "B"); (b) as reflected in the register of members of BEA(UK), the Issuer is the registered holder of the 500,000 issued ordinary shares of (Dutch Gilder)1 each of BEA(UK) and the 380,000 issued cumulative redeemable preference shares of (Dutch Gilder)1 each of BEA(UK). Pursuant to Section 361 Companies Act 1985, the register of members of a company (as defined in that Act) is prima facie evidence of any matters which are by that Act directed or authorised to be inserted in it, and of legal ownership of shares; (c) as reflected in the register of members of FEEL, BEA(UK) is the registered holder of the 100 issued ordinary shares of (Dutch Gilder)1 each of FEEL. Pursuant to Section 361 Companies Act 1985, the register of members of a company (as defined in that Act) is prima facie evidence of any matters which are by that Act directed or authorised to be inserted in it, and of legal ownership of shares; (d) in the absence of any circumstance by which a member of a company limited by shares (as defined in the Companies Act 1985) may become liable for the company's debts, the liability of the member (including, with respect to BEA(UK), the Issuer or with respect to FEEL, BEA(UK)) for such debts will be limited to the -3- 46 par value of the shares held and any premium agreed to be paid, to the extent that such amounts have not been paid by any previous holder of those shares. According to the register of members of each of BEA(UK) and FEEL, the search of microfiches relating to each of BEA(UK) and FEEL referred to in paragraph 4 above and the certificates of the officers and directors of the Issuer, BEA(UK) and FEEL, but having made no other enquiry, investigation or verification, we are of the opinion that the issued ordinary shares of (Dutch Gilder)1 each in BEA(UK) and FEEL are fully paid; (e) the issued cumulative redeemable preference shares of (Dutch Gilder)1 each of BEA(UK) have been duly authorised, validly issued and fully paid; (f) the issued cumulative redeemable preference shares of (Dutch Gilder)1 each of BEA(UK) were not issued in violation of any pre-emptive rights under statute or under the Memorandum and Articles of Association of BEA(UK); (g) none of the following will result in any breach of the Memorandum and Articles of Association of either of BEA(UK) or FEEL:- (i) the execution and delivery by the Issuer of the Purchase Agreement, the consummation by the Issuer of the transactions therein contemplated and the compliance by the Issuer with its terms; (ii) the execution and delivery by the Issuer of the Registration Rights Agreement and the compliance by the Issuer with its terms; (iii) the execution and delivery by the Issuer of the Indenture and the compliance by the Issuer with its terms; (iv) the issue and delivery by the Issuer of the Securities as contemplated by the Offering Memorandum; (v) the consummation by the Issuer of the transactions contemplated in the Offering Memorandum; and (h) the matters referred to in paragraph 8(g)(i) to (v) inclusive above do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of either BEA(UK) or FEEL under:- (i) any existing English law, rule or regulation; or (ii) to our knowledge (based solely upon written notification by BEA(UK) and -4- 47 FEEL) and on the basis of the certificates of the officers and directors of BEA(UK), FEEL and the Issuer, any judgment, order or decree of any government, governmental instrumentality or court having jurisdiction over BEA(UK) or FEEL or any of their properties. 9. This opinion is addressed to you in connection with the Issuer. It is given for your benefit for the purpose of the issue of the Securities only, and may not be disclosed or quoted to or relied upon by any other person, without our prior written consent in each specific case, or used for any other purpose. No person (other than you) into whose possession a copy of this opinion may come may rely on this opinion without our express written consent addressed to him. Yours faithfully Lovell White Durrant -5- 48 Appendix to Opinion In this opinion letter, we have assumed that:- (a) All documents submitted to us as originals are authentic and complete and all signatures and seals are genuine. (b) All documents supplied to us as photocopies or facsimile transmitted copies or other copies conform to the originals and such originals are authentic and complete. (c) All documents, forms, notices and information which should have been delivered to the Companies Registration Office and the Central Registry of Winding Up Petitions on behalf of or relating to BEA(UK) and FEEL have been so delivered and the file of records maintained at the Companies Registration Office and the Central Registry of Winding Up Petitions concerning BEA(UK) and FEEL, and reproduced on microfiche for public inspection or disclosed to us orally, was complete, accurate and up-to-date at the time of the respective searches referred to in paragraph 4 of this opinion letter and there has been no change in the information filed or the oral disclosure made since the date on which those searches were made. (d) All documents dated earlier than the date of this opinion letter on which we have expressed reliance remain accurate, complete and in full force and effect at the date of the opinion letter. (e) Neither BEA(UK) nor FEEL has passed a resolution for its winding-up and no proceedings have been instituted or steps taken for the winding-up of BEA(UK) or FEEL or the appointment of an administrator or receiver in respect of all or any assets of BEA(UK) or FEEL. (f) No law (other than English law) affects any of the conclusions stated in this opinion letter. (g) The resolutions contained in the minutes referred to in paragraph 3(a) of this opinion letter were duly passed at a properly convened, constituted and conducted meeting of duly appointed directors and shareholders, respectively, of BEA(UK) and FEEL at which all constitutional, statutory and other formalities were duly observed (including, if applicable, those relating to the declaration of directors' interests or the power of interested directors to vote); such resolutions have not been amended or rescinded and are in full force and effect; and the minutes of such meetings referred to in paragraph 3(a) of this opinion letter are a true record of the proceedings at such meetings. (h) The certificates of the officers and directors of the Issuer and BEA(UK) and FEEL provided for the purposes of this opinion letter are true and accurate in all respects. -6- 49 EXHIBIT B-3 FORM OF OPINION OF TRENITE VAN DOORNE [Trenite van Doorne Letterhead] MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Chase Securities Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co Incorporated c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, NY 10281 USA Rotterdam, 6 February 1998 Dear Sirs, We have acted as legal advisers in The Netherlands to BE Aerospace (Netherlands) B.V. ("BEAN"), Koninklijke Fabriek Inventum B.V. ("KFI") and BE Aerospace (Sales and Services) B.V. ("BEASS"), which companies have their registered office at Galvanibaan 5, 3439 MG Nieuwegein, The Netherlands, for the purpose of rendering an opinion on certain matters of Netherlands law in connection with the issue and sale by BE Aerospace Inc. of US$ 200,000,000 principal amount of [ ]% Senior Subordinated Notes due 2008. For the purposes of this opinion we have examined and relied only on the documents listed in Schedule 1 and Schedule 2, which shall form part of this opinion. The documents listed in Schedule 1 are referred to as the "Documents" and the documents listed in Schedule 2 as the "Certificates". BEAN, KFI and BEASS are hereinafter referred to as the "Dutch Companies" and each company individually as the "Dutch Company". In connection with our examination and in giving this opinion, we have assumed: (a) the genuineness of the signatures to the Documents and the Certificates, the authenticity and completeness of the Documents and the Certificates submitted to us as originals, the conformity to the original documents of the Documents and the Certificates submitted to -7- 50 us as copies and the authenticity and completeness of those original documents; (b) the legal capacity (handelingsbekwaambeid) of the natural persons acting on behalf of the parties, the due incorporation and valid existence of, the power, authority and legal rights of, and the due authorization and execution of the Documents by the parties thereto under any applicable law; (c) the due compliance with all matters of, and the validity, binding effect and enforceability of the Documents under any applicable law (other than Dutch law) and in any jurisdiction (other than The Netherlands) in which an obligation under the Documents falls to be performed; and (d) the accuracy, validity and binding effect of the Certificates and the matters certified or evidenced thereby at the date hereof and any other relevant date; and (e) the due execution by the parties thereto of the Documents submitted to and examined by us in draft in the form of those drafts. This opinion is given only with respect to Dutch law as generally interpreted and applied by the Dutch courts as at the date of this opinion. As to matters of fact we have relied on the representations and warranties expressed in the Documents and the Certificates. We do not express an opinion on the representations or warranties made by the parties to the Documents, matters of fact, matters of foreign law, international law, including, without limitation, the law of the European Union, and tax and anti-trust law, except to the extent that those representations and warranties and matters of fact and law are explicitly covered by the opinions below and except to the extent the law of the European Union (other than anti-trust and tax law) has direct force and effect in The Netherlands. No opinion is given on commercial, accounting or non-legal matters or on the ability of the parties to meet their financial or other obligations under the Documents. We have assumed that foreign law which may apply with respect to the Documents or the transactions contemplated thereby and any document not examined by us would not be such as to affect this opinion. Based on and subject to the foregoing, and subject to the qualifications set out below and the matters of fact, documents or events not disclosed to us, we express the following opinions: 1. Each of the Dutch Companies is duly incorporated and validly existing under the law of The Netherlands as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) and possesses the capacity to sue and to be sued in its own name. -8- 51 2. It does not appear from the Extracts that any Dutch Company has been wound up (ontbinding) or has been declared bankrupt (faillissement) or that any Dutch Company has been granted a (provisional) suspension of payment ((voorlopige) surseance). 3. According to the deed of incorporation and the shareholders register of BEAN, BE Aerospace Inc. ("BEAI" or the "Issuer"), with registered office at 1400 Corporate Center Way, Wellington, Florida 33414, U.S.A., is the registered holder of 36 (thirty six) issued ordinary registered shares, with a par value of NLG 1,000 each, and BE Aerospace (USA) Inc. ("BEAU"), with registered office at 1400 Corporate Center Way, Wellington, Florida 33414, U.S.A., is the registered holder of 4 (four) issued ordinary registered shares, with a par value of NLG 1,000 each, in the issued share capital of BEAN consisting of 40 shares. 4. According to the shareholders register of KFI and the Deed of Transfer KFI, BEAN is the registered holder of 5,584 (five thousand five hundred and eighty-four) issued ordinary registered shares, with a par value of NLG 500 each, in the issued share capital of KFI consisting of 5,604 shares. 5. According to the shareholders register of BEASS and the Deeds of Transfer, BEAN is the registered holder of 40 (forty) shares, with a par value of NLG 1,000 each, in the issued share capital of BEASS consisting of 40 shares. 6. In the absence of any circumstance by which a shareholder of a private company with limited liability (een besloten vennootschap mel beperkle aansprakelijkheid) may become liable for the company's debts, the liability of BEAN, as shareholder of KFI and BEASS, will be limited to the obligation to fully pay the par value of the shares held and any share premium agreed to be paid, to the extent that such amounts have not been paid. 7. Pursuant to the Articles of Association, BEAI and BEAU, as shareholders of BEAN, are each personally liable for everything performed in the name of BEAN. 8. According to the Shareholders Registers and the Extracts, but having made no other enquiry, investigations or verification, the par value of the issued ordinary shares in BEAN, KFI and BEASS is fully paid. 9. The execution and delivery by the Issuer of the Documents and where appropriate the consummation by the Issuer of the transaction therein contemplated and the compliance by the Issuer with its terms will not -9- 52 result in any conflict with rules of Netherlands law or in any breach of the articles of association of either BEAN or KFI. The opinions expressed above are subject to the following qualifications: (A) Our opinions expressed herein are subject to and limited by applicable bankruptcy, insolvency, reorganization, suspension of payment and other laws relating to or affecting the protection or enforcement of priorities and creditors' rights generally. including, without limitation, those governing the avoidance or the validity of transactions entered into and security created at a time when a company is, or may in consequence thereof become, unable to pay its debts. (B) We have assumed that the relevant Extracts fully and accurately reflect the corporate status and position of each of the Dutch Companies. It is noted, however, that the Extracts may not completely and accurately reflect that status and position insofar as there may be a delay between the taking of a corporate action (such as the issuance of shares, the appointment or removal of a director, a winding-up or (provisional) suspension of payment resolution or the making of a court order, like a winding-up, (provisional) suspension of payment or bankruptcy order) and the filing of the necessary documentation at the Commercial Register and a further delay between that filing and an entry appearing on the file of the relevant party at the Commercial Register. (C) There is no public register of shares in The Netherlands. In respect of the title to shares in the share capital of BEAN, KFI and BEASS respectively per the date of this opinion, we have compared the deed of incorporation of BEAN with the shareholders register of BEAN, the Deed of Transfer KFI with the shareholders register of KFI and the Deeds of Transfer with the shareholders register of BEASS and established the consistency of each of these Certificates. The absence of any registration in the Shareholders Registers of any subsequent transfer of title to the shares of BEAN, KFI or BEASS (as the case may be) is, however, no conclusive evidence that any such subsequent transfer of title has not occurred (D) We have assumed that the difference between the total number of shares issued in the share capital of KFI and the number of shares held by BEAN, as reflected in the shareholders register of KFI, is explained by the fact that at conversion of the company of KFI from a company limited by shares (naamloze vennootschap) into a closed company with limited liability (besloten vennootschap mel beperkte aansprakelijkheid) on 2 March 1992, not each holder of shares has offered its shares in order to be registered as a shareholder of the company, as converted. Pursuant to section 2:183, subsection 4, of the -10- 53 Dutch Civil Code, after conversion a shareholder is not able to exercise the rights pertaining to the shares as long as the shareholder has not been registered in the shareholders register of the company. (E) We have assumed that there are no contractual or other restrictions binding on the Dutch Companies, which would affect this opinion. (F) We note that under Dutch securities law it is prohibited (subject to certain exemptions and exceptions) in or from The Netherlands to offer securities, such as the Securities, on issue or to propose such an offer by means of advertisements or documents. This opinion, which is strictly limited to the matters stated herein and which is not to be read as extending by implication to other matters in connection with the Documents or otherwise, is given subject to the conditions(1), including the limitation of liability, set out at the bottom of the front page of this opinion letter, and on the basis that it is governed by and to be construed in accordance with Dutch law and that any action, arising out of it, is to be determined by the competent court in Rotterdam which shall have exclusive jurisdiction in relation thereto. We do not assume any obligation to advise you (or any other person entitled to rely on this opinion) of subsequent changes in, or in the interpretation of, Dutch law. This opinion is given solely for your benefit in this particular matter and the context specified herein. It may not, without our prior written consent, be transmitted or otherwise disclosed to, or relied upon by, others, referred to in other matters or context whatsoever, or be quoted or made public in any way, save that the opinion may be disclosed to your legal advisors. Yours faithfully, Trenite Van Doorne - ---------- (1) The partnership Trenite Van Doorne is the exclusive contractual party with respect to all work and services undertaken. Netherlands law shall apply. The aggregate liability of the partnership, its partners and each of its servants shall be limited to the proceeds available under the partnership's professional liability insurance. -11- 54 SCHEDULE 1 Documents (a) a draft dated February 2, 1998 of an indenture between the Issuer and the trustee named therein (the "Indenture") which we have been advised is the final form thereof; (b) a draft dated February 2, 1998 of a purchase agreement between the Issuer and yourselves relating to the issue and sale of the Securities (the "Purchase Agreement"); (c) a draft dated February 2, 1998 of a registration rights agreement between the Issuer and yourselves relating to the filing of a registration statement with respect to the Securities (the "Registration Rights Agreement"). -12- 55 SHEDULE 2 Certificates (a) copies of the notarial deed of incorporation of BEAN, KFI and BEASS, dated 28 April 1993, 20 May 1915 and 20 August 1990 respectively (the "Deeds of Incorporation"); (b) copies of the articles of association (as amended) of BEAN and KFI dated 20 May 1994 and of BEASS, dated 11 January 1995 (the "Articles of Association"); (c) copies of the register of shareholders of BEAN, KFI and BEASS respectively (the "Shareholders Registers"); (d) extracts dated 6 February 1998 (updated by computer generated extracts dated [__] February 1998) from the Commercial Register (Handelsregister) in Utrecht, The Netherlands, in respect of BEAN, KFI and BEASS respectively (the "Extracts"); (e) two notarial deeds of transfer of shares in the share capital of BEASS, dated 22 September 1994 (the "Deeds of Transfer"); (f) a notarial deed of transfer of shares in the share capital of KFI, dated 29 April 1993 (the "Deed of Transfer KFI"). -1- EX-4.1 3 INDENTURE DATED FEBRUARY 13, 1998 1 Exhibit 4.1 BE AEROSPACE, INC. TO UNITED STATES TRUST COMPANY OF NEW YORK Trustee ----------------- Indenture Dated as of February 13, 1998 ---------------- $250,000,000 8% Senior Subordinated Notes due 2008 and 8% Series B Senior Subordinated Notes due 2008 2 BE AEROSPACE, INC. Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of February 13, 1998 Trust Indenture Indenture Act Section Section 310(a)(1) ........................................... 607 (a)(2) ......................................... 607 (b) ............................................ 608 312(c) .............................................. 701 314(a)(4) ........................................... 1008(a) (c)(1) ......................................... 103 (c)(2) ......................................... 103 (e) ............................................ 103 315(b) .............................................. 601 316(a)(last sentence) ....................................... 101 ("Outstanding") (a)(1)(A) ......................................... 502, 512 (a)(1)(B) ......................................... 513 (b) ............................................ 508 (c) ............................................ 105(d) 317(a)(1) ........................................... 503 (a)(2) ......................................... 504 (b) ............................................ 1003 318(a) .............................................. 112 Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS PAGE ---- PARTIES......................................................................1 RECITALS.....................................................................1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1 SECTION 101. Definitions................................................1 Acquired Indebtedness......................................2 Act........................................................2 Acurex.....................................................2 AET........................................................2 Affiliate..................................................2 Agent Bank.................................................2 Asset Acquisition..........................................2 Asset Sale.................................................3 Average Life...............................................3 Bank Credit Agreement......................................3 Banks......................................................3 Board of Directors.........................................3 Board Resolution...........................................3 Business Day...............................................3 Capital Stock..............................................3 Capitalized Lease Obligation...............................4 Cash Equivalents...........................................4 Change of Control..........................................4 Closing Date...............................................4 Commission.................................................5 Common Stock...............................................5 Company....................................................5 Company Request" or "Company Order.........................5 Consolidated Adjusted Net Income...........................5 Consolidated Fixed Charge Coverage Ratio...................5 Consolidated Income Tax Expense............................6 Consolidated Interest Expense..............................6 Consolidated Net Worth.....................................6 Consolidated Non-cash Charges..............................6 Corporate Trust Office.....................................6 -i- 4 corporation................................................6 Default....................................................6 Defaulted Interest.........................................7 Depositary.................................................7 Designated Senior Indebtedness.............................7 Disinterested Director.....................................7 Eligible Inventories.......................................7 Eligible Receivables.......................................7 Event of Default...........................................7 Exchange Act...............................................7 Exchange Offer.............................................7 Exchange Offer Registration Statement......................7 Exchange Securities........................................8 Fair Market Value..........................................8 Federal Bankruptcy Code....................................8 FEEL.......................................................8 Fully Traded Common Stock..................................8 GAAP.......................................................8 guarantee..................................................8 Guarantee..................................................8 Guarantor..................................................8 Holder.....................................................9 Indebtedness...............................................9 Indenture..................................................9 Initial Securities.........................................9 Interest Payment Date......................................9 Interest Rate Protection Obligations......................10 Investment................................................10 Lien......................................................10 Maturity..................................................10 Moody's...................................................10 Net Cash Proceeds.........................................10 Non-payment Event of Default..............................11 Non-U.S. Person...........................................11 Officers' Certificate.....................................11 Opinion of Counsel........................................11 Outstanding...............................................11 Pari Passu Indebtedness...................................12 Paying Agent..............................................12 Payment Event of Default..................................12 Permitted Indebtedness....................................12 Permitted Investments.....................................13 Permitted Liens...........................................13 -ii 5 Permitted Subsidiary Indebtedness.........................14 Person....................................................15 Predecessor Security......................................15 Preferred Stock...........................................15 QIB.......................................................15 Qualified Capital Stock...................................15 Redeemable Capital Stock..................................15 Redemption Date...........................................15 Redemption Price..........................................15 Registration Rights Agreement.............................15 Registration Statement....................................15 Regular Record Date.......................................15 Regulation S..............................................16 Responsible Officer.......................................16 Restricted Subsidiary.....................................16 Royal Inventum............................................16 Rule 144A.................................................16 S&P.......................................................16 Securities................................................16 Securities Act............................................16 Security Register" and "Security Registrar................16 Senior Indebtedness.......................................16 Senior Notes..............................................17 Senior Notes Indenture....................................17 Shelf Registration Statement..............................17 Significant Subsidiary....................................17 Special Record Date.......................................17 Stated Maturity...........................................17 Subordinated Indebtedness.................................17 Subsidiary................................................17 Trust Indenture Act" or "TIA..............................18 Trustee...................................................18 Unrestricted Subsidiary...................................18 Vice President............................................18 Voting Stock..............................................18 wholly-owned..............................................18 SECTION 102. Incorporation by Reference of Trust Indenture Act.............................................19 SECTION 103. Compliance Certificates and Opinions......................19 SECTION 104. Form of Documents Delivered to Trustee....................20 SECTION 105. Acts of Holders...........................................20 SECTION 106. Notices, Etc., to Trustee, Company........................21 SECTION 107. Notice to Holders; Waiver.................................22 SECTION 108. Effect of Headings and Table of Contents..................22 -iii- 6 SECTION 109. Successors and Assigns....................................22 SECTION 110. Separability Clause.......................................22 SECTION 111. Benefits of Indenture.....................................22 SECTION 112. Governing Law.............................................23 SECTION 113. Legal Holidays............................................23 ARTICLE TWO SECURITY FORMS 24 SECTION 201. Forms Generally...........................................24 SECTION 202. Restrictive Legends.......................................25 ARTICLE THREE THE SECURITIES 27 SECTION 301. Title and Terms...........................................27 SECTION 302. Denominations.............................................27 SECTION 303. Execution, Authentication, Delivery and Dating....................................................27 SECTION 304. Temporary Securities......................................29 SECTION 305. Registration, Registration of Transfer and Exchange..................................................29 SECTION 306. Book-Entry Provisions for U.S. Global Security..................................................30 SECTION 307. Special Transfer Provisions...............................31 SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities................................................34 SECTION 309. Payment of Interest; Interest Rights Preserved.................................................35 SECTION 310. Persons Deemed Owners.....................................36 SECTION 311. Cancellation..............................................36 SECTION 312. Computation of Interest...................................37 ARTICLE FOUR SATISFACTION AND DISCHARGE 38 SECTION 401. Satisfaction and Discharge of Indenture...................38 SECTION 402. Application of Trust Money................................39 ARTICLE FIVE REMEDIES 40 SECTION 501. Events of Default.........................................40 SECTION 502. Acceleration of Maturity; Rescission and Annulment.................................................41 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee....................................43 SECTION 504. Trustee May File Proofs of Claim..........................43 SECTION 505. Trustee May Enforce Claims Without Possession of Securities..................................44 -iv- 7 SECTION 506. Application of Money Collected............................44 SECTION 507. Limitation on Suits.......................................45 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest...........................45 SECTION 509. Restoration of Rights and Remedies........................45 SECTION 510. Rights and Remedies Cumulative............................46 SECTION 511. Delay or Omission Not Waiver..............................46 SECTION 512. Control by Holders........................................46 SECTION 513. Waiver of Past Defaults...................................46 SECTION 514. Waiver of Stay or Extension Laws..........................47 ARTICLE SIX THE TRUSTEE 48 SECTION 601. Notice of Defaults........................................48 SECTION 602. Certain Rights of Trustee.................................48 SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities....................................49 SECTION 604. May Hold Securities.......................................49 SECTION 605. Money Held in Trust.......................................50 SECTION 606. Compensation and Reimbursement............................50 SECTION 607. Corporate Trustee Required; Eligibility...................51 SECTION 608. Resignation and Removal; Appointment of Successor.................................................51 SECTION 609. Acceptance of Appointment by Successor....................52 SECTION 610. Merger, Conversion, Consolidation or Succession to Business....................................53 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE 54 SECTION 701. Disclosure of Names and Addresses of Holders..............54 SECTION 702. Reports by Trustee........................................54 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 55 SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.............................................55 SECTION 802. Successor Substituted.....................................56 SECTION 803. Securities to Be Secured in Certain Events................56 -v- 8 ARTICLE NINE SUPPLEMENTAL INDENTURES 57 SECTION 901. Supplemental Indentures Without Consent of Holders...................................................57 SECTION 902. Supplemental Indentures with Consent of Holders...................................................57 SECTION 903. Execution of Supplemental Indentures......................58 SECTION 904. Effect of Supplemental Indentures.........................58 SECTION 905. Conformity with Trust Indenture Act.......................59 SECTION 906. Reference in Securities to Supplemental Indentures................................................59 SECTION 907. Notice of Supplemental Indentures.........................59 SECTION 908. Effect on Senior Indebtedness.............................59 ARTICLE TEN COVENANTS 60 SECTION 1001. Payment of Principal, Premium, If Any, and Interest..................................................60 SECTION 1002. Maintenance of Office or Agency...........................60 SECTION 1003. Money for Security Payments to Be Held in Trust.....................................................60 SECTION 1004. Corporate Existence.......................................62 SECTION 1005. Payment of Taxes and Other Claims.........................62 SECTION 1006. Maintenance of Properties.................................62 SECTION 1007. Insurance.................................................62 SECTION 1008. Statement by Officers as to Default.......................62 SECTION 1009. Provision of Financial Statements.........................63 SECTION 1010. Limitation on Indebtedness................................63 SECTION 1011. Limitation on Restricted Payments.........................64 SECTION 1012. Limitation on Issuances and Sales of Restricted Subsidiary Stock...............................67 SECTION 1013. Limitation on Transactions with Affiliates................67 SECTION 1014. Limitation on Liens Securing Pari Passu Indebtedness or Subordinated Indebtedness.................67 SECTION 1015. Change of Control.........................................68 SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales...............................................69 SECTION 1017. Limitation on Guarantees of Indebtedness by Restricted Subsidiaries...................................70 SECTION 1018. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries..............................................71 SECTION 1019. Limitation on Other Senior Subordinated Indebtedness..............................................71 SECTION 1020. Waiver of Certain Covenants...............................72 -vi- 9 ARTICLE ELEVEN REDEMPTION OF SECURITIES 73 SECTION 1101. Right of Redemption.......................................73 SECTION 1102. Applicability of Article..................................73 SECTION 1103. Election to Redeem; Notice to Trustee.....................73 SECTION 1104. Selection by Trustee of Securities to Be Redeemed..................................................73 SECTION 1105. Notice of Redemption......................................74 SECTION 1106. Deposit of Redemption Price...............................74 SECTION 1107. Securities Payable on Redemption Date.....................74 SECTION 1108. Securities Redeemed in Part...............................75 ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE 76 SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance.......................................76 SECTION 1202. Defeasance and Discharge..................................76 SECTION 1203. Covenant Defeasance.......................................76 SECTION 1204. Conditions to Defeasance or Covenant Defeasance................................................77 SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions..................................78 SECTION 1206. Reinstatement.............................................79 ARTICLE THIRTEEN SUBORDINATION OF SECURITIES 80 SECTION 1301. Securities Subordinate to Senior Indebtedness.............80 SECTION 1302. Payment Over of Proceeds upon Dissolution, Etc.......................................................80 SECTION 1303. Suspension of Payment When Senior Indebtedness in Default...................................81 SECTION 1304. Payment Permitted If No Default...........................82 SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness..............................................82 SECTION 1306. Provisions Solely to Define Relative Rights...............83 SECTION 1307. Trustee to Effectuate Subordination.......................83 SECTION 1308. No Waiver of Subordination Provisions.....................83 SECTION 1309. Notice to Trustee.........................................84 SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent.........................................85 SECTION 1311. Rights of Trustee As a Holder of Senior Indebtedness; Preservation of Trustee's Rights....................................................85 SECTION 1312. Article Applicable to Paying Agents.......................85 -vii- 10 SECTION 1313. No Suspension of Remedies.................................85 SECTION 1314. Trust Moneys Not Subordinated.............................85 TESTIMONIUM.................................................................87 SIGNATURES AND SEALS........................................................87 -viii- 11 EXHIBITS Exhibit A Form of Security Exhibit B Form of Certificate to Be Delivered upon Termination of Restricted Period Exhibit C Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S -ix- 12 INDENTURE, dated as of February 13, 1998 between BE AEROSPACE, INC., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 1400 Corporate Center Way, Wellington, Florida 33414, and UNITED STATES TRUST COMPANY OF NEW YORK, corporation formed under the laws of the State of New York, Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of 8% Senior Subordinated Notes due 2008 (herein called the "Initial Securities"), and 8% Series B Senior Subordinated Notes due 2008 (the "Exchange Securities" and, together with the Initial Securities, the "Securities") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. Upon the issuance of the Exchange Securities, if any, or the effectiveness of the Shelf Registration Statement (as defined herein), this Indenture will be subject to the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions. All things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company and to make this Indenture a valid agreement of the Company, in accordance with their and its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms 13 "cash transaction" and "self-liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Articles Two, Ten and Twelve, are defined in those Articles. "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an Asset Acquisition from such Person or (b) existing at the time such Person becomes a subsidiary of any other Person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such Person becoming such a subsidiary). "Act", when used with respect to any Holder, has the meaning specified in Section 105. "Acurex" means Acurex Corporation, a Delaware corporation. "AET" means Applied Extrusion Technologies, Inc., a Delaware corporation. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and, in the case of the Company and its Restricted Subsidiaries, also means AET and The K.A.D. Companies, Inc. "Agent Bank" means The Chase Manhattan Bank, a New York banking corporation, as Administrative Agent under the Bank Credit Agreement, and any future agent under the Bank Credit Agreement. "Asset Acquisition" means (a) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company shall be merged with or into the Company or any Restricted Subsidiary of the Company or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person which constitute all or substantially all of the assets of such Person or any division or line of business of such Person. "Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition to any Person other than the Company or a wholly-owned Restricted Subsidiary of the Company, in one or a series of related transactions, of (a) any Capital Stock of any Restricted Subsidiary of the Company held by the Company or any Restricted Subsidiary; (b) all or substantially all of the properties and assets of any division or line of business of the Company or any Restricted Subsidiary -2- 14 of the Company; or (c) any other properties or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets (i) that is governed by the provisions of Article Eight of this Indenture, (ii) to an Unrestricted Subsidiary, if permitted under Section 1011 of this Indenture or (iii) having a Fair Market Value of less than $250,000. "Average Life" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of each such principal payment by (b) the sum of all such principal payments. "Bank Credit Agreement" means the Credit Agreement dated as of October 29, 1993, amended and restated as of May 29, 1997, as further amended on November 19, 1997 and on January 28, 1998, between the Company and the Banks as in effect on the date hereof and as such Agreement may be amended, restated, supplemented, replaced, refinanced, substituted or otherwise modified from time to time. "Banks" means the banks and other financial institutions from time to time that are lenders under the Bank Credit Agreement. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York or the city in which the principal trust office of the Trustee is located are authorized or obligated by law or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the United States of America or any -3- 15 agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of 180 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; and (iii) commercial paper with a maturity of 180 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) 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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total Voting Stock of the Company; (b) the Company consolidates with, or merges with or into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of the Company is converted into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of the surviving or transferee corporation or (2) cash, securities and other property in an amount that could be paid by the Company as a Restricted Payment under this Indenture and (ii) immediately after such transaction no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is 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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total Voting Stock of the surviving or transferee corporation; (c) during any consecutive two-year 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 such Board of Directors or whose nomination for 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 (d) any final order, judgment or decree of a court of competent jurisdiction shall be entered against the Company decreeing the dissolution or liquidation of the Company. "Closing Date" means February 13, 1998. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) -4- 16 of, such Person's common stock, whether outstanding at the Closing Date or issued after the Closing Date, and includes, without limitation, all series and classes of such common stock. "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order in sufficient form and detail satisfactory to the Trustee signed in the name of the Company by its Chairman, Chief Executive Officer, its President, any Vice President, its Chief Financial Officer, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "Consolidated Adjusted Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (a) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions, (c) the net income (or net loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Restricted Subsidiaries in cash by such other Person during such period, (d) net income (or net loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that net income is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders and (f) income resulting from transfers of assets received by the Company or any Restricted Subsidiary from an Unrestricted Subsidiary. "Consolidated Fixed Charge Coverage Ratio" of any Person means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash Charges, in each case, for such period, of such Person and its subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (b) the sum of such Consolidated Interest Expense for such period; provided that (i) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period, (ii) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period, and (iii) notwithstanding clauses (i) and (ii) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements. If such Person or any of its subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the above clause shall give effect to the incurrence of such guaranteed -5- 17 Indebtedness as if such Person or such subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all accrued interest, (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP and (iii) the aggregate dividends paid or accrued on Preferred Stock of such Person or its Subsidiaries, to the extent such Preferred Stock is owned by Persons other than such Person and its Subsidiaries. "Consolidated Net Tangible Assets" of any Person means, as of any date, (a) all amounts that would be shown on the latest consolidated balance sheet of such Person and its Subsidiaries prepared in accordance with GAAP, at the date of determination less (b) the amount thereof constituting goodwill and other intangible assets as calculated in accordance with GAAP. "Consolidated Net Worth" means, with respect to any Person at any date, the consolidated stockholders' equity of such Person less the amount of such stockholders' equity attributable to Redeemable Capital Stock or treasury stock of such Person and its Subsidiaries, as determined in accordance with GAAP. "Consolidated Non-cash Charges" means, with respect to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Corporate Trust Office" means the principal corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 114 West 47th Street, New York, New York 10036, except that with respect to presentation of Securities for payment or for registration of transfer or exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate agency business shall be conducted. "corporation" includes corporations, associations, companies and business trusts. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. -6- 18 "Defaulted Interest" has the meaning specified in Section 309. "Depositary" means The Depository Trust Company, its nominees and successors. "Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Agreement and the Senior Notes and (ii) following the full repayment of Indebtedness under the Bank Credit Agreement and the termination of the commitments thereunder, any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding of at least $17,000,000 and is specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under this Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Eligible Inventories" as of any date means the consolidated inventories of the Company and its Restricted Subsidiaries (net of any reserve) on the basis of the method of accounting (either last in/first out or first in/first out) used by the Company in the preparation of its financial statements included in the latest Form 10-K filed by the Company under the Securities Act, as shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries, all in accordance with GAAP. "Eligible Receivables" as of any date means the consolidated accounts receivables (net of any reserve) of the Company and its Restricted Subsidiaries that are not more than 60 days past their due date and that were entered into on normal payment terms as shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries, all in accordance with GAAP. "Equity Offering" means any public or private sale of common stock of the Company, other than (i) any public offerings with respect to the Company's Common Stock registered on Form S-8 or Form S-4 and (ii) any private placement occurring in connection with or after the occurrence of a Change of Control when the Company's Common Stock is eligible for delisting from a national securities exchange or automated quotation dealer system on which such Common Stock was trading or quoted prior to such Change of Control. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder. "Exchange Offer" means the exchange offer that may be effected pursuant to the Registration Rights Agreement. "Exchange Offer Registration Statement" means the Exchange Offer Registration Statement as defined in the Registration Rights Agreement. -7- 19 "Exchange Securities" has the meaning stated in the first recital of this Indenture and refers to any Exchange Securities containing terms substantially identical to the Initial Securities (except that such Exchange Securities shall not contain terms with respect to transfer restrictions) that are issued and exchanged for the Initial Securities pursuant to the Registration Right Agreement and this Indenture. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "FEEL" means Flight Equipment and Engineering Limited, an English corporation. "Fully Traded Common Stock" means Common Stock issued by any corporation if (A) such Common Stock is listed on The New York Stock Exchange, The American Stock Exchange or The London Stock Exchange or is included for trading privileges in the National Market System of the National Association of Securities Dealers Automated Quotation System; provided that such Common Stock is freely tradeable under the Securities Act (or, in the case of The London Stock Exchange, any applicable law, rule or regulation) upon issuance; and (B) such Common Stock does not constitute more than 15% of the issued and outstanding Common Stock of such corporation held by Persons other than 10% holders of such Common Stock and Affiliates and insiders of such corporation. "GAAP" means generally accepted accounting principles, consistently applied, that are set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States of America, which are applicable as of the Closing Date. "guarantee" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "Guarantee" means any guarantee of any Indebtedness of the Company incurred by any Restricted Subsidiary pursuant to (1) paragraph (a) of Section 1017, (2) clause (v) of Section 1018, (3) clause (y) of paragraph (b) of Section 1010 or (4) clause (ii) of the definition of Permitted Investment. When used as a verb, "Guarantee" shall have a corresponding meaning. "Guarantor" means any Restricted Subsidiary which incurs a Guarantee. -8- 20 "Holder" means a Person in whose name a Security is registered in the Security Register. "Indebtedness" means, with respect to any Person, without duplication, (a) all liabilities of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit, bankers' acceptance or other similar credit transaction and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (b) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (c) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (d) all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred to in the preceding clauses of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured), (f) all guarantees by such Person of Indebtedness referred to in this definition, (g) all Redeemable Capital Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends, (h) all obligations of such Person under or in respect of currency exchange contracts and Interest Rate Protection Obligations and (i) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of such Person of the types referred to in clauses (a) through (h) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Securities" has the meaning stated in the first recital of this Indenture. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. -9- 21 "Interest Rate Protection Obligations" means the obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. In addition, the Fair Market Value of the net assets of any Restricted Subsidiary of the Company at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. A Person shall be deemed to own subject to a Lien any property which such Person 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. "Maturity", when used with respect to any Security, means the date on which any principal of such Security or an installment of interest becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary of the Company), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP consistently applied against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee. -10- 22 "Non-payment Event of Default" means any event (other than a Payment Event of Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Designated Senior Indebtedness. "Non-U.S. Person" means a Person that is not a "U.S. person" as defined in Regulation S. "Officers' Certificate" means a certificate signed by the Chairman, the Chief Executive Officer, the President, a Vice President or the Chief Financial Officer, and by the Treasurer, the Chief Financial Officer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel in form and substance reasonably satisfactory to the Trustee, who may be counsel for the Company, including an employee of the Company, and who shall be acceptable to the Trustee. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled pursuant to a Company Order by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore irrevocably deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities, except to the extent provided in Sections 1202 and 1203, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Twelve; and (iv) Securities which have been paid pursuant to Section 308 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented and delivered to the Trustee proof satisfactory to it in its sole discretion that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in -11- 23 determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Pari Passu Indebtedness" means Indebtedness of the Company which is pari passu with the Securities. "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (and premium, if any, on) or interest on any Securities on behalf of the Company. "Payment Event of Default" means any default in the payment of Designated Senior Indebtedness. "Permitted Indebtedness" means any of the following: (i) Indebtedness of the Company under the Bank Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the greater of (i) $200,000,000 and (ii) the sum of 80% of the aggregate amount of Eligible Receivables and 50% of the aggregate amount of Eligible Inventory, measured as of the most recent fiscal quarter preceding the time such Indebtedness is incurred; (ii) Indebtedness of the Company under the Securities; (iii) Indebtedness of the Company outstanding on the date of this Indenture (other than Indebtedness incurred pursuant to clause (i) of this definition); (iv) obligations of the Company pursuant to Interest Rate Protection Obligations, which obligations do not exceed the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations and obligations under currency exchange contracts entered into in the ordinary course of business; (v) Indebtedness of the Company to any wholly owned Restricted Subsidiaries; (vi) Indebtedness of the Company consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries; (vii) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company of any Indebtedness of the Company incurred pursuant to Section 1010 or clauses (ii) and (iii) of this definition, including any -12- 24 successive refinancings by the Company, so long as (A) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Securities at least to the same extent as the Indebtedness being refinanced and (C) such new Indebtedness has an Average Life longer than the Average Life of the Securities and a final Stated Maturity later than the final Stated Maturity of the Securities; and (viii) Indebtedness in an aggregate principal amount not in excess of $30 million at any one time outstanding, less the amount of Permitted Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the definition thereof. "Permitted Investments" means any of the following: (i) Investments in Cash Equivalents; (ii) Investments in the Company or wholly-owned Restricted Subsidiaries; (iii) Investments in an amount not to exceed $15 million at any one time outstanding; (iv) Investments by the Company or any Restricted Subsidiary of the Company in another Person, if as a result of such Investment (A) such other Person becomes a wholly-owned Restricted Subsidiary or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a wholly-owned Restricted Subsidiary; or (v) Investments from the date of the Indenture in a Restricted Subsidiary that is less than wholly-owned in an aggregate amount measured at the time of Investment (less payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary, to the extent not included in clause (D) of the last paragraph of subsection (a) of Section 1011) not to exceed 5% of Consolidated Net Tangible Assets of the Company. In connection with any assets or property contributed or transferred to any Person as an Investment, such property and assets shall be equal to the Fair Market Value (as determined by the Company's Board of Directors) at the time of Investment. "Permitted Liens" means the following types of Liens: (i) Liens on any property or assets of a Restricted Subsidiary granted in favor of the Company or any Restricted Subsidiary; (ii) Liens securing the Securities; (iii) Liens securing the Guarantees; (iv) Liens securing Acquired Indebtedness created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that any such Lien does not extend to any property or assets of -13- 25 the Company or any Restricted Subsidiary other than the assets acquired in connection with the incurrence of such Acquired Indebtedness; and (v) any extension, renewal or replacement, in whole or in part, of any Lien described in the foregoing clauses (i) through (iv); provided that any such extension, renewal or replacement shall be no more restrictive in any material respect that the Lien so extended, renewed or replaced and shall not extend to any additional property or assets. "Permitted Subsidiary Indebtedness" means any of the following: (i) Indebtedness of any Restricted Subsidiary outstanding on the date of this Indenture; (ii) obligations of any Restricted Subsidiary pursuant to Interest Rate Protection Obligations, which obligations do not exceed the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations; (iii) Indebtedness of any Restricted Subsidiary to any wholly-owned Restricted Subsidiary of the Company or to the Company; (iv) Indebtedness of any Restricted Subsidiary consisting of guaranties, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries; (v) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by any Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary incurred pursuant to clause (i) of this definition, including any successive refinancings by such Restricted Subsidiary, so long as any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by such Restricted Subsidiary as necessary to accomplish such refinancing, plus the amount of expenses of such Restricted Subsidiary incurred in connection with such refinancing and such new Indebtedness has an Average Life longer than the Average Life of the Securities and a final Stated Maturity later than the final Stated Maturity of the Securities; (vi) Indebtedness (as defined in clauses (e) and (f) of the definition of Indebtedness) to the Holders incurred pursuant to provisions of this Indenture; (vii) Indebtedness in an amount not to exceed $30 million at any one time outstanding, less the amount of Permitted Indebtedness then outstanding pursuant to clause (viii) of the definition thereof; and -14- 26 (viii) Guarantees of Indebtedness of the Company permitted under Section 1017. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 308 in exchange for a mutilated security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Closing Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "QIB" means a "Qualified Institutional Buyer" under Rule 144A. "Qualified Capital Stock" of any person means any and all Capital Stock of such person other than Redeemable Capital Stock. "Redeemable Capital Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Redemption Date", when used with respect to any Security to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement between the Company and the Initial Purchasers named therein, dated as of February 13, 1998, relating to the Securities. "Registration Statement" means the Registration Statement as defined in the Registration Rights Agreement. "Regular Record Date" for the interest payable on any Interest Payment Date means the February 15 or August 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. -15- 27 "Regulation S" means Regulation S under the Securities Act. "Responsible Officer", when used with respect to the Trustee, means the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Royal Inventum" means Royal Inventum, B.V., a company incorporated under the laws of the Netherlands. "Rule 144A" means Rule 144A under the Securities Act. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., and its successors. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Securities" shall include any Exchange Securities to be issued and exchanged for any Securities pursuant to the Registration Rights Agreement and this Indenture and, for purposes of this Indenture, all Initial Securities and Exchange Securities shall vote together as one series of Securities under this Indenture. "Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means the principal of (and premium, if any, on) and interest on (including interest accruing after the filing of a petition by or against the Company under any bankruptcy law) and all other amounts due on or in connection with any Indebtedness of the Company, whether outstanding on the date of this Indenture or hereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of (and premium, if any, on) and interest (including interest accruing after the occurrence of an event of default or after the filing of a petition by or against the Company under any bankruptcy law) on all Indebtedness, and all other amounts and obligations of every nature of the Company from time to time owed, under the Bank Credit Agreement and the Senior Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not -16- 28 include (A) Indebtedness evidenced by the Securities and the 9 7/8% Securities, (B) Indebtedness of the Company that is expressly subordinated in right of payment to any Indebtedness of the Company, (C) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (D) that portion of any Indebtedness of the Company that at the time of incurrence thereof is incurred in violation of any covenant of this Indenture, (E) any liability for federal, state or local taxes or other taxes, owed or owing by the Company, (F) trade accounts payable owed or owing by the Company, (G) Indebtedness of the Company to any Subsidiary or any other Affiliate of the Company, (H) Redeemable Capital Stock of the Company and (I) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Subsidiary of the Company. "Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company issued under the Senior Notes Indenture. "Senior Notes Indenture" means the Indenture dated as of March 3, 1993 between the Company and United States Trust Company of New York, as trustee, as amended by the First Supplemental Indenture thereto dated as of January 5, 1996. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" of the Company means any Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the Securities Act, and in any event shall include any Guarantor. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 309. "Stated Maturity" means, when used with respect to any Security or any installment of interest thereon, the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable, and when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company which is expressly subordinated in right of payment to the Securities. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation), including without limitation a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions). Unless specifically provided to the contrary herein, Unrestricted Subsidiaries shall not be included in the -17- 29 definition of Subsidiaries for any purpose of this Indenture (other than for the purposes of the definition of "Unrestricted Subsidiary" herein). "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any property of the Company or any other Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so designated; provided that either (x) the Subsidiary to be designated has total assets of $1,000 or less at the time of its designation or (y) immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010. The Board of Directors may designate any Unrestricted Subsidiary to be a Subsidiary; provided that immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). "wholly-owned" with respect to any Subsidiary, means any Subsidiary of any Person of which at least 99% of the outstanding Capital Stock is owned by such Person or another wholly-owned Subsidiary of such Person. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Subsidiary. "9 7/8% Notes" means the Company's 9 7/8% Senior Subordinated Notes due 2006. "9 7/8% Notes Indenture" means the Indenture, dated as of January 24, 1996, between the Company and Fleet National Bank of Connecticut, or its successors or assigns, in connection with the 9 7/8% Notes. -18- 30 SECTION 102. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings: "indenture securities" means the Securities; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by reference in the Trust Indenture Act to another statute or defined by a rule of the Commission and not otherwise defined herein shall have the meanings assigned to them therein. SECTION 103. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate and an Opinion of Counsel each satisfactory in form and substance to the Trustee, which, taken together, state that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 1008(a)) shall include: (1) a statement that each individual signing such certificate or opinion has read and understands such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and -19- 31 (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 105. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any -20- 32 such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The principal amount and serial numbers of Securities held by any Person, and the date of holding the same, shall be proved by the Security Register. (d) If the Company shall solicit from the Holders of Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to Board Resolution, fix in advance a record date, of which it shall notify the Trustee and Paying Agent, for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 106. Notices, Etc., to Trustee, Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at 114 West 47th Street, New York, New York 10036, telefax: 212-852-1626, Attention: Corporate Trust Division, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at 1400 Corporate Center Way, Wellington, Florida 33414, telefax: 561-791-3966, Attention: Chief Financial Officer, or at any other address previously furnished in writing to the Trustee by the Company. -21- 33 SECTION 107. Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Securities Registrar and their successors hereunder, the Holders and, with respect to any provisions hereof relating to the subordination of the Securities or the rights of holders of Senior Indebtedness, the holders of Senior Indebtedness, any benefit or any legal or equitable right, remedy or claim under this Indenture. -22- 34 SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the law of the State of New York, without regard to the principles of conflicts of law. Upon the issuance of the Exchange Securities or the effectiveness of the Shelf Registration Statement, this Indenture shall be subject to the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Stated Maturity or Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity or Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be. -23- 35 ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The definitive Securities shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Securities, as evidenced by their execution of such Securities. The Initial Securities shall be known as the "8% Senior Subordinated Notes due 2008" and the Exchange Securities shall be known as the "8% Series B Senior Subordinated Notes due 2008", in each case, of the Company. The Securities and the Trustee's certificate of authentication shall be in substantially the form annexed hereto as Exhibit A. The Securities may have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture and may have letters, notations or other marks of identification and such notations, legends or endorsements required by law, stock exchange agreements to which the Company is subject or usage. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. The Company shall approve the form of the Securities and any notation, legend or endorsement on the Securities. Each Security shall be dated the date of its authentication. The terms and provisions contained in the form of the Securities annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Initial Securities offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Securities substantially in the form set forth in Exhibit A (the "U.S. Global Security") deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Initial Securities offered and sold in reliance on Regulation S shall be issued initially in the form of temporary certificated Securities in registered form substantially in the form set forth in Exhibit A (the "Temporary Offshore Physical Securities"). The Temporary Offshore Physical Securities will be registered in the name of, and held by, a temporary certificate holder designated by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated until the later of the completion of the distribution of the Initial Securities and the termination of the "restricted period" (as defined in Regulation S) with respect to the offer and sale of the Initial Securities (the "Offshore Securities Exchange Date"). At any time following the Offshore Securities Exchange Date, upon receipt by the Trustee and the Company of a certificate substantially in the form of Exhibit B hereto, the Company shall execute, and the Trustee shall authenticate and deliver, one or more permanent -24- 36 certificated Securities in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Physical Securities"), in exchange for the surrender of Temporary Offshore Physical Securities of like tenor and amount. Initial Securities offered and sold other than as described in the preceding two paragraphs shall be issued in the form of permanent certificated Securities in registered form in substantially the form set forth in Exhibit A (the "U.S. Physical Securities"). The Temporary Offshore Physical Securities, Permanent Offshore Physical Securities and U.S. Physical Securities are sometimes collectively herein referred to as the "Physical Securities". SECTION 202. Restrictive Legends. Unless and until (i) an Initial Security is sold under an effective Registration Statement or (ii) an Initial Security is exchanged for an Exchange Security in connection with an effective Registration Statement, in each case pursuant to the Registration Rights Agreement, each such U.S. Global Security, Temporary Offshore Physical Security, Permanent Offshore Physical Security and each U.S. Physical Security shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY, OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 (IF AVAILABLE), OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION -25- 37 FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. Each U.S. Global Security, whether or not an Initial Security, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE. -26- 38 ARTICLE THREE THE SECURITIES SECTION 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $250,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 307, 308, 906, 1015, 1016 or 1108. The Initial Securities shall be known and designated as the "8% Senior Subordinated Notes due 2008" of the Company. The Exchange Securities shall be known and designated as the "8% Series B Senior Subordinated Notes due 2008" of the Company. The Stated Maturity of the Initial Securities and the Exchange Securities shall be March 1, 2008, and, except as otherwise set forth herein, they shall bear interest at the rate of 8% per annum from February 13, 1998, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable semi-annually in arrears on March 1 and September 1 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for. The principal of (and premium, if any, on) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. SECTION 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman, its President or a Vice President, under its corporate seal reproduced thereon and attested by its Secretary or an Assistant Secretary. The signature of any of these officers on the Securities may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals -27- 39 or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Initial Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Initial Securities directing the Trustee to authenticate the Securities and certifying that all conditions precedent to the issuance of Securities contained herein have been fully complied with, and the Trustee in accordance with such Company Order shall authenticate and deliver such Initial Securities. On Company Order, the Trustee shall authenticate for original issue Exchange Securities in an aggregate principal amount not to exceed $250,000,000; provided that such Exchange Securities shall be issuable only upon the valid surrender for cancellation of Initial Securities of a like aggregate principal amount in accordance with an Exchange Offer pursuant to the Registration Rights Agreement. In each case, the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such authentication of Securities. Such order shall specify the amount of Securities to be authenticated and the date on which the original issue of Initial Securities or Exchange Securities is to be authenticated. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for in Exhibit A duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time Outstanding for Securities authenticated and delivered in such new name. -28- 40 SECTION 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Security Register shall be open to inspection by the Trustee. The Trustee is hereby initially appointed as security registrar (the "Security Registrar") for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations of a like aggregate principal amount. Furthermore, any Holder of the U.S. Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interest in such Global Security may be effected only through a book-entry system maintained by the Holder at such Global Security (or its agent), and that ownership of a beneficial interest in the Security shall be required to be reflected in a book entry. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange (including an exchange of Initial Securities for Exchange Securities), the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is -29- 41 entitled to receive; provided that no exchange of Initial Securities for Exchange Securities shall occur until an Exchange Offer Registration Statement shall have been declared effective by the Commission and that the Initial Securities to be exchanged for the Exchange Securities shall be cancelled by the Trustee. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1015, 1016 or 1108 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the selection of Securities to be redeemed under Section 1104 and ending at the close of business on the day of such mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 306. Book-Entry Provisions for U.S. Global Security. (a) The U.S. Global Security initially shall (i) be registered in the name of the Depositary for such global Security or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 202. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any U.S. Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under the U.S. Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such U.S. Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Security. (b) Transfers of the U.S. Global Security shall be limited to transfers of such U.S. Global Security in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the U.S. Global Security may be transferred in accordance -30- 42 with the rules and procedures of the Depositary and the provisions of Section 307. Beneficial owners may obtain U.S. Physical Securities in exchange for their beneficial interests in the U.S. Global Security upon request in accordance with the Depositary's and the Registrar's procedures. In addition, U.S. Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Security if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the U.S. Global Security and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary. (c) In connection with any transfer of a portion of the beneficial interest in the U.S. Global Security to beneficial owners pursuant to subsection (b) of this Section, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Security in an amount equal to the principal amount of the beneficial interest in the U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (d) In connection with the transfer of the entire U.S. Global Security to beneficial owners pursuant to subsection (b) of this Section, the U.S. Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the U.S. Global Security, an equal aggregate principal amount of U.S. Physical Securities of authorized denominations. (e) Any U.S. Physical Security delivered in exchange for an interest in the U.S. Global Security pursuant to subsection (c) or subsection (d) of this Section shall, except as otherwise provided by paragraph (e) of Section 307, bear the applicable legend regarding transfer restrictions applicable to the U.S. Physical Security set forth in Section 202. (f) The registered holder of the U.S. Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 307. Special Transfer Provisions. Unless and until (i) an Initial Security is sold under an effective Registration Statement, or (ii) an Initial Security is exchanged for an Exchange Security in connection with an effective Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Security to a QIB (excluding Non-U.S. Persons): (i) If the Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked -31- 43 the box provided for on the form of Initial Security stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Security stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Initial Security for its own account or an account with respect to which it exercises sole investment discretion and that it, or the person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) If the proposed transferee is an Agent Member, and the Initial Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the U.S. Global Security in an amount equal to the principal amount of the U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities, as the case may be, to be transferred, and the Trustee shall cancel the Physical Security so transferred. (b) Transfers by Non-U.S. Persons on or Prior to March 25, 1998. The following provisions shall apply with respect to registration of any proposed transfer of an Initial Security by a Non-U.S. Person on or prior to March 25, 1998: (i) The Registrar shall register the transfer of any Initial Security (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto or (y) if the proposed transferee is a QIB and the proposed transferor has checked the box provided for on the form of Initial Security stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Security stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Initial Security for its own account or an account with respect to which it exercises sole investment discretion and that it, or the person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. Unless clause (ii) below is applicable, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Temporary Offshore Physical Securities of like tenor and amount. -32- 44 (ii) If the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the U.S. Global Security in an amount equal to the principal amount of the Temporary Offshore Physical Security to be transferred, and the Trustee shall cancel the Temporary Offshore Physical Security so transferred. (c) Transfers by Non-U.S. Persons on or After March 26, 1998. The following provisions shall apply with respect to any transfer of an Initial Security by a Non-U.S. Person on or after March 26, 1998: (i) (x) If the Initial Security to be transferred is a Permanent Offshore Physical Security, the Registrar shall register such transfer, (y) if the Initial Security to be transferred is a Temporary Offshore Physical Security, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor, the Registrar shall register such transfer and (z) in the case of either clause (x) or (y), unless clause (ii) below is applicable, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (ii) If the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the U.S. Global Security in an amount equal to the principal amount of the Temporary Offshore Physical Security or Permanent Offshore Physical Security to be transferred, and the Trustee shall cancel the Physical Security so transferred. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of an Initial Security to a Non-U.S. Person: (i) Prior to March 25, 1998, the Registrar shall register any proposed transfer of an Initial Security to a Non-U.S. Person upon receipt of a certificate substantially in the form of Exhibit C hereto from the proposed transferor and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Temporary Offshore Physical Securities of like tenor and amount. (ii) On and after March 26, 1998, the Registrar shall register any proposed transfer to any Non-U.S. Person (w) if the Initial Security to be transferred is a Permanent Offshore Physical Security, (x) if the Initial Security to be transferred is a Temporary Offshore Physical Security, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor, (y) if the Initial Security to be transferred is a U.S. Physical Security or an interest in the U.S. Global Security, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor and (z) in the case of either clause (w), (x) or (y), the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. -33- 45 (iii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Security, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i), and (y) instructions in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Security in an amount equal to the principal amount of the beneficial interest in the U.S. Global Security to be transferred and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless either (i) the circumstances contemplated by the fifth paragraph of Section 201 or paragraphs (c)(i) or (d)(ii) of this Section 307 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (g) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 306 or this Section 307. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities. If (i) any mutilated Security is surrendered to the Trustee or the Registrar, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in -34- 46 relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 309. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 310, to the address of such Person as it appears in the Security Register or (ii) transfer to an account maintained by the payee located in the United States. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall irrevocably deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the -35- 47 proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 107, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 310. Persons Deemed Owners. Prior to the due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 309) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Trustee or any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 311. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation along with an Officer's Certificate and Company Order requesting the cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures and certification of their disposal delivered to the Company unless by Company Order the Company shall direct that cancelled Securities be returned to it. -36- 48 SECTION 312. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. -37- 49 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when (1) either (a) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 308 and (ii) Securities for whose payment money has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (b) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company or any Guarantor, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each satisfactory in form and substance to the Trustee, which, taken -38- 50 together, state that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. -39- 51 ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Thirteen or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of the principal of or premium, if any, when due and payable, on any of the Securities; or (2) default in the payment of an installment of interest on any of the Securities, when due and payable, for 30 days; or (3) default in the performance or breach of the provisions of Article Eight of this Indenture, the failure to make or consummate a Change of Control Offer in accordance with the provisions of Section 1015 or the failure to make or consummate an Excess Proceeds Offer in accordance with the provisions of Section 1016; or (4) the Company or any Guarantor shall fail to perform or observe any other term, covenant or agreement contained in the Securities, any Guarantee or this Indenture (other than a default specified in (1), (2) or (3) above) for a period of 30 days after written notice of such failure requiring the Company to remedy the same shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Securities then outstanding; or (5) default or defaults under one or more mortgages, bonds, debentures or other evidences of Indebtedness under which the Company or any Significant Subsidiary then has outstanding Indebtedness in excess of $5,000,000, individually or in the aggregate, and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness; or (6) one or more final judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $5,000,000, individually or in the aggregate, shall be entered against the Company or any of its Significant Subsidiaries or any of their respective properties and shall not be discharged or fully bonded and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree, shall not be in effect; or (7) (A) any holder of at least $5,000,000 in aggregate principal amount of secured Indebtedness of the Company or of any Significant Subsidiary as to which a default has -40- 52 occurred and is continuing shall commence judicial proceedings (which proceedings shall remain unstayed for five Business Days) to foreclose upon assets of the Company or any Significant Subsidiary having an aggregate Fair Market Value, individually or in the aggregate, in excess of $5,000,000 or shall have exercised any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure or (B) any action described in the foregoing clause (A) shall result in any court of competent jurisdiction issuing any order for the seizure of such assets; or (8) any Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture) and such condition shall have continued for a period of 30 days after written notice of such failure requiring the Guarantor and the Company to remedy the same shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Securities then outstanding; or (9) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustments or composition of or in respect of the Company or any Significant Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (10) the institution by the Company or any Significant Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(9) or 501(10) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Securities Outstanding may declare the principal amount of, premium, if any, and accrued interest on all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), upon which declaration all amounts payable in respect of the Securities shall be immediately due and payable; provided, however, that, for so long as the Bank Credit Agreement is in effect, such declaration shall not become effective -41- 53 until the earlier of (i) five Business Days following delivery of notice to the Agent Bank of the intention to accelerate the Securities or (ii) the acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of Default specified in Section 501(9) or 501(10) occurs and is continuing, then the principal amount of, premium, if any, and accrued interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Securities Outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or irrevocably deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Outstanding Securities, (B) all unpaid principal of (and premium, if any, on) any Outstanding Securities which has become due otherwise than by such declaration of acceleration, and interest on such unpaid principal at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest on overdue interest at the rate borne by the Securities which has become due otherwise than by such declaration of acceleration, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) such rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (3) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities because of an Event of Default specified in Section 501(5) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such -42- 54 holders, within 30 days after such declaration of acceleration in respect of the Securities, and no other Event of Default has occurred during such 30-day period which has not been cured or waived during such period. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any installment of interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, -43- 55 (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Subject to Article Thirteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any, on) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and -44- 56 THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities (including fees and expenses of its agents and counsel) to be incurred in compliance with such request; (4) the Trustee for 15 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 15-day period by the Holders of a majority or more in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Twelve) and in such Security of the principal of (and premium, if any, on) and (subject to Section 309) interest on, such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. -45- 57 If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 308, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might subject it to personal liability or be unjustly prejudicial to the Holders not consenting. SECTION 513. Waiver of Past Defaults. -46- 58 The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in respect of the payment of the principal of (or premium, if any, on) or interest on any Security, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 514. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -47- 59 ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults. If any Default hereunder is actually known to the Trustee, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such Default within 5 days after the occurrence of any such Default, unless such Default shall have been cured or waived; provided, however, that, except in the case of a Default in the payment of the principal of (or premium, if any, on) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided further that in the case of any Default of the character specified in Section 501(4) no such notice to Holders shall be given until at least 30 days after the occurrence thereof. SECTION 602. Certain Rights of Trustee. Subject to the provisions of TIA Sections 315(a) through 315(d): (1) the Trustee may conclusively rely and shall be protected in acting or refraining from acting, pursuant to the terms of this Indenture or otherwise, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order with sufficient detail as may be requested by the Trustee and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate and/or an Opinion of Counsel; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or -48- 60 indemnity against the costs, expenses and liabilities (including fees and expenses of its agents and counsel) which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into, and may conclusively rely upon, the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and (9) notwithstanding anything else to the contrary contained herein, the Trustee need perform only those duties as are specifically set forth in this Indenture and no others and no implied covenants or obligations shall be read into this Indenture as against the Trustee. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and, upon the effectiveness of the Registration Statement, that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 604. May Hold Securities. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee -49- 61 of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent. SECTION 605. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 606. Compensation and Reimbursement. The Company agrees: (1) to pay to the Trustee (in its capacity as Trustee, Paying Agent and Registrar) from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel); and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(9) or Section 501(10), the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law. -50- 62 SECTION 607. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 609 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, except when the Trustee's duty to resign is stayed in accordance with the provisions of TIA Section 310(b), or (2) the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, -51- 63 then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders of Securities in the manner provided for in Section 107. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 609. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder subject to the retiring Trustee's rights as provided under the last sentence of Section 606. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. -52- 64 SECTION 610. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities; and in case at that time any of the Securities shall not have been authenticated, any successor Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. -53- 65 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities, the Trustee shall transmit to the Holders, in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a). -54- 66 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not, in any transaction or series of transactions, merge or consolidate with or into, or sell, assign, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any Person or Persons, and the Company will not permit any Restricted Subsidiary to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and after giving effect thereto: (1) either (A) if the transaction or transactions is a merger or consolidation, the Company shall be the surviving Person of such merger or consolidation, or (B) the Person formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or to which the properties and assets of the Company or such Restricted Subsidiary, as the case may be, substantially as an entirety, are sold, assigned, transferred, leased or otherwise disposed of (any such surviving Person or transferee Person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and the Indenture, and, in each case, the Indenture shall remain in full force and effect; (2) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing and the Company or the Surviving Entity, as the case may be, after giving effect to such transaction or series of transactions on a pro forma basis, could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010; (3) immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Consolidated Net Worth of the Company, or the Surviving Entity, as the case may be, is at least equal to the Consolidated Net Worth of the Company immediately before such transaction or series of transactions; and (4) the Company or such Person shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel satisfactory in form and substance to the Trustee, which, taken together, state that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. -55- 67 SECTION 802. Successor Substituted. Upon any consolidation of the Company with or merger of the Company with or into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety to any Person in accordance with Section 801, the Surviving Entity formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Surviving Entity had been named as the Company herein, and in the event of any such conveyance or transfer, the Company (which term shall for this purpose mean the Person named as the "Company" in the first paragraph of this Indenture or any Surviving Entity which shall theretofore become such in the manner described in Section 801), except in the case of a lease, shall be discharged of all obligations and covenants under this Indenture and the Securities and may be dissolved and liquidated. SECTION 803. Securities to Be Secured in Certain Events. If, upon any such consolidation of the Company with or merger of the Company into any other corporation, or upon any conveyance, lease or transfer of the property of the Company substantially as an entirety to any other Person, any property or assets of the Company would thereupon become subject to any Lien, then unless such Lien could be created pursuant to Section 1014 without equally and ratably securing the Securities, the Company, prior to or simultaneously with such consolidation, merger, conveyance, lease or transfer, will as to such property or assets, secure the Securities Outstanding (together with, if the Company shall so determine any other Indebtedness of the Company now existing or hereinafter created which is not subordinate in right of payment to the Securities) equally and ratably with (or prior to) the Indebtedness which upon such consolidation, merger, conveyance, lease or transfer is to become secured as to such property or assets by such Lien, or will cause such Securities to be so secured. -56- 68 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee pursuant to the requirements of Section 609; or (5) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that such action shall not adversely affect the interests of the Holders in any material respect; or (6) to secure the Securities pursuant to the requirements of Section 803 or 1014 or otherwise; or (7) to qualify, or maintain the qualification of, this Indenture under the Trust Indenture Act. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby: (1) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any -57- 69 Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) release any Guarantor from any of its obligations under its Guarantee or this Indenture other than in accordance with the terms of this Indenture, or (4) modify any of the provisions of this Section or Sections 513 and 1020, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, or (5) modify any of the provisions of Section 1014 or Section 1019 or any of the provisions of this Indenture relating to the subordination of the Securities in a manner adverse to the Holders thereof, or (6) amend, change or modify the obligation of the Company to make and consummate a Change in Control Offer in the event of a Change in Control or make and consummate an Offer with respect to any Asset Sale or modify any of the provisions or definitions with respect thereto. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof . SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. -58- 70 SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to the Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form and substance approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 107, setting forth in general terms the substance of such supplemental indenture. SECTION 908. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of the holders of Designated Senior Indebtedness under Article Thirteen without the consent of the appropriate representatives of such holders. -59- 71 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, If Any, and Interest. The Company covenants and agrees for the benefit of the Holders that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Securities in accordance with the terms of the Securities and this Indenture. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Trust Office located at 114 West 47th Street, New York, New York 10036 of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any, on) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (and premium, if any, on), or interest on, any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such -60- 72 principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any, on) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. -61- 73 SECTION 1004. Corporate Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each Subsidiary; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1005. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1006. Maintenance of Properties. The Company will cause all properties owned by the Company or any Subsidiary or used or held for use in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. Insurance. The Company will at all times keep all of its and its Subsidiaries properties which are of an insurable nature insured with insurers, believed by the Company to be responsible, against loss or damage to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties. SECTION 1008. Statement by Officers as to Default. (a) The Company will deliver to the Trustee, within (x) 120 days after the end of each fiscal year, (y) within 45 days after the end of each fiscal quarter and (z) within 15 days of the -62- 74 date of receipt by the Company of the request of the Trustee, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of compliance by the Company and the Guarantors with all conditions and covenants under this Indenture. For purposes of this Section 1008(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) When any Default has occurred and is continuing under this Indenture, or if the trustee for or the holder of any other evidence of Indebtedness of the Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Indebtedness in the principal amount of less than $5,000,000), the Company shall deliver to the Trustee by registered or certified mail or by telegram, telex or facsimile transmission an Officers' Certificate specifying such event, notice or other action within 10 days of its occurrence. SECTION 1009. Provision of Financial Statements. The Company will file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15 of the Exchange Act. The Company shall also (a) file with the Trustee, and provide to each holder of Securities, without cost to such holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, the Company shall supply at its cost copies of such reports and documents to any prospective holder of Securities promptly upon written request therefor. SECTION 1010. Limitation on Indebtedness. (a) The Company will not create, incur, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively to "incur") any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness, unless (x) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness, taken as one period (and after giving pro forma effect to: (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) notwithstanding clause (d) of the definition of Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period, reflecting, in the case of such an acquisition, any amount attributable to any operating expense that will be eliminated or cost reduction that will be realized (in each case, net of -63- 75 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 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), would have been at least equal to 2.0 to 1, and (y) if such Indebtedness is Subordinated Indebtedness, such Indebtedness shall have an Average Life longer than the Average Life of the Securities and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Securities. (b) The Company will not permit any Restricted Subsidiary to incur any Indebtedness (including any Acquired Indebtedness), other than Permitted Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness, taken as one period (and after giving pro forma effect to the matters referred to in clauses (i), (ii) and (iii) in the parenthetical in paragraph (a) of this Section 1010), would have been at least equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the Securities in compliance with clause (i) of paragraph (b) and clauses (i)(A), (ii) and (iii) of paragraph (a) of Section 1017. SECTION 1011. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take the following actions: (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Capital Stock or in options, warrants or other rights to purchase such Capital Stock, but excluding dividends or distributions payable in Redeemable Capital Stock or in options, warrants or other rights to purchase Redeemable Capital Stock), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled principal payment, scheduled sinking fund payment or maturity, any Subordinated Indebtedness, (iv) make any Investment (other than any Permitted Investment) in any Person, or (v) incur any guarantee of Indebtedness of any Affiliate, including any Unrestricted Subsidiary (other than with respect to (a) guarantees of Indebtedness of any wholly-owned Restricted Subsidiary by the Company or (b) guarantees of Indebtedness of the Company by any Restricted Subsidiary), (such payments or other actions described in (but not excluded from) clauses (i) through (v) are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as -64- 76 determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing, (2) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010, and (3) the aggregate amount of all Restricted Payments declared or made after the date of the 9 7/8% Notes Indenture shall not exceed the sum of (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day after the date of the 9 7/8% Notes Indenture and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net cash proceeds received after the date of the 9 7/8% Notes Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Capital Stock of the Company (other than Redeemable Capital Stock) or warrants, options or rights to purchase such shares of Capital Stock of the Company, plus (C) the aggregate net cash proceeds received after the date of the 9 7/8% Notes Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities that have been converted into or exchanged for Capital Stock of the Company (other than Redeemable Capital Stock) to this extent such debt securities were originally sold for cash, together with the aggregate cash received by the Company at the time of such conversion or exchange, plus (D) to the extent not otherwise included in the Company's Consolidated Adjusted Net Income, the net reduction in Investments in Unrestricted Subsidiaries resulting from the payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or a Restricted Subsidiary after the date of the 9 7/8% Notes Indenture from any Unrestricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as provided in the definition of Investment), not to exceed in the case of any Unrestricted Subsidiary the total amount of Investments (other than Permitted Investments), after the date of the 9 7/8% Notes Indenture in such Unrestricted Subsidiary by the Company and its Restricted Subsidiaries, plus (E) $10,000,000. (b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default shall have occurred and be continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of paragraph (a) above; (ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of the Company; (iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of the Company; -65- 77 (iv) the repurchase of any Subordinated Indebtedness of the Company at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control pursuant to a provision similar to Section 1015; provided that prior to such repurchase the Company has made the Change of Control Offer as provided in such covenant with respect to the Securities and has repurchased all Securities validly tendered for payment in connection with such Change of Control Offer; (v) the purchase, redemption or other acquisition or retirement for value of Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence (other than to a Restricted Subsidiary) of, Indebtedness of the Company so long as (A) the principal amount of such new Indebtedness does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, acquired or retired, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Subordinated Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) such new Indebtedness is subordinated to the Securities to the same extent as the Notes are subordinated to Senior Indebtedness and (C) such new Indebtedness has an Average Life longer than the Average Life of the Securities and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Securities; and (vi) the purchase, redemption or other acquisition or retirement for value of shares of Common Stock of the Company issued pursuant to non-qualified options granted under stock option plans of the Company in order to pay withholding taxes due as a result of income recognized upon the exercise of such options; provided that (1) the Company is required, by the terms of such plans, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $2,000,000 during any fiscal year of the Company. The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) (provided that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce the amount that would otherwise be available under clause (3) of paragraph (a) when declared, but not also when subsequently paid pursuant to such clause (i)) and the actions described in clause (v) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) and shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a). (c) In computing Consolidated Adjusted Net Income of the Company under clause (3)(A) of paragraph (a) above, (1) the Company shall use audited financial statements for the portions -66- 78 of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment shall be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. SECTION 1012. Limitation on Issuances and Sales of Restricted Subsidiary Stock. The Company (i) will not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly-owned Restricted Subsidiary) and (ii) will not permit any Person (other than the Company or a wholly-owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this covenant shall not prohibit (1) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of this Indenture, (2) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law or (3) the issuance and sale of Capital Stock by a Restricted Subsidiary, or the ownership by any Person of any Capital Stock of a Restricted Subsidiary, if, in each case, the Company has made, or is making, an Investment in such Restricted Subsidiary pursuant to clause (v) of the definition of Permitted Investment. SECTION 1013. Limitation on Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company or any beneficial owner of 5% or more of any class of the Company's Capital Stock at any time outstanding ("Interested Persons"), unless (i) such transaction is among the Company and wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms that are no less favorable to the Company, or such Restricted Subsidiary, as the case may be, than those which could have been obtained in an arm's length transaction with third parties who are not Interested Persons, (B) with respect to any transaction involving aggregate consideration equal to or greater than $2 million, the Company has delivered an Officers' Certificate to the Trustee certifying that such transaction complies with clause (ii)(A) above, and (C) with respect to any transaction involving aggregate consideration equal to or greater than $5 million, such transaction has been approved by the Board of Directors (including a majority of the Disinterested Directors); provided, however, that this covenant will not restrict the Company from paying reasonable and customary regular compensation and fees to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary. SECTION 1014. Limitation on Liens Securing Pari Passu Indebtedness or Subordinated Indebtedness. -67- 79 (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or indebtedness of any Restricted Subsidiary, whether owned at the date of the Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Company, the Securities are secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Subordinated Indebtedness of the Company, the Securities are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. (b) The Company will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is pari passu to or subordinate in right of payment to the Guarantee of such Subsidiary, on or with respect to any of such Restricted Subsidiary's properties or assets, including any shares of stock or Indebtedness of any Subsidiary of such Restricted Subsidiary, whether owned at the date of the Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu in right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. SECTION 1015. Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to purchase all of the outstanding Securities (a "Change of Control Offer"), and shall purchase, on a business day (the "Change of Control Purchase Date") not more than 70 nor less than 60 days following the Change of Control, all of the then outstanding Securities validly tendered pursuant to such Change of Control Offer, at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. The Change of Control Offer is required to remain open for at least 20 Business Days and until the close of business on the Change of Control Purchase Date. (b) In order to effect such Change of Control Offer, the Company shall, not later than the 30th day after the Change of Control, notify the Trustee thereof and mail to each Holder and the Banks notice of the Change of Control Offer in the manner provided in Section 107, which notice shall govern the terms of the Change of Control Offer and shall state: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to repurchase such Holder's Securities at the Change of Control Purchase Price. -68- 80 (2) the circumstances and relevant facts regarding such Change of Control (including but not limited to information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the Change of Control Purchase Date; and (4) the instructions a Holder must follow in order to have its Securities repurchased in accordance with paragraph (c) of this Section. (c) Holders electing to have Securities purchased will be required to surrender such Securities to the Company at the address specified in the notice at least five Business Days prior to the Change of Control Purchase Date. Holders will be entitled to withdraw their election if the Company receives, not later than three Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Securities purchased. Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount of the unpurchased portion of the Securities surrendered. (d) The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that a Change of Control occurs and the Company is required to purchase Securities as described above. SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales. (a) The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not less than the Fair Market Value of the assets sold (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash Equivalents; provided that the Company and its Restricted Subsidiaries may engage in Asset Sales for consideration not in the form of cash or Cash Equivalents in amounts in excess of that permitted in this clause (ii), so long as (x) such excess consideration is in the form of Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully Traded Common Stock received by the Company and its Restricted Subsidiaries (measured as of the date of receipt) from all Asset Sales in reliance on this proviso since the date of this Indenture that has not been converted into cash or Cash Equivalents does not exceed $10,000,000 and (z) any Fully Traded Common Stock that is converted into cash or Cash Equivalents shall be applied as provided in paragraphs (b) and (c) of this Section 1016. (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after such Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or enter into a legally binding agreement to invest) in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in businesses of the Company or its Restricted Subsidiaries, as the case may be, existing -69- 81 on the Closing Date or in businesses reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, then the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph (b) constitutes "Excess Proceeds." (c) When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall, within 15 Business Days, make an offer to purchase (an "Excess Proceeds Offer") from all holders of Securities, on a pro rata basis, in accordance with the procedures set forth below, the maximum principal amount (expressed as a multiple of $1,000) of Securities that may be purchased with the Excess Proceeds. The offer price as to each Security shall be payable in cash in an amount equal to 100% of the principal amount of such Security plus accrued and unpaid interest, if any, to the date such Excess Proceeds Offer is consummated. To the extent that the aggregate principal amount of Securities tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Securities validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Securities to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset to zero. SECTION 1017. Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. (a) The Company will not permit any Restricted Subsidiary to guarantee the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Guarantee of payment of the Securities by such Restricted Subsidiary except that (A) if the Securities are subordinated in right of payment to such Indebtedness, the Guarantee under the supplemental indenture shall be subordinated to such Restricted Subsidiary's guarantee with respect to such Indebtedness substantially to the same extent as the Securities are subordinated to such Indebtedness under this Indenture and (B) if such Indebtedness is by its express terms subordinated in right of payment to the Securities, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Restricted Subsidiary's Guarantee with respect to the Securities at least to the same extent as such Indebtedness is subordinated to the Securities; (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; (iii) such Restricted Subsidiary shall appoint CT Corporation in New York City as its agent for the service of process; and (iv) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that (A) such appointment of CT Corporation is valid, (B) such Guarantee of the Securities has been duly executed and authorized and (C) such Guarantee of the Securities constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that this paragraph (a) shall not be applicable to any guarantee of any Restricted Subsidiary that (x) existed at the time such Person became a Restricted Subsidiary of the Company -70- 82 and (y) was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary of the Company. (b) Notwithstanding the foregoing and the other provisions of this Indenture, any Guarantee by a Restricted Subsidiary of the Securities shall provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (ii) the release or discharge of the Guarantee which resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such guarantee. SECTION 1018. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary of the Company, (c) make loans or advances to the Company or any other Restricted Subsidiary of the Company, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary of the Company or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any Restricted Subsidiary of the Company, (iii) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary of the Company in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (iv) any agreement in existence on the Closing Date (to the extent of any encumbrances or restrictions in existence thereunder on the Closing Date) and (v) any agreement providing for the incurrence of Indebtedness of Restricted Subsidiaries pursuant to either clause (x) of paragraph (b) of Section 1010 or clause (vii) of the definition of Permitted Subsidiary Indebtedness; provided that any Restricted Subsidiary (including, without limitation, FEEL, Acurex and Royal Inventum) that becomes subject to any such encumbrances or restrictions pursuant to this clause (v) shall Guarantee the Securities in compliance with the provisions of clause (i) of paragraph (b) and clauses (i)(A), (ii) and (iii) of paragraph (a) of Section 1017. SECTION 1019. Limitation on Other Senior Subordinated Indebtedness. -71- 83 The Company will not, and will not permit any Restricted Subsidiary to, incur, create, assume, guarantee or in any other manner become directly or indirectly liable with respect to or responsible for, or permit to remain outstanding, any Indebtedness, other than the Securities, that is expressly subordinate or junior in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Securities pursuant to provisions substantially similar to those contained in Article Thirteen. SECTION 1020. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 803 or Sections 1007 through 1019, inclusive, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities, by Act of such Holders, waive such compliance in such instance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. -72- 84 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Right of Redemption. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at any time after March 1, 2003, subject to the conditions and at the Redemption Prices specified in the form of Security, together with accrued interest to the Redemption Date. In addition, at any time or from time to time, on or prior to March 1, 2001, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Securities originally issued under this Indenture at a Redemption Price equal to 108% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Redemption Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Securities issued under this Indenture remains outstanding immediately after the occurrence of such redemption; provided further such redemption occurs within 60 days of the date of closing of each such Equity Offering. SECTION 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 1104. SECTION 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Securities; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $1,000. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. -73- 85 For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 1105. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 107 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of a partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price (together with accrued interest, if any, to the Redemption Date payable as provided in Section 1107) will become due and payable upon each such Security, or the portion thereof, to be redeemed, and that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) the CUSIP number. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1106. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1107. Securities Payable on Redemption Date. -74- 86 Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 309. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Securities. SECTION 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. -75- 87 ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either Section 1202 or Section 1203 be applied to all Outstanding Securities upon compliance with the conditions set forth below in this Article Twelve. SECTION 1202. Defeasance and Discharge. Upon the Company's exercise under Section 1201 of the option applicable to this Section 1202, the Company and the Guarantors shall be deemed to have been discharged from their respective obligations with respect to all Outstanding Securities on the date the conditions set forth in Section 1204 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1205 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive, solely from the trust fund described in Section 1204 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any, on) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 308, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article Twelve. Subject to compliance with this Article Twelve, the Company may exercise its option under this Section 1202 notwithstanding the prior exercise of its option under Section 1203 with respect to the Securities. SECTION 1203. Covenant Defeasance. Upon the Company's exercise under Section 1201 of the option applicable to this Section 1203, the Company and the Guarantors shall be released from their respective obligations under any covenant contained in Section 801 and Section 803 and in Sections 1007 through 1019 with respect to the Outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default -76- 88 under Section 501(3) or Section 501(4), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1204. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1202 or Section 1203 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Twelve applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any, on) and interest on the Outstanding Securities on the Stated Maturity (or Redemption Date, if applicable) of such principal (and premium, if any) or installment of interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. Before such a deposit, the Company may give to the Trustee, in accordance with Section 1103 hereof, a notice of its election to redeem all of the Outstanding Securities at a future date in accordance with Article Eleven hereof, which notice shall be irrevocable. Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (2) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit. -77- 89 (3) Such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest, as determined by the Trustee, with respect to any securities of the Company or any Guarantor. (4) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound. (5) In the case of an election under Section 1202, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since February 13, 1998 there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (6) In the case of an election under Section 1203, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (7) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee, which, taken together, state that all conditions precedent provided for relating to either the defeasance under Section 1202 or the covenant defeasance under Section 1203 (as the case may be) have been complied with. (9) No event or condition shall exist that pursuant to the provisions of Section 1302 or 1303 would prevent the Company from making payments of the principal of (and premium, if any, on) or interest on the Securities on the date of such deposit or at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. -78- 90 Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in respect of the Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Governmental Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Twelve to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1204 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance, as applicable, in accordance with this Article. SECTION 1206. Reinstatement. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 1205 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1202 or 1203, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1205; provided, however, that if the Company makes any payment of principal of (or premium, if any, on) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. -79- 91 ARTICLE THIRTEEN SUBORDINATION OF SECURITIES SECTION 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, for the benefit of the holders, from time to time, of Senior Indebtedness that, to the extent and in the manner hereinafter set forth in this Article, the Indebtedness represented by the Securities and the payment of the principal of (and premium, if any) and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment as provided in this Article to the prior payment in full of all Senior Indebtedness; provided, however, that the Securities, the Indebtedness represented thereby and the payment of the principal of (and premium, if any) and interest on the Securities in all respects shall rank equally with, or prior to, all existing and future unsecured indebtedness (including, without limitation, Indebtedness) of the Company that is subordinated to Senior Indebtedness. SECTION 1302. Payment Over of Proceeds upon Dissolution, Etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relating to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets or liabilities of the Company, then and in any such event (1) the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or Cash Equivalents, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character (other than any payment or distribution in the form of equity securities or subordinated securities of the Company or any successor obligor with respect to the Senior Indebtedness provided for by a plan of reorganization or readjustment that, in the case of any such subordinated securities, are subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article (such equity securities or subordinated securities hereinafter being "Permitted Junior Securities")) on account of principal of (or premium, if any, on) or interest on the Securities; and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than a payment or distribution in the form of Permitted Junior Securities), by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under -80- 92 which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash or Cash Equivalents of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, in respect of principal of (and premium, if any) or interest on the Securities before all Senior Indebtedness is paid in full or payment thereof provided for, then and in such event such payment or distribution (other than a payment or distribution in the form of Permitted Junior Securities) shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. SECTION 1303. Suspension of Payment When Senior Indebtedness in Default. (a) Unless Section 1302 shall be applicable, upon the occurrence of a Payment Event of Default, no payment (other than payments made pursuant to Article Twelve from monies or U.S. Government Obligations previously deposited with the Trustee) or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities), shall be made by or on behalf of the Company on account of principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition or defeasance of Securities unless and until such Payment Event of Default shall have been cured or waived in writing or shall have ceased to exist or the Designated Senior Indebtedness to which the Payment Event of Default is related shall have been discharged or paid in full in cash or Cash Equivalents, after which the Company shall resume making any and all required payments in respect of the Securities, including any missed payments. (b) Unless Section 1302 shall be applicable, upon (1) the occurrence of a Non-payment Event of Default and (2) receipt by the Trustee from the Agent Bank or any other representative of holders of Designated Senior Indebtedness of written notice of such occurrence, then no payment (other than payments made pursuant to Article Twelve from monies or U.S. Government -81- 93 Obligations previously deposited with the Trustee) or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities), shall be made by or on behalf of the Company on account of any principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition or defeasance of Securities for a period ("Payment Blockage Period") commencing on the date of receipt by the Trustee of such notice from the Agent Bank or such other representative unless and until (subject to any blockage of payments that may then be in effect under paragraph (a) of this Section) (x) more than 179 days shall have elapsed since receipt of such written notice by the Trustee (provided that any Designated Senior Indebtedness as to which notice was given shall not theretofore have been accelerated), (y) such Non-payment Event of Default shall have been cured or waived in writing or shall have ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full in cash or Cash Equivalents or (z) such Payment Blockage Period, shall have been terminated by written notice to the Company or the Trustee from the Agent Bank or such other representative initiating such Payment Blockage Period, after which, in the case of clause (x), (y) or (z), the Company shall resume making any and all required payments in respect of the Securities, including any missed payments. Notwithstanding any other provision of this Agreement, only one Payment Blockage Period may be commenced within any consecutive 365-day period, and no event of default with respect to Designated Senior Indebtedness which existed or was continuing on the date of the commencement of any Payment Blockage Period initiated by or behalf of such Designated Senior Indebtedness shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period, whether or not within a period of 365 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days subsequent to the commencement of such initial Payment Blockage Period (it being acknowledged that any breach of any financial covenant for the period commencing after the date of commencement of such Payment Blockage Period which would give rise to a Non-payment Default pursuant to any provision under which a Non-payment Default previously existed or was continuing shall constitute a new Non-payment Default). In no event will a Payment Blockage Period extend beyond 179 days. (c) In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to the Company. SECTION 1304. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302 or under the conditions described in Section 1303, from making payments at any time of principal of (and premium, if any, on) or interest on the Securities. SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by -82- 94 its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. SECTION 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness. SECTION 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 1308. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without in any way limiting the generality of paragraph (a) of this Section, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any -83- 95 one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any Person liable in any manner for the collection of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 1309. Notice to Trustee. (a) The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company, the Agent Bank or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to TIA Sections 315(a) through 315(d), shall be entitled in all respects to assume that no such facts exist; provided, however, that, if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. (b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. -84- 96 SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d), and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 1311. Rights of Trustee As a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606. SECTION 1312. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 1311 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 1313. No Suspension of Remedies. Nothing contained in this Article shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law. SECTION 1314. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from cash or the proceeds of U.S. Government Obligations held in trust under Article Thirteen hereof by the Trustee (or other qualifying trustee) and which were deposited in accordance with the terms of Article Thirteen hereof and not in violation of Section 1303 hereof for the payment of principal of (and premium, if any) and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article Thirteen, and none of the -85- 97 Holders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness or any other creditor of the Company. -86- 98 This Indenture may be signed in any number of counterparts each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BE AEROSPACE, INC. By ------------------------------------ Title: UNITED STATES TRUST COMPANY OF NEW YORK By ------------------------------------ Title: -87- 99 STATE OF ) ) ss.: COUNTY OF ) On the ________ day of February, 1998, before me personally came _______________________ to me known who, being by me duly sworn, did depose and say that he is __________________________ of BE Aerospace, Inc., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. _____________________________________ -88- 100 STATE OF ) ) ss.: COUNTY OF ) On the ________ day of February, 1998, before me personally came _______________________ to me known who, being by me duly sworn, did depose and say that he is __________________________ of United States Trust Company of New York, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. _____________________________________ -89- 101 Exhibit A [FACE OF SECURITY] BE AEROSPACE, INC. 8% [Series B]** Senior Subordinated Note due 2008 CUSIP _________________ No. _______ $______________________ BE AEROSPACE, INC., a Delaware corporation (the "Company", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to ________________________________, or its registered assigns, the principal sum of ____________________________________ ($___________), on March 1, 2008. [Initial Interest Rate: 8% per annum.]* [Interest Rate: 8% per annum.]** Interest Payment Dates: March 1 and September 1 of each year commencing September 1, 1998. Regular Record Dates: February 15 and August 15 of each year. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. - ---------- * Include only for Initial Securities. ** Include only for Exchange Securities. Exh. B-1 102 IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Date: BE AEROSPACE, INC. By: -------------------------------- Title: Exh. B-2 103 (Form of Trustee's Certificate of Authentication) This is one of the 8% [Series B]** Senior Subordinated Notes due 2008 described in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: ----------------------------------------- Authorized Signatory - ---------- ** Include only for Exchange Securities. Exh. B-3 104 [REVERSE SIDE OF SECURITY] BE AEROSPACE, INC. 8% [Series B]** Senior Subordinated Note due 2008 1. Principal and Interest; Subordination. The Company will pay the principal of this Security on March 1, 2008. The Company promises to pay interest on the principal amount of this Security on each Interest Payment Date, as set forth below, at the rate of [8% per annum (subject to adjustment as provided below)]* [8% per annum, except that interest accrued on this Security pursuant to the penultimate paragraph of this Section 1 for periods prior to the applicable Exchange Date (as such term is defined in the Registration Rights Agreement referred to below) will accrue at the rate or rates borne by the Securities from time to time during such periods.]** Interest will be payable semiannually (to the holders of record of the Securities (or any predecessor Securities) at the close of business on the February 15 or August 15 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing September 1, 1998. [The Holder of this Security is entitled to the benefits of the Registration Rights Agreement, dated February 13, 1998, between the Company and the Purchasers named therein (the "Registration Rights Agreement"). In the event that either (a) the Exchange Offer Registration Statement (as such term is defined in the Registration Rights Agreement) is not filed with the Securities and Exchange Commission on or prior to the 30th calendar day following the date of original issue of the Securities, (b) the Exchange Offer Registration Statement has not been declared effective on or prior to the 90th calendar day following the date of original issue of the Securities or (c) the Exchange Offer (as such term is defined in the Registration Rights Agreement) is not consummated or a Shelf Registration Statement (as such term is defined in the Registration Rights Agreement) is not declared effective on or prior to the 120th calendar day following the date of original issue of the Securities, the interest rate borne by this Security shall be increased by one-half of one percent per annum following such 30-day period in the case of (a) above, following such 90-day period in the case of (b) above or following such 120-day period in the case of (c) above. The aggregate amount of such increase from the original interest rate pursuant to these provisions shall in no event exceed one-half of one percent per annum. Upon (x) the filing of the Exchange Offer Registration Statement after the 30-day period described in clause (a) above, (y) the effectiveness of the Exchange Offer Registration Statement after the 90-day period described in clause (b) above or (z) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 120-day period described - ---------- * Include only for Initial Securities. ** Include only for Exchange Securities. Exh. B-4 105 in clause (c) above, the interest rate borne by this Security from the date of such filing, effectiveness or consummation, as the case may be, will be reduced to the interest rate set forth above.]* Interest on this Security will accrue from the most recent date to which interest has been paid [on this Security or the Security surrendered in exchange herefor]** or, if no interest has been paid, from February 13, 1998; provided that, if there is no existing default in the payment of interest and if this Security is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest applicable to the Securities. The indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to such provisions. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose. 2. Method of Payment. The Company will pay interest (except defaulted interest) on the principal amount of the Securities on each March 1 and September 1 to the persons who are Holders (as reflected in the Security Register at the close of business on the February 15 and August 15 immediately preceding the Interest Payment Date), in each case, even if the Security is cancelled on registration of transfer or registration of exchange after such record date; provided that, with respect to the payment of principal, the Company will make payment to the Holder that surrenders this Security to any Paying Agent on or after March 1, 2008. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by its check payable in such money. The Company may mail an interest check to a Holder's registered address (as reflected in the Security Register). If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. - ---------- * Include only for Initial Securities. ** Include only for Exchange Securities. Exh. B-5 106 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar upon written notice thereto. The Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or co-registrar. 4. Indenture; Limitations. The Company issued the Securities under an Indenture dated as of February 13, 1998 (the "Indenture"), between the Company and United States Trust Company of New York, as trustee (the "Trustee"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Securities are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Security and the terms of the Indenture, the terms of the Indenture shall control. The Securities are general unsecured obligations of the Company. The Indenture limits the aggregate principal amount of the Securities to $250,000,000. 5. Redemption. Optional Redemption. The Securities may be redeemed at the option of the Company, in whole or in part, at any time and from time to time on or after March 1, 2003, at the following Redemption Prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), if redeemed during the 12-month period beginning March 1 of each of the years set forth below: Redemption Year Price ---- ----- 2003 104.00% 2004 102.00% 2005 and thereafter 100.00% Redemption with Proceeds of Offering. In addition, at any time or from time to time, on or prior to March 1, 2001, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Securities originally issued under this Indenture at a Redemption Price equal to 108% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Redemption Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Securities issued under this Indenture remains outstanding immediately after the occurrence of such redemption; provided further such redemption occurs within 60 days of the date of closing of each such Equity Offering. Exh. B-6 107 Procedures. Notice of a redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder to be redeemed at such Holder's last address as it appears in the Security Register. Securities in original denominations larger than $1,000 may be redeemed in part in integral multiples of $1,000. On and after the Redemption Date, interest ceases to accrue on Securities or portions of Securities called for redemption, unless the Company defaults in the payment of the Redemption Price. 6. Repurchase upon a Change in Control and Asset Sales. (a) Upon the occurrence of a Change of Control, the Company is obligated to make an offer to purchase all outstanding Securities at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase and (b) upon Asset Sales, the Company may be obligated to make offers to purchase Securities with a portion of the Net Cash Proceeds of such Asset Sales at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. 7. Denominations; Transfer; Exchange. The Securities are in registered form without coupons, in denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Securities selected for redemption (except the unredeemed portion of any Security being redeemed in part). Also, it need not register the transfer or exchange of any Securities for a period of 15 days before a selection of Securities to be redeemed is made. 8. Persons Deemed Owners. A Holder may be treated as the owner of a Security for all purposes. 9. Unclaimed Money. If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 10. Discharge Prior to Redemption or Maturity. If the Company irrevocably deposits, or causes to be deposited, with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Securities (a) to redemption or maturity, the Company will be discharged from the Indenture and the Securities, except in certain Exh. B-7 108 circumstances for certain sections thereof, and (b) to the Stated Maturity, the Company will be discharged from certain covenants set forth in the Indenture. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially adversely affect the rights of any Holder. 12. Restrictive Covenants. The Indenture contains certain covenants, including, without limitation, covenants with respect to the following matters: (i) Indebtedness; (ii) Restricted Payments; (iii) issuances and sales of Restricted Subsidiary stock; (iv) transactions with Affiliates; (v) Liens; (vi) guarantees of Indebtedness by Restricted Subsidiaries; (vii) disposition of proceeds of Asset Sales; (viii) dividends and other payment restrictions affecting Restricted Subsidiaries; (ix) merger and certain transfers of assets and (x) issuance of other senior subordinated indebtedness. Within 120 days after the end of each fiscal year and within 45 days after each fiscal quarter, the Company must report to the Trustee on compliance with such limitations. 13. Successor Persons. When a successor person or other entity assumes all the obligations of its predecessor under the Securities and the Indenture, the predecessor person will be released from those obligations. 14. Remedies for Events of Default. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of the Securities then outstanding may declare all the Securities to be immediately due and payable. If a bankruptcy or insolvency default with respect to the Company or any of its Significant Subsidiaries occurs and is continuing, the Securities automatically become immediately due and payable. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of at least a majority in principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power. Exh. B-8 109 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may make loans to, accept deposits from, perform services for, and otherwise deal with, the Company and its Affiliates as if it were not the Trustee. 16. Authentication. This Security shall not be valid until the Trustee signs the certificate of authentication on the other side of this Security. 17. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to BE Aerospace, Inc., 1400 Corporate Center Way, Wellington, Florida 33414, Attention: Chief Executive Officer. Exh. B-9 110 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. (Please print or typewrite name and address including zip code of assignee) the within Security and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer such Security on the books of the Company with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT OFFSHORE PHYSICAL CERTIFICATES] In connection with any transfer of this Security occurring prior to the date which is the earlier of the date of an effective Registration Statement or February 13, 2000, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [_](a) this Security is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [_](b) this Security is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Security and the Indenture. If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Security in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 307 of the Indenture shall have been satisfied. Date:______________________________ Exh. B-10 111 ----------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ------------------------------------ ----------------------------------- NOTICE: To be executed by an executive officer. Exh. B-11 112 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Security purchased by the Company pursuant to Section 1015 or Section 1016 of the Indenture, check the Box: [ ]. If you wish to have a portion of this Security purchased by the Company pursuant to Section 1015 or Section 1016 of the Indenture, state the amount (in original principal amount) below: $______________________. Date:___________________________ Your Signature:________________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:____________________________ Exh. B-12 113 Exhibit B Form of Certificate to Be Delivered upon Termination of Restricted Period On or after March 26, 1998 United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: Corporate Trust Division Re: BE Aerospace, Inc. (the "Company") 8% Senior Subordinated Notes due 2008 (the "Securities") Ladies and Gentlemen: This letter relates to U.S. $________ principal amount of Securities represented by the temporary global note certificate (the "Temporary Certificate"). Pursuant to Section 201 of the Indenture dated as of February 13, 1998 relating to the Securities (the "Indenture"), we hereby certify that (1) we are the beneficial owner of such principal amount of Securities represented by the Temporary Certificate and (2) we are a person outside the United States to whom the Securities could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Certificated Security representing the undersigned's interest in the principal amount of Securities represented by the Temporary Certificate, all in the manner provided by the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ----------------------------------- Authorized Signature Exh. B-1 114 Exhibit C Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S _________________, ____ United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: Corporate Trust Division Re: BE Aerospace, Inc. (the "Company") 8% Senior Subordinated Notes due 2008 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933, as amended. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. Exh. C-1 115 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ----------------------------------- Authorized Signature Exh. C-2 EX-4.2 4 SECOND SUPPLEMENTAL INDENTURE DATED MARCH 3, 1993 1 Exhibit 4.2 SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated as of February 6, 1998, between BE AEROSPACE, INC., a Delaware corporation (the "Company"), and United States Trust Company of New York, a New York corporation (the "Trustee"). WITNESSETH: WHEREAS, in accordance with Section 902 of the Indenture relating to the 9 3/4% Senior Notes due 2003 (the "Notes") of the Company dated as of March 3, 1993, as supplemented on January 5, 1996 (as supplemented, the "Indenture"), between the Company and the Trustee, the Trustee and the Company, when authorized by a Board Resolution, with the written consent of the Holders of a majority in principal amount of the Outstanding Securities (the "Requisite Consents") may amend certain terms and covenants contained in the Indenture; WHEREAS, the Company has obtained the Requisite Consents to amend the Indenture as set forth below; WHEREAS, the Board has, as evidenced by a Board Resolution, authorized the amendment of the Indenture pursuant to this Supplemental Indenture; WHEREAS all things necessary to make this Supplemental Indenture a valid supplement to the Indenture according to its terms have been done; NOW THEREFORE, the parties hereto hereby agree as follows: SECTION 1.1. Certain Terms Defined in the Indenture. All capitalized terms used herein without definition herein shall have the meanings ascribed thereto in the Indenture. SECTION 1.2. Amendments of Section 101. (a) Section 101 of the Indenture is amended by deleting each of the following definitions in their entirety: "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an Asset Acquisition from such Person or (b) existing at the time such Person becomes a subsidiary of any other Person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such Person becoming such a subsidiary). "Asset Acquisition" means (a) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the 2 2 Company shall be merged with or into the Company or any Restricted Subsidiary of the Company or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person which constitute all or substantially all of the assets of such Person or any division or line of business of such Person. "Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition to any Person other than the Company or a wholly-owned Restricted Subsidiary of the Company, in one or a series of related transactions, of (a) any Capital Stock of any Restricted Subsidiary of the Company held by the Company or any Restricted Subsidiary; (b) all or substantially all of the properties and assets of any division or line of business of the Company or any Restricted Subsidiary of the Company; or (c) any other properties or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets (i) that is governed by the provisions of Article Eight of this Indenture, (ii) to an Unrestricted Subsidiary, if permitted under Section 1011 of this Indenture or (iii) having a Fair Market Value of less than $10,000. "Average Life" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of each such principal payment by (b) the sum of all such principal payments. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or become 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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total Voting Stock of the Company; (b) the Company consolidates with, or mergers with or into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of the Company is converted into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of the surviving or transferee corporation or (2) cash, securities and other property in an amount which could be paid by the Company as a Restricted Payment under this Indenture and (ii) immediately after such transaction no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the 3 3 "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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total Voting Stock of the surviving or transferee corporation; (c) during any consecutive two-year 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 such Board of Directors or whose nomination for 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 (d) any final order, judgment or decree of a court of competent jurisdiction shall be entered against the Company decreeing the dissolution or liquidation of the Company. "Consolidated Adjusted Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (a) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions, (c) the net income (or net loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Restricted Subsidiaries in cash by such other Person during such period, (d) net income (or net loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that net income is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders and (f) income resulting from transfers of assets received by the Company or any Restricted Subsidiary from an Unrestricted Subsidiary. "Consolidated Fixed Charge Coverage Ratio" of any Person means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-cash Charges, in each case, for such period, of such Person and its subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (b) the sum of such Consolidated Interest Expense for such period; provided that (i) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of 4 4 computation had been the applicable rate for the entire period, (ii) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period, and (iii) notwithstanding clauses (i) and (ii) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements. If such Person or any of its subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the above clause shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or such subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all accrued interest, (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP and (iii) the aggregate dividends paid or accrued on Preferred Stock of such Person or its Subsidiaries, to the extent such Preferred Stock is owned by Persons other than such Person and its Subsidiaries. "Consolidated Net Worth" means, with respect to any Person at any date, the consolidated stockholders' equity of such Person less the amount of such stockholders' equity attributable to Redeemable Capital Stock or treasury stock of such Person and its Subsidiaries, as determined in accordance with GAAP. "Consolidated Non-cash Charges" means, with respect to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. 5 5 "Eligible Inventories" as of any date means the consolidated inventories of the Company and its Restricted Subsidiaries (net of any reserve) on the basis of the method of accounting (either last in/first out or first in/first out) used by the Company in the preparation of its financial statements included in the latest Form 10-K filed by the Company under the Securities Act, as shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries, all in accordance with GAAP. "Eligible Receivables" as of any date means the consolidated accounts receivables (net of any reserve) of the Company and its Restricted Subsidiaries that are not more that 60 days past their due date and that were entered into on normal payment terms as shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries, all in accordance with GAAP. "Fully Traded Common Stock" means Common Stock issued by any corporation if (A) such Common Stock is listed on The New York Stock Exchange, The American Stock Exchange or The London Stock Exchange or is included for trading privileges in the National Market System of the National Association of Securities Dealers Automated Quotation System; provided that such Common Stock is freely tradeable under the Securities Act (or, in the case of The London Stock Exchange, any applicable law, rule or regulation) upon issuance; and (B) such Common Stock does not constitute more than 15% of the issued and outstanding Common Stock of such corporation held by Persons other than 10% holders of such Common Stock and Affiliates and insiders of such corporation. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. In addition, the Fair Market Value of the net assets of any Restricted Subsidiary of the Company at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary of the Company), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) 6 6 owning a beneficial interest in the assets subject to the Asset Sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP consistently applied against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee. "Permitted Indebtedness" means any of the following: (i) Indebtedness of the Company under the Bank Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of 80% of the aggregate amount of Eligible Receivables and 50% of the aggregate amount of Eligible Inventory, measured as of the end of the most recent fiscal quarter preceding the time such Indebtedness is incurred; (ii) Indebtedness of the Company under the Securities; (iii) Indebtedness of the Company outstanding on the date of this Indenture (other than Indebtedness incurred pursuant to clause (i) of this definition); (iv) obligations of the Company pursuant to interest Rate Protection Obligations, which obligations do not exceed the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations; (v) Indebtedness of the Company to any wholly owned Restricted Subsidiaries; (vi) Indebtedness of the Company consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries; (vii) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company of any Indebtedness of the Company incurred pursuant to clauses (ii) and (iii) of this definition, including any successive refinancings by the Company, so long as (A) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced 7 7 plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Securities at least to the same extent as the Indebtedness being refinanced and (C) such new Indebtedness has an Average Life longer than the Average Life of the Securities and a final Stated Maturity later than the final Stated Maturity of the Securities; and (viii) Indebtedness in an aggregate principal amount not in excess of $30 million at any one time outstanding, less the amount of Permitted Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the definition thereof. "Permitted Investments" means any of the following (i) Investments in Cash Equivalents; (ii) Investments in the Company or wholly-owned Restricted Subsidiaries; provided that if the Company shall make any Investment in FEEL in excess of $1 million, FEEL shall Guarantee the Securities in compliance with paragraph (b) and clauses (i)(A) and (ii) of paragraph (a) of Section 1017; (iii) Investments in an amount not to exceed $15 million at any one time outstanding; or (iv) Investments by the Company or any Restricted Subsidiary of the Company in another Person, if as a result of such Investment (A) such other Person becomes a Restricted Subsidiary or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary. "Permitted Liens" means the following types of Liens: (a) Liens for taxes, assessments or governmental charges or claims either (i) not delinquent or (ii) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety 8 8 and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (d) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (e) easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (f) any interest or title of a lessor under any Capitalized Lease Obligation or operating lease; (g) purchase money Liens; provided, however, that (i) the related purchase money Indebtedness shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired and (ii) the Lien securing such Indebtedness shall be created (A) in the case of any Asset Acquisition, within 270 days of the closing of such Asset Acquisition and (B) in all other cases, in the ordinary course of business within 90 days of such acquisition; (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods; (i) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment, or storage of such inventory or other goods; (j) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (k) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets; 9 9 (l) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (m) Liens securing Interest Rate Protection Obligations which Interest Rate Protection Obligations relate to Indebtedness that is secured by Liens otherwise permitted under this Indenture; and (n) Liens securing an aggregate of $30 million of Indebtedness permitted to be incurred under this Indenture by the Company and its Restricted Subsidiaries. "Permitted Subsidiary Indebtedness" means any of the following: (i) Indebtedness of any Restricted Subsidiary outstanding on the date of this Indenture; (ii) obligations of any Restricted Subsidiary pursuant to Interest Rate Protection Obligations, which obligations do not exceed the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations; (iii) Indebtedness of any Restricted Subsidiary to any wholly-owned Restricted Subsidiary of the Company or to the Company; (iv) Indebtedness of any Restricted Subsidiary consisting of guaranties, indemnities or obligations in respect or purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries; (v) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by any Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary other than Indebtedness incurred pursuant to clause (vii) of this definition, including any successive refinancings by such Restricted Subsidiary, so long as any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced and such new Indebtedness has an Average Life longer than the Average Life of the Securities and final Stated Maturity later than the final Stated Maturity of the Securities; and (vi) Indebtedness (as defined in clauses (e) and (f) of the definition of Indebtedness) to the Holders incurred pursuant to provisions of this Indenture; 10 10 (vii) Indebtedness in an amount not to exceed $30 million at any one time outstanding, less the amount of Permitted Indebtedness then outstanding pursuant to clause (vii) of the definition thereof; and (viii) Guarantees of Indebtedness of the Company permitted under Section 1017. (b) The definition of "Unrestricted Subsidiary" located in Section 101 of the Indenture is amended in full to read as follows: ""Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any property of the Company which is not a Subsidiary of the Subsidiary to be so designated. The Board of Directors may designate any Unrestricted Subsidiary to be a Subsidiary." SECTION 1.3. Amendment of Section 501. Section 501 of the Indenture is amended and restated in full to read as follows: "SECTION 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of the principal of or premium, if any, when due and payable, on any of the Securities; or (2) default in the payment of an installment of interest on any of the Securities, when due and payable, for 30 days; or (3) default in the performance or breach of the provisions of Article Eight of this Indenture; or (4) the Company or any Guarantor shall fail to perform or observe any other term, covenant or agreement contained in the Securities, any Guarantee or this Indenture (other than a default specified in (1), (2) or (3) above) for a period of 30 days after written notice of such failure requiring the Company to remedy the same 11 11 shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Securities then outstanding; or (5) any Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture) and such condition shall have continued for a period of 30 days after written notice of such failure requiring the Guarantor and the Company to remedy the same shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Securities then outstanding; or (6) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustments or composition of or in respect of the Company or any Significant Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (7) the institution by the Company or any Significant Subsidiary or proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due." SECTION 1.4. Amendment of Section 801. Section 801 of the Indenture is amended and restated in full to read as follows: "SECTION 801. Company May Consolidate, etc., Only on Certain Terms. 12 12 The Company shall not, in any transaction or series of transactions, merge or consolidate with or into, or sell, assign, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any Person or Persons, and the Company will not permit any Restricted Subsidiary to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and after giving effect thereto: (1) either (A) if the transaction or transactions is a merger or consolidation, the Company shall be the surviving Person of such merger or consolidation, or (B) the Person formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or to which the properties and assets of the Company or such Restricted subsidiary, as the case may be, substantially as an entirety, are sold, assigned, transferred, leased or otherwise disposed of (any such surviving Person or transferee Person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and the Indenture, and, in each case, the Indenture shall remain in full force and effect; (2) the Company or such Person shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel satisfactory in form and substance to the Trustee, which, taken together, state that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transactions have been complied with." SECTION 1.5. Amendments to Article Ten. Article Ten of the Indenture is amended by deleting the following sections in their entirety and inserting "Intentionally Omitted" under each Section heading: SECTION 1009. Provision of Financial Statements. The Company shall file with the Commission the annual, quarterly and other reports required by Section 13(a), 13(c) or 15(d) of the Exchange Act, regardless of whether such Sections of the Exchange Act are applicable to the Company, and shall provide copies of such reports to Holders and the Trustee within 15 days of the date it is or would have been required to file such reports with the Commission had it been subject to such Sections. The Company shall also comply with the other provisions of TIA Section 314(a). 13 13 SECTION 1010. Limitation on Indebtedness. (a) The Company will not create, incur, issue, assume, guarantee or in any manner become directly or indirectly liable for (collectively to "incur") the payment of any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness, unless (x) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness, taken as one period (and after giving pro forma effect to: (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) notwithstanding clause (d) of the definition of Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period), would have been at least equal to 2.0 to 1, and (y) if such Indebtedness is Subordinated Indebtedness, such Indebtedness shall have an Average Life longer than the Average Life of the Securities and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Securities. (b) The Company will not permit any Restricted Subsidiary to incur any Indebtedness (including any Acquired Indebtedness), other than Permitted Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness, taken as one period (and after giving pro forma effect to the matters referred to in clauses (i), (ii) and (iii) in the parenthetical in paragraph (a) of this Section 1010), would have been at least equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the Securities in compliance with paragraph (b) and clauses (i)(A) and (ii) of paragraph (a) of Section 1017. (c) The Company shall not incur any Indebtedness that is expressly subordinated to any other Indebtedness of the Company unless such Indebtedness, by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is issued or outstanding, is also expressly made subordinate to the Securities at least to the extent it is subordinated to such other Indebtedness, except that the securities shall not be required to become designated senior indebtedness or its equivalent due solely to the incurrence of such other Indebtedness in accordance with this sentence. 14 14 SECTION 1011. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take the following actions: (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Capital Stock or in options, warrants or other rights to purchase such Capital Stock, but excluding dividends or distributions payable in Redeemable Capital Stock or in options, warrants or other rights to purchase Redeemable Capital Stock), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled principal payment, scheduled sinking fund payment or maturity, any Subordinated Indebtedness, (iv) make any Investment (other than any Permitted Investment) in any Person, or (v) incur any guarantee of Indebtedness of any Affiliate, including any Unrestricted Subsidiary (other than with respect to (a) guarantees of Indebtedness of any wholly-owned Restricted Subsidiary by the Company or (b) guarantees of Indebtedness of the Company by any Restricted Subsidiary), (such payments or other actions described in (but not excluded from) clauses (i) through (v) are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing, (2) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010, and (3) the aggregate amount of all Restricted Payments declared or made after the date of this Indenture shall not exceed the sum of (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day after the date of this Indenture and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net cash proceeds received after the date of this 15 15 Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Capital Stock of the Company (other than Redeemable Capital Stock) or warrants, options or rights to purchase such shares of Capital Stock of the Company, plus (C) the aggregate net cash proceeds received after the date of this Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities that have been converted into or exchanged for Capital Stock of the Company (other than Redeemable Capital Stock) to this extent such debt securities were originally sold for cash, together with the aggregate cash received by the Company at the time of such conversion or exchange, plus (D) to the extent not otherwise included in the Company's Consolidated Adjusted Net Income, the net reduction in Investments in Unrestricted Subsidiaries resulting from the payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or a Restricted Subsidiary after the date of this Indenture from any Unrestricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as provided in the definition of Investment), not to exceed in the case of any Unrestricted Subsidiary the total amount of Investments (other than Permitted Investments) in such Unrestricted Subsidiary by the Company and its Restricted Subsidiaries, plus (E) $10 million. (b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv) and (v) below) no Default or Event of Default shall have occurred and be continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of paragraph (a) above; (ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of the Company; (iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of the Company; (iv) the purchase, redemption or other acquisition or retirement for value of Subordinated Indebtedness (other than Redeemable Capital Stock or Permitted Indebtedness incurred pursuant to clause (vii) of the definition thereof) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence (other 16 16 than to a Restricted Subsidiary) of, Indebtedness of the Company so long as (A) the principal amount of such new Indebtedness does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, acquired or retired, (B) such new Indebtedness is subordinated to the Securities to the same extent as such Subordinated Indebtedness so purchased, redeemed, acquired or retired and (C) such new Indebtedness has an Average Life longer than the Average Life of the Securities and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Securities; and (v) the purchase, redemption or other acquisition or retirement for value of shares of Common Stock of the Company issued pursuant to non-qualified options granted under stock option plans of the Company in order to pay withholding taxes due as a result of income recognized upon the exercise of such options; provided that (1) the Company is required, by the terms of such plans, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $2 million during any fiscal year of the Company. The actions described in clauses (i), (ii), (iii) and (v) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) (provided that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce the amount that would otherwise be available under clause (3) of paragraph (a) when declared, but not also when subsequently paid pursuant to such clause (i)) and the actions described in clause (iv) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) and shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a). (c) In computing Consolidated Adjusted Net Income of the Company under clause (3)(A) of paragraph (a) above, (1) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment shall be deemed 17 17 to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. SECTION 1012. Limitation on Issuances and Sales of Restricted Subsidiary Stock. The Company (i) will not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly-owned Restricted Subsidiary) and (ii) will not permit any Person (other than the Company or a wholly-owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this covenant shall not prohibit (1) the issuance and sale of all, but not less than all, of the issued and outstanding Capital stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of this Indenture, or (2) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law. SECTION 1013. Limitation on Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company or any beneficial owner of 5% or more of any class of the Company's Capital Stock at any time outstanding ("Interested Persons"), unless (i) such transaction is among the Company and wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms that are no less favorable to the Company, or such Restricted Subsidiary, as the case may be, than those which could have been obtained in an arm's length transaction with third parties who are not Interested Persons and (B) such transaction has been approved by the Board of Directors (including a majority of the Disinterested Directors); provided, however, that this covenant will not restrict (1) the Company from paying reasonable and customary regular compensation and fees to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary and (2) the performance of the Company's obligations under the AET Contract. SECTION 1014. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on or with respect to any of its property or assets, whether owned at the date of this Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Subordinated Indebtedness, the Securities are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien and (y) in the case of any other Lien, the 18 18 Securities are equally and ratably secured, except for (a) Liens existing as of the Closing Date; (b) Liens securing the Securities; (c) Liens in favor of the Company; (d) Liens securing Indebtedness of the Company or any Restricted Subsidiary having a principal amount not in excess of (A) the sum of 80% of Eligible Receivables and 50% of Eligible Inventory, measured as of the end of the most recent fiscal quarter preceding the incurrence of such Lien less (B) the amount of Indebtedness secured by Liens incurred pursuant to clause (n) of the definition of Permitted Liens; provided that, to the extent such Liens secure Indebtedness of any Restricted Subsidiary (i) such Restricted Subsidiary shall Guarantee the Securities in compliance with the provisions of paragraph (b) and clauses (i)(A) and (ii) of paragraph (a) of Section 1017 and (ii) such Restricted Subsidiary's Guarantee of the Securities shall be equally and ratably secured with the Indebtedness secured by such Lien; and (e) Permitted Liens. SECTION 1015. Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to purchase all of the outstanding Securities (a "Change of Control Offer"), and shall purchase, on a business day (the "Change of Control Purchase Date") not more than 70 nor less than 60 days following the Change of Control Date, all of the then outstanding Securities validly tendered pursuant to such Change in Control Offer, at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. The Change of Control offer is required to remain open for at least 20 Business Days and until the close of business on the Change of Control Purchase Date. (b) In order to effect such Change of Control Offer, the Company shall, not later than the 30th day after the Change of Control, mail to each Holder notice of the Change of Control Offer in the manner provided in Section 106, which notice shall govern the terms of the Change of Control Offer and shall state: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to repurchase such Holder's Securities at the Change of Control Purchase Price. (2) the circumstances and relevant facts regarding such Change of Control (including but not limited to information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the Change of Control Purchase Date; and (4) the instructions a Holder must follow in order to have its Securities repurchased in accordance with paragraph (c) of this Section. 19 19 (c) Holders electing to have Securities purchased will be required to surrender such Securities to the Company at the address specified in the notice at least five Business Days prior to the Change of Control Purchase Date. Holders will be entitled to withdraw their election if the Company receives, not later than three Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Securities purchased. Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount of the unpurchased portion of the Securities surrendered. (d) The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that a Change of Control occurs and the Company is required to purchase Securities as described above. SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales. (a) The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not less than the Fair Market Value of the assets sold (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash Equivalents; provided that the Company and its Restricted Subsidiaries may engage in Asset Sales for consideration not in the form of cash or Cash Equivalents in amounts in excess of that permitted in this clause (ii), so long as (x) such excess consideration is in the form of Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully Traded Common Stock received by the Company and its Restricted Subsidiaries (measured as of the date of receipt) from all Asset Sales in reliance on this proviso since the date of this Indenture that has not been converted into cash or Cash Equivalents does not exceed $10 million and (z) any Fully Traded Common stock that is converted into cash or Cash Equivalents shall be applied as provided in paragraphs (b) and (c) of this Section 1016. (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after such Asset Sale, to (i) repay or prepay any then outstanding senior Indebtedness of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or enter into a legally binding agreement to invest) in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Closing Date or in businesses reasonably related thereto. If any such legally binding agreement to invest such 20 20 Net Cash Proceeds is terminated, then the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clauses (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph (b) constitutes "Excess Proceeds." (c) When the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall, within 15 Business Days, make an offer to purchase (an "Excess Proceeds Offer") from all holders of Securities, on a pro rata basis, in accordance with the procedures set forth below, the maximum principal amount (expressed as a multiple of $1,000) of Securities that may be purchased with the Excess Proceeds. The offer price as to each Security shall be payable in cash in an amount equal to 100% of the principal amount of such Security plus accrued and unpaid interest, if any, to the date such Excess Proceeds Offer is consummated. To the extent that the aggregate principal amount of Securities tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Securities validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Securities to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset to zero. SECTION 1017. Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. (a) The Company will not permit any Restricted Subsidiary to guarantee the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary unless (i) (A) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for an unsubordinated Guarantee of payment of the Securities by such Restricted Subsidiary and (B) with respect to any such Guarantee of Subordinated Indebtedness, any such Guarantee of such Restricted Subsidiary with respect to such Subordinated Indebtedness shall be subordinated to such Restricted Subsidiary's Guarantee with respect to the Securities at least to the same extent as such Subordinated Indebtedness is subordinated to the Securities; (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; (iii) such Restricted Subsidiary shall appoint CT Corporation in New York City as its agent for the service of process; and (iv) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that (A) such appointment of CT Corporation is valid, (B) such Guarantee of the Securities has been duly executed and authorized and (C) such Guarantee of the Securities constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all 21 21 laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that this paragraph (a) shall not be applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the time such Person became a Restricted Subsidiary of the Company and (y) was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary of the Company. (b) Notwithstanding the foregoing and the other provisions of this Indenture, any Guarantee by a Restricted Subsidiary of the Securities shall provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (ii) the release or discharge of the Guarantee which resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such Guarantee. SECTION 1018. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary of the Company, (c) make loans or advances to the Company or any other Restricted Subsidiary of the Company, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary of the Company or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any Restricted Subsidiary of the Company, (iii) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary of the Company in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (iv) any agreement in existence on the Closing Date (to the extent of any encumbrances or restrictions in existence thereunder on the Closing Date) and (v) any agreement providing for the incurrence of Indebtedness of Restricted Subsidiaries pursuant to either clause (x) of paragraph (b) of Section 1010 or clause (vii) of the definition of Permitted Subsidiary Indebtedness; provided that any Restricted Subsidiary (including, without limitation, FEEL) that becomes subject to any such encumbrances or restrictions pursuant to this clause (v) shall Guarantee the Securities in compliance with the provisions of paragraph (b) and clauses (i) and (ii) of paragraph (a) of Section 1017. 22 22 SECTION 1.6 Section 1020. A new Section 1020 entitled "Waivers" will be added to the Indenture reading in its entirety as follows: "SECTION 1020. Waivers. The application of the provisions of the Indenture are hereby waived to the extent that such provisions might otherwise interfere with the ability of the Company to enter into agreements contemplated by, and to consummate the offer and sale of one or more new issues of senior subordinated debt securities in a public or private offering." SECTION 2. Effectiveness. This Supplemental Indenture shall become effective in accordance herewith upon its execution but shall become operative and shall supersede the Indenture to the extent provided herein only if, and on the date (the "Operative Date") that, the Company consummates the purchase of Securities pursuant to and in accordance with the terms of the Offer to Purchase and Consent Solicitation Statement of the Company, dated January 28, 1998. From and after such date, the Indenture shall apply only to the extent not amended and superseded hereby. The Company shall notify the trustee of the Operative Date promptly after such date. Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect (a) the validity of this Supplemental Indenture or (b) this Supplemental Indenture becoming operative pursuant to this Section 2. SECTION 3. Governing Law. This Supplemental Indenture shall be governed by the laws of the State of New York. SECTION 4. Counterparts. This Supplemental Indenture may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 5. Severability. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 6. Ratification. Except as expressly amended hereby, each provision of the Indenture shall remain in full force and effect and, as amended hereby, the Indenture is in all respects agreed to, ratified and confirmed by each of the Company and the Trustee. ----------------------------------- 23 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. BE AEROSPACE, INC. By:______________________________________ Title: Attest:___________________ Title: UNITED STATES TRUST COMPANY OF NEW YORK By:______________________________________ Title: Attest:___________________ Title: EX-10.1 5 THIRD AMENDED AND RESTATED CREDIT AGREEMENT 1 Exhibit 10.1 [CONFORMED COPY] *************************************************************** BE AEROSPACE, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 29, 1993 Amended and Restated as of May 29, 1997 THE CHASE MANHATTAN BANK, as Administrative Agent NATIONSBANK, N.A. (SOUTH), as Co-Agent *************************************************************** 2 TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only. Page Section 1. Definitions and Accounting Matters ............................ 1 1.01 Certain Defined Terms ........................................... 1 1.02 Accounting Terms and Determinations ............................. 23 1.03 Classes and Types of Loans ...................................... 24 Section 2. Commitments, Loans, Notes and Prepayments ..................... 25 2.01 Loans ........................................................... 25 2.02 Borrowings ...................................................... 26 2.03 Letters of Credit ............................................... 26 2.04 Changes of Commitments .......................................... 31 2.05 Commitment Fee .................................................. 32 2.06 Lending Offices ................................................. 32 2.07 Several Obligations; Remedies Independent ....................... 32 2.08 Evidence of Debt ................................................ 33 2.09 Optional Prepayments and Conversions or Continuations of Loans .. 33 2.10 Mandatory Prepayments and Reductions of Commitments ............. 34 Section 3. Payments of Principal and Interest ............................ 37 3.01 Repayment of Loans .............................................. 37 3.02 Interest ........................................................ 37 Section 4. Payments; Pro Rata Treatment; Computations; Etc ............... 38 4.01 Payments ........................................................ 38 4.02 Pro Rata Treatment .............................................. 39 4.03 Computations .................................................... 39 4.04 Minimum Amounts ................................................. 40 4.05 Certain Notices ................................................. 40 4.06 Non-Receipt of Funds by the Administrative Agent ................ 41 4.07 Sharing of Payments, Etc. ....................................... 42 Section 5. Yield Protection, Etc. ........................................ 43 5.01 Additional Costs ................................................ 43 5.02 Limitation on Types of Loans .................................... 46 5.03 Illegality ...................................................... 47 5.04 Treatment of Affected Loans ..................................... 47 5.05 Compensation .................................................... 48 5.06 Additional Costs in Respect of Letters of Credit ................ 48 5.07 U.S. Taxes ...................................................... 49 Section 6. Conditions Precedent .......................................... 51 6.01 Conditions to Effectiveness ..................................... 51 6.02 Initial and Subsequent Extensions of Credit ..................... 53 (i) 3 Page ---- Section 7. Representations and Warranties ................................ 54 7.01 Corporate Existence ............................................. 54 7.02 Financial Condition ............................................. 54 7.03 Litigation ...................................................... 55 7.04 No Breach ....................................................... 55 7.05 Action .......................................................... 55 7.06 Approvals ....................................................... 56 7.07 Use of Credit ................................................... 56 7.08 ERISA ........................................................... 56 7.09 Taxes ........................................................... 56 7.10 Investment Company Act .......................................... 57 7.11 Public Utility Holding Company Act .............................. 57 7.12 Material Agreements and Liens ................................... 57 7.13 Environmental Matters ........................................... 57 7.14 Capitalization .................................................. 59 7.15 Subsidiaries, Etc ............................................... 60 7.16 Title to Assets ................................................. 61 7.17 Compliance with Law ............................................. 61 7.18 True and Complete Disclosure .................................... 61 Section 8. Covenants of the Company ...................................... 62 8.01 Financial Statements, Etc ....................................... 62 8.02 Litigation ...................................................... 66 8.03 Existence, Etc. ................................................. 66 8.04 Insurance ....................................................... 67 8.05 Prohibition of Fundamental Changes .............................. 67 8.06 Limitation on Liens ............................................. 68 8.07 Indebtedness .................................................... 70 8.08 Investments ..................................................... 71 8.09 Restricted Payments ............................................. 71 8.10 Leverage Ratio .................................................. 73 8.11 Adjusted Net Worth .............................................. 73 8.12 Interest Coverage Ratio ......................................... 74 8.13 Net Worth of Acurex ............................................. 74 8.14 Lines of Business ............................................... 74 8.15 Transactions with Affiliates .................................... 74 8.16 Use of Proceeds ................................................. 75 8.17 Certain Obligations Respecting Subsidiaries ..................... 75 8.18 Modifications of Certain Documents .............................. 76 8.19 Environmental Matters ........................................... 76 8.20 Security for Series A Loans ..................................... 77 8.21 Redemption of Senior Subordinated Notes ......................... 77 Section 9. Events of Default ............................................. 77 Section 10. The Administrative Agent ..................................... 82 10.01 Appointment, Powers and Immunities ............................. 82 10.02 Reliance by Administrative Agent ............................... 82 10.03 Defaults ....................................................... 83 10.04 Rights as a Lender ............................................. 83 10.05 Indemnification ................................................ 84 (ii) 4 Page ---- 10.06 Non-Reliance on Administrative Agent and Other Lenders ......... 84 10.07 Failure to Act ................................................. 85 10.08 Resignation or Removal of Administrative Agent ................. 85 10.09 Consents under Basic Documents ................................. 86 10.10 Collateral Sub-Agents .......................................... 86 10.11 Co-Agent ....................................................... 87 Section 11. Miscellaneous ................................................ 87 11.01 Waiver ......................................................... 87 11.02 Notices ........................................................ 87 11.03 Expenses, Etc. ................................................. 87 11.04 Amendments, Etc. ............................................... 89 11.05 Successors and Assigns ......................................... 90 11.06 Assignments and Participations ................................. 90 11.07 Survival ....................................................... 92 11.08 Captions ....................................................... 93 11.09 Counterparts ................................................... 93 11.10 Governing Law; Submission to Jurisdiction ...................... 93 11.11 Waiver of Jury Trial ........................................... 93 11.12 Treatment of Certain Information; Confidentiality .............. 93 11.13 Amendments to Security Documents ............................... 94 Annex 1 - Commitments SCHEDULE I - Material Agreements and Liens SCHEDULE II - Hazardous Materials SCHEDULE III - Subsidiaries and Investments SCHEDULE IV - Approvals and Compliance SCHEDULE V - Existing Letters of Credit SCHEDULE VI - Taxes SCHEDULE VII - Transactions with Affiliates EXHIBIT A-1 - Form of Revolving Credit Security Agreement EXHIBIT A-2 - Form of Term Loan Security Agreement EXHIBIT B - Form of Confidentiality Agreement (iii) 5 THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 29, 1993, amended and restated as of May 29, 1997, 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 Second Amended and Restated Credit Agreement dated as of October 29, 1993, amended and restated as of January 19, 1996 (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 Lender 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. Credit Agreement 6 - 2 - "Acurex" shall mean Acurex Corporation, a Delaware corporation. "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 fair market value of any shares of capital stock of the Company (determined as of the date such shares are issued) which are utilized in any business combination accounted for using pooling of interest accounting plus (c) an amount not to exceed $20,000,000 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 February 22, 1997 plus (d) 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. "Administrative Questionaire" 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 Credit Agreement 7 - 3 - 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. "Applicable Margin" shall mean with respect to Base Rate Loans and Eurodollar Loans, the rate for such Type of Loan for each rating level period set forth in the schedule below: Applicable Margin Rating Level Period Base Rate Loans Eurodollar Loans - ------------------- --------------- ---------------- Level I Period 0.00% 0.500% Level II Period 0.00% 0.625% Level III Period 0.00% 0.750% Level IV Period 0.00% 0.875% Level V Period 0.00% 1.000% Level VI Period 0.00% 1.250% Level VII Period 0.25% 1.500% "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. Credit Agreement 8 - 4 - "Borrowing Base" shall mean, as at any date, the sum of (a) 80% of the aggregate amount of Eligible Receivables at said date plus (b) 50% of the aggregate value of Eligible Inventory at said date plus (c) the lesser of (i) 40% of the net book value of personal Property (excluding real estate owned or leased, and excluding Eligible Inventory and Eligible Receivables) of the Company in which the Administrative Agent has a valid and perfected first-priority security interest and (ii) $20,000,000 through and including the third anniversary of the Restatement Date, $15,000,000 from the third anniversary of the Restatement Date through and including the fourth anniversary of the Restatement Date, and $10,000,000 thereafter; provided that in no event shall the amount of the Borrowing Base exceed the amount of Indebtedness permitted to be secured by Liens under clause (d) of Section 1014 of the Senior Indenture. "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. "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. Credit Agreement 9 - 5 - "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 Revolving Credit Security Agreement. "Commitment Fee Rate" shall mean (a) .1875% for any Level I Period, (b) .2000% for any Level II Period, (c) .2250% for any Level III Period, (d) .2500% for any Level IV Period, (e) .2750% for any Level V Period, (f) .3250% for any Level VI Period and (e) .3750% for any Level VII Period. "Commitments" shall mean the Series A Commitments and the Series B Commitments. "Continue", "Continuation" and "Continued" shall refer to the continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to the next Interest Period. "Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans, which may be 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 Credit Agreement 10 - 6 - 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, 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. "Eligible Inventory" shall mean, as at any date, the inventories (net of any reserve and excluding capitalized engineering expenditures) of the Company on the basis of the method of accounting (either last in/first out or first in/first out) used by the Company in the preparation of its financial statements included in the latest Form 10-K filed by the Company under the Securities Exchange Act, as included in the most recent consolidated balance sheet of the Company and its Subsidiaries delivered pursuant to Section 8.01 hereof (or, prior to the delivery of the first consolidated balance sheet under Section 8.01 hereof, the consolidated balance sheet as at February 22, 1997 referred to in Section 7.02 hereof) and in which the Administrative Agent has a valid and perfected first-priority security interest. "Eligible Receivables" shall mean, as at any date, the trade accounts receivable (net of any reserve) of the Company that are not more than 60 days past their due date and that were entered into on normal payment terms as included in the most recent consolidated balance sheet of the Company and its Subsidiaries delivered pursuant to Section 8.01 hereof (or, prior to the delivery of the first consolidated balance sheet under Section 8.01 hereof, the consolidated balance sheet as at February 22, 1997 referred to in Section 7.02 hereof) and in which the Administrative Agent has a valid and perfected first-priority security interest. "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 Credit Agreement 11 - 7 - natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any written claim by any governmental authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any written claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "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 February 22, 1997 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 the Closing Date of any capital contribution received (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 or (y) any capital contribution by the Company or any Wholly Owned Subsidiary of the Company to any Subsidiary of the Company. Credit Agreement 12 - 8 - "Equity Rights" shall mean, with respect to any Person, any outstanding subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or outstanding securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which the Company is a member and (ii) solely for purposes of potential liability under Section 302 (c) (11) of ERISA and Section 412 (c) (11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which the Company is a member. "Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/100 of 1%) of the respective rates per annum quoted by each Reference Lender at approximately 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. Credit Agreement 13 - 9 - "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(1) 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. "Funded Debt" shall mean, for any Person: (a) all Indebtedness of such Person that should be reflected on a balance sheet of such Person in accordance with GAAP; and (b) all Indebtedness of any other Person that should be reflected on a balance sheet of such other Person in accordance with GAAP and that is secured by a Lien on the Property of, is supported by a letter of credit issued for account of, or is Guaranteed by, such Person. "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with those which, in accordance with the last sentence of Section 1.02(a) hereof, are to be used in making the calculations for purposes of determining compliance with this Agreement. "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, Credit Agreement 14 - 10 - 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. "Increased Acquisition Amount" shall have the meaning assigned to such term in Section 8.05(b) hereof. "Increased Senior Note Prepayment Amount" shall have the meaning assigned to such term in Section 8.09 hereof. "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 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 Credit Agreement 15 - 11 - 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. "Information Memorandum" shall mean the Confidential Information Memorandum dated May, 1997 distributed to the Lenders. "Interest Coverage Ratio" shall mean, as at any date the ratio of (i) EBITDA for the period of four consecutive complete fiscal quarters of the Company ending on or most recently ended prior to such date to (ii) Interest Expense for such 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 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 Commitment Reduction Date unless, after giving effect thereto, the aggregate principal amount of the Series B Loans having Interest Periods that end after such Series B Commitment Reduction 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 Commitment Reduction Date; (iii) each Interest Period that would otherwise end on a day Credit Agreement 16 - 12 - 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); (iv) notwithstanding clauses (i) and (ii) above, no Interest Period shall have a duration of less than one month and, if the Interest Period for any Eurodollar Loan would otherwise be a shorter period, such Eurodollar Loan shall not be available hereunder for such period; and (v) until the earlier of (a) the date that Chase shall have notified the Company that its syndication of the Commitments and Loans is completed and (b) the ninetieth day after the Amendment Effective Date, Interest Periods in excess of one month shall not be available. "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 V 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 any other Person or any agreement to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such 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. Credit Agreement 17 - 13 - "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. "Letter of Credit" shall have the meaning assigned to such term in Section 2.03 hereof. "Letter of Credit Documents" shall mean, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time. "Letter of Credit Interest" shall mean, for each Series A Lender, such Lender's participation interest (or, in the case of the Issuing Lender, the Issuing Lender's retained interest) in the Issuing Lender's liability under Letters of Credit and such Lender's rights and interests in Reimbursement Obligations and fees, interest and other amounts payable in connection with Letters of Credit and Reimbursement Obligations. "Letter of Credit Liability" shall mean, without duplication, at any time and in respect of any Letter of Credit, the sum of (a) the undrawn amount of such Letter of Credit plus (b) the aggregate unpaid principal amount of all Reimbursement Obligations of the Company at such time due and payable in respect of all drawings made under such Letter of Credit. For purposes of this Agreement, a Series A Lender (other than the Issuing Lender) shall be deemed to hold a Letter of Credit Liability in an amount equal to its participation interest in the related Letter of Credit under Section 2.03 hereof, and the Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount equal to its retained interest in the related Letter of Credit after giving effect to the acquisition by the Series A Lenders other than the Issuing Lender of their participation interests under said Section 2.03. "Level I Period" shall mean any period during which (a) no Event of Default shall have occurred and be continuing, and (b) Rating Level 1 is in effect or the Leverage Ratio is less than 1.75 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, (b) neither Rating Level 1 nor Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 1.75 to 1 but less than 2.25 to 1; "Level III Period" shall mean any period, other than a Level I Period or a Credit Agreement 18 - 14 - Level II Period, during which (a) no Event of Default shall have occurred and be continuing, (b) neither Rating Level 1 nor Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 2.25 to 1 but less than 2.75 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, (b) neither Rating Level 1 nor Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 2.75 to 1 but less than 3.25 to 1; "Level V Period" shall mean any period, other than a Level I Period, a Level II Period, a Level III Period or a Level IV Period during which (a) no Event of Default shall have occurred and be continuing, (b) neither Rating Level 1 nor Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 3.25 to 1 but less than 3.75 to 1; "Level VI Period" shall mean any period, other than a Level I Period, a Level II Period, a Level III Period, Level IV Period or a Level V Period during which (a) no Event of Default shall have occurred and be continuing, (b) neither Rating Level 1 nor Rating Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 3.75 to 1 but less than 4.25 to 1; 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 (x) a change in the Standard & Poor's Rating or the Moody's Rating shall become effective on the date of announcement or publication by the respective rating agencies of a change in such rating or, in the absence of such announcement or publication, the effective date of such rating and (y) a change in the Leverage Ratio shall become effective on the first day of the next succeeding fiscal quarterly period of the Company following receipt by the Administrative Agent of the financial statements of the Company and its Subsidiaries for such most recent Fiscal Date delivered as required by Section 8.01(a) or (b) hereof; provided that failure to deliver such financial statements as required by Section 8.01(a) or (b) 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, at any time, the ratio of Total Funded Debt at such time to EBITDA for the four most recent fiscal quarters for which financial statements have been delivered pursuant to Section 6.01(i), 8.01(a) or 8.01(b) hereof. "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 Credit Agreement 19 - 15 - holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property. "Loans" shall mean the Series A Loans and the Series B Loans. "Majority Lenders" shall mean Majority Series A Lenders and Majority Series B Lenders. "Majority Series A Lenders" shall mean Series A Lenders having at least 60% of the aggregate amount of the Series A Commitments or, if the Series A Commitments shall have terminated, Lenders holding at least 60% 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 at least 60% of the aggregate amount of the Series B Commitments or, if the Series B Commitments shall have terminated, Lenders holding at least 60% of the aggregate unpaid principal amount of the Series B 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. "Moody's" shall mean Moody's Investors Services, Inc. or any successor corporation thereto. "Moody's Rating" shall mean, at any time, the then current rating (including the failure to rate) by Moody's of the Company's long-term senior unsecured Indebtedness. "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. Credit Agreement 20 - 16 - "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 Credit Agreement 21 - 17 - be net of any repayments by the Company or any of its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured by a Lien on the Property that is the subject of such Disposition and (ii) the transferee of (or holder of a Lien on) such Property requires that such Indebtedness be repaid as a condition to the purchase of such Property. "Notes" shall mean the promissory notes (if any) executed and delivered by the Company pursuant to Section 2.08 hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Investments" shall mean any Investment in (i) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America, or of any agency thereof; (ii) commercial paper rated at least A-1 by S&P or P-1 by Moody's; (iii) time deposits with, including certificates of deposit issued by, any office located in the United States of America of any bank or trust company which is organized under the laws of the United States of America or any state thereof and has capital, surplus and undivided profits aggregating at least $1,000,000,000; (iv) shares of any money market or mutual fund not less than 80% of the assets of which are invested solely in securities or obligations of the type described in clauses (i) through (iii) above and (v) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above, provided in each case that such Investment matures within one year from the date of acquisition thereof by the Company or a Subsidiary of the Company. "Person" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). "Plan" shall mean an employee benefit plan established or maintained by the Company or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "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 Credit Agreement 22 - 18 - date to but excluding the date on which such amount is paid in full equal to 2% plus the Base Rate as in effect from time to time plus the Applicable Margin for Base Rate Loans (provided that, if the amount so in default is principal of a Eurodollar Loan and the due date thereof is a day other than the last day of the Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period for and including such due date to but excluding the last day of the Interest Period, 2% plus the interest rate for such Loan as provided in Section 3.02 hereof and, thereafter, the rate provided for above in this definition) "Prime Rate" shall mean the rate of interest from time to time announced by Chase at the Principal Office as its prime commercial lending rate. "Principal Office" shall mean the principal office of Chase, located on the date hereof at 270 Park Avenue, New York, New York 10017. "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Quarterly Dates" shall mean the quarterly anniversaries of the Restatement Date; provided that, if any such date is not a Business Day, the Quarterly Date shall be the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, the next preceding Business Day). "Rating Level 1" shall mean (a) the Standard & Poor's Rating is at or above BBB- (or any successor rating) and (b) the Moody's Rating is at or above Baa3 (or any successor rating). "Rating Level 2" shall mean (a) the Standard & Poor's Rating is below BB- (or any successor rating) or (b) the Moody's Rating is below Ba3 (or any successor rating). "Recapture Date" shall mean the last day of the Recapture Period. "Recapture Period" shall mean each period (a) commencing on the later of (i) October 29, 1993 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. Credit Agreement 23 - 19 - "Reference Lenders" shall mean Chase and NationsBank, N.A. "Regulations A, D, U and X" shall mean, respectively, Regulations A, B, 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, at any time, the obligations of the Company then outstanding, or which may thereafter arise in respect of all Letters of Credit then outstanding, to reimburse amounts paid by the Issuing Lender in respect of any drawings under a Letter of Credit. "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata. The terms "Release" and "Released" used as a verb shall have a correlative meaning. "Reserve Requirement" shall mean, for any Interest Period for any Eurodollar Loan, the average maximum rate at which reserves (including, without limitation, any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall include any other reserves required to be maintained by such member banks by reason of any Regulatory Change with respect to (i) any category of liabilities that includes deposits by reference to which the Eurodollar Base Rate is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions of credit or other assets that includes Eurodollar Loans. Credit Agreement 24 - 20 - "Restatement Date" shall mean May 29, 1997. "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 (i) which is subordinated in right of payment to the prior payment of the Loans or (ii) which is evidenced by the Senior Notes. "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. "Revolving Credit Security Agreement" shall mean the Revolving Credit Security Agreement dated as of October 29, 1993 between the Company and the Agent, a copy of which is attached as Exhibit A-l hereto, as amended by Section 11.13 (a) hereof and as the same shall be further modified, supplemented and in effect from time to time. "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Security Documents" shall mean, collectively, the Revolving Credit Security Agreement and the Term Loan Security Agreement. "Senior Indenture" shall mean the Indenture dated as of March 3, 1993 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. Credit Agreement 25 - 21 - "Senior Notes" shall mean the Company's 9-3/4% Senior Notes due 2003 issued pursuant to the Senior Indenture, as the same shall be modified and supplemented and in effect from time to time. "Senior Subordinated 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 Notes" shall mean the Company's Senior Subordinated Notes due 2006 issued pursuant to the Senior Subordinated Indenture, as the same shall be modified and supplemented and in effect from time to time. "Series A Commitment" shall mean, for each Series A Lender, the obligation of such Lender to make Series A Loans in an aggregate amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on Annex 1 hereto under the caption "Series A Commitment" (as the same may be reduced from time to time pursuant to Section 2.04 hereof or increased or reduced from time to time pursuant to Section 11.06 hereof). The original aggregate principal amount of the Series A Commitments is $100,000,000. "Series A Commitment Percentage" shall mean, with respect to any Series A Lender, the ratio of (a) the amount of the Series A Commitment of such Lender to (b) the aggregate amount of the Series A Commitments of all of the Lenders. "Series A Commitment Termination Date" shall mean the fifth anniversary of the Restatement Date; provided that if such day is not a Business Day, the Series A Commitment Termination Date shall be the immediately preceding Business Day. "Series A Lenders" shall mean (a) on the Amendment Effective Date, the Lenders having Series A Commitments as indicated on Annex 1 hereto and (b) thereafter, the Lenders from time to time holding Series A Loans and Series A Commitments after giving effect to any assignments thereof permitted by Section 11.06 hereof. "Series A Loans" shall mean the loans provided for by Section 2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans. "Series A Notes" shall mean the promissory notes provided for by Section 2.08 (a) hereof and all promissory notes delivered in substitution or exchange therefor, in each case as Credit Agreement 26 - 22 - the same shall be modified and supplemented and in effect from time to time. "Series B Commitment" shall mean, for each Series B Lender, the obligation of such Lender to make Series B Loans in an aggregate amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on Annex 1 hereto under the caption "Series B Commitment" (as the same may be reduced from time to time pursuant to Section 2.04 hereof or increased or reduced from time to time pursuant to Section 11.06 hereof). The original aggregate principal amount of the Series B Commitments is $25,000,000. "Series B Commitment Reduction Dates" shall mean the eight Quarterly Dates commencing with the Quarterly Date falling on or nearest to the date three years and three months after the Restatement Date and ending on the Series B Commitment Termination Date. "Series B Commitment Termination Date" shall mean the fifth anniversary of the Restatement Date; provided that if such day is not a Business Day, the Series B Commitment Termination Date shall be the immediately preceding Business Day. "Series B Lenders" shall mean (a) on the Amendment Effective Date, the Lenders having Series B Commitments as indicated on Annex 1 hereto and (b) thereafter, the Lenders from time to time holding Series B Loans and Series B Commitments after giving effect to any assignments thereof permitted by Section 11.06 hereof. "Series B Loans" shall mean the loans provided for by Section 2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans. "Series B Notes" shall mean the promissory notes provided for by Section 2.08(b) hereof and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. "S&P" shall mean Standard & Poor's Rating Group or any successor thereto. "Specified Subsidiary" shall mean each of BE Aerospace International, Inc., BE Aerospace (France) S.A.R.L. and Nordskog Industries, Inc., 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 Revolving Credit Security Agreement or are otherwise pledged to Credit Agreement 27 - 23 - the Administrative Agent for the benefit of the Series A Lenders pursuant to documentation in form and substance reasonably satisfactory to the Majority Series A Lenders. "Standard & Poor's Rating" shall mean, at any time, the then current rating (including the failure to rate) by S&P of the Company's long-term senior unsecured Indebtedness. "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. "Term Loan Security Agreement" shall mean the Term Loan Security Agreement dated as of October 29, 1993, a copy of which is attached as Exhibit A-2 hereto, as amended by Section 11.13(b) hereof and as the same shall be further modified, supplemented and in effect from time to time. "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 Credit Agreement 28 - 24 - used in the preparation of the latest financial statements furnished to the Lenders hereunder (which, prior to the delivery of the first financial statements under Section 8.01 hereof, shall mean the audited financial statements as at February 22, 1997 referred to in Section 7.02 hereof). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of generally accepted accounting principles applied on a basis consistent with those used in the preparation of the latest annual or quarterly financial statements furnished to the Lenders pursuant to Section 8.01 hereof (or, prior to the delivery of the first financial statements under Section 8.01 hereof, used in the preparation of the audited financial statements as at February 22, 1997 referred to in Section 7.02 hereof) unless (i) the Company shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) the Majority Lenders shall so object in writing within 30 days after delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 8.01 hereof, shall mean the audited financial statements as at February 22, 1997 referred to in Section 7.02 hereof) (b) The Company shall deliver to the Lenders at the same time as the delivery of any annual or quarterly financial statement under Section 8.01 hereof (i) a description in reasonable detail of any material variation between the application of accounting principles employed in the preparation of such statement and the application of accounting principles employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the last sentence of subsection (a) above and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. (c) To enable the ready and consistent determination of compliance with the covenants set forth in Section 8 hereof, the fiscal year of the Company shall end on the last Saturday in February of each year, and the last days of the first three fiscal quarters shall fall on the last Saturday in each of May, August and November of each year, respectively. 1.03 Classes and Types of Loans. Loans hereunder are distinguished by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a Loan) refers to whether such Loan is a Series A Loan or a Series B Loan, each of which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Credit Agreement 29 - 25 - Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may be identified by both Class and Type. Section 2. Commitments, Loans, Notes and Prepayments. 2.01 Loans. (a) Series A Loans. Each Series A Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Company in Dollars to but not including the Series A Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of the Series A Commitment of such Lender as in effect from time to time (such Loans, together with the "Series A Loans" made under the Existing Credit Agreement, being herein called "Series A Loans"), provided that in no event shall the aggregate principal amount of all Series A Loans, together with the aggregate amount of all Letter of Credit Liabilities, exceed the aggregate amount of the Series A Commitments or the Borrowing Base as in effect from time to time. 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) or Continue Series A Loans of one Type as Series A Loans of the same Type (as provided in Section 2.09 hereof); provided that prior to the earlier of (i) the date that the Administrative Agent shall have notified the Company that it has completed its syndication of the Commitments or (ii) the date 90 days after the Restatement Date, all Eurodollar Loans must have Interest Periods of one month. (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 at any one time outstanding up to but not exceeding the amount of the Series B Commitment of such Lender as in effect from time to time (such Loans, together with the "Series B Loans" made under the Existing Credit Agreement, being herein called "Series B Loans"), provided that in no event shall the aggregate principal amount of all Series B Loans exceed the aggregate amount of the Series B Commitments as in effect from time to time. Subject to the terms and conditions of this Agreement, the Company may borrow, repay and reborrow 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); provided that prior to the earlier of (i) Credit Agreement 30 - 26 - the date that the Administrative Agent shall have notified the Company that it has completed its syndication of the Commitments or (ii) the date 90 days after the Restatement Date, all Eurodollar Loans must have Interest Periods of one month. (c) Limit on Eurodollar Loans. No more than six separate Interest Periods in respect of Eurodollar Loans of either Class from each Lender may be outstanding at any one time. 2.02 Borrowings. The Company shall give the Administrative Agent (which shall promptly notify the Lenders) notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on the date specified for each borrowing hereunder, each Lender shall make available the amount of the Loan or Loans to be made by it on such date to the Administrative Agent, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders, in immediately available funds, for account of the Company. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by depositing the same, in immediately available funds, in an account of the Company maintained with Chase at the Principal Office designated by the Company. 2.03 Letters of Credit. Subject to the terms and conditions of this Agreement, the Series A Commitments may be utilized, upon the request of the Company, in addition to the Series A Loans provided for by Section 2.01(a) hereof, by the issuance by the Issuing Lender of letters of credit (collectively, "Letters of Credit") for account of the Company or any of its Subsidiaries (as specified by the Company), provided that in no event shall (i) the aggregate amount of all Letter of Credit Liabilities, together with the aggregate principal amount of the Series A Loans, exceed the aggregate amount of the Series A Commitments as in effect from time to time, (ii) the outstanding aggregate amount of all Letter of Credit Liabilities exceed $15,000,000 and (iii) the expiration date of any Letter of Credit extend beyond the earlier of the Series A Commitment Termination Date and the date twelve months following the issuance of such Letter of Credit. The following additional provisions shall apply to Letters of Credit: (a) The Company shall give the Administrative Agent at least three Business Days' irrevocable prior notice (effective upon receipt) specifying the Business Day (which shall be no later than thirty days preceding the Series A Commitment Termination Date) each Letter of Credit is to be issued and the account party or parties therefor and describing in reasonable detail the proposed terms of such Credit Agreement 31 - 27 - Letter of Credit (including the beneficiary thereof) and the nature of the transactions or obligations proposed to be supported thereby (including whether such Letter of Credit is to be a commercial letter of credit or a standby letter of credit). Upon receipt of any such notice, the Administrative Agent shall advise the Issuing Lender of the contents thereof. (b) On each day during the period commencing with the issuance by the Issuing Lender of any Letter of Credit and until such Letter of Credit shall have expired or been terminated, the Series A Commitment of each Series A Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Series A Commitment Percentage of the then undrawn face amount of such Letter of Credit. Each Series A Lender (other than the Issuing Lender) agrees that, upon the issuance of any Letter of Credit hereunder, it shall automatically acquire a participation in the Issuing Lender's liability under such Letter of Credit in an amount equal to such Lender's Series A Commitment Percentage of such liability, and each Series A Lender (other than the Issuing Lender) thereby shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and shall be unconditionally obligated to the Issuing Lender to pay and discharge when due, its Series A Commitment Percentage of the Issuing Lender's liability under such Letter of Credit. (c) Upon receipt from the beneficiary of any Letter of Credit of any demand for payment under such Letter of Credit, the Issuing Lender shall promptly notify the Company (through the Administrative Agent) of the amount to be paid by the Issuing Lender as a result of such demand and the date on which payment is to be made by the Issuing Lender to such beneficiary in respect of such demand. Notwithstanding the identity of the account party of any Letter of Credit, the Company hereby unconditionally agrees to pay and reimburse the Administrative Agent for account of the Issuing Lender for the amount of each demand for payment under such Letter of Credit at or prior to the date on which payment is to be made by the Issuing Lender to the beneficiary thereunder, without presentment, demand, protest or other formalities of any kind. (d) Forthwith upon its receipt of a notice referred to in clause (c) of this Section 2.03, the Company shall advise the Administrative Agent whether or not the Company intends to borrow hereunder to finance its obligation to reimburse the Issuing Lender for the amount of the related demand for payment and, if it does, submit a notice of such borrowing Credit Agreement 32 - 28 - as provided in Section 4.05 hereof. In the event that the Company fails to so advise the Administrative Agent, or if the Company fails to reimburse the Issuing Lender for a demand for payment under a Letter of Credit by the date of such payment, the Administrative Agent shall give each Series A Lender prompt notice of the amount of the demand for payment, specifying such Lender's Series A Commitment Percentage of the amount of the related demand for payment. (e) Each Series A Lender (other than the Issuing Lender) shall pay to the Administrative Agent for account of the Issuing Lender at the Principal Office in Dollars and in immediately available funds, the amount of such Lender's Series A Commitment Percentage of any payment under a Letter of Credit upon notice by the Issuing Lender (through the Administrative Agent) to such Series A Lender requesting such payment and specifying such amount; provided that such Series A Lender shall not be obligated to reimburse the Issuing Bank if such payment is the result of the willful misconduct or gross negligence of the Issuing Bank in determining that the request or demand for such payment complied with the terms of such Letter of Credit. Each such Series A Lender's obligation to make such payments to the Administrative Agent for account of the Issuing Lender under this clause (e), and the Issuing Lender's right to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, (i) the failure of any other Series A Lender to make its payment under this clause (e), the financial condition of the Company (or any other account party), the existence of any Default or (ii) the termination of the Commitments. Each such payment to the Issuing Lender shall be made without any offset, abatement, withholding or reduction whatsoever. If any Series A Lender shall default in its obligation to make any such payment to the Administrative Agent for account of the Issuing Lender, for so long as such default shall continue the Administrative Agent shall at the request of the Issuing Bank withhold from any payments received by the Administrative Agent under this Agreement or any Note for account of such Series A Lender the amount so in default and the Administrative Agent shall pay the same to the Issuing Lender in satisfaction of such defaulted obligation. (f) Upon the making of each payment by a Series A Lender to the Issuing Lender pursuant to clause (e) above in respect of any Letter of Credit, such Lender shall, automatically and without any further action on the part of the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a participation in an amount equal to such Credit Agreement 33 - 29 - payment in the Reimbursement Obligation owing to the Issuing Lender by the Company hereunder and under the Letter of Credit Documents relating to such Letter of Credit and (ii) a participation in a percentage equal to such Lender's Series A Commitment Percentage in any interest or other amounts payable by the Company hereunder and under such Letter of Credit Documents in respect of such Reimbursement Obligation (other than the commissions, charges, costs and expenses payable to the Issuing Lender pursuant to clause (g) of this Section 2.03). Upon receipt by the Issuing Lender from or for account of the Company of any payment in respect of any Reimbursement Obligation or any such interest or other amount (including by way of setoff or application of proceeds of any collateral security) the Issuing Lender shall promptly pay to the Administrative Agent for account of each Series A Lender entitled thereto, such Series A Lender's Series A Commitment Percentage of such payment, each such payment by the Issuing Lender to be made in the same money and funds in which received by the Issuing Lender. In the event any payment received by the Issuing Lender and so paid to the Series A Lenders hereunder is rescinded or must otherwise be returned by the Issuing Lender, each Series A Lender shall, upon the request of the Issuing Lender (through the Administrative Agent), repay to the Issuing Lender (through the Administrative Agent) the amount of such payment paid to such Lender, with interest as specified in clause (j) of this Section 2.03. (g) The Company shall pay to the Administrative Agent for account of the Series A Lenders in respect of each Letter of Credit a letter of credit fee in an amount equal to the product of the Applicable Margin for Eurodollar Loans times the daily average undrawn amount of such Letter of Credit for the period from and including the date of issuance of such Letter of Credit to and including the date such Letter of Credit is drawn in full, expires or is terminated (such fee to be non-refundable, to be paid in arrears on each Quarterly Date and on the Series A Commitment Termination Date and to be calculated, for any day, after giving effect to any payments made under such Letter of Credit on such day). In addition, the Company shall pay to the Administrative Agent for account of the Issuing Lender all commissions, charges, costs and expenses in the amounts customarily charged by the Issuing Lender from time to time in like circumstances with respect to the issuance of each Letter of Credit and drawings and other transactions relating thereto. (h) Promptly following the end of each calendar month, the Issuing Lender shall deliver (through the Administrative Credit Agreement 34 - 30 - Agent) to each Series A Lender and the Company a notice describing the aggregate amount of all Letters of Credit outstanding at the end of such month. Upon the request of any Series A Lender from time to time, the Issuing Lender shall deliver any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding. (i) The issuance by the Issuing Lender of each Letter of Credit shall, in addition to the conditions precedent set forth in Section 6 hereof, be subject to the conditions precedent that (i) such Letter of Credit shall be in such form, contain such terms and support such transactions as shall be satisfactory to the Issuing Lender consistent with its then current practices and procedures with respect to letters of credit of the same type and (ii) the Company shall have executed and delivered such applications, agreements and other instruments relating to such Letter of Credit as the Issuing Lender shall have reasonably requested consistent with its then current practices and procedures with respect to letters of credit of the same type, provided that in the event of any conflict between any such application, agreement or other instrument and the provisions of this Agreement or any Security Document, the provisions of this Agreement and the Security Documents shall control. (j) To the extent that any Series A Lender fails to pay any amount required to be paid pursuant to clause (e) or (f) of this Section 2.03 on the due date therefor, such Lender shall pay interest to the Issuing Lender (through the Administrative Agent) on such amount from and including such due date to but excluding the date such payment is made (i) during the period from and including such due date to but excluding the date three Business Days thereafter, at a rate per annum equal to the Federal Funds Rate (as in effect from time to time) and (ii) thereafter, at a rate per annum equal to the Base Rate (as in effect from time to time) plus 2%. (k) The issuance by the Issuing Lender of any modification or supplement to any Letter of Credit hereunder shall be subject to the same conditions applicable under this Section 2.03 to the issuance of new Letters of Credit, and no such modification or supplement shall be issued hereunder unless either (x) the respective Letter of Credit affected thereby would have complied with such conditions had it originally been issued hereunder in such modified or supplemented form or (y) each Series A Lender shall have consented thereto. Credit Agreement 35 - 31 - (l) Pursuant to Section 2.03 of the Existing Credit Agreement, Chase has issued the Letters of Credit identified on Schedule V hereto (the "Existing Letters of Credit"). Each Series A Lender hereby agrees that each Existing Letter of Credit shall constitute, on and after the Amendment Effective Date, a Letter of Credit for all purposes of this Agreement. The Company hereby indemnifies and holds harmless each Series A Lender and the Administrative Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender or the Administrative Agent may incur (or which may be claimed against such Lender or the Administrative Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or refusal to pay by the Issuing Lender under any Letter of Credit; provided that the Company shall not be required to indemnify any Lender or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the Issuing Lender in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (y) in the case of the Issuing Lender, such Lender's failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the other obligations of the Company, any Lender or the Administrative Agent under this Agreement. 2.04 Changes of Commitments. (a) Series A Commitments. (i) The Series A Commitments shall terminate on the Series A Commitment Termination Date. (ii) The Company shall have the right at any time or from time to time (x) so long as no Series A Loans or Letter of Credit Liabilities are outstanding, to terminate the Series A Commitments and (y) to reduce the aggregate unused amount of the Series A Commitments (for which purpose use of the Series A Commitments shall be deemed to include the aggregate amount of Letter of Credit Liabilities); provided that (A) the Company shall give notice of each such termination or reduction as provided in Section 4.05 hereof, (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) the aggregate amount of the Series A Commitments may not be (I) terminated so long as Credit Agreement 36 - 32 - the Series B Commitments are outstanding or (II) reduced below the aggregate amount of the Series B Commitments then outstanding. (b) Series B Commitments. (i) The Series B Commitments shall terminate on the Series B Commitment Termination Date. In addition, the aggregate amount of the Series B Commitments shall be automatically reduced on each Series B Commitment Reduction Date by an amount equal to the product of (x) the aggregate amount of the Series B Commitments as originally in effect times (y) 12.5%. (ii) The Company shall have the right at any time or from time to time (x) so long as no Series B Loans are outstanding, to terminate the Series B Commitments and (y) to reduce the aggregate amount of the Series B Commitments; provided that (A) the Company shall give notice of each such termination or reduction as provided in Section 4.05 hereof; (B) each partial reduction shall be in an aggregate amount at least equal to $5,000,000 or in multiples of $1,000,000 in excess thereof; and (C) to the extent that, after giving effect to any such reduction, the aggregate principal amount of the Series B Loans would exceed the Series B Commitments, the Company shall prepay the Series B Loans. (c) All Commitments. The Commitments once terminated or reduced may not be reinstated. 2.05 Commitment Fee. The Company shall pay to the Administrative Agent for account of (i) each Series A Lender a commitment fee on the daily average unused amount of such Lender's Series A Commitment (for which purpose Letter of Credit Liabilities shall be deemed to be a use of any Lender's Series A Commitment) and (ii) each Series B Lender a commitment fee on the daily average unused amount of such Lender's Series B Commitment, for the period from and including the Amendment Effective Date to but not including the date such Commitment is terminated, at a rate per annum equal to the Commitment Fee Rate. Accrued commitment fee shall be payable on each Quarterly Date and on the date the relevant Commitments are terminated. 2.06 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. 2.07 Several Obligations; Remedies Independent. The failure of any Lender to make any Loan to be made by it on the Credit Agreement 37 - 33 - date specified therefor shall not relieve any other Lender of its obligation to make its Loan on such date, but neither any Lender nor the Administrative Agent shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender, and no Lender shall have any obligation to the Administrative Agent (except as provided in Section 4.06 hereof) or any other Lender for the failure by such Lender to make any Loan required to be made by such Lender. 2.08 Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Company to such Lender resulting from each Loan made or continued hereunder by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made or continued hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Company to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this Section 2.08 shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Loans in accordance with the terms of this Agreement. (d) Any Lender may request that Loans made or continued by it hereunder be evidenced by a promissory note(s). In such event, the Company, at its own expense, shall prepare, execute and deliver to such Lender a promissory note(s) payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent and such note(s) shall be evidence of such Loans (and all amounts payable in respect thereof). 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 Credit Agreement 38 - 34 - 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). Notwithstanding the foregoing, and without limiting the rights and remedies of the Lenders under Section 9 hereof, in the event that any Event of Default shall have occurred and be continuing, the Administrative Agent may (and at the request of the Majority Lenders shall) suspend the right of the Company to Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in which event all Loans shall be Converted (on the last day(s) of the respective Interest Periods therefor) or Continued, as the case may be, as Base Rate Loans. 2.10 Mandatory Prepayments and Reductions of Commitments. (a) Borrowing Base. Until the Series A Commitment Termination Date, the Company shall from time to time prepay the Series A Loans (and/or provide cover for Letter of Credit Liabilities as specified in clause (f) below) in such amounts as shall be necessary so that at all times the aggregate outstanding amount of the Series A Loans together with the outstanding Letter of Credit Liabilities shall not exceed the Borrowing Base, such amount to be applied, first, to Series A Loans outstanding and, second, as cover for Letter of Credit Liabilities outstanding. (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 Credit Agreement 39 - 35 - 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 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) under clause (b) of Section 1016 of the Senior Subordinated Indenture (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. Credit Agreement 40 - 36 - (d) Reversions. Without limiting the obligation of the Company under Section 8.01(c) hereof, upon any Reversion the Company shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in clause (f) below), and the Commitments shall be subject to automatic reduction, in an aggregate amount equal to 75% of the Net Available Proceeds thereof, such prepayment and reduction to be effected in each case in the manner and to the extent specified in clause (e) of this Section 2.10. (e) Application. Prepayments and reductions of Commitments described in the above clauses of this Section 2.10 (other than clause (a) above) shall be effected as follows: (i) first, the Series B Commitments shall be reduced in an amount equal to the prepayment or reduction specified in such clauses (and to the extent that, after giving effect to such reduction, the aggregate principal amount of Series B Loans would exceed the Series B Commitments, the Company shall prepay Series B Loans (such prepayments shall be applied first to Base Rate Loans and then to Eurodollar Loans) in an aggregate amount equal to such excess); 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 Letter of Credit Liabilities, would exceed the Series A Commitments, the Company shall, first, prepay Series A Loans (such prepayments shall be applied first to Base Rate Loans and then to Eurodollar Loans) and, second, provide cover for Letter of Credit Liabilities as specified in clause (f) below, in an aggregate amount equal to such excess). (f) Cover for Letter of Credit Liabilities. In the event that the Company shall be required pursuant to this Section 2.10 to provide cover for Letter of Credit Liabilities, the Company shall effect the same by paying to the Administrative Agent immediately available funds in an amount equal to the required amount, which funds shall be retained by the Administrative Agent in the Collateral Account (as provided therein as collateral security in the first instance for the Letter of Credit Liabilities) until such time as the Letters of Credit shall have been terminated and all of the Letter of Credit Liabilities paid in full. Credit Agreement 41 - 37 - Section 3. Payments of Principal and Interest. 3.02. 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) The Company hereby promises to pay to the Administrative Agent for account of each Series B Lender the entire outstanding principal amount of such Lender's Series B Loans, and each Series B Loan shall mature, on the Series B Commitment Termination Date. In addition, if following any Series B Commitment Reduction Date the aggregate principal amount of the Series B Loans shall exceed the Series B Commitments, the Company shall pay Series B Loans in an aggregate amount equal to such excess. 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 p1us the Applicable Margin. Notwithstanding the foregoing, the Company hereby promises to pay to the Administrative Agent for account of each Lender interest at the applicable Post-Default Rate on any principal of any Loan made by such Lender, on any Reimbursement Obligation held by such Lender and on any other amount payable by the Company hereunder or under the Notes held by such Lender to or for account of such Lender, which shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full. Accrued interest on each Loan shall be payable (i) in the case of a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three Credit Agreement 42 - 38 - 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 Section 2.03 (e) hereof, each payment received by Credit Agreement 43 - 39 - the Administrative Agent under this Agreement or any Note for account of any Lender shall be paid by the Administrative Agent promptly to such Lender, in immediately available funds, for account of such Lender's Applicable Lending Office for the Loan or other obligation in respect of which such payment is made. (e) If the due date of any payment under this Agreement or any Note would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension. 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each borrowing of Loans of a particular Class from the Lenders under Section 2.01 hereof shall be made from the relevant Lenders, each payment of commitment fee under Section 2.05 hereof in respect of Commitments of a particular Class shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments of a particular Class under Section 2.04 hereof and under Section 2.10(e) hereof shall be applied to the respective Commitments of such Class of the relevant Lenders, pro rata according to the amounts of their respective Commitments of such Class; (b) the making, Conversion and Continuation of Series A Loans and Series B Loans of a particular Type (other than Conversions provided for by Section 5.04 hereof) shall be made pro rata among the relevant Lenders according to the amounts of their respective Series A and Series B Commitments (in the case of making of Loans) or their respective Series A and Series B Loans (in the case of Conversions and Continuations of Loans) and the then current Interest Period for each Eurodollar Loan shall be coterminous; (c) each payment or prepayment of principal of Series A Loans or Series B Loans by the Company shall be made for account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans of such Class held by them; and (d) each payment of interest on Series A Loans and Series B Loans by the Company shall be made for account of the relevant Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders. 4.03 Computations. Interest on Eurodollar Loans and Reimbursement Obligations and commitment fee and letter of credit fee shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable and interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable. Notwithstanding the foregoing, for Credit Agreement 44 - 40 - 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 and (ii) each borrowing, Conversion or partial prepayment of principal of Series B Loans shall be in multiples of $1,000,000 (borrowings, Conversions or prepayments of or into Loans of different Types, or, in the case of Eurodollar Loans, having different Interest Periods at the same time hereunder to be deemed separate borrowings, Conversions and prepayments for purposes of the foregoing, one for each Type or Interest Period). Anything in this Agreement to the contrary notwithstanding, the aggregate principal amount of Eurodollar Loans having the same Interest Period shall be in an amount at least equal to $5,000,000 or in multiples of $1,000,000 in excess thereof and, if any Eurodollar Loans would otherwise be in a lesser principal amount for any period, such Loans shall be Base Rate Loans during such period. 4.05 Certain Notices. Notices by the Company to the Administrative Agent of terminations or reductions of the Commitments, of borrowings, Conversions, Continuations and optional prepayments of Loans and of Classes of Loans and of Types of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by the Administrative Agent not later than 10:00 a.m. New York time on the number of Business Days prior to the date of the relevant termination, reduction, borrowing, Conversion, Continuation or prepayment or the first day of such Interest Period specified below: Number of Business Notice Days Prior ------ ---------- Termination or reduction of Commitments 3 Borrowing or prepayment of, or Conversions into, Base Rate Loans 1 Borrowing or prepayment of, Conversions into, Continuations as, or duration of Interest Period for, Eurodollar Loans 3 Credit Agreement 45 - 41 - 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 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 Credit Agreement 46 - 42 - Advance Date, then, retroactively to the Advance Date, the Payor and the recipient(s) shall each be obligated to pay interest on the Required Payment as follows: (i) if the Required Payment shall represent a payment to be made by the Company to the Lenders, the Company and the recipient(s) shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment at the Post-Default Rate (and, in case the recipient(s) shall return the Required Payment to the Administrative Agent, without limiting the obligation of the Company under Section 3.02 hereof to pay interest to such recipient(s) at the Post-Default Rate in respect of the Required Payment) and (ii) if the Required Payment shall represent proceeds of a loan to be made by the Lenders to the Company, the Payor and the Company shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment at the rate of interest provided for such Required Payment pursuant to Section 3.02 hereof (and, in case the Company shall return the Required Payment to the Administrative Agent, without limiting any claim the Company may have against the Payor in respect of the Required Payment). 4.07 Sharing of Payments. Etc. (a) The Company agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for account of the Company at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans, Reimbursement Obligations or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to the Company), in which case it shall promptly notify the Company and the Administrative Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender shall obtain from the Company payment of any principal of or interest on any Loan of any Class or Letter of Credit Liability owing to it or payment of any other amount under this Agreement or any other Basic Document through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Administrative Agent as provided herein), and, as a result of such payment, such Lender shall have received a greater Credit Agreement 47 - 43 - percentage of the principal of or interest on the Loans of such Class or Letter of Credit Liabilities or such other amounts then due hereunder or thereunder by the Company to such Lender than the percentage received by any other Lender, it shall promptly purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans of such Class or Letter of Credit Liabilities or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Loans of such Class or Letter of Credit Liabilities or such other amounts, respectively, owing to each of the Lender. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) The Company agrees that any Lender so purchasing such a participation (or direct interest) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Company. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 4.07 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.07 to share in the benefits of any recovery on such secured claim. 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 Credit Agreement 48 - 44 - 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 Credit Agreement 49 - 45 - 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 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 Credit Agreement 50 - 46 - 45 days, after such Lender obtains actual knowledge thereof; provided that (i) if any Lender fails to give such notice within 45 days after it obtains actual knowledge of such an event, such Lender shall, with respect to compensation payable pursuant to this Section 5.01 in respect of any costs resulting from such event, only be entitled to payment under this Section 5.01 for costs incurred from and after the date 45 days prior to the date that such Lender does give such notice and (ii) each Lender will designate a different Applicable Lending Office for the Loans of such Lender affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender, except that such Lender shall have no obligation to designate an Applicable Lending Office located in the United States of America. Each Lender will furnish to the Company a certificate setting forth the basis and amount of each request by such Lender for compensation under paragraph (a) or (c) of this Section 5.01. Determinations and allocations by any Lender for purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or (b) of this Section 5.01, or of the effect of capital maintained pursuant to paragraph (c) of this Section 5.01, on its costs or rate of return of maintaining Loans or its obligation to make Loans, or on amounts receivable by it in respect of Loans, and of the amounts required to compensate such Lender under this Section 5.01, shall be conclusive, provided that such determinations and allocations are made on a reasonable basis. 5.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any Eurodollar Base Rate for any Interest Period: (a) the Administrative Agent reasonably determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Eurodollar Loans as provided herein; or (b) if the related Loans are Series A Loans, the Majority Series A Lenders or, if the related Loans are Series B Loans, the Majority Series B Lenders reasonably determine, which determination shall be conclusive, and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rate of interest for Eurodollar Loans for such Interest Period is to be determined are not likely adequately to Credit Agreement 51 - 47 - 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 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. Credit Agreement 52 - 48 - 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 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 Credit Agreement 53 - 49 - 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 Credit Agreement 54 - 50 - 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 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.O7(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). Credit Agreement 55 - 51 - 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 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 Credit Agreement 56 - 52 - 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. (f) Approvals and Consents. Evidence that all necessary governmental and third party filings, licenses, permits, consents and approvals have been obtained by the Company and are in full force and effect on the Amendment Effective Date. (g) Payment of Fees and Expenses. Evidence that (i) all principal of and interest on, and all other amount owing in respect of, the loans made by the Existing Lenders under the Existing Credit Agreement shall have been paid in full Credit Agreement 57 - 53 - and (ii) all fees and expenses payable to the Existing Lenders and the Administrative Agent under the Existing Credit Agreement accrued to the Amendment Effective Date and unpaid and such fees as the Company shall have agreed to pay or deliver to the Administrative Agent in connection herewith, including, without limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase in connection with the negotiation, preparation, execution and delivery of the amendment and restatement of the Existing Credit Agreement and the Notes and the other Basic Documents and the extensions of credit hereunder (to the extent that statements for such fees and expenses have been delivered to the Company) shall have been paid in full. (h) Governmental Proceedings: Etc. Evidence that no litigation or similar proceeding is threatened by any governmental agency or authority or any other person with respect to the execution and delivery of the amendment and restatement of the Existing Credit Agreement, the Notes and the other Basic Documents, and the consummation of the transactions herein or therein contemplated which, in each case, the Lenders shall reasonably determine is likely to have a material adverse effect on (i) the assets, business, operations, or condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (ii) the timely payment of the Loans and interest thereon or the enforceability of the Basic Documents or the rights and remedies thereunder. (i) Leverage Ratio. A certificate of a senior officer of the Company, dated the Amendment Effective Date, setting forth the Leverage Ratio as at the Amendment Effective Date. (i) 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, Credit Agreement 58 - 54 - shall be true and correct on and as of the date of the making of such Loan or other extension of credit with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Each notice of borrowing or request for the issuance of a Letter of Credit by the Company hereunder shall constitute a certification by the Company to the effect set forth in the preceding sentence (both as of the date of such notice or request and, unless the Company otherwise notifies the Administrative Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance); and (b) The Administrative Agent shall have received a certificate of a senior financial officer of the Company setting forth in reasonable detail the computations necessary to demonstrate that both immediately prior to the making of such Loan or other extension of credit and immediately after giving effect thereto, the Company is or will be in compliance with (i) Section 1010 of the Senior Indenture, (ii) Section 1010 of the Senior Subordinated Indenture, (iii) if the Loan to be made is a Series A Loan or the extension of credit is to be a Letter of Credit, Section 1014 of the Senior Indenture and (iv) the Borrowing Base as at the end of the quarterly fiscal period of the Company ending on or most recently ended prior to the date of such extension of credit. 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 the consolidated balance sheet of the Company and its Subsidiaries as at February 22, 1997 and the related consolidated statements of operations, stockholders' equity and cash flows of the Company Credit Agreement 59 - 55 - and its Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Deloitte & Touche. All such financial statements are complete and correct and fairly present the financial condition of the Company and its Subsidiaries as at, and the results of operations for the fiscal year ended on said date, all in accordance with generally accepted accounting principles and practices applied on a consistent basis. Neither the Company nor any of its Subsidiaries has on the Restatement Date any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates. (b) Since February 22, 1997, there has been no material adverse change in the financial condition, operations, business or prospects of the Company and its Subsidiaries from that set forth in said financial statements as at said date. 7.03 Litigation. Except as disclosed to the Lenders in writing prior to the Amendment Effective Date, there are no legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or (to the knowledge of the Company) threatened against the Company or any of its Subsidiaries which, if adversely determined, could have a Material Adverse Effect. 7.04 No Breach. None of the execution and delivery of this Agreement and the Notes and the other Basic Documents, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof will conflict with or result in a breach of, or require any consent under, the charter or by-laws of the Company, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Company or any of its Subsidiaries is a party (including, without limitation, the Senior Indenture and the Senior Subordinated Indenture) 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 Credit Agreement 60 - 56 - Documents have been duly authorized by all necessary corporate action on its part (including, without limitation, any required shareholder approvals); and this Agreement has been duly and validly executed and delivered by the Company and constitutes, and each of the Notes and the other Basic Documents to which it is a party when executed and delivered (in the case of the Notes, for value) will constitute, its legal, valid and binding obligation, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 7.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange, are necessary for the execution, delivery or performance by the Company of the Basic Documents to which it is a party or for the legality, validity or enforceability hereof or thereof, except for filings and recordings in respect of the Liens created pursuant to the Security Documents. 7.07 Use of Credit. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock. 7.08 ERISA. Each Plan, and, to the knowledge of the Company, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law, and no event or condition has occurred and is continuing as to which the Company would be under an obligation to furnish a report to the Lenders under Section 8.01(f) hereof. 7.09 Taxes. The Company and its Domestic Subsidiaries are members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which the Company is the "common parent" (within the meaning of Section 1504 of the Code) of such group. Except as set forth in Schedule VI hereto, the Company and its Domestic Subsidiaries have filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any Credit Agreement 61 - 57 - assessment received by the Company or any of its Domestic Subsidiaries. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Company, adequate. The Company has not given or been requested to give a waiver of the statute of limitations relating to the payment of Federal, state, local and foreign taxes or other impositions. 7.10 Investment Company Act. Neither the Company nor any of its Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 7.11 Public Utility Holding Company Act. Neither the Company nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.12 Material Agreements and Liens. (a) Part A of Schedule I hereto is a complete and correct list, as of the Restatement Date, of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Company or any of its Subsidiaries the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $1,000,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule I. (b) Part B of Schedule I hereto is a complete and correct list, as of the Restatement Date, of each Lien securing Indebtedness the aggregate principal or face amount of which equals or exceeds $1,000,000 of any Person and covering any Property of the Company or any of its Subsidiaries, and the aggregate amount of such Indebtedness secured (or which may be secured) by each such Lien and the Property covered by each such Lien is correctly described in Part B of said Schedule I. 7.13 Environmental Matters. Except as set forth in Schedule II hereto, each of the Company and its Subsidiaries has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization would not have a Material Adverse Effect. All of the permits, licenses and authorizations that Credit Agreement 62 - 58 - 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 Credit Agreement 63 - 59 - abandoned, at any site or facility owned, operated or leased by the Company or any of its Subsidiaries; and (iv) to the Company's knowledge after due inquiry, no Hazardous Materials have been Released by the Company or any of its Subsidiaries at, on or under any site or facility now owned, operated or leased by the Company or any of its Subsidiaries in a reportable quantity established by any Environmental Law. (c) To the Company's knowledge after due inquiry, neither the Company nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location that is listed on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by the Environmental Protection Agency, or listed in the Comprehensive Environmental Response and Liability Information System, as provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"), or on any similar state or local list or that is the subject of Federal, state or local enforcement actions or other investigations that may lead to Environmental Claims against the Company or any of its Subsidiaries. (d) No Liens are presently recorded with the appropriate land records under or pursuant to any Environmental Laws on any site or facility owned, operated or leased by the Company or any of its Subsidiaries, and to the Company's knowledge no government action has been taken or is in process that could subject any such site or facility to such Liens. Neither the Company nor any of its Subsidiaries would be required to place any notice or restriction relating 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 Amendment Effective Date, of an aggregate of 31,000,000 shares consisting of (i) 30,000,000 shares of common stock, par value $0.01 per share, of which Credit Agreement 64 - 60 - 21,893,392 shares were, as at February 22, 1997 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 22, 1997. As of the Amendment Effective 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 Amendment Effective Date, (x) except for options to purchase 2,447,425 shares of the common stock of the Company, there are no outstanding Equity Rights with respect to the Company and (y) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of the Company nor are there any outstanding obligations of the Company or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Company or any of its Subsidiaries. 7.15 Subsidiaries, Etc. (a) Set forth in Part A of Schedule III hereto is a complete and correct list, as of the Restatement Date, of all of the Subsidiaries of the Company, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Part A of Schedule 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 $100,000 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 Credit Agreement 65 - 61 - created pursuant to the Security Documents), all such Investments. (c) Except as set forth in Schedule III hereto, none of the Subsidiaries of the Company is, on the Restatement Date, subject to any indenture, agreement, instrument or other arrangement of the type described in the last sentence of Section 8.17 hereof. 7.16 Title to Assets. The Company owns and has on the Restatement Date, and will own and have on the Amendment Effective Date, good and marketable title (subject only to Liens permitted by Section 8.06 hereof) to the Properties shown to be owned in the most recent financial statements referred to in Section 7.02 hereof (other than Properties disposed of in the ordinary course of business or otherwise permitted to be disposed of pursuant to Section 8.05 hereof). The Company owns and has on the Restatement Date, and will own and have on the Amendment Effective Date, good and marketable title to, and enjoys on the Restatement Date, and will enjoy on the Amendment Effective Date, peaceful and undisturbed possession of, all Properties (subject only to Liens permitted by Section 8.06 hereof) that are necessary for the operation and conduct of its businesses. 7.17 Compliance with Law. Except as set forth in Schedule IV hereto, each of the Company and its Subsidiaries is in compliance with all applicable laws, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities or bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its Property (including Environmental Laws), except such noncompliance as would not, in the aggregate, have a Material Adverse Effect on the business, properties, assets, operations, condition (financial or otherwise), or prospects of the Company and its Subsidiaries, taken as a whole. 7.18 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Company to the Administrative Agent or any Lender prior to the Amendment Effective Date in connection with the negotiation, preparation or delivery of this Agreement and the other Basic Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole (together with the Information Memorandum which the Lenders acknowledge contains projections based on certain assumptions therein stated) do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished on or after the Amendment Effective Date by the Company Credit Agreement 66 - 62 - 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. 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 45 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Company, consolidated statements of earnings, stockholders' equity and cash flows of the Company and its Subsidiaries, and of Acurex, 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, and of Acurex, 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, and of Acurex, 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 90 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, Credit Agreement 67 - 63 - 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 8.10, 8.11, 8.12 or 8.13 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 90 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; Credit Agreement 68 - 64 - (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 Credit Agreement 69 - 65 - secondary liability as a result of a purchaser default) or the receipt by the Company or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against the Company or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a) (29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if the Company or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (g) promptly after the Company knows or has reason to believe that any Default has occurred, a notice of such Default describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that the Company has taken or proposes to take with respect thereto; (h) within 45 days after the end of each quarterly fiscal period of each fiscal year of the Company, a certificate of a senior financial officer of the Company setting forth in reasonable detail a true and accurate calculation of the Borrowing Base as at the end of such quarterly fiscal period; (i) within 45 days after the end of each quarterly fiscal period of each fiscal year of the Company, a statement of a senior officer of the Company (A) listing each Disposition by the Company and its Subsidiaries that occurred during such quarterly fiscal period if the Net Available Proceeds thereof exceeded $50,000 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 Credit Agreement 70 - 66 - 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) or (b) 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 the computations necessary to determine whether the Company is in compliance with Sections 8.07(e), 8.07(g), 8.08(f), 8.08(h), 8.09, 8.10, 8.11, 8.12 and 8.13 hereof as of the end of the respective quarterly fiscal period or fiscal year. 8.02 Litigation. The Company will promptly give to each Lender notice of all legal or arbitral proceedings, and of all proceedings by or before any governmental or regulatory authority or agency, and any material development in respect of such legal or other proceedings, affecting the Company or any of its Subsidiaries, except proceedings which, if adversely determined, would not have a Material Adverse Effect. Without limiting the generality of the foregoing, the Company will give to each Lender notice of the assertion of any Environmental Claim by any Person against, or with respect to the activities of, the Company or any of its Subsidiaries and notice of any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations, other than any Environmental Claim or alleged violation which, if adversely determined, would not have a Material Adverse Effect. 8.03 Existence. Etc. The Company will, and will cause each of its Subsidiaries to: (a) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section 8.03 shall prohibit any transaction expressly permitted under Section 8.05 hereof); (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 Credit Agreement 71 - 67 - tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; (d) maintain all of its Properties used or useful in its business in good working order and condition, ordinary wear and tear excepted; (e) keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied; and (f) permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be). 8.04 Insurance. The Company will, and will cause each of its Subsidiaries to, keep insured by financially sound and reputable insurers all Property of a character usually insured by corporations engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations and carry such other insurance as is usually carried by such corporations. 8.05 Prohibition of Fundamental Changes. The Company will not, nor will it permit any of its Subsidiaries to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or Dispose of all or substantially all of its Property. The Company will not, nor will it permit any of its Subsidiaries to, to make any Acquisition except for Investments permitted under Section 8.08 hereof. Notwithstanding the foregoing provisions of this Section 8.05: (a) any Subsidiary of the Company may be merged or consolidated with or into: (i) the Company if the Company shall be the continuing or surviving corporation or (ii) any other such Subsidiary; provided that (x) if any such transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary shall be the continuing or surviving corporation; (b) subject to Section 8.14 hereof, the Company or any Subsidiary of the Company may make any Acquisition; provided that immediately prior to and after giving effect to any Credit Agreement 72 - 68 - such Acquisition, (i) no Default shall have occurred and be continuing and (ii) not more than $50,000,000 of the proceeds of Loans then outstanding shall have been applied, directly by the Company or indirectly through a Subsidiary, to the purchase price of one or more Acquisitions (provided, that, an amount in excess of $25,000,000 (the "Increased Acquisition Amount") of the proceeds of the Loans may be applied directly by the Company or indirectly through a Subsidiary, to the purchase price of one or more Acquisitions so long as the amount of such excess plus the Increased Senior Note Prepayment Amount shall not at any time exceed $25,000,000); 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; Credit Agreement 73 - 69 - (e) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Company or any of its Domestic Subsidiaries; (h) Liens on Property of any corporation which becomes a Domestic Subsidiary of the Company after 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 acquired after the Restatement Date (by purchase, construction or otherwise) by the Company or any of its Domestic Subsidiaries (other than Acurex) 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); Credit Agreement 74 - 70 - (j) additional Liens upon real and/or tangible personal Property of the Company or any of its Domestic Subsidiaries (other than Acurex) 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 listed in Part A of Schedule I hereto and any extension, renewal or replacement thereof; (c) Indebtedness of Subsidiaries of the Company to the Company in the aggregate amounts permitted 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 (other than Acurex, at all times prior to the Series B Commitment Termination Date) of Indebtedness of the Company or any Subsidiary of the Company; provided that at all times prior to the Series B Commitment Termination Date, Acurex may Guarantee Indebtedness of the Company or any Subsidiary of the Company from time to time so long as the Company shall reduce the Series B Commitments pursuant to Section 2.04(b) (ii) hereof simultaneously with the execution of any such Guarantee by Acurex in an amount equal to the value of such Guarantee; and (g) additional unsecured Indebtedness of the Company and its Subsidiaries (other than Acurex) up to but not Credit Agreement 75 - 71 - exceeding in the aggregate $40,000,000 at any one time outstanding; provided that (i) any such Indebtedness of any such individual Subsidiary may not exceed $10,000,000 in the aggregate at any one time outstanding and (ii) any such Indebtedness shall not be used to refinance the Senior Notes; provided that the Company may incur additional unsecured Indebtedness that has no regularly scheduled maturity or mandatory prepayments on or before the Series A Commitment Termination Date. 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 capital stock of Subsidiaries of the Company and advances by the Company to Subsidiaries of the Company in the ordinary course of business; provided that the aggregate amount of the Investments by the Company or any of its Subsidiaries in the Specified Subsidiaries shall not exceed $5,000,000 at any one time outstanding; (e) Investments by Subsidiaries of the Company in capital stock of other Subsidiaries of the Company and advances by Subsidiaries of the Company to the Company and to other Subsidiaries of 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 in joint ventures or 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 Credit Agreement 76 - 72 - leasing of products to customers, [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 obligations that are not fully secured (whether by a perfected Lien on, or an indefeasible title retention to, the products so sold or leased, or otherwise) plus the aggregate fair market value of all Property (whether now owned or hereafter acquired) of the Company or any of its Subsidiaries (as determined in good faith by the chief financial officer of the Company) sold, assigned, transferred or otherwise disposed of on or after the Restatement Date to all such joint ventures shall not exceed at any one time outstanding the greater of (i) $15,000,000 and (ii) 5% of Adjusted Net Worth. 8.09 Restricted Payments. The Company will not, nor will it permit any of its Subsidiaries to, declare or make any Restricted Payment at any time; provided that (i) the Company may pay dividends ("Dividend Payments") and/or prepay, redeem or otherwise retire the Senior Notes ("Senior Note Payments" and, together with Dividend Payments, "Permitted Payments") during any fiscal year (the "Current Fiscal Year") in 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 (x) any portion of Available Net Earnings not used for Permitted Payments in the Current Fiscal Year (the "Carry-Over Amount") may be used for Senior Note Payments only (for which purpose Senior Note Payments shall first be deemed to have been made from the Carry-over Amount and only thereafter from Available Net Earnings) in any succeeding fiscal year and (y) no more than $25,000,000 in the aggregate of principal of the Senior Notes may be prepaid, redeemed or retired (provided, that, an amount in excess of $25,000,000 (the "Increased Senior Note Prepayment Amount") of principal of the Senior Notes may be prepaid, redeemed or retired so long as the amount of such excess of the Increased Acquisition Amount shall not at any time exceed $25,000,000) and (ii) any Subsidiary of the Company (other than Acurex, at all times prior to the Series B Commitment Termination Date) may make Restricted Payments to the Company from time to time; and provided, further, that at all times prior to the Series B Commitment Termination Date, Acurex may make Restricted Payments to the Company from time to time so long as the Company shall reduce the Series B Commitments pursuant to Section 2.04(b) (ii) hereof simultaneously with the receipt of each such Restricted Payment in an amount equal to the proceeds thereof (less the amount of any such proceeds, if any, applied to the payment of interest on the Series B Loans). Credit Agreement 77 - 73 - 8.10 Leverage Ratio. The Company will not permit the Leverage Ratio to exceed the following respective ratios at any time during the following respective periods: Period Ratio ------ ----- From the Fiscal Date in February 1997 through the Fiscal Date in August 1997 5.5 to 1 From (but not including) the Fiscal Date in August 1997 through the Fiscal Date in February 1998 5.0 to 1 From (but not including) the Fiscal Date in February 1998 through the Fiscal Date in February 1999 4.5 to 1 From (but not including) the Fiscal Date in February 1999 through the Fiscal Date in February 2000 4.0 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) $125,761,000 plus (b) 75% of the aggregate amount of Net Available Proceeds of Equity Issuances received after the Restatement Date 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 February 22, 1997; provided that consolidated net earnings for any fiscal quarter in which there is a consolidated net loss shall be deemed to be zero. Credit Agreement 78 - 74 - 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: Period Ratio ------ ----- From the Fiscal Date in February 1997 through the Fiscal Date in August 1997 2.00 to 1 From (but not including) the Fiscal Date in August 1997 through the Fiscal Date in February 1998 2.25 to 1 From (but not including) the Fiscal Date in February 1998 through the Fiscal Date in February 1999 2.50 to 1 From (but not including) the Fiscal Date in February 1999 through the Fiscal Date in February 2000 2.75 to 1 Thereafter 3.00 to 1 8.13 Net Worth of Acurex. The Company shall cause Acurex to maintain, at all times, a minimum net worth of not less than two times the aggregate outstanding amount of the Series B Loans. 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 directly 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, Credit Agreement 79 - 75 - 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 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 the Loans hereunder solely to finance ongoing working capital and other capital requirements of the Company and to finance Acquisitions (subject to clause (b) of the last sentence of Section 8.05) (in compliance with all applicable legal and regulatory requirements); provided that neither the Administrative Agent nor any Lender shall have any responsibility as to the use of any of such proceeds. 8.17 Certain Obligations Respecting Subsidiaries. (a) The Company will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that the Company and each of its Subsidiaries at all times owns (subject only to the Lien of the Security Documents) at least the same percentage of the issued and outstanding shares of each class of stock of each of its Subsidiaries as is owned on the Restatement Date. Without limiting the generality of the foregoing, none of the Company nor any of its Subsidiaries shall sell, transfer or otherwise dispose of any shares of stock in any Subsidiary owned by them, nor permit any Subsidiary to issue any shares of stock of any class 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 shall be issued by any such Subsidiary or (b) the Company shall create any new Subsidiary or Acquire any additional Subsidiary and shall thereby become the owner, directly or indirectly, of the shares of capital stock of such new or additional Subsidiary, as the case may be, the Company agrees forthwith to deliver to the Administrative Agent pursuant to terms of the Revolving Credit Security Agreement the certificates representing such shares of stock, accompanied by undated stock powers executed in blank and shall take such other Credit Agreement 80 - 76 - action as the Administrative Agent shall request to perfect the security interest created therein pursuant to the Revolving Credit Security Agreement; provided that if any such 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 or other ownership interest in such Subsidiary and such pledge shall, at the request of the Majority Series A Lenders, be made either under the Revolving Credit Security Agreement or under a pledge or other agreement governed by the law of such Subsidiary's jurisdiction of organization. (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 any modification, supplement or waiver of any of the provisions of the Senior Indenture, the Senior Subordinated Indenture, the Senior Notes, the Senior Subordinated Notes or the corporate documents referred to in Section 6.01(a) hereof (other than the by-laws of the Company) without the prior consent of the Administrative Agent (with the approval of the Majority Lenders). 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 Credit Agreement 81 - 77 - 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 Series A Loans. The Company shall, no later than 90 days following the request by the Majority Series A 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 Revolving Credit Security Agreement. 8.21 Redemption of Senior Subordinated Notes. The Company will not prepay, redeem, effect a defeasance or covenant defeasance or otherwise retire any of the Senior Subordinated Notes. 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 Credit Agreement 82 - 78 - 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, 8.12 or 8.13 hereof or the Company shall default in the performance of any of its obligations under Section 5.02 of the Revolving Credit Security Agreement or Section 4.02 of the Term Loan 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 (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 Credit Agreement 83 - 79 - 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 Credit Agreement 84 - 80 - (j) A reasonable basis shall exist for the assertion against the Company or any of its Subsidiaries of (or there shall have been asserted against the Company or any of its Subsidiaries) claims or liabilities, whether accrued, absolute or contingent, based on or arising from the generation, storage, transport, handling or disposal of Hazardous Materials by the Company or any of its Subsidiaries or Affiliates, or any predecessor in interest of the Company or any of its Subsidiaries or Affiliates, or relating to any site or facility owned, operated or leased by the Company or any of its Subsidiaries or Affiliates, which claims or liabilities (insofar as they are payable by the Company or any of its Subsidiaries but after deducting any portion thereof which is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor), in the judgment of the Majority Lenders are reasonably likely to be determined adversely to the Company or any of its Subsidiaries, and the amount thereof is, singly or in the aggregate, reasonably likely to have a Material Adverse Effect; or (k) Any "person" or "group" (as such terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act (other than Amin or Robert Khoury, their lineal descendants or trusts established by such Persons for their respective lineal descendants)) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the aggregate voting rights of the outstanding capital stock of the Company (on a fully diluted basis); or during any consecutive 25-month period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by the stockholders of the Company was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or (1) 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; Credit Agreement 85 - 81 - THEREUPON: (1) in the case of an Event of Default other than one referred to in clause (f) or (g) of this Section 9 with respect to the Company, the Administrative Agent may, by notice to the Company, terminate the Commitments and/or declare the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by the Company hereunder and under the Notes (including, without limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be forthwith due and payable (provided that (x) if so requested by the Majority Series A Lenders, the Administrative Agent shall take such action with respect to the Series A Commitments and/or the Series A Loans, Reimbursement Obligations and such interest and other amounts to the extent owed to the Series A Lenders and (y) if so requested by the Majority Series B Lenders, the Administrative Agent shall take such action with respect to the Series B Commitments and the Series B Loans and such interest and other amounts to the extent owed to the Series B Lenders), whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company; and (2) in the case of the occurrence of an Event of Default referred to in clause (f) or (g) of this Section 9 with respect to the Company, the Commitments shall automatically be terminated and the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by the Company hereunder and under the Notes (including, without limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company. In addition, upon the occurrence and during the continuance of any Event of Default (if the Administrative Agent has declared the principal amount then outstanding of, and accrued interest on, the Series A Loans and all other amounts payable by the Company hereunder and under the Notes to be due and payable), the Company agrees that it shall, if requested by the Administrative Agent or the Majority Series A Lenders through the Administrative Agent (and, in the case of any Event of Default referred to in clause (f) or (g) of this Section 9 with respect to the Company, forthwith, without any demand or the taking of any other action by the Administrative Agent or such Lenders) provide cover for the Letter of Credit Liabilities by paying to the Administrative Agent immediately available funds in an amount equal to the then aggregate undrawn face amount of all Letters of Credit, which funds shall be held by the Administrative Agent in the Collateral Account as collateral security in the first instance for the Letter of Credit Credit Agreement 86 - 82 - 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. 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, Credit Agreement 87 - 83 - independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Basic Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Majority Lenders or, if provided herein, in accordance with the instructions given by the Majority Series A Lenders, the Majority Series B Lenders or all of the Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. 10.03 Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received notice from a Lender or the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 10.07 hereof) take such action with respect to such Default as shall be directed by the Majority Lenders or, if provided herein, the Majority Series A Lenders or the Majority Series B Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Majority Lenders, the Majority Series A Lenders, the Majority Series B Lenders or all of the Lenders. 10.04 Rights as a Lender. With respect to its Commitments and the Loans made by it, Chase (and any successor acting as Administrative Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. Chase (and any successor acting as Administrative Agent) and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in and generally engage in any kind of banking, trust or other business with the Company (and any of its Subsidiaries or Affiliates) as if it were not acting as the Administrative Agent, and Chase and its affiliates may accept fees and other consideration from the Credit Agreement 88 - 84 - 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 Revolving Credit 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 Revolving Credit 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 Credit Agreement 89 - 85 - 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. 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 Credit Agreement 90 - 86 - respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. 10.09 Consents under Basic Documents. Except as otherwise provided in Section 11.04 hereof with respect to this Agreement, the Administrative Agent may, with the prior consent of the Majority Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Basic Documents, provided that, (i) without the prior consent of the Majority Series B Lenders, the Administrative Agent shall not consent to any modification, supplement or waiver under the Term Loan Security Agreement, (ii) without the prior consent of the Majority Series A Lenders, the Administrative Agent shall not consent to any modification, supplement or waiver under the Revolving Credit Security Agreement, (iii) without the consent of each Series B Lender, the Administrative Agent shall not (except as provided herein or in the Term Loan Security Agreement) release any collateral or otherwise terminate any Lien under the Term Loan Security Agreement providing for collateral security, or agree to additional obligations being secured by such collateral security (unless the Lien for such additional obligations shall be junior to the Lien in favor of the other obligations secured by such Term Loan Security Agreement) and (iv) without the consent of each Series A Lender, the Administrative Agent shall not (except as provided herein or in the Revolving Credit Security Agreement) release any collateral or otherwise terminate any Lien under the Revolving Credit Security Agreement providing for collateral security, or agree to additional obligations being secured by such collateral security (unless the Lien for such additional obligations shall be junior to the Lien in favor of the other obligations secured by such Revolving Credit Security Agreement), 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 or (b) is all or any part of the Company's United States Services' Division to the extent that such Property is transferred to a Wholly Owned Subsidiary of the Company so long as the shares of such Wholly Owned Subsidiary have been pledged to the Administrative Agent pursuant to the Revolving Credit Security Agreement. 10.10 Collateral Sub-Agents. Each Series A Lender by its execution and delivery of this Agreement agrees, as contemplated by Section 4.03 of the Revolving Credit 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 Series A Lender, and such Series A Lender shall hold such Permitted Investments as a collateral sub-agent for the Administrative Credit Agreement 91 - 87 - Agent thereunder. The Company by its execution and delivery of this Agreement hereby consents to the foregoing. 10.11 Co-Agent. The Co-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 Credit Agreement 92 - 88 - 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 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 Revolving Credit 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 Credit Agreement 93 - 89 - 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 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" or "Majority Series B 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, 2.04(a), 2.05(i) and 5.06, may be modified or supplemented Credit Agreement 94 - 90 - 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, and (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. 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. (b) Each Lender may assign any of its Loans, its Notes, its Commitments, and, if such Lender is a Series A 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 or a 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) any such consent by the Company shall not be unreasonably withheld, (ii) no such consent by the Company or the Administrative Agent shall be required in the case of any assignment to another Lender; (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 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 Letter of Credit Interest, Series B Loans, Series B Note and Series B Commitment is assigned to the respective assignee; and (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 Credit Agreement 95 - 91 - Commitment and 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, 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 Credit Agreement 96 - 92 - 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 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 Credit Agreement 97 - 93 - 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 Credit Agreement 98 - 94 - subsidiary or affiliate receiving such information shall be bound by the provisions of clause (b) below as if it were a Lender hereunder. (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 Amendments to Security Documents. (a) The Revolving Credit Security Agreement is hereby amended so that from and after the Amendment Effective Date, all references therein to the Credit Agreement shall be deemed to be a reference to the Credit Agreement as amended and restated hereby. (b) The Term Loan Security Agreement is hereby amended so that from and after the Amendment Effective Date, (x) all references therein to the Credit Agreement shall be deemed to be Credit Agreement 99 - 95 - a reference to the Credit Agreement as amended and restated hereby. Credit Agreement 100 - 96 - 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 /s/ Thomas P. McCaffrey ----------------------------------- Title: Vice President & CFO Address for Notices: BE Aerospace, Inc. 1300 Corporate Center Way Wellington, Florida 33414 Attention: Amin J. Khoury Telecopier No. (561) 791-5000 Telephone No. : (561) 791-3966 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 Credit Agreement 101 - 97 - LENDERS THE CHASE MANHATTAN BANK By /s/ Mathew H. Massie ----------------------------------- Title: Vice President NATIONSBANK, N.A. (SOUTH) By /s/ Andrew M. Airheart ----------------------------------- Title: Senior Vice President LASALLE BUSINESS CREDIT, INC. By /s/ Patrick E. Killpatrick ----------------------------------- Title: Vice President LTCB TRUST COMPANY By /s/ John J. Sullivan ----------------------------------- Title: Executive Vice President CREDITANSTALT- BANKVEREIN By /s/ Greg Roux ----------------------------------- Title: Vice President By /s/ John P. Macukas ----------------------------------- Title: Senior Vice President Credit Agreement 102 - 98 - FUJI BANK & TRUST COMPANY By /s/ Toshiaki Yakura ----------------------------------- Title: Executive Vice President CREDIT LYONNAIS, NEW YORK BRANCH By /s/ Robert Ivosevich ----------------------------------- Title: Authorized Signature THE SUMITOMO BANK, LIMITED By /s/ Ana C. Bolduc ----------------------------------- Title: Vice President & Manager By /s/ Brian M. Smith ----------------------------------- Title: Senior Vice President & Regional Manager (East) Credit Agreement 103 - 99 - THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ Mathew H. Massie ----------------------------------- Title: Vice President Address for Notices to Chase as Administrative Agent: The Chase Manhattan Bank Loan and Agency Services Group New York, New York 10081 Credit Agreement 104 Annex 1 Series A Series B Total Bank Commitment Commitment Commitments - ---- ---------- ---------- ----------- The Chase Manhattan Bank $ 16,000,000 $ 4,000,000 $ 20,000,000 NationsBank, N.A. (South) $ 16,000,000 $ 4,000,000 $ 20,000,000 LTCB Trust Company $ 15,200,000 $ 3,800,000 $ 19,000,000 LaSalle Business Credit, Inc. $ 15,200,000 $ 3,800,000 $ 19,000,000 Credit Lyonnais, New York Branch $ 11,200,000 $ 2,800,000 $ 14,000,000 Creditanstalt-Bankverein $ 10,400,000 $ 2,600,000 $ 13,000,000 Fuji Bank Ltd $ 8,000,000 $ 2,000,000 $ 10,000,000 The Sumitomo Bank Limited $ 8,000,000 $ 2,000,000 $ 10,000,000 ------------ ----------- ------------ Total $100,000,000 $25,000,000 $125,000,000 Annex 1 to Credit Agreement 105 SCHEDULE I Material Agreements and Liens [See Sections 7.12 and 8.07(b)] Part A - Material Agreements 1. Indenture dated as of March 3, 1993 between the Company, as issuer, and the United States Trust Company of New York, as trustee, in connection with $125,000,000 of 9-3/4. Senior Notes of the Company. 2. Loan agreements dated February 24, 1993 between the Company's subsidiary Flight Equipment and Engineering Limited, an English corporation ("FEEL"), and Barclays Bank PLC ("Barclays"), as amended, providing for an overdraft facility in the aggregate principal amount of (pound)3,000,000. 3. Guarantee dated February 24, 1993 by the Company to Barclays limited to (pound)2,750,000 of the Indebtedness of FEEL described in Item 2 above. 4. Guarantee as of March 1, 1993 of Aircraft Furnishing Limited ("AFL") in an unlimited amount of the Indebtedness of FEEL described in described in Item 2 above. 5. Loan agreement between Royal Inventum B.V. and ING Bank dated July 14, 1993 in the aggregate principal amount of Dfl. 2,000,000. 6. Demand Promissory Note dated August 27, 1993 from Aero Holdings Acquisition Corp. (now known as Acurex Corporation) to the Company in the aggregate principal amount of approximately $2,000,000. 7. Acquisition Agreement among the Company, Elinor T. Nordskog and Nordskog Industries, Inc. dated July 27, 1993. (Acquisition purchase price adjustments unknown) 8. Purchase Agreement dated October 26, 1993 between the Company and Thomas P. McCaffrey and Kerry J. McCaffrey, Trustees of the Thomas P. and Kerry J. McCaffrey Living Trust, Dated August 3, 1990 pursuant to which the trust sold certain residential property located in San Clemente, California to the Company, and the Company, among other things, assumed Indebtedness which, as of the date hereof, is outstanding to Countrywide Funding Corporation in the aggregate principal amount of $457,484. 9. Capitalized lease obligations of FEEL and AFL for machinery and equipment in the aggregate amount of $945,000. Schedule I to Credit Agreement 106 -2- 10. Indebtedness of FEEL to the Company in an aggregate principal amount not in excess of (pound)3,369,541. 11. Indebtedness of BE Aerospace (Netherlands) B.V. to the Company in an aggregate principal amount not in excess of Dfls. 49,385,000. 12. 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. 13. 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.) Schedule I to Credit Agreement 107 SCHEDULE I 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) Allied American Insurance Company, filed May 24, 1993, file number 93099606. Certain leased machining equipment. (iii) United Jersey Bank, filed May 3, 1993, file number 93086057. Certain leased computer equipment and related tangible and intangible property, (iv) 1st Source Bank, filed March 18, 1993, file number 93054020. Certain leased computer equipment. (v) 1st Source Bank, filed March 18, 1993, file number 93054019. Certain leased machining equipment. (vi) Yale Financial Services, Inc., filed March 15, 1993, file number 93052839. Fork lift. (vii) Tilden Financial Corp., filed March 4, 1993, file number 93044645. Certain leased equipment. (viii) United Jersey Bank, filed March 5, 1993, file number 93043802. Certain leased computer equipment and related tangible and intangible property. (ix) Bankers Leasing Association, Inc., filed December 29, 1992, file number 92275389. Certain leased computer equipment. (x) First Bank and Trust Company of Illinois, filed May 7, 1993, file number 92275389. Certain leased computer equipment. (Assignment of No. 92275389) 108 (xi) United Jersey Bank, filed December 14, 1992, file number 92263097. Certain leased machining equipment. (xii) United Jersey Bank, filed March 30, 1993, file number 92263097. Certain leased computer equipment. (xiii) Guaranty Lease Funding Corporation, filed September 24, 1992, file number 92207704. Certain leased equipment. (xiv) GE Capital Corporation, filed August 7, 1992, file number 92170592. Certain leased office furniture and fixtures. (xv) Copelco Capital, Inc., filed October 12, 1993, file number 93208050. Certain leased office equipment. (xvi) The Chase Manhattan Bank, filed November 3, 1993, file number 93221435. Blanket filing. (xvii) UJB Leasing Corporation, filed December 1, 1994, file number 9435361073. Miscellaneous equipment. (xviii) Hewlett-Packard Company Finance and Remark, filed December 6, 1994, file number 9435560656. Miscellaneous equipment. (xix) NEC America, Inc., filed March 17, 1995, file number 9508060313. Miscellaneous telephone equipment. (xx) British Airways PLC, filed May 20, 1996, file number 9614460354. Miscellaneous equipment. (xxi) Hewlett-Packard Company Finance and Remark, filed May 9, 1997, file number 9712861105. Certain leased equipment and related tangible and intangible property. (xxii) Hewlett-Packard Company Finance and Remark, filed May 7, 1997, file number 9712960794. Certain leased equipment and related tangible and intangible property. b. Other -2- 109 (i) An outstanding mortgage on a residential property in San Clemente, California in favor of Countrywide Funding Corporation secures, as of the date hereof, $457,484 of Indebtedness. 2. Connecticut a. UCC - Secretary of State (i) Yale Financial Services, Inc., filed March 11, 1993, file number 1001222. Forklift. (ii) 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). (iii) IBM Credit Corporation, filed July 6, 1992, file number 972855. Certain leased computer equipment. (iv) IBM Credit Corporation, filed November 24, 1992, file number 0988857. Certain leased computer equipment. (v) Colonial Pacific Leasing, filed September 28, 1992, file number 982477. Certain leased equipment. (vi) Tilden Financial Corp., filed March 4, 1993, file number 1000393. Certain leased equipment. (vii) European American Bank, filed November 26, 1993, file number 1036973. Miscellaneous leased computer equipment. (viii) UJB Leasing Corporation, filed August 23, 1994, file number 1070220. Miscellaneous leased computer equipment. (ix) UJB Leasing Corporation, filed September 8, 1994, file number 1574243. Miscellaneous leased equipment. (x) Nationsbank of Florida, N.A. filed December 22, 1994, file number 1593984. Blanket. -3- 110 (xi) UJB Leasing Corporation, filed January 23, 1995, file number 1600177. Miscellaneous Leased Equipment. (xii) United Jersey Bank, filed January 25, 1995, file number 1600740. Leased equipment and related tangible and intangible property. (xiii) United Jersey Bank, filed January 25, 1995, file number 1600746. Leased equipment and related tangible and intangible property. (xiv) United Jersey Bank, filed January 25, 1995, file number 1600748. Leased equipment and related tangible and intangible property. (xv) UJB Leasing Corporation, filed March 7, 1995, file number 1608175. Miscellaneous equipment. (xvi) AT&T Systems Leasing Corp., Inc., filed July 20, 1995, file number 1633709. Miscellaneous leased computer and office equipment. (xvii) GE Capital filed August 17, 1995, file number 1639218. Leased computer equipment. (xviii) Hyster Credit Company, filed September 27, 1995, file number 1647676. Ford truck and miscellaneous equipment. (xix) AT&T Systems Leasing Corp., Inc., filed January 19, 1996, file number 1668254. Miscellaneous equipment. (xx) AT&T Systems Leasing Corp., Inc., filed March 29, 1996, file number 1683373. Miscellaneous equipment. (xxi) AT&T Systems Leasing Corp., Inc., filed March 29, 1996, file number 1683381. Miscellaneous equipment. (xxii) USL Capital Corporation, filed September 5, 1996, file number 1717760. Miscellaneous machinery. (xxiii) Bankers Leasing Association, Inc., filed December 20, 1996, file number 1739286. Miscellaneous office equipment. (xxiv) General Electric Capital Corporation, filed March 5, 1997, file number 1754332. Leased aircraft. -4- 111 3. Florida a. UCC - Secretary of State (i) GE Capital Corporation, filed October 9, 1992, file number 92204637. Certain equipment. (ii) United Jersey Bank, filed December 14, 1992, file number 92255761. Certain leased machining equipment. (iii) United Jersey Bank, filed March 1, 1993, file number 93044459. Certain leased computer equipment. (iv) Bankers Leasing Association, Inc., filed January 15, 1993, file number 93010622. Certain computer hardware and software. (v) First Bank and Trust Company of Illinois, filed May 6, 1993, file number 93095513. Certain computer hardware and software. (Assignment of No. 93010622) (vi) United Jersey Bank, filed March 4, 1993, file number 93047191. Certain leased computer equipment and certain other tangible and intangible property related thereto. (vii) NationsBank Leasing Corporation, filed March 22, 1993, file number 93060950. Certain leased machining equipment. (viii) Equilease Systems Corp., filed March 25, 1993, file number 93063496. Certain leased computer equipment. (ix) St. James Leasing, filed May 3, 1993, file number 93091970. Certain leased computer equipment and certain other tangible and intangible property relaxed thereto, (x) The Chase Manhattan Bank, filed November 4, 1993, file number 930227345, Blanket; Amendment filed January 31, 1996, file number 960000020922 (Debtor address change); Partial Release filed December 16, 1996, file number 960000262425 (miscellaneous equipment). -5- 112 (xi) EQ Financial Services Corporation, filed November 30, 1993, file number 930244109. Miscellaneous leased equipment. (xii) European American Bank, filed November 30, 1993, file number 930244111. Miscellaneous leased equipment. (xiii) EQ Financial Services Corporation, filed March 15, 1994, file number 94051606. Miscellaneous leased equipment. (xiv) St. James Leasing Ltd., filed August 23, 1994, file number 940171957. Miscellaneous leased equipment. (xv) St. James Leasing Ltd., filed September 6, 1994, file number 940180451. Miscellaneous leased equipment. (xvi) St. James Leasing Ltd., filed September 7, 1994, file number 940182527. Miscellaneous leased equipment. (xvii) St. James Leasing Ltd., filed December 2, 1994, file number 940242154. Miscellaneous leased equipment. (xviii) St. James Leasing Ltd., filed January 29, 1995, file number 95017299. Miscellaneous equipment and related tangible and intangible property. (xix) St. James Leasing Ltd., filed January 26, 1995, file number 95017303, Miscellaneous equipment and related tangible and intangible property. (xx) NEC America, Inc., filed March 20, 1995, file number 95053838. Miscellaneous telephone equipment. (xxi) AT&T Systems Leasing Corporation Division, Inc., filed July 19, 1995, file number 950143452. Miscellaneous computer equipment. (xxii) Lewis/Botle, Inc., filed October 3, 1995, file number 950219964. Ford truck. (xxiii) NationsBank, N.A., filed January 26, 1996, file number 96018099. Blanket. (xxiv) Chemical Leasing, filed September 26, 1996, file number 960201890. Miscellaneous office equipment. -6- 113 (xxv) Yale Financial Services, Inc., filed December 23, 1996, file number 960266376. Miscellaneous equipment. (xxvi) Yale Financial Services, Inc. filed February 24, 1997, file number 97038608. Forklift and related equipment. (xxvii) General Electric Capital Corporation filed March 5, 1997, file number 97047206. Leased aircraft. 4. North Carolina a. Other (i) An outstanding mortgage on a residential property in Pfafftown, North Carolina in favor of The Pfefferkorn Company secures, as of the date hereof, $136,568 of Indebtedness. (ii) The Chase Manhattan Bank N.A. filed January 30, 1996, file number 1304283, blanket. (iii) CLG. Inc., filed May 1, 1996, file number 1335435, miscellaneous computer equipment. (iv) USL Capital Corporation, filed May 23, 1996, file number 1342441, miscellaneous leased equipment. (v) NationsBank Leasing, filed December 20, 1996, file number 1409484, miscellaneous equipment. (vi) Yale Financial Services Inc., filed December 23, 1996, file number 1409894, miscellaneous equipment. (vii) Yale Financial Services Inc., filed February 19, 1997, file number 1429174, fork lift and rented equipment. (viii) Pullman Bank and Trust Company, filed April 15, 1997, file number 1450646, miscellaneous leased office equipment. -7- 114 5. Forsyth County, NC (i) The Chase Manhattan Bank, filed January 29, 1996, file number 215975, miscellaneous leased equipment. (ii) CLG, Inc., filed May 1, 1996, file number 217178, miscellaneous leased equipment. (iii) USL Capital Corporation, filed May 28, 1996, file number 217462, [ ] (iv) USL Capital Corporation, filed September 10, 1996, file number 218787, miscellaneous leased equipment. (v) Yale Financial Services, Inc., filed December 20, 1996, file number 220219, miscellaneous equipment. (vi) NationsBank Leasing Corporation, filed December 24, 1996, file number 220297, miscellaneous leased equipment. (vii) Yale Financial Services, Inc., filed February 19, 1997, file number 220980, Forklift and related accessories. (ix) US Technology Leasing Corporation, filed April 14, 1997, file number 221618, miscellaneous leased equipment. BE Avionics, Inc. 1. California a. UCC - Secretary of State (i) California City Bank, filed February 20, 1990, file number 90045391. Certain computer equipment. (ii) AT&T Credit Corporation, filed September 17, 1990, file number 90231153. Certain leased equipment. (iii) Pitney Bowes Credit Corporation, filed February 22, 1991, file number 91037908. Certain leased copier equipment. -8- 115 (iv) Pitney Bowes Credit Corporation, filed June 21, 1991, file number 91135535. Certain leased equipment. (v) Leasametric Inc., filed May 18, 1992, file number 92111404. Certain leased equipment. (vi) Colonial Pacific Leasing, filed September 24, 1992, file number 92208231. Certain leased equipment. 2. Massachusetts a. UCC - Secretary of State (i) The Chase Manhattan Bank, N.A. as Agent, filed March 3, 1992, file number 077540. All personal property, whether tangible or intangible. Aircraft Products Company 1. Florida a. UCC- Secretary of State (i) Chrysler Capital Corporation, filed November 9, 1989, file number 89297767. Certain leased computer equipment. (ii) General Electric Capital Corporation, filed September 29, 1992, file number 92197513. Certain leased computer hardware and software. (Assignment of No. 89297767) (iii) Chrysler Capital Corporation, filed November 9, 1989, file number 89297768. Certain leased computer hardware and software. (iv) General Electric Capital Corporation, filed September 25, 1992, file number 92194967. Certain leased equipment. (Assignment of No. 89297768) (v) Chrysler Capital Corporation, filed September 27, 1990, file number 90245856. Certain leased equipment. -9- 116 (vi) Chrysler Capital Corporation, filed December 24, 1990, file number 90315841. Certain leased equipment. (vii) Oliver-Allen Corporation, filed July 22, 1991, file number 91157029. Certain leased equipment. (viii) Datamatic Leasing Inc., filed August 12, 1991, file number 91173649. Certain leased equipment. (ix) GE Capital Corporation, filed October 8, 1992, file number 92204637. Certain leased machining equipment. (x) Minolta Leasing Services, filed June 14, 1993, file number 93123779. Certain leased equipment. PTC Aerospace Inc. 1. California a. UCC - Secretary of State (i) Chrysler Credit Corporation, filed January 9, 1990, file number 90004136, certain leased computer equipment. (ii) Pactel Finance, filed April 2, 1990, file number 90085088, certain equipment. (iii) Oliver-Allen Corporation, filed March 20, 1991, file number 91057403, certain leased equipment. (iv) LB Credit Corporation, filed September 11, 1992, file number 91057403, certain leased equipment. (Assignment of File No. 91057403) (v) Yale Financial Services, Inc., filed November 3, 1992, file number 92237178, certain leased transportation equipment. (vi) Yale Financial Services, Inc., filed November 17, 1992, file number 92247474, certain leased transportation equipment. -10- 117 (vii) 1st Source Bank, filed March 18, 1993, file number 93054019, certain leased machining equipment. (viii) 1st Source Bank, filed March 18, 1993, file number 93054020. certain leased computer equipment. (ix) Allied American Insurance Company, filed May 24, 1993, file number 93099606, certain leased equipment. (x) The CIT Group/Equipment Financing Inc., filed June 2, 1993, file number 93105767, certain leased equipment. (xi) 1st Source Bank, filed September 3, 1993, file number 93180960, certain leased equipment 2. Connecticut a. UCC - Secretary of State (i) Oliver-Allen Corporation, filed June 30, 1992, file number 971989. Certain leased printer. (ii) LB Credit Corporation, filed September 14, 1992, file number 980699. Certain leased printer. (Assignment of No. 971989) (iii) United Financial Corporation, filed July 17, 1992, file number 974379. Certain equipment. (iv) SNET Credit, Inc., filed May 18, 1992, file number 966514. Certain equipment. (v) SNET Credit, Inc., filed November 12, 1991, file number 945438. Certain leased equipment. (vi) Colonial Pacific Leasing, filed March 18, 1991, file number 916823. Certain leased equipment. (vii) Tenant Company, filed January 22, 1991, file number 909896. Certain sweeper/scrubber. (viii) Citicorp Dealer Finance, filed May 18, 1990, file number 877886. Forklift. (ix) Bank One Leasing Corp., filed November 20, 1989, file number 853254. Certain leased copier equipment. -11- 118 (x) Chrysler Capital Corporation, filed December 27, 1990, file number 905889. Certain leased machining and computer equipment. (xi) Chrysler Capital Corporation, filed January 25, 1991, file number 908754. Certain leased equipment. (xii) Chrysler Capital Corporation, filed March 28, 1991, file number 916898. Certain manufacturing equipment. (xiii) General Electric Capital Corporation, filed November 17, 1992, file number 0988131. Certain leased equipment. (xiv) XL/Datacomp, Inc., filed March 16, 1992, file number 959099. Certain leased computer hardware and software. (xv) Citicorp Leasing, Inc., filed April 22, 1993, file number 1006782. Certain leased computer hardware and software. (xvi) R.A.S. Financial, Inc. filed November 20, 1992, file number 0988534. Certain leased computer equipment. (xvii) First Source Bank, filed January 8, 1993, file number 0993996. Certain leased computer equipment. (xviii) 1st Source Bank, filed March 12, 1993, file number 1001480. Certain leased machining equipment. (xix) R.A.S. Financial, Inc., filed December 28, 1992, file number 0992519. Certain leased computer equipment. (xx) First Source Bank, filed January 27, 1993, file number 0996132. Certain leased computer equipment. (xxi) 1st Source Bank, filed March 12, 1993, file number 1001481. Certain leased computer equipment. (xxii) XL/Datacomp, Inc., filed March 17, 1993, file number 1002012. Certain leased computer hardware and software. (xxiii) Allied American Insurance Company, filed May 24, 1993, file number 1013743. Certain leased manufacturing equipment. (xxiv) The CIT Group/Equipment Financing, Inc., filed June 2, 1993, file number 1015241. Certain leased machining equipment. -12- 119 (xxv) 1st Source Bank, filed August 19, 1993, file number 1025133. Certain leased manufacturing equipment. (xxvi) XL/Datacomp, Inc., filed October 18, 1991, file number 942433. Certain leased computer hardware and software. (xxvii) Citicorp Leasing, Inc., filed January 17, 1992, file number 952759. Certain leased computer hardware and software. (xxviii) Chrysler Capital Corporation, filed January 10, 1990, file number 859351. Certain leased computer hardware and software. 3. New Jersey a. UCC - Secretary of State (i) Chrysler Corporation, filed January 9, 1990, file number 1314179. Certain computer hardware and software. (ii) General Electric Capital Corporation, filed December 2, 1992, file number 1314179. Certain computer hardware and software. (Assignment of No. 1314179) Acurex Corporation 1. California a. UCC - Secretary of State (i) Foothill Bank, filed March 30, 1992, file number 92063114. Certain leased equipment. Nordskog Industries. The 1. California a. UCC - Secretary of State (i) Hewlett Packard Company, Finance and Remarketing Division, filed February 14, 1989, file number 89032824. Certain leased computer equipment. -13- 120 (ii) Hewlett Packard Company, filed September 11, 1989, file number 89240841. Certain leased computer equipment (iii) Hewlett Packard Company, filed February 9, 1990, file number 89240841 (Amendment). (iv) Leasefirst, filed June 19, 1993, file number 90153748. Certain leased computer equipment. (v) Hewlett Packard Company/Finance & Remarketing Division, filed on March 11, 1991, file number 91053748. Certain leased computer equipment. (vi) Lease America Corporation, filed November 22, 1991, file number 91250205. Certain leased copier equipment. (vii) NEC America, Inc., filed January 31, 1992, file number 92020999. Certain leased telephone equipment (viii) NEC America, Inc., filed April 27, 1992, file number 92083995. Certain leased telephone equipment. (ix) The Bank of California, N.A., filed August 30, 1992, file number 93177146. Security interest in general intangibles to secure a Letter of Credit to Self-Insurance Plans, State of California, in the aggregate principal amount of $962,809. (x) Hewlett Packard Company/Finance & Remarketing Division, filed November 12, 1992, file number 92243227. Certain leased computer equipment. Flight Equipment and Engineering Limited The Indebtedness of FEEL 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 FEEL on Barclays' standard form dated 19th November 1982. 2. A charge over the leasehold, Nashleigh Works, Nashleigh Hill, Chesham, on Barclays' standard form dated 11th May 1985. 3. A charge over the freehold Asheridge Road, Chesham, on Barclays' standard form dated 7th July 1975. -14- 121 4. A charge over the freehold property on the Northwest side of Grovebury Road, Leighton Buzzard, on Barclays' standard form dated 2nd March 1993. 5. A charge over the leasehold property, Nissen House, Grovebury Road, Leighton Buzzard, on Barclays' standard form dated 2nd March 1993. 6. A charge over the leasehold property lying on the East of the Grand Union Canal, Leighton Buzzard on Barclays' standard form dated 3rd March 1993. 7. A charge over the Guardian Assurance Life Policy on the life of John Branham on Barclays' standard form dated 24th September 1991. 8. A charge over the life policy on the life of John Tcheng to be charged on Barclays' standard form. 9. A charge over the life policy on the life of David Boulter to be charged on Barclays' standard form. 10. The AFL guarantee referred to in Section 5 of Part A of this Schedule I. 11. A debenture over the assets of AFL on Barclays' standard form granted as of March 1, 1993. 12. The Company's guarantee referred to in Section 4 of Part A of this Schedule I. 13. A Letter of Set Off allowing Barclays' to combine any account, Sterling or Currency dated 24th September 1991. In addition, FEEL and AFL have capitalized lease obligations outstanding for machinery and equipment in the aggregate amount of $945,000. Royal Inventum B.V. The Indebtedness of Royal Inventum B.V. identified in Section 6 of Part A of this Schedule I is secured by a charge over the assets of Royal Inventum B.V. by ING Bank. BE Aerospace (UK) Limited 1. Guarantee (Unlimited) on Barclays' standard form given by Aircraft Furnishing Limited (now known as Fort Hill Aircraft Limited) for the benefit of Flight Equipment and Engineering Limited (now BE Aerospace (UK) Limited). [No date, but believed to be dated 24 February 1993. We believe that it was given to guarantee a medium term loan agreement dated 28 February 1993.] -15- 122 2. Guarantee (Foreign) on Barclays' standard form given by BE Aerospace, Inc. for (pound)2.75 million for the benefit of BE Aerospace (UK) Limited, dated 24 February 1993. It appears to cover a medium term loan agreement dated 28 February 1993. 3. Legal charge over Nashleigh Works, Nashleigh Hill, Chesham, Buckinghamshire, dated 11 May 1995. In addition, there may be other liens securing indebtedness of amounts less than $1,000,000. -16- 123 SCHEDULE II Hazardous Materials 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. 124 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. 10. Hazardous waste from the Altamonte Springs, Florida site may have been disposed of at the Seaboard 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 Environmental 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 is was considered a de minimis PRP with respect to the Frontier Chemical Site in Niagara Fails, 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. -2- 125 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. 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 recordkeeping, personnel medical monitoring, and other worker safety and health requirements. (4) Facility may require NPDES stormwater 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 stormwater discharge permit. -3- 126 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) 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 stormwater 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, -4- 127 (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. 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 front 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. -5- 128 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. -6- 129 SCHEDULE III Subsidiaries and Investments [See Sections 7.17 and 8.08(a)] Part A - Subsidiaries Jurisdiction of Percentage Subsidiary Organization Owners of Ownership - ---------- ------------ ------ ------------ BE Aerospace Barbados BEA 100% International, Ltd. BE Aerospace (UK) England BEA 100% Limited ("BEA-UK") Flight Equipment and England BEA-UK 100% Engineering Limited BE Aerospace England BEA-UK 100% (Services), Limited Aircraft Furnishing England BEA-UK 99.00% Limited ("AFL") 1.00% Fort Hill Aircraft Northern AFL 100% Limited Ireland AFI Holdings Northern AFL 100% Limited Ireland BE Aerospace France BEA 98.00% (France) S.A.R.L. K.A.D. 1.00% Companies, 1.00% Inc. Marc Leveille (director) BE Aerospace Delaware BEA 100% (U.S.A.), Inc. BE Aerospace Netherlands BEA 90% (Netherlands) B.V. BEA (U.S.A.) 10% ("BEA-Neth") Royal Inventum B.V. Netherlands BEA-Neth 96.60%* Tepaco Properties B.V. Netherlands BEA-Neth 100% Acurex Corporation Delaware BEA 100% Schedule III to Credit Agreement 130 -2- Nordskog Industries, California BEA 100% Inc. - ---------- * The balance of these shares were lost prior to the sale of the shares of this entity to BEA. Schedule III to Credit Agreement 131 -3- 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. an Investment in a residential property in San Clemente, California in an amount of approximately $600,000; and c. Money Market Funds in the amount, as of May 23, 1997, of approximately $35M. Finally, each of the matters described in Items 3, 5, 9 and 10 of Part A of Schedule I constitutes an Investment in or by FEEL, AFL and the Company, as the case may be. Schedule III to Credit Agreement 132 SCHEDULE IV Approvals and Compliance None, except compliance with certain Environmental Laws disclosed in the materials set forth in Schedule II hereto. Schedule IV to Credit Agreement 133 SCHEDULE V Existing Letters of Credit Letter of Credit No. Amount Outstanding Expiry Date - -------------------- ------------------ ----------- P-259468 636,380.00 5/29/97 P-361496 25,509.00 5/31/97 P-258984 534,000.00 12/11/97 P-754546 800,000.00 1/10/98 P-259114 1,400,000.00 1/31/98 P-751178 307,817.00 2/28/98 P-754750 505,000.00 3/16/98 P-753306 313,719.00 5/1/98 -------------- Total Letters of Credit Outstanding $4,522,425.00 Schedule V to Credit Agreement 134 SCHEDULE VI Taxes None. Schedule VI to Credit Agreement 135 SCHEDULE VII Transactions with Affiliates Under a Supply Agreement dated April 17, 1990 with Applied Extrusion Technologies, Inc., a Delaware corporation ("AET"), the Company purchases from AET its requirements of injection-molded plastic parts for use in the manufacture of passenger control units and other products for installation in commercial aircraft for the period ending March 31, 1998. Under that agreement, AET has agreed to use its best efforts at all times to maintain available and in good working order a sufficient number and variety of injection molding machines to satisfy the Company's orders as received and to use its best efforts to initiate production within three days of receipt of an order or, in emergency situations, on the date on which the order is received. The price to be paid by the Company to AET for products purchased under the Supply Agreement is an amount which results in a 33-1/3% gross margin to AET, after including in AET's standard cost for such products, all direct and indirect costs of labor, materials, equipment and overhead. Purchases by the Company under this agreement for the fiscal year ended on February 22, 1997 were approximately $1,642,000. Mr. Amin J. Khoury is a director and significant stockholder of AET and serves as its Chairman and Chief Executive Officer. Messrs. Richard G. Hamermesh and Hansjoerg Wyss, directors of BE Aerospace, Inc. are also directors of AET. Schedule VII to Credit Agreement 136 CONFORMED COPY EXHIBIT A-1 REVOLVING CREDIT SECURITY AGREEMENT REVOLVING CREDIT SECURITY AGREEMENT dated as of October 29, 1993 between BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), 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 "Agent"). The Company, certain lenders and the Agent are parties to a Credit Agreement dated as of October 29, 1993 (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 in an aggregate principal or face amount not exceeding $85,000,000. 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 pledge and grant a security interest in the Revolving Credit Collateral (as hereinafter defined) as security for the Revolving Credit Secured Obligations (as so defined). 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 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. Revolving Credit Security Agreement 137 - 2 - "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. "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. Revolving Credit Security Agreement 138 - 3 - "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 Stock" shall have the meaning ascribed thereto in Section 3(a) hereof. "Revolving Credit Collateral" shall have the meaning ascribed thereto in Section 3 hereof. "Revolving Credit Secured Obligations" shall mean, collectively, (a) the principal of and interest on the Revolving Credit Loans made by the Revolving Credit Lenders to, and the Revolving Credit Note(s) held by each Revolving Credit Lender of, the Company and all other amounts from time to time owing to the Revolving Credit Lenders or the 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 Revolving Credit Lenders and the Agent hereunder. "Stock Collateral" shall mean, collectively, the Revolving Credit 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. "Term Loan Collateral" shall have the meaning assigned to such term in the Term Loan Security Agreement. "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. Revolving Credit Security Agreement 139 - 4 - "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. 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 Revolving Credit Collateral and no Lien exists or will exist upon the Revolving Credit 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit Security Agreement 140 - 5 - 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 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 Revolving Credit Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended. Revolving Credit Security Agreement 141 - 6 - Section 3. Revolving Credit Collateral. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Revolving Credit Secured Obligations, the Company hereby pledges and grants to the Agent, for the benefit of the Revolving Credit 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 "Revolving Credit Collateral"): (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 Revolving Credit Security Agreement 142 - 7 - 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"); (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; Revolving Credit Security Agreement 143 - 8 - (1) the balance from time to time in the Collateral Account; (m) all other tangible and intangible property of the Company (other than Term Loan Collateral), 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 Revolving Credit Collateral. 4.01 Collateral Account. The Agent may establish with Chase a cash collateral account (the "Collateral Account") in the name and under the control of the Agent into which there shall be deposited from time to time the cash proceeds of any of the Revolving Credit Collateral (including proceeds of insurance thereon) required to be delivered to the Agent pursuant hereto and into which the Company may from time to time deposit any additional amounts which it wishes to pledge to the Agent for the benefit of the Revolving Credit Lenders as additional collateral security hereunder. The balance from time to time in the Collateral Account shall constitute part of the Revolving Credit Collateral hereunder and shall not constitute payment of the Revolving Credit Secured Obligations until applied as hereinafter provided. Except as expressly provided in the next sentence, the 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 Agent may (and, if instructed by the Revolving Credit 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 Revolving Credit Security Agreement 144 - 9 - Collateral Account to the payment of the Revolving Credit Secured Obligations in the manner specified in Section 5.09 hereof. The balance from time to time in the Collateral 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 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 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 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 Agent) under arrangements, in form and substance satisfactory to the 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 Agent for deposit into the Collateral Account. All payments made to the 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 Revolving Credit 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 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 Agent) shall determine, which Permitted Investments shall be held in the name and be under the control of the Agent, provided that (i) at any time after the occurrence and during the continuance of an Event of Default, the Agent may (and, if instructed by the Revolving Credit 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 Revolving Credit 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 Revolving Credit Security Agreement 145 - 10 - control of one or more of the Revolving Credit Lenders (and in that connection each Revolving Credit Lender, pursuant to Section 10.10 of the Credit Agreement, has agreed that such Permitted Investments shall be held by such Revolving Credit Lender as a collateral sub-agent for the 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 Agent in a separate 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 Revolving Credit 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 Revolving Credit Lender and the Agent as follows: 5.01 Delivery and Other Perfection. The Company shall: (a) 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 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 Agent, pursuant to the terms of this Agreement, as part of the Revolving Credit Collateral or (y) take such other action as the 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 Agent any and all Instruments, endorsed and/or accompanied by such instruments of assignment and transfer in such form and substance as the 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 Agent shall, promptly upon request of the Company, Revolving Credit Security Agreement 146 - 11 - make appropriate arrangements for making any other Instrument pledged by the Company available to the Company for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by the 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 Agent) to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the 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 Agent or its nominee (and the Agent agrees that if any Stock Collateral is transferred into its name or the name of its nominee, the 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 Revolving Credit Lender, cause the 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 Agent; (e) keep full and accurate books and records relating to the Revolving Credit Collateral, and stamp or otherwise mark such books and records in such manner as the Agent may reasonably require in order to reflect the security interests granted by this Agreement; (f) furnish to the 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 Agent may reasonably request, all in reasonable detail; (g) promptly upon request of the Agent, following receipt by the 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 Revolving Credit Security Agreement 147 - 12 - Copyright, Patent or Trademark which becomes part of the Revolving Credit Collateral under this Agreement; (h) permit representatives of the Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Revolving Credit Collateral, and permit representatives of the Agent to be present at the Company's place of business to receive copies of all communications and remittances relating-to the Revolving Credit Collateral, and forward copies of any notices or communications received by the Company with respect to the Revolving Credit Collateral, all in such manner as the Agent may require; (i) upon the occurrence and during the continuance of any Event of Default, upon request of the Agent, promptly notify (and the Company hereby authorizes the Agent so to notify) each account debtor in respect of any Accounts or Instruments that such Revolving Credit Collateral has been assigned to the Agent hereunder, and that any payments due or to become due in respect of such Revolving Credit Collateral are to be made directly to the 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 Agent (granted with the authorization of the Revolving Credit 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 Revolving Credit Collateral in which the Agent is not named as the sole secured party for the benefit of the Revolving Credit Lenders. 5.03 Preservation of Rights. The Agent shall not be required to take steps necessary to preserve any rights against prior parties to any of the Revolving Credit Collateral. 5.04 Special Provisions Relating to Certain Revolving Credit 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 Revolving Credit Security Agreement 148 - 13 - Issuer to constitute 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 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). (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 Agent or any Revolving Credit Lender exercises any available right to declare any Revolving Credit 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 Revolving Credit Secured Obligations, all dividends and other distributions on the Stock Collateral shall be paid directly to the 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 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, 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 Revolving Credit Secured Obligations), be returned by the Agent to the Company. (b) Intellectual Property. (1) For the purpose of enabling the Agent to exercise rights and remedies under Section 5.05 hereof at such time as the Agent shall be lawfully entitled to exercise such rights and Revolving Credit Security Agreement 149 - 14 - remedies, and for no other purpose, the Company hereby grants to the 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 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 (i) immediately above as to any specific Intellectual Property). Further, upon the payment in full of all of the Revolving Credit Secured Obligations and cancellation or termination of the Revolving Credit Commitments and Letter of Credit Liabilities or earlier expiration of this Agreement or release of the Revolving Credit Collateral, the Agent shall grant back to the Company the license granted pursuant to clause (1) immediately above. The exercise of rights and remedies under Section 5.05 hereof by the 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). 5.05 Events of Default, Etc. During the period during which an Event of Default shall have occurred and be continuing: (a) the Company shall, at the request of the Agent, assemble the Revolving Credit Collateral owned by it at such place or places, reasonably convenient to both the Agent and the Company, designated in the Agent's request; (b) the Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Revolving Credit Collateral and may extend the time of Revolving Credit Security Agreement 150 - 15 - payment, arrange for payment in installments, or otherwise modify the terms of, any of the Revolving Credit Collateral; (c) the Agent shall have all of the rights and remedies with respect to the Revolving Credit 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 Revolving Credit Collateral as if the 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 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 Revolving Credit Collateral, but shall be under no obligation to do so; and (e) the Agent may, upon ten Business Days' prior written notice to the Company of the time and place, with respect to the Revolving Credit Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Agent, the Revolving Credit Lenders or any of their respective agents, sell, lease, assign or otherwise dispose of all or any part of such Revolving Credit Collateral, at such place or places as the 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 Agent or any Revolving Credit Lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Revolving Credit 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 Revolving Credit Security Agreement 151 - 16 - symbolized by the Trademark Collateral subject to such disposition shall be included, and the Company shall supply to the Agent or its designee, for inclusion in such sale, assignment or other disposition, all Intellectual Property relating to such Trademark Collateral. The 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 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 Agent may be compelled, with respect to any sale of all or any part of the Revolving Credit Collateral, to limit purchasers to those who will agree, among other things, to acquire the Revolving Credit 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 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 Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Revolving Credit Collateral for the period of time necessary to permit the 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 Revolving Credit 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 Revolving Credit Secured Obligations, the Company shall remain liable for any deficiency. 5.07 Removals. Etc. Without at least 30 days' prior written notice to the Agent, the Company shall not (i) maintain any of its books and records with respect to the Revolving Credit 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 Revolving Credit Security Agreement 152 - 17 - 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 Agent and the Revolving Credit Lenders shall incur no liability as a result of the sale of the Revolving Credit 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 Agent or any Revolving Credit Lender arising by reason of the fact that the price at which the Revolving Credit Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Revolving Credit Secured Obligations, even if the Agent accepts the first offer received and does not offer the Revolving Credit 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 Revolving Credit Collateral pursuant hereto, and any other cash at the time held by the Agent under Section 4 hereof or this Section 5, shall be applied by the 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 Agent and the reasonable fees and expenses of its agents and counsel, and all reasonable expenses incurred and advances made by the Agent in connection therewith; Next, to the payment in full of the Revolving Credit Secured Obligations, in each case equally and ratably in accordance with the respective amounts thereof then due and owing or as the Revolving Credit 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 Revolving Credit Secured Obligations in the manner provided above in this Section 5.09. Revolving Credit Security Agreement 153 - 18 - As used in this Section 5, "proceeds" of Revolving Credit Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Revolving Credit 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 Revolving Credit Collateral. 5.10 Attorney-in-Fact. Without limiting any rights or powers granted by this Agreement to the Agent while no Event of Default has occurred and is continuing, upon the occurrence and during the continuance of any Event of Default the 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 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 Agent shall be entitled under this Section 5 to make collections in respect of the Revolving Credit Collateral, the Agent shall have the right and power to receive, endorse and collect all checks made payable to the order of the Company representing any dividend, payment or other distribution in respect of the Revolving Credit 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 Agent may request to perfect the security interests granted by Section 3 of this Agreement, (ii) cause the Agent (to the extent requested by any Revolving Credit Lender) to be listed as the lienholder on all certificates of title or ownership relating to Motor Vehicles owned by the Company and (iii) deliver to the Agent all certificates identified in Annex 1 hereto, accompanied by undated stock powers duly executed in blank. 5.12 Termination. When all Revolving Credit Secured Obligations shall have been paid in full and the Revolving Credit Commitments of the Revolving Credit Lenders under the Credit Agreement and all Letter of Credit Liabilities shall have expired or been terminated, this Agreement shall terminate, and the Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Revolving Credit 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 Agent shall also execute and deliver to the Company upon such Revolving Credit Security Agreement 154 - 19 - 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 Revolving Credit Collateral. 5.13 Expenses. The Company agrees to pay to the 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 Agent of any obligations of the Company in respect of the Revolving Credit 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 Revolving Credit Collateral, and for the care of the Revolving Credit Collateral and defending or asserting rights and claims of the Agent in respect thereof, by litigation or otherwise, including expenses of insurance, and all such expenses shall be Revolving Credit Secured Obligations to the Agent secured under Section 3 hereof. 5.14 Further Assurances. The Company agrees that, from time to time upon the written request of the Agent, the Company will execute and deliver such further documents and do such other acts and things as the 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 Agent shall execute and deliver to the Company such instruments as the Company shall reasonably request to remove the notation of the 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 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 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 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, Revolving Credit Security Agreement 155 - 20 - 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 Agent (with the consent of the Revolving Credit Lenders as specified in Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be binding upon the Agent and each Revolving Credit Lender, each holder of any of the Revolving Credit Secured Obligations and the Company. 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 Agent, the Revolving Credit Lenders and each holder of any of the Revolving Credit Secured Obligations (provided, however, that the Company shall not assign or transfer its rights hereunder without the prior written consent of the 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 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 Agent and the Revolving Credit 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 Revolving Credit Security Agreement 156 - 21 - jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Security Agreement to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By /s/ Thomas P. McCaffrey -------------------------------------- Title: Secretary THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By /s/ Matthew H. Massie -------------------------------------- Title: Vice President Revolving Credit Security Agreement 157 ANNEX 1 PLEDGED STOCK Certificate Registered Issuer Nos. Owner Number of Shares - ------ ----------- ---------- ---------------- Flight Equipment 26 BE Avionics, 325,000 and Engineering Inc. (now ordinary Limited known as BE shares, (pound)1 par Aerospace, value Inc.) BE Aerospace 1-23 BE 23 shares of (Netherlands) (uncertificated Aerospace, capital stock, B.V. shares) Inc. dfl. 1,000 par value BE Aerospace 2 BE 65 shares of (U.S.A.), Inc. Aerospace, common stock, Inc. $0.01 par value Annex 1 to Revolving Credit Security Agreement 158 ANNEX 2 LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND APPLICATIONS FOR COPYRIGHT REGISTRATIONS Title Date Filed Registration No. Effective Date - ----- ---------- ---------------- -------------- None. Annex 2 to Revolving Credit Security Agreement 159 ANNEX 3 LIST OF PATENTS AND PATENT APPLICATIONS File Patent Country Registration No. Date - ---- ------ ------- ---------------- ---- Locking USA 37103076 01/23/73 Electrical Cable Connector Acoustic Yoke Great Brit. 1510243 02/27/76 Coupler Switch Transducer USA 4028491 06/07/77 Switching System Miniature USA 4029375 06/14/77 Electrical Connector Acoustic Yoke USA 4029169 06/14/77 Ear Coupler USA 4055233 10/25/77 Variable USA 4352084 09/28/82 Resistor Disk Assembly Controller Unit USA 4509097 04/02/85 Quick Release USA 4547016 10/15/85 Mounting Matrix Control USA 4577191 03/18/86 Method & Apparatus 574259-1 Coffee/Tea Maker APPLICATION BEING PREPARED 574259-11 Auto Retractable Step II APPLICATION BEING PREPARED 574259-12 Auto Retractable Step I APPLICATION BEING PREPARED 776650 Auto Monitor Tilt Mechanism APPLICATION FILED 10/03/91 Annex 3 to Revolving Credit Security Agreement -1- 160 File Patent Country Registration No. Date - ---- ------ ------- ---------------- ---- 574267-12 Apparatus for France 46414 Selectively 574267-13 Apparatus for Great Brit. 46414 Selectively 574267-14 Apparatus for Italy 46414 Selectively 574267- Brewing Inline USA 3898428 08/05/75 Apparatus 574267- Cart, Serving USA 3986582 10/19/76 Has Spaced 574267-30 Des. Dish Singl- USA 284156 06/10/86 Serv. 574267- Des. Dish Singl- USA 280960 10/15/85 Serv. 574267- Des. Dish Singl- USA 282335 01/28/86 Serv. 574267- Dinsh Singl- USA 4560859 12/24/85 Serv. 574267- Heater Assy USA 4294643 10/13/81 Method 574267- Heater Assy USA 4286143 08/25/81 Laminated 574267- Oven Freezer Canada 0891768 02/01/72 Has Fan 574267-5 Singl-Serv. Australia 515828 09/15/78 Heater Shelf 574267-17 Singl Serv. Canada 1218245 02/24/87 574267-18 Singl Serv. Canada 1231543 01/19/88 574267-11 Singl Serv. Europe 0046414 08/20/81 Annex 3 to Revolving Credit Security Agreement -2- 161 File Patent Country Registration No. Date - ---- ------ ------- ---------------- ---- 574267-15 Singl Serv. Japan 1214307 10/20/83 574267-10 Singl Serv. Germany 31728324 08/20/81 System 574267-20 Singl Serv. Great Brit. 2017293 09/14/78 Heater 574267-8 Singl Serv. Japan 1085804 06/18/81 Heater 574267-25 Singl Serv. USA 4180125 12/25/79 Heater 574267-33 Singl Serv. USA 30623 05/26/81 Heater 574267-34 Singl Serv. USA 4346756 08/31/82 System 574267-29 Singl Serv. USA 4776485 10/11/88 with Insulat. Aircraft USA 4647980 03/03/87 Passenger Television System Airline USA 281940 12/03/85 Passenger Seatback Combined LCD Display and Battery Pack Unit For an Entertainment and Information System Television USA 295042 04/05/88 Nodule Annex 3 to Revolving Credit Security Agreement -3- 162 File Patent Country Registration No. Date - ---- ------ ------- ---------------- ---- Aircraft Taiwan 36006 11/10/87 Passenger Television System Television Taiwan 17791 03/10/89 Module Aircraft Australia 577768 02/13/89 Passenger Television System Aircraft Canada 1227735 10/06/87 Passenger Television System Aircraft Europe Application Filed 1/15/87; Passenger (designated Ser. No. 87100474.3 Television countries System are: Austria, Belg., Fr., Ger., U.K., Italy, Swed., Switz. And Neth.) Airline Japan Application Filed 5/18/87; Passenger Ser. No. 12160/87 Television System Television Japan Application Filed 5/23/86; Module Ser. No. 61-19680 Annex 3 to Revolving Credit Security Agreement -4- 163 ANNEX 4 LIST OF TRADE NAMES, TRADEMARKS, SERVICE MARKS, TRADEMARK AND SERVICE MARK REGISTRATIONS AND APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS U.S. Trademarks Mark Registration Registration Goods ---- ------------ ------------ ----- No. Date --- ---- 1. Airvision Logo 1,404,654 8/12/86 Audio visual entertainment units for installation in the rear seats of transportation vehicles, consisting of: a viewing screen, earphones, cassettes, cassette players - sold as a unit, in international class 9. 2. Airvision 1,449,452 7/28/87 Audio visual entertainment units for installation in the rear seats of transportation vehicles, consisting of: a viewing screen, earphones, cassettes, cassette players - sold as a unit, in international class 9. Annex 4 to Revolving Credit Security Agreement 164 Foreign Trademarks
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes Name No. Date No. Renewal Date AIRVISION ALGERIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION AUSTRALIA Registered A490611 06/07/88 A19D511 06/07/88 06/07/95 41, AIRVISION AUSTRALIA Registered A490612 06/07/88 A19D512 06/07/88 06/07/95 9, AIRVISION AUSTRIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION BENELUX Registered 710868 07/01/88 438360 03/06/88 07/01/98 9,37,41, AIRVISION BULGARIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION CROATIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION CZECHOSLOVAKIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION DENMARK Pending 4276/88 24/06/88 3671-1991 14/06/91 14/06/01 9,37,41, AIRVISION EGYPT Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION FINLAND Registered 3756/88 24/06/88 106329 06/06/90 06/06/00 9,37,41, AIRVISION FRANCE Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION GERMANY EAST Registered 22/06/88 525719 22/06/88 22/06/98 9,37,41, AIRVISION GERMANY WEST Withdrawn 22/06/88 525719 22/06/88 22/06/98 9,37,41, AIRVISION GREAT BRITAIN Registered 1360025 29/04/88 9, AIRVISION GREAT BRITAIN _________ 1360026 29/04/88 41, AIRVISION GREECE Pending 89642 06/07/88 89642 17/12/90 06/07/98 9, AIRVISION HUNGARY Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION INDONESIA Registered 22/06/88 248940 24/04/89 24/04/98 9, AIRVISION INTERNATIONAL Registered 22/06/88 525719 22/06/88 22/06/98 9,37,41, AIRVISION INTERNATIONAL Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION IRELAND Registered 2593/88 23/06/88 129284 26/11/90 07/01/95 9, AIRVISION ITALY Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION JAPAN Registered 78073/88 07/01/88 229993T 31/01/91 31/10/00 24, AIRVISION JAPAN Pending 78072/88 07/01/88 11, AIRVISION JAPAN Registered 78074/88 07/01/88 2325T84 30/05/91 30/05/01 26, AIRVISION JAPAN Drop 78072/88 07/01/88 11, AIRVISION KOREA PEP. DEM. R. Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION LIECHTENSTEIN Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION MALAYSIA Pending 88/03214 04/07/88 9, AIRVISION MONACO Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION MOROCCO Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION NEW ZEALAND Registered 184982 24/06/88 184952 10/03/92 24/06/95 41, AIRVISION NEW ZEALAND Registered 184951 24/06/88 184951 10/03/92 24/06/95 9, AIRVISION NORWAY Registered 882834 27/06/88 140052 11/01/90 11/01/00 9,37,41, AIRVISION PORTUGAL Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION ROMANIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION SAN MARINO Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION SINGAPORE Registered 3332/88 30/06/88 3332/88 30/06/88 07/01/95 9, AIRVISION SLOVENIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION SOUTH KOREA Registered 1388/88 29/06/88 10336 20/09/89 20/09/99 111, AIRVISION SOUTH KOREA Registered 14427/88 29/06/88 181022 11/10/89 11/10/99 38, AIRVISION SOUTH KOREA Registered 14429/88 29/06/88 177402 23/06/89 23/06/99 52, AIRVISION SOUTH KOREA Registered 14428/88 29/06/88 177778 29/08/89 29/06/99 31, AIRVISION SOVIET UNION Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION SPAIN Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION SUDAN Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION SWEDEN Pending 88-5694 06/07/88 227109 18/10/91 18/10/01 9,37,41, AIRVISION SWITZERLAND Registered 22/06/88 525719A 22/06/88 22/06/98 9, AIRVISION TAIWAN Registered (71)29898 24/06/88 447777 01/06/89 01/06/99 73, AIRVISION TAIWAN Registered 77-29896 24/06/88 457033 01/11/89 01/11/99 93, AIRVISION TAIWAN Registered (77)29699 24/06/88 33324 15/01/89 15/01/99 1,
Annex 4 to Revolving Credit Agreement Security Agreement -2- 165
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes Name No. Date No. Renewal Date AIRVISION TAIWAN Registered (77)29897 24/06/88 424801 31/01/89 31/01/98 66, AIRVISION UKRAINE Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION YUGOSLAVIA Registered 22/06/88 525719A 22/06/88 22/06/98 9,37,41, AIRVISION (LOGO) ALGERIA Registered 06/01/89 533525A 06/01/89 06/01/98 9,16,41, AIRVISION (LOGO) AUSTRALIA Registered 492951 08/08/88 A482981 09/06/88 08/06/95 41, AIRVISION (LOGO) AUSTRALIA Registered 492979 08/08/88 A482979 09/06/88 08/06/95 9, AIRVISION (LOGO) AUSTRALIA Registered 492980 08/08/88 A482969 09/06/88 08/06/95 16, AIRVISION (LOGO) AUSTRIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) BENELUX Registered 717180 06/07/88 447996 10/02/89 06/07/98 9,16,41, AIRVISION (LOGO) BULGARIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) CROATIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) CZECHOSLOVAKIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) DENMARK Registered 5390/88 04/06/88 689-990 08/02/90 09/02/90 9,16,41 AIRVISION (LOGO) EGYPT Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) FINLAND Registered 3412/88 05/08/88 108123 05/10/90 05/10/00 9,16,41 AIRVISION (LOGO) FRANCE Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) GERMANY EAST Registered 06/01/89 533525 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) GERMANY WEST Registered 06/01/89 533525 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) GREAT BRITAIN Registered 1353493 06/08/88 1353483 23/10/92 05/05/95 41, AIRVISION (LOGO) GREAT BRITAIN Registered 1492841 21/02/82 1492041 21/02/93 26/02/99 9, AIRVISION (LOGO) GREAT BRITAIN Rejected 1353992 05/08/88 16, AIRVISION (LOGO) GREAT BRITAIN Pending 1353991 05/08/88 9, AIRVISION (LOGO) GREECE Registered 90143 10/06/88 90143 10/08/88 10/08/98 9,16 AIRVISION (LOGO) HONG KONG Registered 5053/88 16/06/88 8700/83 16/02/93 16/06/95 16, AIRVISION (LOGO) HONG KONG Withdrawn 5052/88 16/06/88 9, AIRVISION (LOGO) HUNGARY Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) INDONESIA Registered 11/06/88 266038 01/04/91 01/04/01 9,16, AIRVISION (LOGO) INTERNATIONAL Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) INTERNATIONAL Registered 06/01/89 533525 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) IRELAND Registered 3410/88 06/06/88 129285 26/11/90 08/08/95 9, AIRVISION (LOGO) IRELAND Registered 3411/88 06/06/88 129286 26/11/90 08/08/95 16, AIRVISION (LOGO) ITALY Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) JAPAN Registered 92602/88 10/06/88 2402644 30/04/92 30/04/02 26, AIRVISION (LOGO) JAPAN Pending 92599/88 10/06/88 11, AIRVISION (LOGO) JAPAN Registered 92601/88 10/06/88 2364916 25/12/91 29/12/01 25, AIRVISION (LOGO) JAPAN Registered 92600/88 10/06/88 2340952 30/09/91 30/06/01 24, AIRVISION (LOGO) KOREA PEP. DEM. R. Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) LIECHTENSTEIN Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41 AIRVISION (LOGO) MALAYSIA Pending 88/05223 10/10/88 9, AIRVISION (LOGO) MALAYSIA Pending 88/05222 10/10/88 16, AIRVISION (LOGO) MONACO Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) MOROCCO Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) NEW ZEALAND Registered 186296 10/06/88 186296 12/03/92 10/08/95 16, AIRVISION (LOGO) NEW ZEALAND Registered 186295 10/06/88 186295 12/03/92 10/08/95 9, AIRVISION (LOGO) NEW ZEALAND Registered 186297 10/06/88 186297 12/03/92 10/08/95 41, AIRVISION (LOGO) NORWAY Registered 88-3533 01/06/88 145136 23/05/91 23/05/01 9,16,41, AIRVISION (LOGO) POLAND Pending Z-82457 22/06/90 9, AIRVISION (LOGO) PORTUGAL Registered 06/01/89 533525A 06/01/99 06/01/99 9,16,41, AIRVISION (LOGO) ROMANIA Registered 06/01/89 533525A 06/01/99 06/01/99 9,16,41, AIRVISION (LOGO) SAN MARINO Registered 06/01/89 533525A 06/01/99 06/01/99 9,16,41 AIRVISION (LOGO) SINGAPORE Pending 5234/88 24/09/88 16, AIRVISION (LOGO) SINGAPORE Registered 5232/88 24/09/88 5232/88 24/09/88 24/09/95 9, AIRVISION (LOGO) SLOVENIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41
Annex 4 to Revolving Credit Agreement Security Agreement -3- 166
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes Name No. Date No. Renewal Date AIRVISION (LOGO) SOUTH KOREA Registered 19260/88 27/06/88 177776 29/06/89 29/06/99 51, AIRVISION (LOGO) SOUTH KOREA Registered 1797/88 27/06/88 10537 16/11/89 16/11/99 111, AIRVISION (LOGO) SOUTH KOREA Pending 19259/88 27/06/88 39, AIRVISION (LOGO) SOUTH KOREA Registered 19261/88 27/06/88 177396 23/06/89 23/06/99 52, AIRVISION (LOGO) SOVIET UNION Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) SPAIN Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) SUDAN Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) SWEDEN Registered 88-6794 12/08/88 227113 18/10/91 18/10/01 9,16,41, AIRVISION (LOGO) SWTZERLAND Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) TAIWAN Registered 77-44068 22/08/88 437928 01/04/89 01/04/99 95, AIRVISION (LOGO) TAIWAN Registered 77-44066 22/08/88 435019 16/03/89 16/03/99 49, AIRVISION (LOGO) TAIWAN Registered 77-44069 22/08/88 445192 01/07/89 31/01/99 96, AIRVISION (LOGO) TAIWAN Registered 77-44066 22/08/88 35082 16/04/89 15/01/99 1, AIRVISION (LOGO) TAIWAN Registered 77-44067 22/08/88 447783 01/08/89 01/08/99 73, AIRVISION (LOGO) UKRAINE Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41, AIRVISION (LOGO) YUGOSLAVIA Registered 06/01/89 533525A 06/01/89 06/01/99 9,16,41,
Annex 4 to Revolving Credit Agreement Security Agreement -4- 167 ANNEX 5 LIST OF CONTRACTS. LICENSES AND OTHER AGREEMENT 1. Pursuant to an Amended and Restated Asset Purchase Agreement (the "Asset Purchase Agreement") between the Company and Philips Electronics North America Corporation ("PENA") dated August 27, 1993, on October 13, 1993 the Company purchased certain assets and liabilities from the Philips Airvision division ("Airvision") of PENA, including certain patents, patent applications, trademarks and trademark applications of Airvision. Based on copies of affidavits and other letters of the inventors' attorney in PENA's files, a public disclosure by the inventors of a representative airline seat with seatback mounted television was made on or about October 1984 at a meeting of the World Airline Entertainment Association in San Diego. This disclosure was not brought to the attention of the Patent and Trademark Office examiner during the prosecution of this application. Based on such affidavits and letters, it is believed that the mock-up consisted of a small LCD color television screen supported by tape and wood blocks in the seat headrest. The screen was removed from a hand-held portable television and combined with electronic components externally of the seat to provide a visual display with separate channels of a seatback mounted television. Such affidavits and letters disclose that the above mock-up was displayed on a limited basis in a hotel room to others attending the conference for the purpose of soliciting a research and development partner having access to an aircraft upon which the system could be tested. At the time, no in-flight demonstration testing had occurred. Based on facts averred in a Declaration Under 37 C.F.R. 1.131 filed by the inventors during prosecution of the application, there is also a possible basis for the assertion that the television system was "on sale" more than one year prior to the date of application. As PENA understands it, Airvision's predecessor in interest (a) made a confidential offer to sell the system to The Boeing Company on October 11, 1982 including a description of and offer to include "Second Generation Devices" intended to permit a selection of movies; (b) completed a first prototype (seat mounted LCD screen in 1983); (c) completed a working second prototype (TV modular system for installation into passenger seat) in September, 1984; (d) conducted market studies Annex 5 to Revolving Credit Security Agreement -1- 168 for the remainder of 1984 and 1985; (e) completed a third prototype (production model) on August 13, 1985; and (f) filed a patent application on January 21, 1986, more than one year after the working prototype was made. 2. Pursuant to a Letter Agreement dated February 5, 1992 between Hughes Avicom International and Philips Airvision Ltd., Airvision agreed not to assert against Hughes Avicom Airvision's U.S. Patent No. 4,647,980, and Hughes Avicom agreed not to assert against Airvision Hughes Avicom's U.S. Patent Application Serial No. 07/579,335. Pursuant to the Asset Purchase Agreement, the Company has assumed this agreement. 3. Pursuant to the Asset Purchase Agreement, the Company agreed with PENA that the assignment of patents and patent applications thereunder was subject to existing cross-licenses of PENA to which the Company will not have the benefit and that PENA will have the right to renew and extend such cross-licenses under such patents and patent applications. 4. The foreign trademarks of the Company were agreed to be transferred to the Company pursuant to the Asset Purchase Agreement by Philips Electronics N.V., a Netherlands corporation and indirect parent of PENA. However, until certain transfer documents have been filed in certain jurisdictions outside of the United States, the Company cannot be said to hold all ownership, right, title and interest in and to such trademarks. Annex 5 to Revolving Credit Security Agreement -2- 169 ANNEX 6 LIST OF LOCATIONS AND TRADE NAMES Part A - List of Locations 1. 1300 Corporate Center Way, Suite 202, Wellington, FL 33414 2. 975 Sunshine Lane, Altamonte Springs, FL 32714 3. 17481 Red Hill Avenue, P.O. Box 22008, Irvine, CA 92714-5630 4. 12807 Lake Drive, P.O. Drawer 130, Delray Beach, FL 33447 5. 11710 Central Parkway, Jacksonville, FL 32216 6. Parkerbaan 20, 3439 MC Nieuwegein, The Netherlands 7. 2 Moor Road, Kilkeel, Co. Down, BT34 4NG, Northern Ireland 8. Nashleigh Works, Preston Hill, Chesham, Buckinghamshire, HP5 3JR, England 9. Grovebury Road, Leighton Buzzard, Bedfordshire, LU7 854, England 10. 607 Bantam Road, Litchfield, CT 06759 11. 11752 Markon Drive, Garden Grove, CA 92641 Annex 6 to Revolving Credit Security Agreement 170 Part B - Trade Names/State Trade Name State ---------- ----- BE Avionics California Florida PTC Aerospace California Connecticut Aircraft Products Company California Florida Trans Video Systems Florida New Jersey BE Services California Florida Annex 6 to Revolving Credit Security Agreement 171 CONFORMED COPY EXHIBIT A-2 TERM LOAN SECURITY AGREEMENT TERM LOAN SECURITY AGREEMENT dated as of October 29, 1993 between BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as agent for certain lenders or other financial institutions or entities party to the Credit Agreement referred to below (in such capacity, together with its successors in such capacity, the "Agent"). The Company, certain lenders and the Agent are parties to a Credit Agreement dated as of October 29, 1993 (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 in an aggregate principal or face amount not exceeding $85,000,000. 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 pledge and grant a security interest in the Term Loan Collateral (as hereinafter defined) as security for the Term Loan Secured Obligations (as so defined). 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: "Issuer" shall mean the corporation identified on Annex 1 hereto under the caption "Issuer". "Pledged Stock" shall have the meaning ascribed thereto in Section 3(a) hereof. "Term Loan Collateral" shall have the meaning ascribed thereto in Section 3 hereof. "Term Loan Secured Obligations" shall mean, collectively, (a) the principal of and interest on the Term Loans made by the Term Loan Lenders to, and the Term Loan Note(s) held by each Term Loan Lender of, the Company and all other amounts from time to time owing to the Term Loan Lenders or the Agent by the Company under the Basic Documents and (b) all obligations of the Company to the Term Loan Lenders and the Agent hereunder. Term Loan Security Agreement 172 -2- "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 Term Loan Lenders and the Agent that: (a) The Company is the sole beneficial owner of the Term Loan Collateral and no Lien exists or will exist upon the Term Loan 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 Term Loan 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 Term Loan Collateral. (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 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 all of the issued and outstanding shares of capital stock of any class of the Issuer 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 Issuer 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. Section 3. The Pledge. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Term Loan Secured Obligations, the Company hereby pledges and grants to the Agent, for the benefit of the Term Loan 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 Term Loan Security Agreement 173 -3- Company or hereafter acquired and whether now existing or hereafter coming into existence (all being collectively referred to herein as "Term Loan Collateral"): (a) the shares of capital stock of the Issuer represented by the certificates identified in Annex 1 hereto and all other shares of capital stock of whatever class of the Issuer, 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; and (d) all proceeds of and to any of the property of the Company described in the preceding clauses of this Section 3 and, to the extent related to any property described in said clauses or such proceeds, all books, correspondence, credit files, records, invoices and other papers. Section 4. 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 Term Loan Lender and the Agent as follows: 4.01 Delivery and Other Perfection. The Company shall: (a) 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 Agent such shares or securities so received by the Company (together with the certificates for any such Term Loan Security Agreement 174 -4- 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 Agent, pursuant to the terms of this Agreement, as part of the Term Loan Collateral or (y) take such other action as the 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) 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 Agent) to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the 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 Term Loan Collateral to be transferred of record into the name of the Agent or its nominee (and the Agent agrees that if any Term Loan Collateral is transferred into its name or the name of its nominee, the Agent will thereafter promptly give to the Company copies of any notices and communications received by it with respect to the Term Loan Collateral); (c) keep full and accurate books and records relating to the Term Loan Collateral, and stamp or otherwise mark such books and records in such manner as the Agent may reasonably require in order to reflect the security interests granted by this Agreement; and (d) permit representatives of the Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Term Loan Collateral, and permit representatives of the Agent to be present at the Company's place of business to receive copies of all communications and remittances relating to the Term Loan Collateral, and forward copies of any notices or communications received by the Company with respect to the Term Loan Collateral, all in such manner as the Agent may require. 4.02 Other Financing Statements and Liens. Except as otherwise permitted under Section 8.06 of the Credit Agreement, without the prior written consent of the Agent (granted with the authorization of the Term Loan 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 Term Loan Collateral in which Term Loan Security Agreement 175 -5- the Agent is not named as the sole secured party for the benefit of the Term Loan Lenders. 4.03 Preservation of Rights. The Agent shall not be required to take steps necessary to preserve any rights against prior parties to any of the Term Loan Collateral. 4.04 Term Loan Collateral. (1) The Company will cause the Term Loan Collateral to constitute at all times 100% of the total number of shares of each class of capital stock of the 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 Term Loan 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 Term Loan 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 which it is entitled to exercise pursuant to this Section 4.04(2). (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 Term Loan 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 Agent or any Term Loan Lender exercises any available right to declare any Secured Obligation 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 Obligation, all dividends and other distributions on the Term Loan Collateral shall be paid directly to the Agent and retained by it as part of the Term Loan 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, provided that if such Event of Default is cured, any such dividend or distribution theretofore paid to the Agent shall, Term Loan Security Agreement 176 -6- upon request of the Company (except to the extent theretofore applied to the Term Loan Secured Obligations), be returned by the Agent to the Company. 4.05 Events of Default, Etc. During the period during which an Event of Default shall have occurred and be continuing: (a) the Agent shall have all of the rights and remedies with respect to the Term Loan 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 Term Loan Collateral as if the 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); (b) the 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 Term Loan Collateral, but shall be under no obligation to do so; and (c) the Agent may, upon ten Business Days' prior written notice to the Company of the time and place, with respect to the Term Loan Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Agent, the Term Loan Lenders or any of their respective agents, sell, lease, assign or otherwise dispose of all or any part of such Term Loan Collateral, at such place or places as the 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 Agent or any Term Loan Lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Term Loan 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, Term Loan Security Agreement 177 -7- notice and right or equity being hereby expressly waived and released. The 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 4.05 shall be applied in accordance with Section 4.09 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 Agent may be compelled, with respect to any sale of all or any part of the Term Loan Collateral, to limit purchasers to those who will agree, among other things, to acquire the Term Loan 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 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 Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Term Loan Collateral for the period of time necessary to permit the or issuer thereof to register it for public sale. 4.06 Deficiency. If the proceeds of sale, collection or other realization of or upon the Term Loan Collateral pursuant to Section 4.05 hereof are insufficient to cover the costs and expenses of such realization and the payment in full of the Term Loan Secured Obligations, the Company shall remain liable for any deficiency. 4.07 Removals, Etc. Without at least 30 days' prior written notice to the Agent, the Company shall not (i) maintain any of its books and records with respect to the Term Loan Collateral at any office or maintain its principal place of business at any place other than at the address indicated beneath the signature of the Company to the Credit Agreement or (ii) change its name, or the name under which it does business, from the name shown on the signature pages hereto; provided that the Company may do business in the states and under the names specified in Annex 2 hereto. 4.08 Private Sale. The Agent and the Term Loan Lenders shall incur no liability as a result of the sale of the Term Loan Collateral, or any part thereof, at any private sale Term Loan Security Agreement 178 -8- pursuant to Section 4.05 hereof conducted in a commercially reasonable manner. The Company hereby waives any claims against the Agent or any Term Loan Lender arising by reason of the fact that the price at which the Term Loan Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Term Loan Secured Obligations, even if the Agent accepts the first offer received and does not offer the Term Loan Collateral to more than one offeree. 4.09 Application of Proceeds. Except as otherwise herein expressly provided, the proceeds of any collection, sale or other realization of all or any part of the Term Loan Collateral pursuant hereto, and any other cash at the time held by the Agent under this Section 4, shall be applied by the 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 Agent and the reasonable fees and expenses of its agents and counsel, and all reasonable expenses incurred and advances made by the Agent in connection therewith; Next, to the payment in full of the Term Loan Secured Obligations, in each case equally and ratably in accordance with the respective amounts thereof then due and owing or as the Term Loan 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. As used in this Section 4, "proceeds" of Term Loan Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Term Loan 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 Term Loan Collateral. 4.10 Attorney-in-Fact. Without limiting any rights or powers granted by this Agreement to the Agent while no Event of Default has occurred and is continuing, upon the occurrence and during the continuance of any Event of Default the Agent is hereby appointed the attorney-in-fact of the Company for the purpose of carrying out the provisions of this Section 4 and taking any action and executing any instruments which the 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 Term Loan Security Agreement 179 -9- foregoing, so long as the Agent shall be entitled under this Section 4 to make collections in respect of the Term Loan Collateral, the Agent shall have the right and power to receive, endorse and collect all checks made payable to the order of the Company representing any dividend, payment or other distribution in respect of the Term Loan Collateral or any part thereof and to give full discharge for the same. 4.11 Perfection. Prior to or concurrently with the execution and delivery of this Agreement, the Company shall deliver to the Agent all certificates identified in Annex 1 hereto, accompanied by undated stock powers duly executed in blank. 4.12 Termination. When all Term Loan Secured Obligations shall have been paid in full and the Term Loan Commitments of the Term Loan Lenders under the Credit Agreement shall have expired or been terminated, this Agreement shall terminate, and the Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Term Loan Collateral and money received in respect thereof, to or on the order of the Company. 4.13 Expenses. The Company agrees to pay to the 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 4, or performance by the Agent of any obligations of the Company in respect of the Term Loan 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 Term Loan Collateral, and for the care of the Term Loan Collateral and defending or asserting rights and claims of the Agent in respect thereof, by litigation or otherwise, and all such expenses shall be Term Loan Secured Obligations to the Agent secured under Section 3 hereof. 4.14 Further Assurances. The Company agrees that, from time to time upon the written request of the Agent, the Company will execute and deliver such further documents and do such other acts and things as the Agent may reasonably request in order fully to effect the purposes of this Agreement. Section 5. Miscellaneous. 5.01 No Waiver. No failure on the part of the 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 Term Loan Security Agreement 180 -10- remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the 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. 5.02 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. 5.03 Notices. All notices, requests, consents and demands hereunder shall be in writing and 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. 5.04 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 Agent (with the consent of the Term Loan Lenders as specified in Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be binding upon the Agent and each Term Loan Lender, each holder of any of the Term Loan Secured Obligations and the Company. 5.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Company, the Agent, the Term Loan Lenders and each holder of any of the Term Loan Secured Obligations (provided, however, that the Company shall not assign or transfer its rights hereunder without the prior written consent of the Agent). 5.06 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. 5.07 Agents. The 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. 5.08 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 Agent and the Term Loan Term Loan Security Agreement 181 -11- 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. IN WITNESS WHEREOF, the parties hereto have caused this Term Loan Security Agreement to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By /s/ Thomas P. McCaffrey ---------------------------------- Title: Secretary THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By /s/ Matthew H. Massie ---------------------------------- Title: Vice President Term Loan Security Agreement 182 ANNEX 1 PLEDGED STOCK Certificate Registered Issuer Nos. Owner Number of Shares - ------ ----------- ---------- ---------------- Acurex 2 BE 100 shares of Corporation Aerospace, common stock, Inc. $0.01 par value Annex 1 to Term Loan Security Agreement 183 ANNEX 2 TRADE NAMES Trade Name State ---------- ----- BE Avionics California Florida PTC Aerospace California Connecticut Aircraft Products Company California Florida Trans Video Systems Florida New Jersey BE Services California Florida Annex 2 to Term Loan Security Agreement 184 EXHIBIT B [Form of Confidentiality Agreement] CONFIDENTIALITY AGREEMENT [Date) [Insert Name and Address of Prospective Participant or Assignee] Re: Third Amended and Restated Credit Agreement dated as of October 29, 1993 and amended and restated as of _______, 1997 (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 Confidentiality Agreement 185 -2- 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__________________________] Confidentiality Agreement EX-10.2 6 AMENDMENT NO. 1 DATED NOVEMBER 19, 1997 1 Exhibit 10.2 CONFORMED COPY AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of November 19, 1997, between BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"); each of the lenders that is a signatory hereto (individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The Company, the Lenders and the Administrative Agent are parties to a Third Amended and Restated Credit Agreement dated as of October 29, 1993, as amended and restated as of May 29, 1997 (as heretofore modified and supplemented and in effect on the date hereof, the "Credit Agreement"). The Company and the Administrative Agent are parties to a Revolving Credit Security Agreement dated as of October 29, 1993 (as heretofore modified and supplemented and in effect on the date hereof, the "Revolving Credit Security Agreement"). The Company has requested that the Credit Agreement and the Revolving Credit Security Agreement be amended in certain respects, and accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 1. terms defined in the Credit Agreement (as amended hereby) are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 below, but effective as of the date hereof (the "First Amendment Effective Date"), the Credit Agreement and the Revolving Credit Security Agreement shall be amended as follows: 2.01. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby. References in the Revolving Credit Security Agreement (including references to the Revolving Credit Security Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Revolving Credit Security Agreement as amended hereby. 2.02. Section 1.01 of the Credit Agreement shall be amended by adding the following new definitions (to the extent not already included in said Section 1.01) and inserting the same in the appropriate alphabetical locations and by amending the following definitions (to the extent already included in said Section 1.01) to read in their entirety, as follows: "Amendment No. 1" shall mean Amendment No. 1 dated as of November 13, 1997 to this Agreement. "BE Services" shall mean B/E Services, Inc. a Delaware corporation and Wholly Owned Subsidiary of the Company. 2 -2- "First Amendment Effective Date" shall have the meaning ascribed thereto in Amendment No. 1. "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 and Security Agreement" shall mean a Guarantee and Security Agreement substantially in the form of Exhibit A to Amendment No. 1, dated the First Amendment Effective Date, between In-Flight Entertainment, LLC and the Administrative Agent as the same shall be modified and supplemented and in effect from time to time. "In-Flight Entertainment LLC" shall mean In-Flight Entertainment, LLC, a Delaware limited liability company and Wholly Owned Subsidiary of the Company. "Revolving Credit Security Agreement" shall mean the Revolving Credit Security Agreement dated as of October 29, 1993 between the Company and the Agent, a copy of which is attached as Exhibit A-1 hereto, as amended by Sections 11.13(a) and 11.13(c) hereof and as the same shall be further modified, supplemented and in effect from time to time. "Security Documents" shall mean, collectively, the Revolving Credit Security Agreement, the Term Loan Security Agreement and the Guarantee and Security Agreement." "Term Loan Security Agreement" shall mean the Term Loan Security Agreement dated as of October 29, 1993, a copy of which is attached as Exhibit A-2 hereto, as amended by Sections 11.13(b) and 11.13(d) hereof and as the same shall be further modified, supplemented and in effect from time to time. 2.03. The definition of "Borrowing Base" in Section 1.01 of the Credit Agreement is hereby amended by (i) inserting, In-Flight Entertainment LLC and BE Services" immediately following "Company" therein and (ii) inserting ", other than in the case of BE Services," immediately after "the Administrative Agent has" therein. 2.04. The definition of "Eligible inventory" in Section 1.01 of the Credit Agreement is hereby amended by (i) inserting ", In-Flight Entertainment LLC and BE Services" immediately following "Company" in the third line therein and (ii) inserting ", other than in the case of BE Services," immediately after "the Administrative Agent has" therein. 2.05. The definition of "Eligible Receivables" in Section 1.01 of the Credit Agreement is hereby amended by (i) inserting ", In-Flight Entertainment LLC and BE Services" immediately following "Company" in the second line therein and (ii) inserting ", other than in the case of BE Services," immediately after "the Administrative Agent has" therein. 3 -3- 2.06. Section 8.06(i) of the Credit Agreement is hereby amended by inserting "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)" immediately following "real and/or tangible personal Property" therein. 2.07. Section 8.17(a) of the Credit Agreement is hereby amended to read in its entirety as follows: "(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 or otherwise dispose of any shares of stock or partnership or other ownership interest in any Subsidiary owned by them, nor permit an 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) an" 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 Subsidiary or Acquire any additional 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 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 Revolving Credit Collateral and Series A Collateral (as defined in the Revoking Credit Security Agreement and Guarantee and Security Agreement, respectively) to be transferred of record into the name of the Administrative Agent; provided that if any such 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 Subsidiary and such pledge shall, at the request of the Majority Series A Lenders, be made either under the Revolving Credit Security Agreement or under a pledge or other agreement governed by the law of such Subsidiary's jurisdiction of organization." 2.08. Section 9(d) of the Credit Agreement is hereby amended by adding the following at the end thereof: 4 -4- "In-Flight Entertainment LLC shall default in the performance of any of its obligations under Section 6.02 of the Guarantee and Security Agreement; or" 2.09. Section 10.05 of the Credit Agreement is hereby amended by inserting "or Section 5.02 of the Guarantee and Security Agreement" immediately following "Section 4.02 of the Revolving Credit Security Agreement" wherever the same occurs therein. 2.10. Section 10.09 of the Credit Agreement is hereby amended by inserting "or the Guarantee and Security Agreement" immediately following "the Revolving Credit Security Agreement" in clauses (ii) and (iv) therein. 2.11. Section 10.10 of the Credit Agreement is hereby amended by inserting "and Section 5.03 of the Guarantee and Security Agreement" immediately following "Section 4.03 of the Revolving Credit Security Agreement" therein. 2.12. Section 11.03 of the Credit Agreement is hereby amended by inserting "or Section 5.02 of the Guarantee and Security Agreement" immediately following "Section 4.02 of the Revolving Credit Security Agreement" therein. 2.13. Section 11.13 of the Credit Agreement is hereby amended by adding the following at the end thereof: "(c) The Revolving Credit Security Agreement is hereby amended so that (i) from and after the Amendment Effective Date, (x) all references therein to the Credit Agreement shall be deemed to be a reference to the Credit Agreement as amended and restated hereby and (y) all references therein to '$85,000,000' shall be deemed to be a reference to '$125,000,000', and (ii) from and after May 18, 1994, all references therein to 'Revolving Credit Notes' and 'Revolving Credit Commitments' shall be deemed to be references to 'Series A Lenders', 'Series A Loans', 'Series A Notes' and 'Series A Commitments', respectively. (d) The Term Loan Security Agreement is hereby amended so that (i) from and after the Amendment Effective Date, (x) all references therein to the Credit Agreement shall be deemed to be a reference to the Credit Agreement as amended and restated hereby and (y) all references therein to '$85,000,000' shall be deemed to be a reference to '$125,000,000', and (ii) from and after May 18, 1994, all references therein to 'Term Loan Lenders', 'Term Loans', 'Term Loan Notes' and 'Term Loan Commitments' shall be deemed to be references to 'Series B Lenders', 'Series B Loans', 'Series B Notes' and 'Series B Commitments', respectively." 2.14. Section 1 of the Revolving Credit Security Agreement shall be amended by adding the following new definitions and inserting the same in the appropriate alphabetical locations, as follows: "LLC Agreements" shall have the meaning ascribed thereto in Section 3(m) hereof. 5 -5- "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. "Pledged Membership Interests" shall have the meaning ascribed thereto in Section 3(m) hereof. 2.15. Section 2 of the Revolving Credit Security Agreement is hereby amended by adding the following at the end thereof: "(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." 2.16. Section 3 of the Revolving Credit Security Agreement is hereby amended by relettering clause (m) as clause (r) and by inserting the following immediately following clause (l) therein: "(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 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 Revolving Credit 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; 6 -6- (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;" 2.17. Section 5.01(a) of the Revolving Credit Security Agreement is hereby amended by inserting the following immediately before "subject to Section 5.04(a)(1) hereof" therein: "(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)" 2.18. Section 5.04 of the Revolving Credit Security Agreement is hereby amended by inserting a new clause (c) at the end thereto reading as follows: "(c) LLC Collateral. (1) The Company will cause the LLC Collateral to constitute at all times 100% of the aggregate ownership and membership interest 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). 7 -7- (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 Series A Lender exercises any available right to declare any Revolving Credit 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit Secured Obligations), be returned by the Agent to the Company." 2.19. Section 5.11 of the Revolving Credit Security Agreement is hereby amended by deleting "and" at the end of clause (ii) therein, inserting "and" at the end of clause (iii) therein and inserting and clause (iv) thereto reading as follows: "(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" 2.20. Annex 1 to the Revolving Credit Security Agreement is hereby amended by adding the following at the end thereof: 1,000 shares of common stock "B/E Services, Inc. 1 BE Aerospace Inc. $0.0l par value" 8 -8- 2.21. The Revolving Credit Security Agreement is hereby amended by adding a new Annex 7 thereto as follows: "Annex 7 PLEDGED MEMBERSHIP INTERESTS
Certificate Nos. Percentage of LLC Issuer (if any) Registered Owner Ownership Interest - ---------- --------------- ---------------- ------------------ In-Flight Entertainment, LLC None BE Aerospace, Inc. 100%"
Section 3. Representations and Warranties. The Company represents and warrants to the Lenders that the representations and warranties set forth in Section 7 of the Credit Agreement (as amended hereby) are true and complete on the date hereof as if made on and as of the date hereof (or, if such representation or warranty is expressly stated to be made as of a specific date, as of such specific date) and as if each reference in said Section 7 to "this Agreement" included reference to this Amendment No. 1. The Company represents and warrants to the Lenders that the representations and warranties set forth in Section 2 of the Revolving Credit Security Agreement (as amended hereby) are true and complete on the date hereof as if made on and as of the date hereof (or, if such representation or warranty is expressly stated to be made as of a specific date, as of such specific date) and as if each reference in said Section 2 to "this Agreement" included reference to this Amendment No. 1. Section 4. Conditions Precedent. As provided in Section 2 above, the amendments to the Credit Agreement and Revolving Credit Security Agreement set forth in said Section 2 shall become effective, as of the date hereof upon the satisfaction of the following conditions: 4.01. Execution. This Amendment No. 1 shall have been executed and delivered by the Company and the Majority Lenders. 4.02. Documents. The Administrative Agent shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance: (1) Corporate Documents. Certified copies of the organizational documents of the Company, In-Flight Entertainment LLC and BE Services (or, in the case of the Company, a certification to the effect that none of such documents has been modified since delivery thereof on the Amendment Effective Date pursuant to the Credit Agreement) and of all limited liability company or corporate authority for the Company and In-Flight Entertainment LLC (including, without limitation, board of director resolutions, member approvals and evidence of incumbency, including specimen signatures) with respect to the execution, delivery and performance of this Amendment No. 1, the Credit Agreement as amended hereby and the Guarantee and Security Agreement, as the case may be, and each other document to be delivered by the Company and In-Flight Entertainment LLC from time to time in connection 9 -9- with the Credit Agreement as amended hereby and the Security Documents (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). (2) Officer's Certificate. A certificate of a senior officer of the Company, dated the date hereof, to the effect that, after giving effect to this Amendment No. 1, no defaults shall have occurred and be continuing. (3) Security. The Company and In-Flight Entertainment LLC shall have taken such action (including, without limitation, delivery to the Administrative Agent appropriately completed and duly executed copies of the Guarantee and Security Agreement) as the Administrative Agent shall have requested in order to perfect the security interests created pursuant to the Security Documents after giving effect to the amendments contemplated hereby. (4) Opinion of Counsel to the Company and In-Flight Entertainment LLC. An opinion, dated the date hereof, of Ropes & Gray, counsel to the Company and In-Flight Entertainment LLC, in form and substance satisfactory to the Administrative Agent (and the Company and In-Flight Entertainment LLC hereby instruct such counsel to deliver such opinion to the Lenders and the Administrative Agent). (5) Compliance Certificate. A certificate of a senior officer of the Company selling forth in reasonable detail the computations necessary to demonstrate, effective as of the date hereof (and after giving effect to this Amendment No. 1) that the Company will be in compliance with (x) Section 1010 of the Senior Indenture, (y) Section 1010 of the Senior Subordinated Indenture and (z) Section 1014 of the Senior Indenture. (6) Expenses. Evidence of the payment or delivery by the Company of 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 this Amendment No. 1 (to the extent that statements for such fees and expenses shall have been delivered to the Company.) (7) Other Documents. Such other documents as the Administrative Agent or any Lender or special New York counsel to Chase may reasonably request. Section 5. Consent to Release. Upon the satisfaction of the conditions precedent set forth in Section 4 hereof, the Majority Lenders hereby consent to the release of the Lien under the Revolving Credit Security Agreement (i) covering the equipment subject to the GE Lease Agreement which is to be transferred to General Electric Capital Corporation and/or the Participants under the GE Lease Agreement (ii) on all or any part of the Company's In-Flight Entertainment Division to the extent such Property is transferred to In-Flight Entertainment LLC and (iii) on all or any part of the Company's Services Division to the extent such Property is transferred to BE Services. Section 6. GE Lease Obligations. The Administrative Agent and the Lenders agree that the obligations of the Company incurred pursuant to the GE Lease Agreement (including, without 10 -10- limitation, those attributable to the J. D. Edwards software (as so defined therein)) shall not constitute "Indebtedness" under the Credit Agreement. Section 7. Miscellaneous. Except as herein provided, the Credit Agreement and Revolving Credit Security Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. 11 -11- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By /s/ Thomas P. McCaffrey ----------------------------------- Title: Chief Financial Officer LENDERS THE CHASE MANHATTAN BANK By /s/ Matt Massie ----------------------------------- Title: Vice President NATIONSBANK, N.A. (SOUTH) By /s/ Andrew M. Airheart ----------------------------------- Title: Senior Vice President LASALLE BUSINESS CREDIT, INC. By /s/ Pat Killpatrick ----------------------------------- Title: Vice President LTCB TRUST COMPANY By /s/ Philip A. Marsden ----------------------------------- Title: Senior Vice President 12 -12- CREDITANSTALT-BANKVEREIN By /s/ Greg Roux ----------------------------------- Title: Vice President By /s/ John Macukas ----------------------------------- Title: Senior Vice President FUJI BANK & TRUST COMPANY By /s/ Toshiaki Yakura ----------------------------------- Title: Senior Vice President CREDIT LYONNAIS, NEW YORK BRANCH By /s/ Robert Ivosevich ----------------------------------- Title: Senior Vice President THE SUMITOMO BANK, LIMITED By /s/ Ann C. Bolduc ----------------------------------- Title: Vice President & Manager By /s/ Brian M. Smith ----------------------------------- Title: Senior Vice President & Regional Manager (East) THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ Matt Massie ----------------------------------- Title: Vice President 13 EXHIBIT A [Conformed Copy] GUARANTEE AND SECURITY AGREEMENT GUARANTEE AND SECURITY AGREEMENT dated as of November 19, 1997 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 May 29, 1997 (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 in an aggregate principal or face amount not exceeding $125,000,000. Contemporaneously with the execution of this Agreement, the Company has requested, and the Lenders and the Administrative Agent have agreed to amend the Credit Agreement on the terms, and subject to the conditions, set forth in Amendment No. 1 to the Credit Agreement ("Amendment No. 1"). To induce the Lenders to (i) enter into Amendment No. 1 and to agree, pursuant to Amendment No. 1, to include the Eligible Inventory (as so defined) and Eligible Receivables (as so defined) of the Guarantor in the Borrowing Base (as so defined) under the Credit Agreement, (ii) to extend credit under the Credit Agreement and (iii) 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 Series A Collateral (as so defined) as security for the Series A 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 Account" shall have the meaning ascribed thereto in Section 5.01 hereof. Guarantee and Security Agreement 14 -2- "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 Guarantee and Security Agreement 15 -3- 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. "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. "Series A Collateral" shall have the meaning ascribed thereto in Section 4 hereof. "Series A 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 Series A 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 Guarantee and Security Agreement 16 -4- 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 Series A 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 Series A Loans made by the Series A Lenders to, and the Series A Note(s) held by each Series A Lender of, the Company and all other amounts from time to time owing to the Series A 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"). 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, Guarantee and Security Agreement 17 -5- 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 Series A Lender or Series A 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 Series A 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 any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. Guarantee and Security Agreement 18 -6- 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 Series A Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Administrative Agent or such Series A 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 Series A 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 Series A 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 Series A Lender or the Administrative Agent, at its sole option, in the event of a Guarantee and Security Agreement 19 -7- 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. 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 Series A 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 Series A 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 Guarantee and Security Agreement 20 -8- 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 Series A Collateral and no Lien will exist upon the Series A 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 Series A 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 Series A Collateral (other than Intellectual Property registered or otherwise located outside of the United States of America). (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 Guarantee and Security Agreement 21 -9- 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 Series A Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended. Section 4. Series A Collateral. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Series A Secured Obligations, the Guarantor hereby pledges and grants to the Administrative Agent, for the benefit of the Series A 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 "Series A 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 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 Guarantee and Security Agreement 22 -10- 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 Guarantor or any Guarantee and Security Agreement 23 -11- computer bureau or service company from time to time acting for the Guarantor. Notwithstanding the foregoing, the Series A 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 Series A 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 Series A 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 Series A Lenders as additional collateral security hereunder. The balance from time to time in the Collateral Account shall constitute part Guarantee and Security Agreement 24 -12- of the Series A Collateral hereunder and shall not constitute payment of the Series A 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 Series A 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 Series A Secured Obligations in 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 Series A 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. Guarantee and Security Agreement 25 -13- 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 Series A 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 Series A 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 Series A Lenders (and in that connection each Series A Lender, pursuant to Section 10.10 of the Credit Agreement) has agreed that such Permitted Investments shall be held by such Series A 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 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 Series A 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 Series A 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 Guarantee and Security Agreement 26 -14- 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 Series A 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 Series A 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 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 Guarantee and Security Agreement 27 -15- 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 Series A 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 Series A 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 Series A Collateral, and forward copies of any notices or communications received by the Guarantor with respect to the Series A 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 Series A Collateral has been assigned to the Administrative Agent hereunder, and that any payments due or to become due in respect of such Series A 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 Series A 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 Series A Collateral in which the Administrative Agent is not named as the sole secured party for the benefit of the Series A 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 Series A Collateral. 6.04 Special Provisions Relating to Certain Collateral. (a) Intellectual Property. Guarantee and Security Agreement 28 -16- (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, 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 Series A Secured Obligations and cancellation or termination of the Series A Commitments and Letter of Credit Liabilities or earlier expiration of this Agreement or release of the Series A 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 Series A Collateral owned by it at such place or places, reasonably convenient to both Guarantee and Security Agreement 29 -17- 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 Series A Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Series A Collateral; (c) the Administrative Agent shall have all of the rights and remedies with respect to the Series A 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 Series A Collateral as if the Administrative Agent were the sole and absolute owner thereof (and 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 Series A 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 Series A Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of the Administrative Agent, the Series A Lenders or any of their respective agents, sell, lease, assign or otherwise dispose of all or any part of such Series A 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 Series A Lender or anyone else may be the purchaser, lessee, Guarantee and Security Agreement 30 -18- assignee or recipient of any or all of the Series A 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 Series A Collateral, to limit purchasers to those who will agree, among other things, to acquire the Series A 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 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 Series A 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 Series A Collateral pursuant to Section 6.05 hereof are insufficient to cover the costs and Guarantee and Security Agreement 31 -19- expenses of such realization and the payment in full of the Series A 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 Series A 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 Series A Lenders shall incur no liability as a result of the sale of the Series A 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 Series A Lender arising by reason of the fact that the price at which the Series A 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 Series A Secured Obligations, even if the Administrative Agent accepts the first offer received and does not offer the Series A 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 Series A 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; Guarantee and Security Agreement 32 -20- Next, to the payment in full of the Series A Secured Obligations, in each case equally and ratably in accordance with the respective amounts thereof then due and owing or as the Series A Lenders holding the same may otherwise agree; and 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 Series A Secured Obligations in the manner provided above in this Section 6.09. As used in this Section 6, "proceeds" of Series A Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Series A 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 Series A 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 Series A 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 Series A Collateral or any part thereof and to give full discharge for the same. 6.11 Termination. When all Series A Secured Obligations shall have been paid in full and the Series A Commitments of the Series A Lenders under the Credit Agreement and all Letter of Credit Liabilities shall have expired or been Guarantee and Security Agreement 33 -21- 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 Series A 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 Series A 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. 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. Guarantee and Security Agreement 34 -22- 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 Series A Lenders and the Administrative Agent for all reasonable out-of-pocket costs and expenses of the Series A 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 Series A 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 Series A Collateral, and for the care of the Series A 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, and all such costs and expenses shall be Series A 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 Series A 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 Series A Lender, each holder of any of the Series A Secured Obligations and the Guarantor. 7.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective Guarantee and Security Agreement 35 -23- successors and assigns of the Guarantor, the Administrative Agent, the Series A Lenders and each holder of any of the Series A 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 SERIES A 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. 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 Guarantee and Security Agreement 36 -24- 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 Series A 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. Guarantee and Security Agreement 37 -25- 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 /s/ Thomas P. McCaffrey ---------------------------------- Title: Chief Financial Officer Address for Notices: In-Flight Entertainment, LLC 17481 Red Hill Avenue Irvine, California 92614 Attn: Thomas P. McCaffrey Guarantee and Security Agreement 38 -26- THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ Matt Massie ---------------------------------- Title: Vice President 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 Guarantee and Security Agreement 39 ANNEX 1 LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND APPLICATIONS FOR COPYRIGHT REGISTRATIONS
Title Date Filed Registration No. Effective Date - -------------------------------------------------------------------------------- [None]
Annex 1 to Guarantee and Security Agreement 40 ANNEX 2 LIST OF PATENTS AND PATENT APPLICATIONS
File Patent Country Registration No. Date - -------------------------------------------------------------------------------- [None]
Annex 2 to Guarantee and Security Agreement 41 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]
Annex 3 to Guarantee and Security Agreement 42 -2- Foreign Trademarks
Application (A) Registration or Mark Registration (R) Country Filing Date (F) - -------------------------------------------------------------------------------- [None]
Annex 3 to Guarantee and Security Agreement 43 ANNEX 4 LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS [None] Annex 4 to Guarantee and Security Agreement 44 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 Annex 5 to Guarantee and Security Agreement EX-10.3 7 AMENDMENT NO. 2 DATED JANUARY 28, 1998 1 Exhibit 10.3 EXECUTION COPY AMENDMENT NO. 2 AMENDMENT NO. 2 dated as of January 28, 1998, between BE AEROSPACE, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company") each of the lenders that is a signatory hereto (individually, a "Lender" and, collectively, the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The Company, the Lenders and the Administrative Agent are parties to a Third Amended and Restated Credit Agreement dated as of October 29, 1993, as amended and restated as of May 29, 1997, as further amended as of November 19, 1997 (as heretofore modified and supplemented and in effect on the date hereof, the "Credit Agreement"). The Company has requested that the Credit Agreement be amended and accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 2, terms defined in the Credit Agreement (as amended hereby) are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the condition precedent specified in Section 5 below, but effective as of the date hereof (the "Second Amendment Effective Date"), the Credit Agreement shall be amended as follows: 2.01. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby. 2.02. The definition of "Restricted Payment" in Section 1.01 of the Credit Agreement shall be amended to read in its entirety as follows: "'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') (i) which is subordinated in right of payment to the prior payment of the Loans or (ii) which is 2 -2- evidenced by the Senior Notes, 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.". Section 2.03. Section 6.02(b) of the Credit Agreement shall be amended to read in its entirety as follows: "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 (i) Section 1010 of the Senior Subordinated Indenture, (ii) any provisions in any other indenture to which the Company is a party that restrict the incurrence or existence of Indebtedness or Liens and (iii) the Borrowing Base as at the end of the quarterly fiscal period of the Company ending on or most recently ended prior to the date of such extension of credit." Section 2.04. References in the Credit Agreement to the Senior Subordinated Notes and to the Senior Subordinated Indenture shall be deemed to include references to the Senior Subordinated Notes due 2008 issued by the Company during the first quarter of 1998 and to the indenture pursuant to which such Senior Subordinated Notes due 2008 are issued, respectively. Section 2.05. The proviso at the end of Section 8.07 of the Credit Agreement shall be amended to read in its entirety as follows: "provided that the Company may incur additional unsecured Indebtedness that has no regularly scheduled maturity or mandatory prepayments, which does not include required prepayments as a result of a change of control or asset sale, on or before the Series A Commitment Termination Date. Section 3. Waiver. The Banks hereby waive any restriction in Section 8.18 of the Credit Agreement or otherwise to the redemption or repurchase by means of a tender offer and consent solicitation of the Senior Notes with the proceeds of the Senior Subordinated Notes due 2008 proposed to be issued by the Company during the first quarter of 1998 and the amendments to the Senior Indenture contemplated thereby. Section 4. Representations and Warranties. The Company represents and warrants to the Lenders that the representations and warranties set forth in Section 7 of the Credit Agreement (as amended hereby) are true and complete on the date hereof as if made on and as of the date hereof (or, if such representation or warranty is expressly stated to be made as of a specific date, as of such specific date) and as if each reference in said Section 7 to "this Agreement" included reference to this Amendment No. 2. 3 -3- Section 5. Condition Precedent. As provided in Section 2 above, the amendments to the Credit Agreement set forth in said Section 2 and the waiver set forth in Section 3 above shall become effective, as of the date hereof, upon the due execution and delivery of this Amendment No. 2 by the Company, the Guarantor referred to below, the Administrative Agent and the Majority Lenders. Section 6. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 by signing any such counterpart. This Amendment No. 2 shall be governed by, and construed in accordance with, the law of the State of New York. 4 -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By /s/ Thomas P. McCaffrey ------------------------------ Title: /s/ Karen Patturelli KAREN PATTURELLI, Notary Public My Commission Expires May 22, 2003 LENDERS THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH) By By --------------------------- ------------------------------- Title: Title: LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: By --------------------------- Title: 5 -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By ------------------------------ Title: LENDERS THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH) By /s/ [Illegible] By --------------------------- ------------------------------- Title: Title: LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: By --------------------------- Title: 6 -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By ------------------------------ Title: LENDERS THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH) By By /s/ [Illegible] --------------------------- ------------------------------- Title: Title: Vice President LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: By --------------------------- Title: 7 -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By ------------------------------ Title: LENDERS THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH) By By --------------------------- ------------------------------- Title: Title: LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY By By /s/ [Illegible] --------------------------- ------------------------------- Title: Title: SVP CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: By --------------------------- Title: 8 -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. BE AEROSPACE, INC. By ------------------------------ Title: LENDERS THE CHASE MANHATTAN BANK NATIONSBANK, N.A. (SOUTH) By By --------------------------- ------------------------------- Title: Title: LASALLE BUSINESS CREDIT, INC. LTCB TRUST COMPANY By By --------------------------- ------------------------------- Title: Title: CREDITANSTALT-BANKVEREIN FUJI BANK & TRUST COMPANY By By /s/ [Illegible] --------------------------- ------------------------------- Title: Title: Vice President and Manager By --------------------------- Title: 9 -5- CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By /s/ Robert Ivosevich By ------------------------ ---------------------------- Title: Robert Ivosevich Title: Senior Vice President By ---------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By ------------------------ Title: GUARANTOR Consent to the foregoing: IN-FLIGHT ENTERTAINMENT, LLC By ----------------------------- Title: 10 -5- CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By By /s/ William N. Paty ------------------------ ---------------------------- Title: Title: WILLIAM N. PATY VICE PRESIDENT AND MANAGER By /s/ Brian M. Smith ---------------------------- Title: BRIAN M. SMITH SENIOR VICE PRESIDENT & REGIONAL MANAGER (EAST) THE CHASE MANHATTAN BANK, as Administrative Agent By ------------------------ Title: GUARANTOR Consent to the foregoing: IN-FLIGHT ENTERTAINMENT, LLC By ----------------------------- Title: 11 -5- CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By By ------------------------ ---------------------------- Title: Title: By ---------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ [Illegible] ------------------------ Title: GUARANTOR Consent to the foregoing: IN-FLIGHT ENTERTAINMENT, LLC By ----------------------------- Title: 12 -5- CREDIT LYONNAIS, THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By By ------------------------ ---------------------------- Title: Title: By ---------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By ------------------------ Title: GUARANTOR Consent to the foregoing: IN-FLIGHT ENTERTAINMENT, LLC By /s/ Thomas P. McCaffrey ----------------------------- Title: /s/ Karen Patturelli KAREN PATTURELLI, Notary Public My Commission Expires May 22, 2003 EX-23.1 8 CONSENT OF DELOITTE & TOUCHE 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of BE Aerospace, Inc. on Form S-4 of our report, which includes an explanatory paragraph relating to the Company's change in its method of accounting for engineering expenditures, dated April 10, 1997, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Costa Mesa, California March 9, 1998 -----END PRIVACY-ENHANCED MESSAGE-----